1. The New Normal: Budgets, Cost Recovery and Pricing 2013 Massaschusets Parks and Recreation Association-Annual Confernece Chris Nunes, CPRE Director of Parks and Recreation The Woodlands Township The Woodlands, Texas

2. Session Objectives Identify the types and components of a budget Develop a program/cost center budget Forecast cost recovery percentages thus identifying a potential program price

3. Then

5. Now

7. Background Information Somewhere between then and now our facilities, programs, and services changed but did our budgeting and pricing techniques?

8. Is this you and your facility? Decreased share of base fund/tax base Competition/market share Increase in requests for services Facilities built in the late 1990’s and early 2000’s Slow growth, if any Limited capital improvement funding Decreasing agency support How can we better understand these challenges?

9. Background Information Purpose of a Budget Document use of funds spent and received Standardized for ease of comprehension Means for evaluating program and service goals and objectives. If you can’t measure it, you can’t manage it.”- Peter Drucker

10. Budget Information Where does our revenue come from? Membership Dedicated Fees Taxes Fees/Charges Contracts Grants Donations Other????

11. Budget Information Operating Budget Formats Line Item Object Classification Program/Cost Center- Costs are separately figured and allocated- macro, micro, nano

12. Budget Information Types of Budgets Capital long-range, high-cost, long-term budget items buildings, vehicles, major facility renovations etc. ROI on new facilities/equipment

13. Program/Cost Center Budgeting How can you increase funding/decrease cost? Increase membership/sales/base fee/property/sales tax rate Review existing programs/services for efficiency/cost effectiveness Re-tooling the inventory- “sacred cows” Other revenue- concessions, lease/rentals, contract services, etc-CAUTION Review programs and services on a micro level, i.e. cost center

14. Program/Cost Center Budgeting Why do I want to do a program/cost center budget? Accountability Constant review of budget Reduce reliance on subsidy Ensure quality of service Ability to understand market and service paradigm Ability to understand core services and patron needs

15. Program/Cost Center Budgeting Direct Cost- “Go-away” costs; Leaders, instructors and materials or services (i.e. transportation) specific to the course or activity. Indirect Cost- Janitorial, clerical, maintenance wages, lights, electricity, paper, small tools, cleaning supplies, etc. Overhead- Printing, photocopying, training, accounting support, technology, credit card discount costs, administrative/clerical support, technology.

16. Program/Cost Center Budgeting Setting up a Budget: Expenses What is your internal cost structure? In House vs. Contract out Supply Costs Cost to produce a service Utilities Repair and Maintenance Efficiency of Staff Need for Staff Technology Other?

17. Program/Cost Center Budgeting Budget Development What programs/services could be offered? Pool Heater Example Swim Lessons Swim Team Staff Training Rentals Water Polo SCUBA Stroke Training Remember that there are costs associated with providing these services.

18. Program/Cost Center Budgeting Budget Development-Expenses

19. Program/Cost Center Budgeting Budget Development - Expenses

20. Program/Cost Center Budgeting Budget Development-Expenses

21. Budget Development- Direct Cost Program/Cost Center Budgeting What costs are missing……………….

22. Budget Development - Indirect Cost Program/Cost Center Budgeting What are you required to recover? GreenPlay, LLC, 2008 Cost Recovery Study Bend, OR

23. Program/Cost Center Budgeting Should there be a different overhead cost for different services? Budget Development- Indirect Cost

24. Program/Cost Center Budgeting Budget Development - Revenue/Pricing Who benefits from the service? Who generated the need, therefore, the cost? What is the commitment or intensity of the program? Do community values support subsidy? Are we obligated to provide this service? Will the level of the fee affect the demand for the service? Cost Recovery / Goals Recovery Policies

25. Pricing How can price be determined? Cost Recovery Goals (25%, 50%, 75%, 100%, 150%) What costs need to be recovered? Market Based Price based on time/location Supply/Demand

26. Program/Cost Center Budgeting Budget Development - Revenue/Pricing How do I arrive at program estimates? Educated Guess Historical Numbers Trend identification Competition (lack of) Growth/Contraction Other agency’s numbers Fee Increase Hunch………..

27. Pricing Will price have an impact on use rates? Increase Decrease No Impact Elasticity

28. Pricing Minor fee increase Decrease 10% Major increase Decrease 20-40% Value Understand market, Undervalued Services Psychology of Pricing 5’s and 9’s Price breaks First year is the toughest!!

29. Increase in Price No. of Dollars/ Attendees Income Attendance Pricing

30. Program/Cost Center Budgeting Historical Numbers Growth/Contraction Fee Increases

31. Program/Cost Center Budgeting Price by Height Price by Location

32. Program/Cost Center Budgeting Riva Row Boat House 2 years old Elastic or Inelastic Impact of a $5 fee increase? Growth or No Growth? Impact of advertising and marketing Desire to keep fees constant for two years or more

33. Pricing- Market Based Differentiation = Quality, Expertise, Speed/Level of Service Program/Cost Center Budgeting

34. Pricing- Market and Cost Recovery Based Approach Two year-2007 Tiered facility Service Levels Service Differentiation Reaction of the public/board What was the impact of these increases?

35. Pricing- Market and Cost Recovery Based While there is a decrease in use, there may be a decrease in expenses, 51% decrease in use, yet $39,000 increase in net effect.

36. Pricing- Market and Cost Recovery Based

37. Program/Cost Center Budgeting Ability to meet goals Management Tool Monitoring Techniques Are you on track? Additional marketing needed to reach goals?

38. Program/Cost Center Budgeting Can we use this methodology for individual programs?

39. Pool Fees

40. Pricing- Market Based Pool Fees

41. Program/Cost Center Budgeting

43. My competition just changed their price…..what do I do? Evaluate the competitor’s reason for the price change Evaluate marketplace response Considers own product’s strategy Pricing-Issues

44. Pricing Issues What do I do?....... Reduce price Raise perceived quality Improve quality and increase price Launch low price “fighting brand”

45. Capital X Budgeting

49. Program/Cost Center Budgeting Things to remember Understand your pricing philosophy Benefits/costs of micro detail Decreasing use may increase revenue Ability to use for programs, services and maintenance Understand the marketplace and its relation to your price Control leakage The devil (and the savings) is in the details…………. "A billion here, a billion there—sooner or later it adds up to real money.“ — Senator Everett Dirksen

50. Thank You!!!!!! Chris Nunes, Ph.D., CPRE Director of Parks and Recreation The Woodlands Township 2801 Technology Forest Blvd The Woodlands, Texas 77381 281-210-3906 cnunes@thewoodlandstownship-tx.gov