 |
Home | Search | Browse | About IPO | Staff | Links |
|
Home | Search | Browse | About IPO | Staff | Links |
|
Fees and Charges:
by John Muno Park and recreation agencies across Illinois are faced with placing a greater emphasis on recreation program fees and charges as a result of the trend towards property tax reductions, including the recent tax cap legislation imposed on the "collar" counties surrounding Cook County. The Downers Grove and Arlington Heights park districts have focused much attention on this challenge by developing recommendations addressing the issue of recreation program service fees and charges. It is especially important to note that the application of this information to each agency's operation is primarily dependent on your community's unique characteristics and factors that affect the park and recreation agency's leisure service offerings. Historical Perspective The utilization of fees and charges to support recreation programs and services are certainly not new sources of revenue, but rather are being required to play a different role than they have traditionally. A publication of San Diego State University's Institute for Leisure Behavior, User Fees For Public Recreation, A Question of Equity, summarizes this trend, "Even those managers who believe that recreation and park services should be offered free cannot deny the remorseless trend toward increased fees and charges at all levels of government. The real issue facing recreation professionals today is no longer the question of would we charge, but rather one of how much." Another popular publication dedicated to the issue of fees and charges, User Pays for Recreation Resources, written by Robert Aukerman of Colorado State University, says, "Today there is in North America, a general acceptance among recreation managers of the need for user pays. At no other time in history has government and public pressure and acceptance of the concept been greater. The current demand for user pays stems mainly from the need to raise revenue." It is also not surprising that the increased reliance on fees and charges as a revenue source is not unique to the park and recreation industry. Within recent months, it has been very common to see much media coverage reporting various public and governmental agencies attempting to balance tax revenue shortfalls with an increased emphasis on fees and charges. State government, public universities, and the Chicago Transit Authority (CTA) are just a few of the larger organizations taking this approach. The mere fact that there is so much discussion on the need for developing more effective policies and procedures for fees and charges for leisure services, indicates how successful the profession has been, and how far it has come. Twenty to 25 years ago, services provided by park districts and recreation departments were very limited, few in number, and were offered free, or at a nominal charge. Tax revenues were sufficient to support this level of service, thus, there was no need for as much emphasis on fees and charges. However, participants wanted more, and leisure services grew in terms of acreage, facilities, programs and staff to accommodate those interests. Today's agencies are composed of water theme parks, ice arenas, racquet and fitness clubs, nature sanctuaries, deluxe community centers and sports complexes. With those types of major advances in facilities and programs, the need for quantity and quality of staff also increased. Along with that came major increases in utility costs as well as capital expenditures to maintain the facilities. In essence, the system had outgrown the tax base, which has pushed agencies to seek other revenue sources primarily in relation to fees and charges. In fact, it appears that fees and charges in many recreation fund operations have become a larger source of funds than tax revenues. Tax Cap Impact on Fees and Charges Those agencies faced with the newly imposed tax cap legislation appear to initially be more suddenly impacted by the need to generate additional fees and charges. This has been a combined result of two items. First, the limitation of tax levy revenue to 5 percent or the Consumer Price Index (CPI), whichever is less. Secondly, the elimination of the financial ability to levy non-referendum bond funds. The limit on levying bond funds directly
affects recreation program and service operations that have benefited from major recreation equipment and capital improvements previously paid for from this revenue source. Typical examples of those types of capital expenditures may include recreation facility renovations, program equipment and athletic field improvements. Fees and charges appear to be the most feasible opportunity to make up for the loss in that funding source previously providing the necessary capital improvements to maintain and enhance quality recreation programs and facilities. The Purpose and Characteristics of a Fees and Charges Policy Recommendation The purpose of developing a fees and charges policy recommendation should identify several key factors. Those items include a need to establish guidelines to more systematically establish fees and charges; a need to more objectively identify the actual costs associated with the various program and service areas; and an attempt to maintain affordable program and service fees and charges, while also attempting to avoid program or service reductions or eliminations. Characteristics for fees and charges have changed dramatically in recent years, and even more significantly in consideration of the tax cap impact. Many agencies were previously fortunate enough to have sufficient tax revenue increases to support the growth and expansion of a comprehensive scope and extensive level of recreation programs and services. Very modest fees and minor, if any fee increases, were not uncommon. Program fee pricing was often determined on a "break-even" basis or included a minimal (10%) "overhead" cost charge. Traditionally, the emphasis for program fees seemed to be on the "direct costs" associated with the program. Those characteristics previously associated with fees and charges, however, are rapidly changing. The characteristics that are becoming more frequently attached to program fees and charges require an emphasis on substantiating or justifying the increased need forthis revenue. Examples include the following: There is becoming significantly less tax revenue available to support and "subsidize" programs and services to the extent that has been funded in the past. Programs and service offerings will be required to recover much more, if not, in some cases, all of the cost associated with providing that program or service. This includes "indirect" cost also. The loss of capital improvement (bond and levy) funding will shift the burden of these costs to the programs and services directly utilizing those capital equipment and project needs. Fees and charges may be required to support the rising costs primarily associated with recreation programs and services, that are funded solely by decreasing separate tax levy financing. Examples include employee benefits for insurance, IMRF, and social security. Recreation Program and Service Reductions or Eliminations Undesirable, but Realistic Option An undesirable, but realistic option or alternative to additional fees and charges is a reduction or elimination of some recreation programs or services. Those programs that are reflective of the larger financial "subsidies" from the tax revenues or are not fees and charges supported seem to be the most vulnerable to reduction or elimination. The most common examples tend to be: summer concert series, special events, drop-in activities, public facility hours, senior programs/activities, lighted athletic areas, and outdoor ice skating rinks, to name a few. Identifying and Differentiating Between Direct and Indirect Program Costs Typically, the focus of program fees has been centered on the "direct" cost of providing particular programs or services. Direct costs or those expenses that can be directly connected with or attributed to a recreation program seem to traditionally fall into several categories including, but not limited, to: part-time program instructors, leaders, or supervisors; program services such as tickets, admissions, meals; program supplies which is self-explanatory; contractual services, such as program instruction that is contracted as opposed to employee provided; program transportation, such as the operation or rental of buses, vans, etc.; and officials, umpires, referees for sports leagues. The identification of "indirect costs" associated with programs is one of the first important steps towards developing a better understanding of the importance of fees and charges. This, however, can be a difficult task partially because of the fact that few, if any, recreation program budget and accounting systems are fully designed and sophisticated enough to enable that process. A more accurate overall financial picture can be attained with the incorporation of those costs in relation to the particular programs they are associated with. While there are many different categories that can be identified as "indirect costs," the key point is to attempt to simplify and minimize the number of
categories. It is important to note that this process is intended to result in an estimated assignment of total costs associated with particular programs or program areas. The utilization of an agency's existing financial report system is possible. The adaptation or transferring of that information into a spreadsheet format is suggested. The incorporation onto a computer application makes this process tremendously easier and more timely. As examples of possible indirect cost categories to be identified may include salaries for full-time recreation supervisors; salaries for full-time secretarial, registration and office support staff; facility operation costs; athletic field lighting costs; combining general program related costs such as brochure, telephone, office supplies, computer registration costs, postage, etc. Several methods of determining an estimated allocation amount to be assigned to particular program areas are suggested. A time-budget study suggests that the estimation or even actual recording of the amount of time spent by full-time personnel be tracked and consequently allocated to the appropriate program areas. A cost-tracking system is useful for determining such things as athletic field light costs. This method requires an estimated hourly cost per lighted athletic area, and the assignment of costs to the appropriate program utilizing the facility based on the number of hours used. Space measurement studies are similar to cost-tracking. This method of estimating indirect costs involves the identification of facility operational costs in proportion to actual facility space or room areas. The second step involves the determination of the amount of time programs utilize each facility space, and consequently the estimated assignment of those indirect facility operations. Another method of estimating indirect costs involves a percentage of budget method. This seems to be the least systematic method, but is useful when a more accurate method such as the ones mentioned above may not really be applicable. For example, there are a significant amount of general program related expenses that seem to be impossible to accurately determine actual cost assignments for. However, when the assignment of all other costs has been completed, a clearer picture of the proportion of costs per program area is possible. Some assumptions can then be made in terms of the percentage or proportion of total expenses that have been estimated per program area. It is at that point that the remaining indirect costs can be then assigned according to the same percentage of budget allocations already arrived at. The end result of these applications is a much different overall financial picture for recreation programs and services. Challenge for the Future A much truer projection of the actual cost of providing those services is provided by incorporating "indirect" cost assignments. In fact, the completion of this informational tool can serve as the basis for the difficult but necessary decisions to what extent or level can agencies continue to afford to support or subsidize particular recreation program and service areas. In summary, fees and charges have become and will continue to play a major role in park and recreation agencies' future challenge to provide the comprehensive scope and quality of leisure services that communities demonstrated the need for, and grown accustomed to. About the Authors John Muno is the Director of Recreation for the Downers Grove Park District. Roger Key is Superintendent of Recreation for the Arlington Heights Park District.
|
|
|