May 18, 2004
SUBJECT: Exploration of Youth Rates for Recreation Programs and Activities — Study Issue (04-170)
EXECUTIVE SUMMARY
This Study Issue was precipitated during Council’s initial study of fees for public use of the newly developed 50-meter pool at Fremont High School. It was decided that if youth rates were to be further studied for Fremont Pool, they should be studied in the context of youth rates for all other City recreational programs and activities.
The Community Recreation Fund and its corresponding enterprise philosophy provide the broad context for all recreation programming and services, including those developed specifically for youth. Fees paid help to ensure the continuation of services, especially the continuation of those services whose fees do not cover the full cost, e.g., youth and seniors.
Determination of what recreation programs and services should be offered at what fees at any given time is a dynamic, and self-correcting process, based in great part on market forces: if the wrong programs are offered, or fees are too high, programs will not have the needed participation. Where social or other overriding objectives drive the desire for certain programming, as is the case with some youth programming, below market strategies can be employed to lower fees beyond what would otherwise be indicated in order to increase desired participation.
The issue of “youth” rates seems to be based on a heartfelt, philosophical belief that the City should “do right” by its youth. Further, it seems that the City has an obligation to ensure that our current practices truly take into account the needs of youth and the value that we as a City place on them.
Staff believes that our current practices do indeed take into account the needs and value of youth and that the City’s recreation programs already do utilize “youth” rates for much of its programming, although these rates have not been identified as such. In fact, feedback from the public has supported this idea and has suggested that better communication in this area would alleviate many if not all of their concerns.
Staff believes that the City’s existing policies now provide ample direction and desirable flexibility in setting recreational rates in such a way that “youth” rates are possible and are being offered. However, these policies could be supplemented or revised, if Council so desired, to achieve more specific ends. If a new policy relating to fees youth are charged for recreation is desired, there are three major variables to be determined: Which youth should be charged what rate for which programs or activities. This report reviews some of the possible options in this regard.
Finally, there was consensus among those involved during the writing of this report that the fee waiver program is important to continue as a means of ensuring the ability of the economically disadvantaged to access programs, and should be considered separate from any discussion of youth rates.
Fiscal Impact
There is no fiscal impact to continuing Council’s existing policies for establishing recreation fees and to staff’s current approach to youth rates. If Council were to supplement these policies with new ones that would reduce rates that youth are charged for some or all programs, there would be a negative impact to the Community Recreation Fund, which would need to be made up either in an increased subsidy from the General Fund or through reductions to other subsidized services within the Community Recreation Fund, such as other youth programs and/or senior programs. Staff believes it is at market with its other rates, such that attempts to raise fees in these other areas would not be effective in generating additional revenue that could be used to offset a negative impact to the Community Recreation Fund.
Public Contact
On February 25, 2004, a joint Study Session was conducted with the Arts Commission and the Parks and Recreation Commission.
On March 4, 2004, staff met with Ms. Holly Lofgren, Former Chairperson, Friends of Fremont Pool.
On March 10, 2004, staff met with City staff from the Columbia Neighborhood Center, the Office of the City Manager, and two case managers working with students at the Columbia Neighborhood Center.
On March 10, 2004, a joint Study Session was conducted with the Arts Commission and the Parks and Recreation Commission.
On April 14, 2004, a joint Study Session was conducted with the Arts Commission and the Parks and Recreation Commission.
On April 28, 2004, the Parks and Recreation Commission held a public hearing on this matter.
On May 3, 2004, the Arts Commission held a public hearing on this matter.
Public contact was made through posting of the Arts Commission, Parks and Recreation Commission, and Council agendas on the City’s official notice bulletin board, posting of the agendas and report on the City’s web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the report in the City Clerk’s office, Library, Parks and Recreation Administration, Community Center, and Senior Center.
Meeting notices were also sent out to a wide range of potentially interested and/or affected individuals and organizations notifying them of the April 14, 2004, joint Study Session with the Arts Commission and the Parks and Recreation Commission. Notification was also provided of when the Parks and Recreation Commission, the Arts Commission, and the City Council were scheduled to take action on this matter. Individuals and organizations so notified included school districts and youth sports groups. A full listing along with a copy of the meeting notice is included as Attachment A.
Recommendation
Staff recommends Alternatives 1 and 3: Continue supporting existing policies concerning the establishment of recreation fees and direct staff to review future promotional and communication pieces on fees and to incorporate references to youth rates where appropriate.
The Parks and Recreation Commission considered this matter during its public hearing on April 28, 2004, and recommended Council accept staff’s recommendation – Alternatives No. 1 and No. 3 – with a vote of 2-1, Commissioner Pole dissenting, (Commissioners DeWolf and Lawson absent.)
The Arts Commission considered this matter during its public hearing on May 3, 2004, and recommended Council accept staff’s recommendation – Alternatives No. 1 and No. 3 – with a vote of 4-1, Commissioner Carney dissenting.
Attachments
A. Meeting Notice and List of Recipients (pdf format)
B. Study Issue Paper (pdf format)
C. Model Illustrating the Relative Distribution of Revenue and Expense within the Community Recreation Fund (as currently budgeted) (pdf format)
D. How It Works: Our Basic Model for Setting Fees (pdf format)
E. Clarification of Existing Policy and Practices in Establishing the Recreation Fees that Youth Are Charged (pdf format)
F. Examples of Current Fee Structures for Youth Resulting from Existing Policy Direction (pdf format)
G. Options for Supplementing Existing Policy on Setting Recreation Fees that Youth Are Charged (pdf format)
H. Fremont Pool – Current Fee Schedule (pdf format)
BACKGROUND
This Study Issue was precipitated during Council’s initial study of fees for public use of the newly developed 50-meter pool at Fremont High School. (Please see Attachment B for a copy of the Study Issue paper.) For a number of reasons, staff recommended against “youth” rates for the pool and Council supported that initial recommendation. This Study Issue was proposed in acknowledgement of continued public interest in reduced youth rates for Fremont Pool. However, it was decided that if youth rates were to be further studied for Fremont Pool, they should be studied in the context of youth rates for all other City recreational programs and activities.
History of the Community Recreation Enterprise Fund
In Fiscal Year 1991/92, the City created the Community Recreation Enterprise Fund by combining all recreational services into one financial package. Golf services, which previously constituted their own Fund, were brought together with all other recreation serves to form one Enterprise Fund. As with all other enterprise funds, it was assumed that to the degree possible, related services should be paid for by those receiving them and those who benefited most from them. In other words, recreational services would be paid for by user fees as opposed to tax dollars.
Essentially, the fund objectives were to clearly depict the recreation activities of the City as well as the recreation revenues used to offset them and to develop a strong market-based system to, over the long term, create greater financial independence for the recreation activities of the City. A market-based, entrepreneurial approach to operating the Community Recreation Fund was adopted.
Despite continued efforts to reduce costs and increase revenues, by the late 1990s, it was clear that a number of activities, particularly in the areas of seniors and youth programming, continued to operate with substantial subsidies. A 1998 Study Issue (RTC 98-446: Develop Policy Framework for Determining and Evaluating Community Recreation Fund Service Levels and Revenue to Expense Ratios) concluded that while self-sufficiency is a worthy goal, it should not be the City’s primary goal. Action by Council on that RTC also established a supplemental Action Statement to the Recreation Sub-element: Consider below market fees for programs such as “at-risk” teen programming, where a higher priority is placed on ensuring participation than any other factor.
Community Recreation Fund Today
The Community Recreation Fund and its corresponding enterprise philosophy provide the broad context for all recreation programming and services, including those developed specifically for youth. Fees paid help to ensure the continuation of services, especially the continuation of those services whose fees do not cover the full cost, e.g., youth and seniors.
In very broad terms, the Community Recreation Fund contains recreation programming and services for youth, seniors, adults (including facility rentals) and golfers. Consistent with the City’s other enterprise funds, additional significant costs in the Fund include infrastructure and in-lieu fees.
Since acknowledging that pursuit of self-sufficiency should not be the most important goal driving the Fund, the key (and challenge) has always been to maintain BALANCE within the Community Recreation Fund (if not to improve its position). The money to subsidize each and every activity whose costs are not fully covered by fees has to come from somewhere WITHIN the Fund, whether by increasing revenues elsewhere or by decreasing costs. Please see Attachment C: Model Illustrating the Relative Distribution of Revenue and Expense within the Community Recreation Fund (as currently budgeted). The Fund is most heavily dependent on receiving a continued subsidy from the General Fund along with continued support from the two golf courses in order to maintain its current balance of revenues to costs. Any reduction in support from either the General Fund or from golf would likely have the most negative impact on youth programming and/or senior programming, since these two areas of programming are most heavily subsidized.
Determination of what recreation programs and services should be offered at what fees at any given time is a dynamic, and self-correcting process, based in great part on market forces: if the wrong programs are offered, or fees are too high, programs will not have the needed participation. Where social or other overriding objectives drive the desire for certain programming, as is the case with some youth programming, below market strategies can be employed to lower fees beyond what would otherwise be indicated in order to increase desired participation.
As structured, there is not a need for the fees themselves to be set to ensure that the economically disadvantaged can participate. Rather than subsidize everyone regardless of their ability to pay by establishing artificially low fees, fees are set at market, and qualified residents are able to get these fees waived (subject to an annual per person cap). This program is funded through the Community Recreation Fund and is administered by Sunnyvale Community Services.
EXISTING POLICY
Recreation Sub-Element
Policy C.3. – Utilize available pricing and promotional tools in order to maximize participation and/or use related programs, facilities and services, without jeopardizing the integrity and infrastructure of related facilities.
6.1C.3a Utilize market-based pricing in the establishment of fees, and continually evaluate the effectiveness of pricing strategies.
6.1C.3b Structure the pricing and enrollment system for class registration and facility reservation to give City residents advantage over non-residents, where feasible and appropriate.
6.1C.3c Offer and implement multi-use discount programs where feasible and appropriate.
Policy 6.1C.4 Provide a system to allow persons who are economically disadvantaged to participate and use programs, facilities and services.
6.1C.4a Evaluate the effectiveness of the fee waiver program and the criteria to determine eligibility and make appropriate adjustments.
6.1C.4b Provide pricing advantages to economically disadvantaged individuals for programs, facilities and services.
Approved Supplemental Action Statement for the City’s Recreation Sub-Element, as a Result of Council Action 12/08/98; RTC 98-446:
Consider below market fees for programs such as “at-risk” teen programming, where a higher priority is placed on ensuring participation than any other factor.
Fiscal Management Sub-Element
7.1A.1i Establish user charges and fees at a level closely related to the cost of providing those services.
7.1A.1k For each enterprise fund, review fees annually and set them at a level that will support the total direct and indirect costs of the activity.
DISCUSSION
Why Charge?
Even were elimination of fees an option, it is doubtful that staff would recommend doing so in all cases. Charging fees can have other benefits beyond those of the revenue generated. Charging a fee can communicate value and quality, whereas a free activity can often be perceived as being of lower quality and value. Individuals often feel increased ownership of the program when they pay for the right to participate. For these reasons alone, staff believes appropriate fees have an important place in youth programming.
What Do We Mean By Youth?
The term “youth” itself can cause some confusion. In the broadest sense, youth covers all people between the ages of birth to 18. For programming purposes, staff generally uses the following groupings, which are essentially by age:
r Pre-school aged (1 to 4 years old)
r Elementary (K – 5th grade, or 5 to 10 years old)
r Middle School (6th –8th grade, or 11 – 14 years old)
r High School Teens (9th – 12th grade, or 15 – 18 years old)
r “Adult” programming, for 16 and older
However, youth might be looked at and “sorted” in any number of ways, based on income level, primary language, level of risk for specific behaviors, ethnic background, etc.
How Are Fees Set, and What Types Of Fees Do We Currently Have Affecting Youth?
As noted in the Background and Existing Policies sections of this report, the Community Recreation Fund operates as an enterprise fund and is guided by principles of the market. In practice, this means that for every determination of a fee, a fairly complex set of variables is evaluated, only one part of which is an attempt to find market comparables while accounting for specific needs, circumstances and/or history in Sunnyvale’s program. Attachment D provides a look at staff’s basic model for setting fees.
It is worth remembering that the charge to use “market-rate” pricing in no means guarantees full cost recovery. This is particularly true in the pricing of youth activities, since our youth “sub-market” takes into account youth needs, their willingness to pay and the individual and community value of youth participation. While sometimes charging the youth market rate means a profit is generated (e.g., swim lessons), more often it does not, and a subsidy is required (e.g., youth camps). Attachment E is a chart which illustrates how staff implements existing policies.
What Are Youth Rates?
This brings us to the question at the core of this issue – what is meant by “youth” rates? What is the need that a “youth” rate would fulfill? When people speak of a need for youth rates, it seems to be based on a heartfelt, philosophical belief that the City should “do right” by its youth. Further, it seems that the City has an obligation to ensure that our current practices truly take into account the needs of youth and the value that we as a City place on them.
It is this last question which has drawn the greatest discussion during staff’s study of this issue and preparation of this report and has led to surprisingly little disagreement that our current practices do indeed take into account the needs and value of youth.
When the Community Recreation Fund was first established in the early 1990’s it represented a huge shift in how we conduct business. The idea of operating a municipal recreation program like a business was novel and required staff to learn a new approach to developing, pricing, promoting programs and explaining to the public our new focus. Over time, our reliance on these business and market principles has become so ingrained that we may have lost sight of the need to articulate some of the other (complementary) principles and results that are present. Staff believes this to be so in the case of youth rates.
When asked how fees are determined, staff answers, “using market-rate pricing”. When asked whether there are youth fees, staff states that we don’t approach pricing by categories, but rather “market-rate pricing” is used.
And this has become staff’s mantra – market-based pricing. Our practice has indeed followed this mantra; however, the “market” used to determine pricing is not a monolithic entity used as a benchmark for every activity regardless of scope or population. The “market” is made up of numerous “sub-markets”, which are customized to the population and activity/program being compared. In the case of the “market” used to determine market-based pricing for youth programs, it consists of public, non-profit and other agencies providing similar services, usually with the same goals tailored specifically to youth and their needs.
Staff believes that the City’s recreation programs already do utilize “youth” rates for much of its programming, although these rates have not been identified as such, and feedback from the public supported this idea. Below are the types of fee structures in place, with some examples of each kind. These include:
· Facilities and programs provided to participants for free, such as the skateboard park and “Fun on the Run”, the mobile recreation program;
· Offerings below the market rate for youth, such as drop in activities (e.g., Dog House, Columbia Drop-in Gym), and discount passes; and
· Offerings at the market rate for youth, such as most classes limited to youth along with the Junior Golf Pass.
Attachment F provides more examples of activities where a “youth” rate is charged. Future Activity Guides and other promotional pieces will begin to reflect this. As a sidenote, and in the same vein, staff also believes that much of the current fees charged for senior recreational activities are in actuality “senior” rates, and future promotional pieces will reflect this as well.
Supplementing Existing Policy
The inclusion of the supplemental Action Statement for the Recreation Sub-Element in 1998 (consider below market fees for programs such as “at-risk” teen programming, where a higher priority is placed on ensuring participation than any other factor) was an important policy addition. Staff believes that the City’s existing policies now provide ample direction and desirable flexibility in setting recreational rates in such a way that “youth” rates are possible and are being offered. These policies could certainly be supplemented, if Council so desired, to achieve more specific ends.
Fee Waivers
It would be hard to have any discussion of fees and fee policy without also addressing the fee waiver program. This is an area which staff is continually exploring. Just recently, in accordance with Council policy, an adjustment upward to the maximum yearly per person allocation has been made corresponding to cost of living adjustments. In discussions with the Parks and Recreation Commission and the Arts Commission as well as others, the fee waiver program was strongly supported as a means of ensuring the ability of the economically disadvantaged to access programs.
Youth Sports
This Study Issue does not include evaluation of youth sports and the rates they charge youth, although youth sports leagues in Sunnyvale such as Little Leagues, soccer and PAL football and cheerleading, involve a substantial number of youth in recreational activities. There are two main reasons for this.
1. While the City has a long and mutually beneficial history of supporting youth sports leagues through its co-sponsorship policy, the leagues remain independent entities responsible for establishing their own fees. The fees that the City charges the leagues are not the rates that the youth pay to participate, but rather cover costs such as field rentals.
2. Council may remember that co-sponsorship has been replaced by a new policy governing relationships with groups. With that change, youth groups such as the sports leagues may obtain use of facilities for a fee. While the fee that youth sports leagues would be charged has not been developed specifically for youth, it does take into consideration the sports groups’ structure as a non-profit. Further, if groups do not feel the established rates address their situation, they can request a negotiated special agreement, where their particular needs and circumstances can be evaluated. At this time, all of the co-sponsored youth sports groups are in the process of converting their co-sponsorship relationship to a special agreement, which will offer lower fees and take into account the fact that community youth are being served.
And Full Circle to Where It All Began – Fremont Pool
Staff believes that the question of youth rates for the Fremont Pool is no longer an issue. Those who were most concerned at the time have expressed satisfaction. Some have said that if staff had communicated its policies and practices surrounding the pricing of youth activities differently, they might not have had the concern in the first place. Staff has taken this message to heart and will be looking for ways to more clearly communicate these sorts of issues in the future.
What are the options?
Council could change the basic model currently used by staff for setting fees as seen in Attachment D and adjust it specifically for youth. In the fourth step of that model for example, staff considers adjusting the fee, either up or down, from an established market rate for a variety of reasons. There are several options Council could recommend that would result in adjustments to the market rate and ultimately determine what the "youth rate" could be for various recreation programs and activities. Some examples of these options include:
1. Once staff has established the market rate for an activity, Council can recommend that it be changed to reflect a flat pre-determined reduction – say 25%. In this case, once staff established that the market fee for a particular activity was $25 an hour, staff would automatically further reduce that fee by 25% to $20 an hour for all youth participants.
2. The youth rate could vary depending on the age group served – programs for elementary aged children could have more (or less) of a discount applied to the market rate than those serving older youth.
3. Subjective limits or caps on youth fees could be established – for example no drop-in program would be allowed to exceed $5.00, regardless of any other factor.
4. Steps 3 and 4 of the current model shown in Attachment D could be eliminated entirely, that is, disregard the market for youth fees. Rather, Council could elect to determine the actual cost to the City to offer a particular activity, then simply reduce that cost by a specific percent. This would be relatively simple, but would also result in fees drastically different from the general market place and no doubt in some cases this would generate significant public concern.
5. Attachment G depicts the different options, in the form of questions one may ask when setting a youth rate. First, which youth are served? Second, which rate? And third, which programs or activities? From this one can discern the wide variety of options that are available to set youth fees for recreation programs.
6. Finally, an additional option not shown in Attachment G would be for Council to choose to set all youth fees itself based on what seems palatable or intuitive from personal, constituent or user perspectives. Staff would remind Council however, that there are literally hundreds of youth fees established each year, and that annual reviews would not allow for periodic adjustments due to cost increases, attendance or any number of other variables that can change throughout the year.
The options listed above and described in Attachment G are quite varied, and Council could decide to set specific standards that all youth rates would be required to meet. But, an arbitrary rule to set fees based on a flat rate, or a percentage of the cost to produce the program, or on the group served, could leave programs deemed too expensive by the user. Participation levels could decline, and/or requirements to subsidize recreation programs could increase, and/or the wide variety of recreation programs currently offered could decline.
Fiscal Impact
There is no fiscal impact to continuing Council’s existing policies for establishing recreation fees and to staff’s current approach to youth rates. If Council were to supplement these policies with new ones that would reduce rates that youth are charged for some or all programs, there would be a negative impact to the Community Recreation Fund, which would need to be made up either in an increased subsidy from the General Fund or through reductions to other subsidized services within the Community Recreation Fund, such as other youth programs and/or senior programs. Staff believes it is at market with its other rates, such that attempts to raise fees in these other areas would not be effective in generating additional revenue that could be used to offset a negative impact to the Community Recreation Fund.
Conclusion
· While self-sufficiency is a worthy goal of the Community Recreation Fund, it should not be the City’s primary goal.
· Staff believes appropriate fees have an important place in youth programming.
· “Market-rate” pricing in no means guarantees full cost recovery.
· Current practices do indeed take into account the needs and value of youth.
· The City’s recreation programs already do utilize “youth” rates for much of its programming, although these rates have not been identified as such.
· Future promotional and communication pieces on fees should incorporate references to youth rates where appropriate.
· With the inclusion of the 1998 Council approved new Action Statement of the Recreation Sub-element, staff has clear direction enabling it to deviate from market pricing when a higher priority is placed on ensuring participation than any other factor, as in the case of some programming for youth, especially teens.
· Staff believes that the City’s existing policies provide ample direction and desirable flexibility in setting recreational rates in such a way that “youth” rates are possible and are being offered.
· If a new policy relating to fees youth are charged for recreation is desired, there are three major variables to be determined: Which youth should be charged what rate for which programs or activities.
· The fee waiver program is important to continue as a means of ensuring the ability of the economically disadvantaged to access programs.
PUBLIC CONTACT
On February 25, 2004, a joint Study Session was conducted with the Arts Commission and the Parks and Recreation Commission.
On March 4, 2004, staff met with Ms. Holly Lofgren, Former Chairperson, Friends of Fremont Pool.
On March 10, 2004, staff met with City staff from the Columbia Neighborhood Center, the Office of the City Manager, and two case managers working with students at the Columbia Neighborhood Center.
On March 10, 2004, a joint Study Session was conducted with the Arts Commission and the Parks and Recreation Commission.
On April 14, 2004, a joint Study Session was conducted with the Arts Commission and the Parks and Recreation Commission.
On April 28, 2004, the Parks and Recreation Commission held a public hearing on this matter.
On May 3, 2004, the Arts Commission held a public hearing on this matter.
Public contact was made through posting of the Arts Commission, Parks and Recreation Commission, and Council agendas on the City’s official notice bulletin board, posting of the agendas and report on the City’s web page, publication of the Council agenda in the San Jose Mercury News, and the availability of the report in the City Clerk’s office, Library, Parks and Recreation Administration, Community Center, and Senior Center.
Meeting notices were also sent out to a wide range of potentially interested and/or affected individuals and organizations notifying them of the April 14, 2004, joint Study Session with the Arts Commission and the Parks and Recreation Commission. Notification was also provided of when the Parks and Recreation Commission, the Arts Commission, and the City Council were scheduled to take action on this matter. Individuals and organizations so notified included school districts and youth sports groups. A full listing along with a copy of the meeting notice is included as Attachment A.
ALTERNATIVES
1. Continue supporting existing policies concerning the establishment of recreation fees.
2. Pursue other fee setting criteria, as directed by City Council.
3. Direct staff to review future promotional and communication pieces on fees and to incorporate references to youth rates where appropriate.
4. Other action as determined by Council.
RECOMMENDATION
Staff recommends Alternatives 1 and 3.
The Parks and Recreation Commission considered this matter during its public hearing on April 28, 2004, and recommended Council accept staff’s recommendation – Alternatives No. 1 and No. 3 – with a vote of 2-1, Commissioner Pole dissenting, (Commissioners DeWolf and Lawson absent.)
The Arts Commission considered this matter during its public hearing on May 3, 2004, and recommended Council accept staff’s recommendation – Alternatives No. 1 and No. 3 – with a vote of 4-1, Commissioner Carney dissenting.
Prepared by:
Jenny L. Shain
Manager, Special Projects
Reviewed by:
Robert Walker
Director, Department of Parks and Recreation
Approved by:
Amy Chan
City Manager