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Item 4GCity of Southlake, Texas M E M O R A N D U M April 17, 2007 TO: Shana Yelverton, City Manager FROM: Steve Polasek, Director of Community Services Approve the revised Recreation Activities Cost Recovery Policy SUBJECT: ___________________________________________________________________________ Action Requested: City Council approval of the revised Recreation Activities Cost Recovery Policy. Background Information: As part of the management study performed by Matrix Consulting, staff was given the task of reviewing and revising the current cost recovery policy. The recommendation called for staff to attempt to determine the total costs of offering each program. Past practice in formulation of these fees included using a variety of criteria including fees charged by other cities for similar programs and services, increases in the cost of operating the program, and enrollment. While there were criteria to formulate program fees, there was no formal structure connecting the cost of the program to the fee being charged. In an effort to better assess programs cost relative to fees, provide a more formal structure to develop fees and clarify specific cost recovery goals, staff began the process of developing a revised cost recovery policy for recreation programs. Development of the recommended cost recovery policy included analysis of current and estimated future cost recovery of recreation programs, reviewing cost recovery policies and goals from other cities, and soliciting input from staff. Staff began the process by organizing expenditures and revenues into cost centers by recreation activity. The cost centers included cost allocations for cost outside the current recreation program expenses such as facilities, brochure cost, RecNet fees, and Department executive support. After researching cost recovery policies from various agencies staff decided to use the Pricing Pyramid Model to formulate the cost recovery policy. This model assisted staff in determining which programs should have a higher subsidy than others based on who the program serves, the benefit to the community or individual and the type of program being offered (general vs. specialized). A definition of levels (five levels total) allowed for the allocation of activities to the levels of the pyramid which calls for the amount of cost recovery to increase as the levels increase. For instance, a Level One program such as Stars and Stripes (Community Special Events) would not have to recover as much as a Level Two program, Sweetheart Dance because a Level One programs has more of a community wide benefit than level two programs. Shana Yelverton, City Manager April 17, 2007 Page 2 There is a definition for each level and activities are assigned a level based on that definition. Once the levels were defined and activities were allocated to the levels staff began analysis of the current cost recovery status of each activity and level to establish the cost recovery goals identified in the Recreation Activities Cost Recovery Policy (See Chart Below). The Pricing Pyramid Model Levels Definition of Recovery Levels Level 1 Programs or activities that fulfill the core mission of the City and/or enhance the health, safety and livability of the (13% of programs fall community that require the removal of a cost barrier for into this category) optimum participation. Example: Stars and Stripes. Level 2 Programs or activities that fulfill the core mission of the Recreation Division that provide a community wide benefit. These programs and activities are general, basic and non- (4% of programs fall specific to any one recreational activity or age generally into this category) accepted as traditional municipal youth programs. Example: Sweetheart Dance. Level 3 These programs and activities are more interest specific and have more of an individual benefit or purpose to fulfill a Example: Youth (47% of programs fall specific recreational interest or need. into this category) Basketball. Level 4 These programs and activities have a higher individual (30% of programs fall focus and may be competitive or a highly specialized into this category) program activity. Example: Summer Camp Mania. Level 5 These are activities or programs that are offered to generate (6% of programs fall revenue to lower the subsidy of the Recreation Division. into this category) Example: Southlake Saturday Nite. Cost Recovery Percentage Levels Minimum Target 1 0% 25% 2 25% 50% 3 50% 75% 4 75% 100% 5 100% and Up 100%+ Shana Yelverton, City Manager April 17, 2007 Page 3 Some key elements of this policy include the following:  Activities unable to meet their minimum cost recovery levels shall be reviewed by staff for consideration of recommending appropriate action i.e.; increase cost, change cost recovery level, revise program, or eliminate the activity.  Activities that have achieved or exceeded their recovery levels shall be evaluated to determine if the cost recovery level should be increased.  Strategies for achieving cost recovery will be established by staff. The strategies may include immediate or gradual action depending upon the best interests of maintaining a strong program and achieving the designated target for each level within a reasonable time period and current fiscal conditions.  The Cost Recovery Policy shall, where applicable, also include other specific fee considerations (e.g. benchmarking of surrounding cities) that may supersede cost recovery target considerations.  New activities are assigned to a level according to the Pricing Pyramid Model and may be given an evaluation period of one year after first conducting the program before the activity is required to meet the corresponding cost recovery minimum. This policy will serve as guidance for staff to develop annual activity budgets, and establishing fees to be charged for recreation activities. Financial Considerations: The proposed Recreation Activities Cost Recovery Policy will provide staff with greater ability to track anticipated revenues and expenses. Financial Impact: Revenue is expected to increase for recreation programs. The actual increase will not be determined until after the development of a cost recovery policy implementation plan and annual analysis of programs. Citizen Input/ Board Review:  The existing policy was originally reviewed by the Policies and Ordinances Review Committee. As a result of the recommendations received from the Management Study performed by Matrix revisions were made to the proposed policy originally submitted by the committee.  Parks and Recreation Board recommended approval (7-0) at their April 9, 2007 meeting. Legal Review: This document has been reviewed by the city attorney. Alternatives: City Council discussion and consideration may result in various alternatives, including: Shana Yelverton, City Manager April 17, 2007 Page 4  Approval of the proposed policy as presented.  Approval with modifications of the proposed policy.  Decision not to approve the proposed policy. Supporting Documents: Supporting document includes the following items:  Final Proposed Recreation Activities Cost Recovery Policy  Final Proposed Recreation Activities Cost Recovery (strikethrough version) Staff Recommendation: City Council approval of the revised Recreation Activities Cost Recovery Policy. Shana Yelverton, City Manager April 17, 2007 Page 5 Community Service Department Policies and Procedures Manual Policy: Recreation Activities Cost Recovery Policy Source: City Council Category: Administrative POLICY The following shall serve as the guidance for establishing a Recreation Activities Cost Recovery Policy, for the purpose of developing annual activity budgets, and establishing fees to be charged for recreation activities. The scope of this policy shall only include programs managed by City staff. The specific elements of this policy are as follows:  Appendix A The Parks and Recreation Pricing Pyramid Model shall be used ().  In recognition of the wide variety of service values and revenue generating potentials of various activities, specific cost recovery levels shall be established for each recreation activity.  Appendix B) The cost recovery levels shall include both minimum and target levels of cost recovery (.  Activities unable to meet their minimum cost recovery levels shall be reviewed by staff for consideration of recommending appropriate action i.e.; increase cost; change cost recovery level; eliminate activity.  Activities that have achieved or exceeded their recovery levels shall be evaluated to determine if the cost recovery level should be increased.  Strategies for achieving cost recovery will be established by staff. The strategies may include immediate or gradual action depending upon the best interests of maintaining a strong program and achieving the designated target for each level within a reasonable time period and current fiscal conditions.  The Cost Recovery Policy shall, where applicable, also may include other specific fee considerations (e.g. benchmarking of surrounding cities) that may supersede cost recovery target considerations.  Once the Cost Recovery Policy is established, staff shall have the authority to set and adjust fees, except that no fee adjustment shall exceed 20% within a 1-year period without the review of the Parks and Recreation Board and approval from the City Council.  New activities are assigned to a level according to the Parks and Recreation Pricing Pyramid Model Appendix A () and may be given an evaluation period of one year after first conducting the program before that activity is required to meet the corresponding cost recovery minimum. Shana Yelverton, City Manager April 17, 2007 Page 6 DEFINITIONS  Direct Costs - Cost of part-time recreation staff (e.g. instructors, recreation aides, and recreation leaders), supplies, materials, or services.  Fixed Program Costs – Recreation Specialists, recreation brochure, and other fixed resources that do not vary with the program.  Fixed Division Costs – RecNet fees  Facility Costs – City and Joint Use facilities  Indirect Costs – Cost of full-time staff (e.g. director, office staff, superintendent, maintenance staff), utilities, and other overhead. RECREATION PROGRAMS FINANCIAL ASSISTANCE Southlake residents who desire access to programs and services will have the opportunity to participate. Therefore, the recreation financial assistance program should be in effect for those residents who do not have the ability to pay all or part of the established fee or charge. The recreation financial assistance program will Appendix D establish a program, which provides staff the guidelines and procedures () to provide reduced fees for those residents who do not have the means to pay in full. The guidelines will be based upon established standards, such as school Income Eligibility Guidelines used for the free lunch program. The guidelines will respect the privacy of the individual/family and will be applied consistently. Shana Yelverton, City Manager April 17, 2007 Page 7 Appendix A The Pricing Pyramid Model The Pricing Pyramid Model will be used to determine the percentage of cost recovery recreation activities should achieve. The levels have been developed using the Cost Recovery Pricing Pyramid Model. Activities are assigned to levels based on the definition of the level. The definitions for each level are as follows: Levels Definition of Recovery Levels Level 1 Programs or activities that fulfill the core mission of the City and/or enhance the health, safety and livability of the (13% of programs fall into community that require the removal of a cost barrier for this category) optimum participation. Example: Stars and Stripes. Level 2 Programs or activities that fulfill the core mission of the Recreation Division that provide a community wide benefit. These programs and activities are general, basic and non- (4% of programs fall into specific to any one recreational activity or age generally this category) accepted as traditional municipal youth programs. Example: Sweetheart Dance. Level 3 These programs and activities are more interest specific and have more of an individual benefit or purpose to fulfill a Example: Youth (47% of programs fall into specific recreational interest or need. this category) Basketball. Level 4 These programs and activities have a higher individual focus (30% of programs fall into and may be competitive or a highly specialized program this category) activity. Example: Summer Camp Mania. Level 5 These are activities or programs that are offered to generate (6% of programs fall into revenue to lower the subsidy of the Recreation Division. this category) Example: Southlake Saturday Nite. Shana Yelverton, City Manager April 17, 2007 Page 8 Appendix B Cost Recovery Percentages The cost recovery percentages increase from level 1 to 5. The activities within each level will be assigned cost recovery minimums at each level. The cost recovery percentages by level are listed below: Levels Minimum Target 1 0% 25% 2 25% 50% 3 50% 75% 4 75% 100% 5 100% and Up 100%+ Shana Yelverton, City Manager April 17, 2007 Page 9 Appendix C Cost Grouping Matrix Cost Description Direct Fixed Fixed Facility Indirect Costs Program Division Costs Costs Part-Time Staff (Actual) X Recreation Program Expenses X Actual () Recreation Specialists (10% X of Direct Cost ) Recreation Brochure ($250 X per page ) Facility (Per Fee X Schedule/Joint Use Fees) Indirect Costs (i.e. Director, X Deputy Director, Administrative Secretary, Attorney Fees, Clerical) 10%of total program ( costs ) RecNet Fees (2% of Total X Fees Charged Per Program ) Shana Yelverton, City Manager April 17, 2007 Page 10 Appendix D Recreation Program Financial Assistance Guidelines and Procedures Who is eligible for this program? Must be a child younger than 17 years old. Must I live in Southlake to receive these scholarship funds? Yes. Must be a resident of Southlake or attending Carroll ISD. Is there a limit to the amount of fund we may receive? The maximum annual expenditure is set at $150 per person per year. If program funds run out during the year, it is possible the scholarship program will need to be halted, and assistance for all will be denied until funding is renewed. How can I qualify? Must be able to provide evidence of a bona-fide financial hardship. Examples include: a. Recipients of current reduced lunch program. b. Recipients of SSI (Supplemental Security Income) or Social Security Benefits. c. Recipients of AFDC (Aid to Family with Dependent Children) d. Recipients of WIC ( Women, Infants, and Children) program e. Other, such as situation that creates substantial financial burden, i.e., foster family caring for multiple children or medical expenses for severe medical disability, Therapeutic Recreation need that would prohibit participation without scholarship. f. Parent currently serving full active duty in the military with no additional income. Can foster children in my care receive scholarship funds? Yes. If you are the child’s legal guardian, they must reside with you and meet guidelines that apply. Will this information be kept confidential? Yes. Information is reviewed and verified by City of Southlake staff only. However, information may be subject to the Public Information Act. Are there limitations to what we can use funds for? Yes. The scholarship program is available only for programs conducted in- house with City of Southlake staff for contract instructors, and excludes consignment or outside ticketed programs unless specifically approved as an accepted program by the Recreation Superintendent or higher authority. What happens after I submit my application? All applications are reviewed by three (3) Recreation Specialists, who submit their recommendation to the Recreation Superintendent. The Recreation Superintendent makes a determination as to whether the scholarship is granted and provides notice to the applicant. A program registration form must be attached to scholarship application. If approved, the application serves as a receipt for payment. If denied, the applicant may file a letter of appeal to the Director of Community Services, who reviews the request and make a final determination within 3 days of receipt of the request for appeal. The decision of the Director of Community Services is final. Shana Yelverton, City Manager April 17, 2007 Page 11 Appendix E Determination of Program Fees (Staff Use) The following are the guidelines to establish fees for programs and services: Determine Total Costs  Direct Costs ( 100% of program and staff expenses)  Fixed Program Costs (10% of direct costs/brochure)  Fixed Division Costs (2% of RecNet fees)  Facility Costs (Based on Joint Use/Fee Schedule)  Indirect Costs (10% of total program costs) Multiply the Total Costs by Program Level Percentage  Level 1 0%-25%  Level 2 25%-50%  Level 3 50%-75%  Level 4 75%-100%  Level 5 100% + Once the total cost and the program level is determined staff will then divide by the Number of Expected Participants to get the expected cost of each program. Staff should be able to justify programs that do not meet program minimums. Example: Youth Basketball $144,475.00 (Total Costs) X .75(Level 3) \ 1400 participants = $77.00 Approval Date: July 2001 Approved by: City Council 1. Amendment Date Approved by: 2. Amendment Date Approved by: Shana Yelverton, City Manager April 17, 2007 Page 12 Shana Yelverton, City Manager April 17, 2007 Page 13 Shana Yelverton, City Manager April 17, 2007 Page 14 Shana Yelverton, City Manager April 17, 2007 Page 15 Shana Yelverton, City Manager April 17, 2007 Page 16 Shana Yelverton, City Manager April 17, 2007 Page 17 Shana Yelverton, City Manager April 17, 2007 Page 18 Shana Yelverton, City Manager April 17, 2007 Page 19 Shana Yelverton, City Manager April 17, 2007 Page 20 Shana Yelverton, City Manager April 17, 2007 Page 21 Shana Yelverton, City Manager April 17, 2007 Page 22 Shana Yelverton, City Manager April 17, 2007 Page 23 Shana Yelverton, City Manager April 17, 2007 Page 24