cost recovery and revenue neutral...

COST RECOVERY AND REVENUE NEUTRAL

PROGRAMS Moderator: Rob Jessee

Panelists: Keith Melvin, Wendy Knox, & Brooks Glasnapp

PURPOSE

The purpose of a revenue neutral program is to bring in just enough income to cover the expenses/costs incurred while running the program.

The purpose of a cost recovery program is to “recover” the costs you have already expended.

OBJECTIVES

Share the sources of revenue for your state’s ODA program Discuss ways you have been able to cut/control costs Describe any cost recovery programs that your state has in place Discuss how you track historical expenses to ensure revenue neutrality.

FLORIDA ODA REVENUE SOURCES

Annual Permit Fees

Annual License Fees

Reinstatement Fees

Transfer Fees

FLORIDA ODA REVENUE SOURCES

CUTTING COSTS WITHOUT CUTTING CORNERS

Created D.O.V.E. to more efficiently track and remove illegal signs

Developed a Letter of Concern in order to reduce Administrative Hearing requests

Used regular mail instead of certified

Currently developing a new system for reviewing sign inventory that will decrease the amount of paper used and greatly decrease administrative time

COST RECOVERY PROGRAMS

We utilize a contractor to remove illegal signs from private property. We then invoice the sign owner/property owner for the cost of removal.

NOTICE OF VIOLATION

INVOICE FROM CONTRACTOR

HISTORICAL DATA/INCOME PROJECTIONS

In order to ensure revenue neutrality, you need to be able to accurately predict the income you hope to receive as well as the expenses you are projecting.

HISTORICAL DATA/INCOME PROJECTIONS

HISTORICAL DATA/INCOME PROJECTIONS

COST RECOVERY AND REVENUE NEUTRAL

PROGRAMS Presenter: Keith C. Melvin, Director

South Carolina Department of Transportation

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

Centralized Statewide Program

Headquarters Director

Administrative Specialist (Vacant)

Program Assistant

7 Districts 4 ODA Coordinators

Midlands Region Outdoor Advertising Coordinator (1 & 4)

Piedmont Region Outdoor Advertising Coordinator (2 & 3)

Pee Dee Region Outdoor Advertising Coordinator (5)

Low Country Region Outdoor Advertising Coordinator (6 & 7)

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

Fees & Charges Billboard (State Law)

Vegetation

$100 nonrefundable permit application fee $30 annual fee for signs 350 sq. ft. or more $20 annual fee for signs less than 350 sq. ft.

$400 participation charge $400 recoup for services preformed annually

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

Current Sign Inventory

Active Permits - 5892

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

New Applications

Year Total $ Amount

2014 $210.00

2013 $410.00

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

Billboard Revenue

Year Number of Companies Invoiced Total $ Amount

2014 590 $154,850.00

2013 603 $154,580.00

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

Vegetation Revenue

Year Number of Companies Invoiced Total $ Amount

2014 96 $527,600.00

2013 92 $527,600.00

SOUTH CAROLINA DEPARTMENT OF TRANSPORTATION

OUTDOOR ADVERTISING PROGRAM

Total Revenue (New apps., billboards & vegetation by year)

Year Total $ Amount

2014 $691,090.00

2013 $693,670.00

COST RECOVERY AND REVENUE NEUTRAL

PROGRAMS Presenter: Wendy Knox

Texas Department of Transportation

REGULATORY PROGRAM COST RECOVERY – JUST GOOD BUSINESS

Typical of federal mandates for states to be responsible for specific regulatory programs such as the orderly and effective display of outdoor advertising, federal funding does not follow.

Without federal funding, good business practices of any state would demand that the cost to implement, administer and enforce the regulatory requirements must be recovered from the specific regulated industry.

The practical application of recovering regulatory program costs are through state issuance of licenses, permits and certifications. Fee structures can then be promulgated through state administrative rules.

EXAMPLE OF A STATE LAW

Regulatory program responsibilities for the HBA in Texas are administered by the Outdoor Advertising Regulatory Program (OARP) as a section of the ROW Division at TxDOT under two statutes.

Highways regulated by the Highway Beautification Act (HBA); and Rural Highways and Roads located outside corporate limits of cities, towns

and villages under the Rural Roads Act (RRA).

Statutes for both programs specifically address the issue of cost recovery or revenue neutrality in similar language, but the language does not mandate full cost recovery, but the intent of revenue neutrality is clear.

EXAMPLE OF STATE STATUE

For funds collected under the HBA Texas Transportation Code - §391.004 – Disposition of Fees “Money the commission receives under this chapter shall be deposited to

the credit of the state highway fund. The commission shall use money in the state highway fund to administer this chapter and Chapter 394.”

For funds collected under the RRA Texas Transportation Code - §394.005 – Disposition of Fees “Money the commission receives under this chapter shall be deposited to

the credit of the state highway fund.”

Note that while the statutes do not specifically demand full cost recovery, the intent is clear.

DETERMINING FULL PROGRAM COSTS

Not as easy as it should be. Depending on the agency’s financial software and legislative reporting requirements, the degree of report granularity might be limited.

Examples – Indirect costs for general and administrative costs are approved by the

FHWA for every state on an annual basis. For Texas, the statewide rate for Fiscal Year 2015 is 5.74%. Used to bill indirect costs on federally funded projects and to bill individuals and local entities outside the department it is a reasonable estimate of indirect costs to administer a regulatory program such as the HBA. Composite Rate, also approved annually by the FHWA considers the base

salary of employees plus total additives (i.e., retirement matching funds, holiday leave, longevity projections, etc.) to equal a total Composite Rate. For Fiscal Year 2015, a 1.6193 rate was approved.

WHAT ARE THE BASIC COST CATEGORIES?

Unlimited number of categories, but depending on your agency’s financial software, the typical categories of data to be captured are:

Salary and Wages – base salaries, projections for merits and promotions

Other Personnel Costs – longevity pay, applicability of composite rate

Professional Service Fees and Services – software consultants, others

Travel – fleet vehicle costs (current and replacement) fuel, rent cars, lodging and meals

Legal and Court Costs - your legal representation by the Office of the Attorney General and Office of General Counsel.

Data Capture and Communications – hardware, software, GIS equipment, cell phones, laptops, I-Pads, digital cameras, etc.

Consumable Supplies – Office supplies, field safety equipment

DO THE RESEARCH

Analyzing the revenue stream. Fees – signs in existence plus projections of new units minus takedowns. Replacement permits, relocation permits, late payment penalties,

administrative settlements, and fines.

Analyzing program costs. How does your agency address indirect costs and composite costs. Travel costs for site inspections and on-going inventory can be substantial.

Explore travel options, i.e., fleet vehicle ownership Vs rental Vs reimbursement for use of personal vehicle. Upgrading data capture and communications equipment provide

opportunities for savings. I-Pads Vs manual inspection forms will be the norm as well as online portals that will allow the regulated industry to submit documents and pay fees online will be the norm, but there can be heavy development and start-up costs. Plan for it.

THE MATH

Program costs vary from state to state, but the cost of a reasonable level of regulatory control indicates a recovery cost of $40 to $80 per sign each year depending on variables such as; Number of signs and your fee schedule Geographical size of your state Industry growth projections; i.e., availability of new markets, municipal trends to

prohibit off-premise signs. Full-time staff members devoted to the HBA or do they have other transportation

duties. State of computer and data capture equipment. How much money will be needed

this year, 3-years from now and 5-years from now. Political climate in state legislature and municipal governments Cost of condemnation and ultimate removal of the sign based on replacement cost,

reproduction cost or income; i.e., does your state consider billboards to be personality or real property?

IN THE END

In analysis of your revenue stream and program costs, the overriding factor is the equitable, efficient and transparent operation of your regulatory program.

While the regulatory program costs should not burden the general citizenry, the same costs should not be an over burden to the regulatory industry.

In the end it’s simple. Use good business practices while incurring costs, pass those costs through to the regulated industry, but constantly challenge yourself to:

Improve service to the public and the regulated industry through

professionalism, efficiency and transparency. Treat the program costs as if you were handling your own funds.

IOWA REVENUE Brooks Glasnapp, Supervisor, Iowa DOT

1972 Iowa Legislature

$450,000 stripped from State Road Use

Tax Fund designated for Highway Beautification Programs “Generate your own money”

1972 Iowa Legislature

1972: $5 application fee, $3 renewal Total number of permits: 12,000

Logo Signing

• Tucked inside billboard control statute

• Logo Program “SHALL” be implemented

• Fees to be given to Hwy Beautification Unit

• Separate Fund created

Fund Balance

2014: 2,438,000 2013: 2,211,000 2012: 2,084,000 2011: 1,967,000 2010: 1,829,000

1995: DEPLETED* 1994: 24,000

*Raised Logo Signing Fees

Centralized Operation Shared work/Independent Admin.

Shared Fieldwork & Cars

Logo Signing Billboard permits

TODS & Directional

Secretary

Supervisor

Violations

Junkyards Church permits, construction inventories

Adjusted for COLA and all FTE’s filled

Permit Fees Received: $910,000 (Logo, TODS, Billboards, Directional) Expenses Incurred: $860,000 (Salaries, Benefits, Supplies)

Logo Fees

$920/participant/interchange/yr Annual Revenue: $750,000

State-run Privatized

• Ohio $1600 • Alabama $1400 • North Carolina $1200 • California $1000 • Iowa $920 • Illinois $660 • South Dakota $620 • Tennessee $511 • Arkansas $500 • New York $400

• Indiana $3744 • S. Carolina $3000 • Kansas $3000 • Delaware $2400 • Maine $2400 • Missouri $2000 • Colorado $1800 • Florida $1800 • Virginia $1600 • Minnesota $1320

Purpose of Logo Program

1. Provide service information for the traveling public - MUTCD

2. Help businesses advertise - ?

3. Generate revenue - ?