1. Cost Recovery And community benefits
Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Cost Recovery And community benefits
Pat O’Toole, Principal
Pat O'Toole, GreenPlay,LLC

2. What we aim to accomplish
Identify the structure and uses of the Pyramid Cost Recovery Methodology
Discuss how to create a comprehensive cost recovery, pricing and resource allocation philosophy based on community benefit and your agency’s mission
Use the pyramid model to allocate subsidy/tax funding where most appropriate

3. Cost Recovery Philosophy & Pricing Policy
Overall Agency
Cost Recovery Philosophy & Pricing Policy
Funding Sources
Traditional Funding
Alternative Funding
Philanthropic
Grants
Partnerships
Donor Programs & Capital Campaigns
Volunteers /
In-kind Service
Single Agency
Multi-Party
Marketing Partnerships & Sponsorships
General Fund
Revenue Bonds
Impact Fees
Various Other Taxing Methods
Fees & Sales

4. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Today’s Conditions
Increased competition for the “leisure dollar”
Increased operating expenses (e.g., utilities, fuel, personnel, supplies)
Disinterest in service reductions or increased fees and charges
Continuing demand for services with no/limited additional funding
Pat O'Toole, GreenPlay,LLC 4

5. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Public parks and recreation agencies are now shifting to more corporate or business-like models to sustain systems
Q: “How much subsidy should be directed to a service if an individual derives a greater benefit than the community as a whole?”
Pat O'Toole, GreenPlay,LLC 5

6. What’s our cost recovery and subsidy allocation philosophy?

7. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Distinctions
Pricing
Policy
Philosophy
We must speak a common language!
Pat O'Toole, GreenPlay,LLC

8. Pyramid Methodology
Management tool utilized by agencies across the country
Articulates the level of benefit that services provide
Aligns with the issue of core services
Allows for logical determination of:
resource allocation
subsidy/cost recovery goals
future fees and charges
Justifies decisions

9. What are the benefits? Community and governing body “buy-in”
A fair, equitable, and simple structure based on agency values, vision and mission
An effective tool for future decisions
Financial sustainability
The ability to “tell our story” and be accountable for and responsible with resources

10. How does this work? Provides a framework for discussion
Uses examples to make you think
You cannot simply adopt another agency’s philosophy

11. Pyramid Methodology – 10 steps
Build on Organizational Values, Vision and Mission
Understanding the Pyramid – the Benefits Filter and
Secondary Filters
Develop the Organization’s Categories of Service
Sort Categories of Services
Determine (or confirm) Current Subsidy/Cost Recovery Levels
Define Direct and Indirect Costs
Establish Subsidy/Cost Recovery Goals
Understand and Prepare for Influential Factors and Considerations
Implement
Evaluate

12. Step #1: Build on Organizational Values, Vision and Mission
The City of Farmington Parks, Recreation,
and Cultural Affairs Department is dedicated
to providing the opportunity for people to
play, to laugh, to grow, to learn, and to
engage in enriching their quality of life.
Our department recognizes the strength in:
Consistency and Fairness
Service and Integrity
Loyalty and Respect

13. Consensus Building – Stakeholder Participation
Governing Bodies
Staff
Community

14. You are expected to serve those who “pick up the tab”
Taxes – General or Dedicated Funds
Mandatory Fees
Fees & Charges
Alternative Funding

15. Step 2: Understand the Pyramid - Benefits Filter and Secondary Filters
Grounded in a primary “benefit” filter and secondary filters
Helps answer the question, “Where should subsidy be used?

16. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Who Expects to Benefit?
Tax Sources/GF
Fees and Charges
Program fees
Permits
Rentals
Alternative Funding
Grants
Donors
Sponsors
“Those who invest expect to benefit”
“Those who pay expect to benefit”
“Those who contribute expect to benefit”
Pat O'Toole, GreenPlay,LLC 16

17. The Foundational Level of the Pyramid
Mostly Community Benefit
(All taxpayers)
Benefits the community as a whole
May increase property values and public safety, address social needs, and enhance basic quality of life of all residents.

18. The Benefits Filter in Action
MOSTLY INDIVIDUAL - elite swimming or diving team
CONSIDERABLE INDIVIDUAL - swim team
INDIVIDUAL/COMMUNITY - swim lessons
CONSIDERABLE COMMUNITY - pool
MOSTLY COMMUNITY - spray ground, non- monitored lake

19. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
For the Outdoor Folks
MOSTLY INDIVIDUAL - marina concessions
CONSIDERABLE INDIVIDUAL - boat launch or reserved camp site
INDIVIDUAL/COMMUNITY - monitored nature garden or interpretive park
CONSIDERABLE COMMUNITY - non-reserved camp site or public fishing pier
MOSTLY COMMUNITY - non-monitored open space park or trail
Pat O'Toole, GreenPlay,LLC 19

20. Secondary Filters Access/Type of Service Organizational Responsibility
Historical Expectations
Anticipated Impacts
Social Value

21. Step 3: Develop Categories of Service - Examples
Non-Monitored Parks and Recreational Facilities
Drop-In Monitored Access (non- instructional)
Camps
After School Programs
Preschool
Tournaments/Leagues
Activities- Beginner/Novice
Activities -Intermediate
Activities-Advanced/Competitive
Merchandise for Resale
Concessions/Vending
Social Services
Social Clubs
Trips
Amusement or Tourism Attraction
Special Events Partnered or City-Offered
Exclusive Use Non-profit and Government
Exclusive Use For-profit and Private
Exclusive Use Government
Leased, management services

22. Step 4: Sorting Services onto the Pyramid
Causes discussion
Values emerge
Develops consensus

23. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
A fun exercise with your colleagues . . .
Pat O'Toole, GreenPlay,LLC

24. Sample Programs Tournaments Art Programs Teen Programs
Admissions – Public Swim
Fitness Classes
Concessions
Facility Rentals
Swim Lessons
Senior Activities
Adult Sports
Youth Sports
Birthday Parties
Golf Programs
After School Program
Therapeutic Programs
Day Camps
Community-side Special Events
Environmental Education Programs

25. Determine (or confirm) Current Subsidy/Cost Recovery Levels
Step 5:
Determine (or confirm) Current Subsidy/Cost Recovery Levels

26. Cost = Subsidy + Cost Recovery
Costs: all identifiable expenses associated with a particular unit of service
Subsidies: tax funding and mandatory fees
Cost Recovery: all revenue sources associated with that service
fees and charges
grants
sponsorships
donations (capital campaigns)
other, non-taxpayer sources

27. Cost Recovery and Subsidy
40%
60%
= 100%
80%
20%
= 100%
100%
+20%

28. Step #6: Define Direct and Indirect Costs
Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Step #6: Define Direct and Indirect Costs
Direct Costs:
Specific, identifiable expenses (fixed and variable) associated with providing a service or program
These expenses would not exist without the program or service.
Pat O'Toole, GreenPlay,LLC 28

29. Indirect Costs
Overhead (fixed and variable) including administrative costs
These costs would exist without any specific services and might also be attributed to facility operations (in which case they are direct expenses to the facility or park operations)

30. Step #7: Establish Subsidy Allocation/ Cost Recovery Goals
Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
Step #7: Establish Subsidy Allocation/ Cost Recovery Goals
Think about subsidy allocation first - cost recovery will follow
Overall goals will be determined based upon placement in the Model
Don’t forget the agency’s values, vision and mission
It is critical to consider current cost recovery/subsidy levels - baseline
-Select formulas as tools for implementation
-Course Correction
-Establish Goals
-Meet New Goals
-Align Cost Recovery Goals with the Market
Pat O'Toole, GreenPlay,LLC 30

31. Farmington Parks, Recreation, and Cultural Affairs
Subsidy Allocation/Cost Recovery Goals - Example
12/27/2018
Pat O'Toole, GreenPlay,LLC
(c) 2008 GreenPlay, LLC 31

32. Farmington Parks, Recreation, and Cultural Affairs
Subsidy Allocation/Cost Recovery Goals - Example
12/27/2018
Pat O'Toole, GreenPlay,LLC
(c) 2008 GreenPlay, LLC 32

33. Subsidy Allocation/Cost Recovery Goals - Example

34. Step 8: Understand and Prepare for Influential Factors and Considerations
Commitment
Trends
Politics
Marketing
Cost to Provide
Economic Conditions
Financial Goals

35. Step 9: Implementation Educate all staff on your new philosophy
Develop implementation strategies including alternative funding and fee adjustments
Continue to foster “buy-in” from staff, governing bodies and citizens

36. Step #10: Evaluation
Evaluate the effectiveness of your new philosophy during the next budget cycle
Make adjustments as necessary

37. Farmington Parks, Recreation, and Cultural Affairs
12/27/2018
The Leading Edge in Parks, Recreation and Open Space Consulting
Pat O’Toole, Principal
Chris
This tool assists with the agency philosophy and the development of “cost recovery” policies to assist in achieving financial sustainability.
Copyright © 2001, 2003, 2008, 2012 GreenPlay LLC
Pat O'Toole, GreenPlay,LLC 37