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Cost Allocation Studies

Creating a Nexus Through Proper Cost Allocations

Increased scrutiny and demand for transparency by rate payers are straining public agencies to do more with less. Our clear and concise cost allocation methodologies help public agencies set rates that fully fund an enterprises’ operations, maintenance, and capital expenses while also providing funding for support services that are not included in general overhead cost allocation plans.

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Enterprise Reimbursement Studies:

As costs of supporting public safety and maintaining public facilities and roadways continue to weigh heavily on public agencies, many cities and counties are looking internally for sources of funding. It is fairly common nowadays for public agencies to utilize transfers from enterprise funds, which generate revenue, to the general fund to supplement such non-revenue generating activities as providing police and fire service, maintaining government buildings, and preserving the structural soundness of public rights-of-way. However, there are statutory limits to these types of internal transfers, and several California agencies have found themselves in legal battles concerning them in recent years.

HF&H has developed a cost-effective methodology to address this matter. Our analyses derive appropriate reimbursements to the general fund for services used by and/or provided to enterprise funds. We gave developed a proven method for calculating equitable reimbursements to support three distinct types of general fund cost obligations: public safety (Police and Fire), governmental facilities (City Hall, Purchasing Storage Facility, Corporation Yard), and right-of-way maintenance (street construction and maintenance).

Stormwater Funding Studies:

HF&H helps our clients develop cost allocation strategies for funding the stormwater programs that complies with California law. Such studies create the relationship (i.e., “nexus”) between the uses of funding in the stormwater program and the appropriate, legally defensible sources of funding. Our studies produce a reports that document the funding strategy and provide guidance for implementation. HF&H has successfully implemented stormwater funding from sources such as, but not limited to: (1) wastewater rates, which benefit from drainage projects that reduce inflow and infiltration into the sanitary sewers; (2) water rates, which benefits from water quality protection requirement in NPDES permits; and, (3) solid waste rates, which should be responsible for street sweeping services whenever possible.

Is Your General Fund Being Fully Reimbursed for the Service Provided?

HF&H recently conducted an enterprise reimbursement study which identified over $2 million in additional reimbursement to the City’s General Fund from its enterprises in return for their proportionate share of the cost of services provided by the General Fund.

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Client Success Stories