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�r <br />PROPOSAL 5: The City of Eugene should examine the possibility of <br />charging a higher rate for the services of its weed mowing program. <br />The strongest argument for a rate increase is made evident by the <br />fact that the actual charges levied during the fiscal year 83 -84 <br />($18,245.20) were less than the total expense ($18,690.40) of the <br />program for that year. This year (FY 84 -85) saw the program at <br />least charging more than its overhead. But with the 60% collectables <br />rate that has been characteristic over the last 5 years, the revenue <br />was still insufficient to cover costs. <br />We again use the net loss table from page 3 to determine an appro- <br />priate increase. We assume a 60% collectables rate: <br />Average <br />Cost <br />Year Net Billings Per Bill <br />83 -84 $18,245 565.00 <br />84 -85 31,499 68.00 <br />Required <br />Avg. Add'l % <br />Net Loss Per Bill Increase <br />S 9,890 535 54 °0 <br />11,522 25 37% <br />The current rate charged by the Weed Mowing Program is $50.00 per <br />hour. For the last two fiscal years, the increased rate needed to <br />cover expenses at a 60% collectable rate would have been <br />($50 x 1.542) $77.00 per hour in 83 -84 and ($50.00 x 1.366) $68.00 <br />per hour in 84 -85. If the collection rate were increased it would <br />have a dramatic effect on the size of a fee increase needed to gain <br />solvency. Using FY 84 -85 as an example: from the above table we see <br />the charge of $68.00 per hour would generate the necessary revenue <br />at a 60% collectables rate. The net billing for FY 84 -85 was <br />531,498.55 and the total program expense (from page 3) was <br />526,343.60. The necessary collection rate to gain solvency at the <br />current $50.00 per hour charge would have been 526,343.60 : $31,498.55= <br />.836 or 83.6%. Using a simple linear approximation, we find how much <br />every percentage point increase above the current 60% collections rate <br />would allow us to drop from the calculated 568.00 per hour charge <br />necessary to gain solvency. <br />Fee Increase Collectables Rates <br />(Dollars) (Percentages) <br />$68.00 - $50.00 60 - 83.6 = -.762 <br />Each percentage point increase over a 60 °0' collectables rate would <br />decrease the needed 568.00 per hour fee by about S.75. A 70% <br />collectable would suggest a decrease of $7.50 (10 x .75) or $60.50 <br />per hour. An 80% collectable would suggest a charge of $53.00, <br />until an 84% collectables rate, where we would not need a rate. <br />hike. <br />We suggest that any rate hikes be tempered by methods to improve the <br />collections rate and so reduce the burden of the bad debt on those <br />customers who responsibly pay their fees. <br />J <br />i <br />