HomeMy Public PortalAboutBy-law 2022-52 Adopt a User Fees PolicyCORPORATION OF THE MUNICIPALITY OF TWEED
BY-LAW NO. 2022-52
Being a By-law to Adopt a User Fees Policy for the Municipality of Tweed.
WHEREAS the Municipal Act, 2001. S.O. 2021, c. 25, as amended, provides the
general authority for Councils to adopt policies;
AND WHEREAS the Council of the Corporation of the Municipality of Tweed
deems it expedient to adopt a User Fees Policy for the Municipality of Tweed;
NOW THEREFORE the Council of the Corporation of the Municipality of Tweed
enacts as follows:
1. THAT the User Fees Policy attached hereto as Schedule 'A' to this By-law,
is hereby adopted as the User Fees Policy for the Municipality of Tweed.
2. THAT Schedule `A' attached hereto forms part of this By-law.
3. THAT this By-law shall come into force and take effect immediately upon
the passing thereof by the Council of the Corporation of the Municipality of
Tweed.
Read a first, second, and third and final time, passed, signed, and sealed in open
Council this 23rd day of August, 2022.
MAYOR
;ro-d-i/ep 6-1/ZeJ
SCHEDULE 'A' TO BY-LAW NO. 2022-52
User Fees Policy
Purpose/Background
The purpose of this policy is to provide a framework to ensure a consistent, transparent,
efficient, and accountable approach for establishing and managing user fees across
Municipal programs that promotes recovery of the full cost of services for which user
fees are charged. Notwithstanding, the service may be subsidized by other sources of
revenue if it is determined that full cost recovery would not be consistent with achieving
the Municipality's policy objectives or legislative requirements. Ongoing review of user
fees will occur to ensure the purpose of this policy and related procedure is met.
Policy Statement
The Corporation of the Municipality of Tweed (the "Municipality") will collect user fees to
recover the costs of services where it is determined that a service provides direct
benefits to individuals, groups, and businesses, unless otherwise directed by Council.
Scope
This policy applies to all Municipal programs and services. All user fees will be updated
annually as part of the operating budget process and displayed on the Municipal
website. The full cost of providing each User Fee service shall be determined as the
starting point for setting the user fee regardless of whether the full cost is to be
recovered. New fees shall not be introduced without knowing the full cost of providing
the service for which a fee is being considered. The costing model developed by the
Treasurer shall be the basis for the costing of Municipal services.
User fees will be set to recover the full cost of providing the applicable service, except
where:
• Council has approved a subsidy or exemption
• Services benefit the community or general public and not just the individual,
group of individuals or business sectors
• Services are based on competition in the open market
• Fee amounts are legislated by the Province
The amount of a fee must not exceed the full cost of providing the applicable service.
Procedure
When to Charge User Fees
Where it is determined that a service or activity provided by the Municipality confers a
direct benefit on individuals, identifiable groups or businesses, a user fee will be set to
recover the cost of providing the User Fee service. User Fee services shall be funded
fully through the user fee charged for the service, unless otherwise determined. Where
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it is determined that a service or activity provided by the Municipality confers a direct
benefit to individuals, identifiable groups or businesses but also results in benefits to the
general public, it will be partially funded by other revenue sources by way of a subsidy.
The characteristic of the service and the nature of the benefits derived will help to
determine the type of service and when to charge user fees. Services delivered by
government are generally classified into the following major categories:
• Public Service: Benefits the general public; it is impossible to exclude someone
from using or enjoying the benefits provided by the service
• Private Service: Benefits specific individuals, groups or businesses; it is possible
to exclude someone from using the service
• Mixed Service: Benefits the general public as well as the specific individual,
group or business using the service
The `Decision Matrix Chart' attached under `References and Related Documents'
represents a decision matrix to assist in determining whether a service is to be funded
by user fees, property tax revenues, other revenue, or a combination of such, based on
the type of service (public or private) and who benefits.
As illustrated in the chart, the analysis distinguishes the degree to which a service
benefits the community as a whole, an individual, or groups of individuals and how it
should be funded.
Notwithstanding that a service qualifies for user fee, the service may be subsidized by
other sources of revenue either entirely or partially if it is determined that full cost
recovery would not be cost effective or would be inconsistent with achieving the
Municipality's policy objectives or legislative requirements.
Every Municipal service must be reviewed at least once every four (4) years to
determine if the cost of providing the service should be recovered through user fees or
funded form property tax revenues or any other source of revenue. In order to
accomplish this, Managers will determine:
• The degree to which the benefits that each service provides accrue directly to
specific individuals or groups of individuals or businesses (a private service), and
• Whether the service should be paid for by users of the service whether the
service benefits the entire community (a public service) and should be funded
form the property tax revenues or other revenue source.
Determine the Full Service Cost
The full cost of providing each User Fee Service shall be determined as the starting
point for setting the user fee regardless of whether the full cost will be recovered. New
fees will not be introduced without knowing the full cost of providing the service for
which a fee is being considered. The costing model developed by the Treasurer will be
the basis for the costing of Municipal services.
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The full cost shall include:
• Direct costs attributed to the delivery of the service such as salaries and benefits,
materials, supplies and purchased services
• Indirect costs that cannot be identified and charged directly to a specific program
but are related to the resources dedicated to support it, such as costs associated
with Corporate Support
• Capital costs for asset utilization referred to as capital amortization. Amortization
is defined as the original cost of the tangible capital asset divided by its useful
life. Examples of capital assets used in the delivery of a program include
buildings, vehicles, and equipment.
Develop the Cost -Recovery Strategy
The major principle of the User Fee Policy is that those who receive the benefits should
pay. Therefore, cost recovery strategies are developed to consider the extent of the
benefits received by identifiable individuals/groups (private benefit) versus that received
by the general public. In situations where full cost recovery is not the appropriate pricing
strategy, the level of subsidy is based on the full cost of delivering the service and the
reasons for recovering less than the full cost of providing the service stated. This
improves consistency, transparency and accountability in managing user fees and
facilitates Council's decision -making process.
The following factors shall be considered when setting user fees and cost recovery
levels.
(i) Community -wide versus individual benefits. Where the Municipality
provides goods or services that have societal benefits, the level of user
fees shall reflect the benefits received by the general public relative to the
private benefits.
(ii) Affordability of the service. Where services are specifically designed to
serve particular groups or segments of the population affordability will be
considered in order to achieve public policy outcomes.
(iii) Where the Municipality provides a cost recoverable service that is similar
to services provided by the private sector under competitive market
conditions, the Municipality's user fees should be in line with prices
charged in the private sector, unless the user fees do not achieve an
appropriate level of cost recovery in which case the service provided by
the Municipality should be reviewed to determine its feasibility. To ensure
that competitiveness is maintained, the Municipality's user fees must be
compared annually to the prices charged in the private sector.
(iv) The fee charged for services can significantly impact demand. In an
environment with increasing public demand for services, user fees can be
utilized as a mechanism for allocating scarce resources in an efficient
manner. The implementation of full cost recovery generally ensures that
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the Municipality is providing a service for which there is a genuine demand
that is not overly stimulated by fees that are substantially below cost.
(v) Where there are limits set by town policy objectives or other legislative
requirements on the level of cost recovery, pricing shall reflect these limits.
An impact assessment must be conducted to ensure that the value of the benefit
provided bears a relation to the user fee associated with the service. The impact
assessment should focus on factors such as economic competitiveness and on social
factors such as access to Municipal services by low-income residents.
Subsidy
Notwithstanding the principle that the full cost of user fee services be recovered, certain
factors may exist that warrant recovery of less than full cost, or no recovery at all. The
amount of the service that is not recovered from user fees would then be subsidized by
the Municipality, principally from property tax revenues. Subsidy for a particular service
will be considered where:
• Full cost recovery would conflict with Municipal policy objectives or priorities, or
with legislative requirements.
• Consumption of the good or service provides societal benefits in excess of the
value received by those paying for the service. In such cases, the amount of the
subsidy should reflect the estimated value of the societal benefit derived from
consumption of the service.
• Collecting the user fee is inefficient, not cost effective, or the fee constitutes an
insignificant portion of the cost of the applicable service.
• Market conditions preclude setting user fees to recover the full cost of services
that are offered in a competitive, open market environment.
• Other conditions exist, based on the extent of societal benefits derived from the
general consumption of the service, which justify funding from other revenue
sources.
The justification for the level of cost recovery associated with individual user fee
services should be clear and explicit. Furthermore, the amount of subsidy shall be well
defined and transparent to those providing and monitoring the user fee service.
As new services are introduced or changes to fee structure or cost recovery are
recommended, the reason why a particular user fee service should be subsidized, the
conditions and criteria will be reported to council prior to the annual update of the Rates
and Fees schedule.
Waivers and Exemptions
A waiver or exemption of the fee can only be authorized by Council resolution.
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Full Service Cost Review
For services that require 100% cost recovery, the full cost of these services will be
updated annually to ensure full cost recovery through user fees.
For services that require less than 100% cost recovery, the full cost of these services
shall be updated at least once in a four year period. Notwithstanding the fact that the full
cost of these services will be updated at least once in a four year period, market -based
fees should still be reviewed annually to ensure that market competitiveness is
maintained.
User Fees Review
Fees will be updated annually as part of the operating budget process. Fees that
require 100% cost recovery will be updated to recover the full cost of providing the
service and will be effective on January 1 of each year, or the passing of the by-law,
whichever comes last, subject to Council approval, or the start of the program offering.
Fees that require less than 100% cost recovery will be adjusted for inflationary changes
and level or standard of service delivery, and will be effective on January 1 of each
year, or the passing of the by-law, whichever comes last, subject to Council approval, or
the start of program offering. Authority is delegated to the appropriate Manager and the
Treasurer to jointly determine the automatic annual inflationary adjustment to each user
fee based on the projected rate of inflation for the upcoming year for the cost of each
component of the overall cost of providing the user fee service.
All user fees shall be reviewed at least once in a four year cycle. The review will re-
evaluate the assumptions upon which the user fee is based and the degree to which the
User Fee Policy is complied with. The review will be coordinated between the Treasurer
and each program Manager and will include the following.
• List of user fees along with primary beneficiaries of the relevant services;
• Full cost of providing each user fee services;
• User fee revenues generated for each service;
• Indication of whether subsidies are to be provided and why along with criteria for
waiving the fee in whole or in part, if applicable;
• Service levels and standards established to deliver the service as well as actual
performance levels that have been reached, and other relevant performance
metrics.
Any changes to the user fees will be incorporated in the rates and fees schedule for
Council consideration.
Categories of User Fees
To facilitate the review of user fees and evaluation of cost recovery rates, user fees are
categorized based on the following classification:
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a) Market -Based: Fees in this category are compared annually to rates charged by
other service providers for the same or similar services to ensure that market
competitiveness is maintained.
b) Province -Legislated: Fees in this category are legislated by the Province.
c) Municipal Policy: Fees in this category are determined by Municipal policy and
recover less than the full cost of providing the service
d) Full Cost Recovery: Fees in this category recover the full cost of providing the
service.
Information Required for Introduction of New User Fees
When introducing a new user fee outside the annual operating budget process, a staff
report is to be prepared and submitted to Council requesting approval of the fee. The
report to Council is to include the following:
• Service and user fee description;
• Primary users of the service for which the user fee relates;
• Full cost of providing the service;
• Proposed fee amount or rate;
• Justification for implementation of the proposed fee;
• Percentage of the full cost that will be recovered from the fee, and if less than full
cost will be recovered the reasons for doing so;
• Estimated annual revenue that the fee will generate;
• Public consultation undertaken — when and how. Provide a summary of
consultation outcomes; and
• Service levels and standards, and relevant performance measures.
Notification
User fees will be presented to Council annually as part of the operating budget process
for approval and inclusion in the annual operating budget. Notice of this will be provided
to the public on the Municipality's website and through advertisement in the local
newspaper. Upon Council approval, all user fees will be posted on the Municipal
website.
Definitions
Full Cost of Services - includes direct and indirect costs, including the costs of
operations and maintenance, overhead, and charges for the use of capital assets used
to provide the service.
Subsidy - is the amount of the full cost of providing a service that is not recovered from
user fees but is paid for by the Municipal, principally from property tax revenues.
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User Fee - means a fee or charge to individuals or groups and/or businesses for the
provision of a service, activity or product, or for conferring certain rights and privileges,
which grant authorization or special permission to a person, or group of persons to
access Municipal -owned resources (including property) or areas of activity.
Responsibilities
Managers are accountable for ensuring that user fees for services charged for their
programs are properly charged, collected, deposited and in general, are administered in
compliance with the principles set out in this policy and procedure.
Council must authorize all user fees and charges for all programs prior to
implementation of the user fees.
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