Cost Analysis & Financial Strategies: On-line Lesson

A cost analysis information is developed from each of the facility and land acquisitions and facility improvements identified in the Agency Action Plan. Costs include capital improvement, operations and maintenance for existing and proposed facilities and resources. The estimated cost is usually based on representative construction cost data adjusted for the locale. Costs for design and project management (5 to 12%) and a contingency amount (10 to 15%) were added to individual action items. Estimates can be developed from consultants, staff park and facility planners or the city's engineer office. Capital improvement costs should be adjusted for inflation. The cost analysis contains four parts.

1) Calculate the per capita (per person) spending on parks and recreation in the community. Divide the community population by the city's parks and recreation budget. Example: $3.2 million Park & Recreation budget divided by a population of 55,000 = $54.55 per capita.

2) Compare the community's per capita figure with those of other communities of comparable socio-demographic characteristics.

3) Specific project costs for each item listed in the Agency Action Plan.

4) Funding strategies to identify monies to support the items in the Agency Action Plan.

Examples

Cost Analysis: Improvements to Existing Parks and Recreation Facilities

Neighborhood Parks

Cheshire Park

land acquisition $232,500
parking and entry drive $30,000
play equipment $35,000
multi-purpose turf field $274,260
trails $31,000
site furnishings and interpretive facilities $10,000
landscaper improvements $13,600
design and project management $106,490
Sub-Total $732,850
15% Contingency $109,930
Total $842,780

Community Parks

Bushmaster Park

playground equipment $50,000
open turf play area $397,740
parking and entry drive $89,520
trail construction $27,000
site furnishings and interpretive facilities $10,000
restroom facilities $27,000
offsite sewage $8,000
offsite water $9,000
offsite electric $2,000
ramada $20,000
skateboard track $75,000
Frisbee golf $20,000
design and project management $125,000
Sub-Total $860,260
15% Contingency $129,040
Total $989,300

Cost Analysis: New Park Construction

Southside Neighborhood Park

land acquisition (1.5 ac. @ $35,000/acre $52,500
pocket park facilities @ $50,000/acre $75,000
design and project management $21,680
Sub-Total $149,180
15% Contingency $22,380
Total $171,560

Lake Mary Community Park

parking and entry drive $238,880
group picnic areas and shelters $180,00
playground at group picnic area $50,000
individual picnic area facilities $32,000
restroom facilities $27,000
multi-purpose turf fields $868,770
trail construction $36,000
landscape treatment $150,000
design and project management $269,060
Sub-Total $1,851,710
15% Contingency $277,760
Total $2,129,470

Cost Analysis: New Community Special Purpose Facilities

Outdoor Sports Complex at Lake Mary Community Park $1,200,000
Community Recreation Center - $2,000,000 $2,000,000
Aquatic Park - $6,500,000 $6,500,000

Cost Analysis: Operations and Maintenance

User safety, satisfaction and community pride are to a great extent related to it's parks, recreation and open space. Proper maintenance will increase the useful life of a park or facility and reduce operational expenses. Parks operation and maintenance expenses may represent half of the total departments annual budget. Maintenance costs can be estimated by estimating acreage for each maintenance level. Per acre maintenance costs were based on the National Recreation and Park Association maintenance labor standard of 118 staff hours per acre per year. Per acre maintenance cost = average hourly wage ($12/hr) + 75% for equipment and supplies.

Maintenance Level Costs

Maintenance Level Factor Cost/acre/year
One +50% $3,720.00
Two +20% $2,980.00
Three average $2,480.00
Four -10% $2,240.00
Five -20% $1,990.00

* Description of Maintenance Levels

Financial Strategies

Funding is a critical component of the Master Plan. Funding sources may include Federal, State and Local government, grants, endowments, trusts, fees and charges. Specific funding sources may be unique to the State or Locale. Several of the most popular funding sources for parks, recreation and leisure services are listed below.

Federal Funding Sources

CDBG Funds for Capital Improvements

Future funding from the Community Development Block Grant program will depend on how it survives the on-going congressional budget reductions. The City will need to use the information presented in this plan to communicate the need for a generous portion of CDBG funds. So long as Congress keeps the Block Grant Program intact, this represents a fairly reliable source of funding for select park and recreation capital improvement projects.

ISTEA Funds

This program is federally funded through the highway administration, but is administrated by each individual state through CTEP (Community Transportation Enhancement Program). Flagstaff has secured ISTEA funding in the past and should be able to secure addition funding for future qualifying projects.

State Funding Sources

Arizona Heritage Fund

As a guideline for funding, the Arizona Heritage Fund Historic Preservation five-year Plan was drafted to assist the Historic Preservation Advisory Committee in making awards from the historic preservation component of the fund. This document is outlined in the 1994 SCORP (Statewide Comprehensive Outdoor Recreation Program). The program funds projects based on their inherent historic preservation needs and merits. In addition, the fund looks at the following factors:

1) Will the project further the preservation movement by its high visibility?

2) Will the project foster pride in the community?

3) Will the project beautify the community?

4) Will the project eliminate hazardous conditions?

5) Will the project create permanent jobs? The Arizona Heritage Fund should be a reliable source of preservation funding as long as the State maintains the availability of funds.

State Lake Improvement Fund

During the past twenty years, the State Lake Improvement Fund (SLIF) Program has evolved under the auspices of the initial SLIF plan completed in 1973. In 1990, the AORCC directed staff to review the SLIF program, its past performance and its impact to date. The resulting report was the 1992 State Lake Improvement Fund Futures Assessment. The assessment studied those issues related to boating in Arizona. In general, priority projects are those which satisfy the needs of statewide significance. The Triennial Watercraft Survey is used to determine what are priority facilities. Participants are encouraged to develop project applications that are based on coordinated long-range planning efforts that address local needs, conditions and priorities. A complete description of the funding considerations are available in the 1994 SCORP (Statewide Comprehensive Outdoor Recreation Plan). The SLIF should be a reliable source of funding for water based recreation.

Local Funding/Tax Sources

Hard  Taxes

These local taxes include:

bulletincome
bulletreal estate
bulletpersonal property and
bulletsales taxes

The majority of hard taxes require voter approval through some type of referendum.

Soft Taxes

Soft taxes may include:

bulletcar rental
bullethotel-motel
bulletplayer
bulletrestaurant
bulletsin (tobacco and alcohol) and
bullettaxi

Bed, Board and Booze Tax (example of a soft tax)

The BBB Tax dollar spending has historically been split between Economic Development, Beautification, Tourism, and the General Tax Fund. Commencing with 1996 the fund was reallocated by the City Council to provide 33 percent of annual revenues for Parks and Recreation. Since 1989 the BBB tax dollars have produced over three million dollars in funding for community improvements, art and science projects, special events, urban trails and park and recreation projects. With the projected growth in tourism, the funds should continue to be a viable source of revenue for various park and recreation improvements. It is estimated that approximately $1.5 million per year will be available, with a total of $21 million over the proposed 15 year life of the tax.

Bond Funding

Major park and recreation infrastructure improvements may be funded either on a long-term pay out or a pay-as-you-go basis. Under the first option, major capital improvements to the park and recreation system are financed with either general obligation bonds, revenue bonds or limited tax notes. General Obligation Bonds are those types of cash-raising instruments in which the payment on interest and principal is drawn from the general tax revenues of the municipality. There are several types of bonds that vary according to the method established by state law which determines the method of debt retirement.

Term Bonds. With a term bond the City would agree to pay off the entire principal at the end of a specified period of time. This is done through the use of a sinking fund. A sinking fund requires an annual amount of money to be set aside until the amount of the bond retiremen payment is reached.

Callable Bonds. Callable bonds are a special type of bond issuance in which the government entity has the option to call in the bond for payment at a specified time before the end of its term, or at any time the City chooses. Because of fluctuations in the municipal bond interest rates, issuers of callable bonds may call higher interest rate bonds in and reissue the bonds at lower interest rates according to the present state of the market.

Serial Bonds. With serial bonds the City pays the bond purchaser a specified portion of the principal plus interest each year that the bond is in effect. Under this method the face value of the bond is reduced by a certain percentage each year. This is done in equal payments similar to making a car payment or house payment.

Revenue or Assessment Bonds. Revenue or Assessment Bonds are those bonds where the funds are derived from special assessments or fees levied on those who use the facility. Park and recreation facilities typically financed with revenue bonds are golf courses, marinas, stadiums, sports complexes and cultural centers.

With these types of bonds, the city must secure a municipal bond rating. Bond packages using these methods of financing must be approved by voters before the city can sell the bonds. Voter in the 1990's are concerned about the nature of the bond repayment schedule and how much their property taxes could increase during the repayment period of the bonds.

Calling a bond election entails certain political considerations. These must be looked at in the context of recent bond elections, scheduled bond elections, and possible future bond elections. Recent bond elections have had mixed success. School bond and override proposals were defeated twice before a greatly scaled back version was passed in 1995. While the 1996 bond elections saw passage of a police and fire bond, a roads and open space package was defeated by a two to one margin. Currently, there is a proposal to place a bond issue for the Fourth Street overpass on the November 1996 ballot. If there was also a parks and recreation bond, would it pass? According to the public opinion survey, a majority of respondents did not favor a bond issue as a funding source. The high community priority on enhancing recreation facilities could override this sentiment, especially with a carefully structured bond program. A proposed bond issue should clearly respond to priorities as outlined in the cost projection. The city should update this information by conducting a separate, detailed public opinion survey on a recreation bond.

Limited Tax Notes. This is a method of selling general revenue bonds by the city that does not require a vote of the people. Certificates of obligation are used in those instances where the city determines that the urgency of the infrastructure need cannot be placed at risk by the potential capricious or fickle nature of the electorate. Typically Certificates of Obligation would be used to make major emergency improvements in park and recreation areas such as the replacement of defective playground equipment, ADA compliance issues, and removal of hazardous trees or buildings.

Special Districts

The Arizona State Statues provides authority for the establishment of a park and recreation district. Historically, the provision has been viewed as a governmental function of incorporated towns, villages and cities. Some argue that park and recreation districts are advantageous to certain cities for accomplishing the following: 1) Shaping the boundaries of the park and recreation district to embrace all of the fringe open lands, 2) Enlarging the tax base, 3) Permitting greater operational flexibility, thereby permitting the park and recreation district to enter into agreements with other special purpose districts such as independent school districts, water supply districts, drainage districts and conservation districts, and 4) Setting, within the limits set by law, the tax rate for the district, which may include commercial and industrial property currently not within the city limits.

Joint Service Authorities

Joint service authorities combine aspects of special improvement districts and intergovernmental agreements. Unlike special improvement districts, legislation to establish jurisdictional and taxing authority may not be required. Agreements establishing areas of responsibility and levels of funding are sufficient to establish joint service authorities.

Partnerships/Sponsorships

One of the most frequently used approaches to generate funding for community parks and recreation is the area of partnerships and sponsorships. Partnerships are a method whereby the City joins in a partnership with a private company, another public agency, a not-for-profit organization or simply a group of citizens, for the purpose of providing the resources necessary to deliver a needed park and recreation service. Partnerships permit something to happen, which if left to the individual resources would not be possible because neither of the partners could have done it alone.

Sponsorships are situations where an outside entity, such as a large company, that agrees to assume the annual maintenance costs of a particular community park or to sponsor summer concerts in the parks. Another possibility would be to sponsor softball teams for those children whose parents cannot afford to pay the assessments required for uniforms, umpires, and insurance.

Grants-in-Aid

Historically, grant writers were employed full-time by many City governments. Their job was to identify sources of grant funding for park development, improvements, or special recreation programs. At this time, most federal grants that provided federal tax funds back to the states for parks are gone. This also includes programs such as Land and Water Conservation Fund and UPAR, Urban Parks and Recreation Recovery Program. The financial burden has been shifted back to the states and cities.

Private companies, trusts and foundations usually distribute their money to a community, based on their review of grant applications. This will require the identification of pressing park and recreation needs, as well as justification of the public benefits to be accrued to the community as a result of receiving the grant moneys requested. Typically, it is the responsibility of City staff, Parks and Recreation, and City Council to steer the grant writing and lobby for approval.

The partnerships are strongly encouraged. The City should identify specific parks and facilities that can be either enhanced or initiated only with private sector sponsorship. It then should begin the process of approaching each local and/or national company in Flagstaff with a case statement in support of the particular grant. The needs and deficiencies identified in this plan should help establish the magnitude of the positive impact that these companies can have on improving the quality of life within Flagstaff.

Public Partnerships

The City could pursue a formal partnership with other government entities for joint development and use of park and recreation facilities. Such a joint-use agreement would have a priority-use provision, an indemnification of liability provision, and a damage maintenance and operations provision. The latter includes items such as utilities, grounds maintenance, and a pro-rata share of parking lot maintenance, as well as facilities such as bleachers, fences, and external restrooms. The city currently partners with FUSD on operation of pools at Flagstaff High School and Mount Elden Middle School, as well as use and maintenance of school athletic fields. In addition to the joint use of athletic facilities and campus grounds, it may be possible to work out individual agreements for the use of various facilities for community recreation programs. Similar agreements might be considered for afternoon and evening use of school gymnasiums.

Each Public agency plays a specific role in providing recreation for Flagstaff residents. These roles provide a basis for inter-agency coordination to avoid duplication of services.

Agency

Role

Coconino County Provides regional recreational facilities. Facilities developed in county parks are available for use by city residents. These facilities should be factored in to overall recreation supply and not duplicated by the city
Coconino Community College Provides indoor and outdoor recreation facilities which can be used by city and county residents. This could augment facilities provided by the city and FUSD.
Northern Arizona University Provides facilities for students, faculty, and staff. Agreements for community use of certain major facilities, such as the natatorium, could be established.
United States Forest Service Provides resource based recreation on a regional basis. Facilities of this type, especially campgrounds, tend to be beyond the scope of city parks and recreation programming. USFS land are managed for multiple use of resources, of which dispersed, outdoor recreation is a part.
National Park Service Provides resource based recreation on a regional basis. Facilities of this type, especially campgrounds, tend to be beyond the scope of city parks and recreation programming. NPS land are managed to protect nationally significant resources.

Park and Recreation Gift Catalog

A Gift Catalog could be designed, similar to an upscale mail-order catalog. This would show pictures of the park and street furnishings, as well as recreation facilities that are needed. In addition, the catalog can obtain suggestions for various kinds of recreation equipment which may not be within the scope of the current City budget. Furnishings may include items such as covered picnic tables, barbecue grills, drinking fountains, trash receptacles, park benches, planting boxes, or tot lot or playground equipment. Specialized items of heavy equipment, as well as computers and computer software can be placed in a Gift Catalog also. The current price of each item and the number of items needed should be included in the catalog.

In an additional section of the catalog, items such as horticultural gifts may be included. In this section, various species of trees, shrubs, flowers, along with planters and fountains can be identified for donation

The Gift Catalog would allow businesses, service clubs, and individuals to select items, for donation, possibly on a yearly basis. To the catalog user, this represents either a tax-deductible contribution or a contribution that has immediate results for the community. Prices for items in the catalog should provide a range of levels of affordability.

Flagstaff Parks Foundation

It has become common in cities across the nation to establish a tax-exempt 501-(c)-3 Parks Foundation. The foundation acts as a receiving agent for all contributions, making the gifts tax deductible. The foundation can also invest gifts of cash into growth funds, securities and other cash growth vehicles, spending only a percentage of the earnings while allowing the principle to grow.

If the Foundation obtains lands which are not needed for park and recreation purposes, they could be sold and the earnings placed in the growth fund. It is not uncommon for a Parks Trust Fund to hold parcels of highly valuable commercial property where the rental income provides a steady flow of cash into the foundation. A Parks Foundation can receive gifts of land with accompanying covenants, usually not acceptable to the convention of public agencies. These kinds of resources enrich opportunities of a park and recreation department to meet a wider range of community needs.

Community Roundtable

The roundtable is a mechanism for major businesses and community leaders to join forces to support programs for parks, recreation and open space. Through this concept, the member's of the roundtable would agree to contribute to the park system. The community roundtable concept dedicated a percentage of each company's gross profits, for example five percent to be pooled and donated to the Park and Recreation Department through the Parks Foundation. The Minneapolis Corporate Roundtable is a good example of how this can work. Major community businesses such as 3M, Pillsbury and IBM have generated funding for community parks and open space projects throughout the city. In Minneapolis this roundtable was the work of the Park and Recreation Director who sold the idea to the major community business leaders over twenty years ago. This kind of education, nurturing and organizational leadership must, by necessity, come from the Director of Parks and Recreation with strong support from the Parks, Recreation and Open Lands Foundation. Another aspect of a community roundtable can be establishment of matching employee programs. Companies and organization can donate services which can be performed on a volunteer basis by employees or members. Corporate sponsorships can also be organized and promoted via the community roundtable.

Cost Recovery From Park and Recreation Fees and User Charges

The concept of cost recovery is based on the philosophy that a community makes a policy decision to identify what it considers to be basic park and recreation resources and facilities. These are made available to all citizens at no cost beyond what they pay in taxes, which go into the city's general fund.

In recent years, an increasing number of park facilities and recreation programs have become extremely expensive, but serve the needs of a relatively small percentage of citizens. Facilities and programs such as lighted ball fields, in-line skating tracks, golf courses, water parks, sailing facilities, and arts and crafts are examples of this. These are expensive to build, maintain, and staff effectively, and in many instances, they attract residents from beyond the city limits who don't contribute to the local tax base.

The cost recovery policy will need to be adopted as part of the budgeting philosophy. For example, the city may choose to set the cost recovery policy at 25 percent of the cost of delivering a specific facility, service or program. Also, in instances where large numbers of nonresidents use a community facility, such as a water park, the non-residents may pay $0.60 of every dollar. Key considerations in establishing pricing or cost recovery policy is the community economic situation, impact of the fee on users, and ability for the City to subsidize the activity. As the cost of a program or service rises, the number of participants declines. A policy will the need to be set toward the cost recovery of each item. This should be all inclusive, using costs of facilities, materials, utilities, maintenance, and staff. This procedure should identify any inconsistencies toward better cost recovery. New policies and fees should be determined with respect to the overall departmental budget requirements.

Cost recovery policies should reflect the relative benefit of participation in recreation programs. Activities which benefit the community, i.e., teen programs or league sports, should be subsidized more. Activities such as dance classes which primarily benefit the individual, should be subsidized less.

City park and recreation facilities are used by both residents and non-residents alike. Nonresidents contribute to park and recreation funding derived from sales and BBB taxes. They do not; however, contribute to capital funding derived from bonds. One means of acquiring greater non-resident user contribution is though establishment of IGA'S, parks districts, and joint service authorities. This would have less impact on lower income users as cost would be borne through taxes rather than user fees. Imposition of a non-resident user fee surcharge would ensure a fairer share of costs borne by non-residents. The primary disadvantage of a surcharge is that it could limit participation by lower income families.

Enterprise Recreation Facilities

This requires the City to organize and operate along the same guidelines as private business. Enterprise Recreation Facilities introduce new facilities into the system that operate for the express purpose of making a profit. Profit is now a legitimate term within public administration. Profit is no longer expressed in higher levels of economic efficiency. Profit means to generate a cash flow in excess of all costs charged against the delivery of the resource, facility or service. Water theme parks, amusement parks, restaurants and clubhouses at community golf courses, train rides and similar facilities represent those kinds of enterprise operations within a community park and recreation system that can earn a respectable return. The City Council and the Park and Recreation Commission may then determine how much of the hypothetical profit should be reinvested back into the facility and how much can be reallocated into other Parks and Recreation accounts. These types of recreation facilities augment general fund appropriations to enhance basic park, recreation, and services that do not have the potential to generate a profit. As a pilot program to test the viability of this strategy, the City could operate the Jay Lively Activity Center in this manner.

Utility Bill Donations

A utility bill donation program is a viable method for the public to contribute to the park and recreation system. Many communities throughout the country have collected significant funds through this type of voluntary program. Participation rates in cities similar in size to Flagstaff range from 4.5% to 82%, with proceeds averaging $37,000 per year. A conservative estimate for revenue from a utility bill donation program in Flagstaff would be a 10% participation rate.

Non-Traditional Funding Sources

Forfeitures of money and property in criminal cases are made available for crime prevention programs. Because recreation programs for youth are regarded as crime prevention programs, the City may be eligible to obtain funding from this source.

Source: Wirth Design Associates. (1997). Long Range Master Plan for Parks, Recreation and Open Space. Flagstaff, AZ: author (re-printed: courtesy of Flagstaff Parks and Recreation Division)

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