Title
PRESENTATION OF THE FINAL REPORT ON THE COST RECOVERY, RESOURCE ALLOCATION AND REVENUE ENHANCEMENT STUDY
RESOLUTION NO. 2017-207 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING CERTAIN SECTIONS OF CHAPTER 7 (RECREATION) OF THE CITY’S MASTER FEE SCHEDULE
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RECOMMENDED ACTION
Recommended Action
Council accept the report and adopt the resolution.
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SUMMARY
In 2014, the City of Chula Vista hired a national consultant firm, PROS Consulting Inc., to conduct a Cost Recovery, Resource Allocation and Revenue Enhancement Study in an effort to continually improve and to enhance services and overall organizational effectiveness within the Recreation Department. An analysis of pricing, operational strategies and working methodologies were developed, including a schedule of recommended fees. Staff recommends that the City Council accept the final report and adopt the resolution updating the City’s Master Fee Schedule accordingly.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
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Environmental Determination
The proposed activity has been reviewed for compliance with the California Environmental Quality Act (CEQA) and it has been determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change in the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
DISCUSSION
In June 2014, a project team was established with City staff from the Recreation, Public Works (Operations) and Finance Departments to work with PROS Consulting, Inc. to accomplish the following:
• review current practices and existing policies related to facility reservations and program fee development (cost recovery, core services and revenue sources);
• proactively engage with the community regarding current pricing satisfaction, future potential pricing methodologies, and likelihood of supporting scholarship fund for low-income residents;
• identify true costs of operations;
• identify opportunities to enhance and leverage the financial resources of the City of Chula Vista in providing recreation facilities and services;
• update the City’s Master Fee Schedule for Recreation Fees (Chapter 7);
• introduce philosophy of service classification (Core/Essential, Important and Value-Added);
• develop a prioritized decision-making roadmap supported by a logical resource allocation model and pricing strategies; and
• develop a dynamic and realistic action plan to recover costs and be financial sustainable.
The study and recommendations have taken over 3 years to complete due to a number of factors, including an extended period of time in 2015 in which the Parks & Recreation Commission did not have enough commissioners to have a quorum, scheduling and coordination amongst multiple departments, and continued availability of an outside consultant working on other projects.
KEY RECOMMENDATIONS
The following recommendations provide guidance for City leadership and the Recreation Department in the implementation of fees, methodologies and practices. Consistent measurement and tracking as well as on-going communication with the community will be critical to ensure success and support in the implementation process.
Recommendation #1 - Incorporate Program Based Pricing Philosophy Based on Exclusivity and Levels of Benefit: It is recommended that the City adopt pricing strategies based on exclusivity of use and levels of individual versus community benefit. Staff has developed a comprehensive program classification matrix that categorizes all current offerings in one of three categories based on this Pricing Philosophy.
¨ This philosophy ensures core programs have highest level of general fund subsidy while value-added programs have lowest level of general fund subsidy. The following range of cost recovery goals is proposed for program areas that fall in each category. The range of cost recovery goals for each classification was based on nationwide best practices.
n Core/Essential Programs (0% - 30% cost recovery)
n Important Programs (31% - 70% cost recovery)
n Value-Added Programs (71% - 100% cost recovery)
The basis for determining where each recreation program should fall is built upon two fundamental values: exclusivity and level of community benefit. The greater the community benefit the more likely it is to be core/essential; the greater the individual benefit the program is likely to be value-added. The model has three tiers (core/essential, important and value-added) which pose a series of questions that help the department determine where each program falls within the stated bands of cost recovery. The series of questions include:
1. Is it part of the mission?
2. Is it expected by the community?
3. Does it serve the broad community or just a small group of people?
The answers to these questions helps determine what classification the program should fall under.
The Recreation Department will annually review and update the classification of programs which are consistently offered and will evaluate each new offering using the aforementioned model in determining program classification. The following tables list program classifications for currently or previously offered programs.
Recommendation #2 - Offer Base Prices with Resident and/or Nonprofit Discounts: Create a base fee structure for all offerings and rentals with discounts for residents and nonprofits. The Department would institute a higher base fee for offerings and services but residents (upon providing proof of residency) would receive a resident discount. Nonprofits would also receive discounts upon providing their nonprofit tax ID.
• A resident shall be considered any person residing within the City limits or any person owning property in the City. (“Resident”). In order to qualify for Resident pricing, the Resident must supply proof of residency or property ownership, by one of the following methods: Valid California Driver’s License, or official identification (“I.D.”) card issued by the Department of Motor Vehicles for non-drivers, displaying a City address on the license or I.D
• Current year utility bill, in the Resident’s name, for an address within the City.
• Current year property tax statement, in the Resident’s name, for an address within the City.
Recommendation #3 - Offer Differential Pricing Rates (Timing / Residency Rates): Establish differential and tiered pricing structures for all offerings. It is an industry best-practice to establish a tiered structure that accounts for differential pricing strategies such as resident / non-resident, prime time / non-prime time, weekday / weekend, quality of the instructor, etc. It, thus, ensures that the pricing accurately reflects the value of the experience received by the users. One component of this should be pricing based on time of use e.g. time of day, and weekday versus Saturday.
Options in pricing of services allow users to pick and choose what components of the service they want and allow staff to provide a tiered range of service offerings. This approach is helpful in the establishment of multi-tiered pricing and allows users to pick and choose what level of quality or quantity they want and will pay for accordingly.
Differential pricing options encourage users to move to a classification that best fits their schedule and price point. These pricing options provide opportunities for staff to maximize utilization and revenue generation for facility rentals and program offerings. The pricing options below include some that Chula Vista currently offers and some others that could be evaluated by staff for future offerings.
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• Primetime |
• Incentive Pricing |
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• Non-primetime |
• Length of Stay Pricing |
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• Season and Off-season Rates |
• Cost Recovery Goal Pricing |
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• Multi-tiered Program Pricing |
• Level of Exclusivity Pricing |
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• Group Discounting and Packaging |
• Age Segment Pricing |
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• Volume Pricing |
• Equipment Pricing |
Recommendation #4 - Annually Update Cost of Service Model: Continue to track indirect and overhead costs (including custodial, park maintenance, etc.) to identify the true cost of offering a service. Annually update the model with data captured during the year and communicate the cost of service to the staff and users on an on-going basis.
The chart below is a sample of the Cost of Service Model identifying the total cost of offering the listed programs, including indirect and overhead costs, as well as listing the cost recovery percentages of the programs, and total cost per unit.
After identifying the true cost of providing a service, the data is analyzed against the classification of the program and the desired full cost recovery percentage to derive the recommended base fee and recommended resident discounted fee. The chart below reflects the data from the cost of service model in the previous chart.
Recommendation #5 - Incorporate City’s Asset Management Program Into Recreation Fees: A large number of existing parks and facilities as well as amenities within the facilities are aging and are at or near the end of their lifecycles. While the on-going asset lifecycle replacement study will provide clarity on future needs, ensuring a pricing structure that supports long term capital improvement and deferred maintenance is critical to the success of our recreation programs as the population served by the city and the demand for parks and recreation offerings increases.
Recommendation #6 - Seek Non-Traditional Funding Sources: More and more parks and recreation agencies are looking to partnerships and creative revenue generating sources as a means to ensure long-term financial sustainability without burdening the existing user base. Pursue new earned income options as a way to ensure greater financial sustainability. Some examples would be to explore sponsorship, naming rights and advertising partnerships or to identify potential crowdfunding projects to be funded through existing platforms, such as Razoo.com, Indiegogo.com, or NRPA’s Fund Your Park Program.
Recommendation #7 - Update the City’s Master Fee Schedule - Proposed Fees and Charges: Staff recommends adoption of the Master Fee Schedule amendments to Municipal Code Chapter 7 - Recreation Fees (Attached Resolution with Exhibit 1 - Redline Master Fee Schedule, Chapter 7 - Recreation Fees).
BOARD/COMMISSION RECOMMENDATION
On September 5, 2017, the Parks & Recreation Commission, voted unanimously in support of the following recommendations:
• Incorporate Program Based Pricing Philosophy Based on Exclusivity and Levels of (Individual versus Community) Benefit
• Offer Base Prices with Resident and/or Nonprofit Discounts
• Offer Differential Pricing Rates (Prime-Time and Non-Prime Time rates)
• Annually Update the Cost of Service Model
• Incorporate City’s Asset Management Program into Recreation Fees
• Seek Non-Traditional Funding Sources
• Update Master Fee Schedule
COMMUNITY SURVEY
An online survey was administered to the Chula Vista community during the month of April 2015. This survey focused on the level of community support initiating a new fee policy and pricing structure. Staff publicized the availability of the survey and encouraged participation through email blasts through ActiveNet. Additionally, staff printed copies of the survey in English and Spanish and had those available at every recreation center to ensure people had the opportunity to participate in the process.
The survey received a total of 1,209 responses which is among the highest response rates the consulting firm has seen nationwide. Over 90% of all respondents were Chula Vista residents so the survey had over 1,000 responses from Chula Vista residents alone.
The recommendations are based on the following:
• Community input from public meetings
• 1,200+ online survey responses. Surveys were available at recreation facilities in both English and Spanish.
• Comparable information from benchmarked sources
• Available direct, indirect and overhead cost data supplemented by staff assumptions
• Parks and Recreation Commission input
• Iterative staff feedback across multiple departments
• Consultant’s operational experiences and nationwide best practices
The meetings and surveys provided community feedback on pricing, operational strategies and working methodologies and help guide the key recommendations.
Community Engagement
Chula Vista Recreation staff helped organize six open public meetings in October 2014, September 2015, and October 2017. These meetings were held at Norman Park Senior Center, Montevalle Community Center, and Salt Creek Recreation Center. These meetings were publicized through written invitation letters, email notifications through the Recreation Department’s software system for program registration and facility booking called ActiveNet, publicity at the Centers, social media through the Recreation Department’s and City of Chula Vista’s Facebook pages, and word of mouth.
The goal of the meetings was to obtain broad community input and preferences for revenue and pricing strategies including differential pricing, scholarships, non-resident fees and various potential revenue sources. Attendees provided a wide range of opinions and a broad consensus on several key issues during the meetings early in the process. As a result of the final community meetings, there were no objections to the findings and recommendations of this study.
CONSISTENT RESERVATION POLICY & PROCESS
The following table displays recommendations to be implemented across the Recreation Department to provide consistency in policy and processes regarding facility reservations. These policies and processes are to be included in the Master Fee Schedule update.
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Policy / Process |
Implementation |
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Rentals / Facility Use Permits |
21 days cancellation notice required |
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Non-refundable Reservation Fee |
$100 fee applied to permit fees |
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Rental Fee Payment |
Payment in full, 21 days prior to event date |
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Commercial Vendor Permit (Charged per Vendor) |
Base Fee ($100) ; Resident Discount ($50) (use of air jump, pony ride, llama ride, petting zoo or similar) |
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Custodial Fee |
Weekend (Friday-Sunday) and holiday rentals to include $60 non-refundable at all facilities (with annual COLA review) |
ELIMINATION OF CLEANING/DAMAGE DEPOSITS
Through analyzing the cost benefits versus the time spent (indirect expenses) on administering the deposit collection and refunding process, it was found that the costs significantly outweighed the revenue generated from the rare instance that the deposit was retained. Therefore, it is recommended the cleaning/damage deposits for the Recreation facility rentals be eliminated.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently, the 500-foot rule found in California Code of Regulations section 18704.2(a)(1), is not applicable to this decision. Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The Cost Recovery, Resource Allocation and Revenue Enhancement Study, has identified opportunities to improve and enhance services and overall organizational effectiveness (Operational Excellence), improve the financial sustainability of the Recreation Department and Public Works Operations of custodial, park maintenance and water (Economic Vitality), evaluated resources and partnership opportunities to provide diversified activities for all to promote healthy lifestyles (Healthy Community), educated the community on recreational opportunities through surveys (Strong and Secure Neighbors) and involved community engagement through meetings with community members and partners (Connected Community).
CURRENT YEAR FISCAL IMPACT
Fiscal impact for FY 2017-18 will vary based upon program and facility rental volume. Staff recommends the implementation of the proposed fees become effective April 1, 2018, the beginning of the Spring Quarter of FY 2017-18. This recommendation is based on building adequate time to communicate the upcoming change to the community and users who may be impacted by the change.
ONGOING FISCAL IMPACT
Ongoing fiscal impacts will vary based upon future program and facility rental activity. Future budgets will be adjusted to reflect actual revenue activity.
ATTACHMENTS
1. Cost Recovery, Resource Allocation and Revenue Enhancement Study Report 2017
2. Resolution with Exhibit 1 and Exhibit 2 - Redline Master Fee Schedule Section 7-100 and 7-200 (Recreation Fees)
Staff Contact: Tim Farmer, Principal Recreation Manager, Recreation Department