February 28, 2006

SUBJECT:      Fee Waiver Program – FY 05/06 Budget Issue (06-063)

REPORT IN BRIEF

The City’s Recreation Fee Waiver Program was created in 1981 to provide disadvantaged families with access to City recreation programs and services. With the establishment of the Community Recreation Fund in FY 1991/1992, and development of a marketing based pricing strategy for recreation programs and services, the value of the fee waiver program as a safety net for low income families was made more important. Staff monitors fee waiver usage on a monthly basis and at the current rate of use, staff projects that the budget for the fee waiver program will be exceeded sometime between March and April of 2006 unless action is taken to either limit use of fee waivers for Sunnyvale recreation programs or increase the budget for the Recreation Fee Waiver Program. At the rate of current use, the Recreation Fee Waiver Program is expected to exceed the current $113,195 allocation by as much as $76,000, for a maximum cost to the City of $189,195. As of January 14, 2006, Accounting Period 7, $78,691 or 69.5% of the budgeted amount has been expended.

Council may recall that a similar situation arose in FY 2004/2005. A report was presented to Council on April 5, 2005. At that time Council directed staff to use the proceeds or interest income from the Swirsky Fund of approximately $10,000- $12,000 towards the fee waiver program and that these resources were to be used for anyone under 18 years of age for the remainder of that fiscal year. Additionally, Council directed staff to reduce the maximum amount of fee waiver allowed per individual from $250 to $180 and to limit the eligibility income criteria to “very low” and “very, very low” income for the remainder of the fiscal year. Any remaining deficit balance for the fee waiver program for all age groups was to be funded from the General Fund Non-recurring Events Reserve. Council’s direction regarding additional funding for the Recreation Fee Waiver Program applied to FY 2004/2005 only. Beginning July 1, 2005, the program returned to the original criteria and funding source in the Community Recreation Fund. The original FY 2004/2005 budget for the Recreation Fee Waiver Program of $113,022 was over expended by $46,018 as of June 30, 2005.

Use of the Recreation Fee Waiver Program fluctuates widely from year to year, making it difficult to project fiscal year expenditures in advance. A ten-year historical chart depicts dramatic variances in fee waiver program costs. Please refer to the chart included in the Background Section on Page 4 of this report. Staff is bringing the issue to City Council’s attention at this time so that if demand in fee waiver program continues at its current pace the issue will not be raised at the last minute. However, because of wide variations in the use of the fee waiver program from year to year it is difficult to project a specific amount, which is why a range of between $51,000 and $76,000 has been identified.

Staff is working on two other issues that are related to, although distinctly different from, the current budget issue with the Recreation Fee Waiver Program. First, a Study Issue to consider the effectiveness and efficiency of the Recreation Fee Waiver Program was approved by Council in December 2005 and ranked as the number one priority for the Department of Parks and Recreation in 2006. This Study Issue is scheduled to be brought to Council on September 19, 2006. As part of the study, staff will explore what other cities are doing with fee waivers, how Sunnyvale compares, and other possible options for greater efficiency and effectiveness. For example, the fee waiver program could be limited to youth programs only, fee waiver reimbursement made to youth sports organizations could be based on a percentage of the total amount waived by the group with the youth sports organizations making up the difference through participation fees and fundraisers, or the maximum fee waiver amount available to each eligible individual could be reduced.

Second, the Recreation Fee Waiver Program is a component of the Community Recreation Fund. The overall status of the Community Recreation Fund and the existing structural imbalance between revenues and expenditures is being addressed as part of the budget process for FY 2006/2007. At the Council Fiscal Issues Workshop on January 30, 2006, Council was advised that staff had developed a plan to address approximately $413,000 of the existing $650,000 structural imbalance in the Community Recreation Fund through new and/or increased revenue and program efficiencies. However, a $237,000 deficit in the Community Recreation Fund remains.

The purpose of this report is to give City Council adequate notice of the potential budget issue in the fee waiver program even though projections made at this time could change by year-end. Staff is requesting Council direction on how to address the potential over-expenditure in the Recreation Fee Waiver Program. A number of strategies are presented in the Discussion Section of this report, along with the pros and cons of each option. Given the City’s existing fiscal situation, staff is recommending that Sunnyvale Community Services be directed to stop issuing fee waiver authorization forms and that outstanding fee waivers that were issued prior to the notification be reviewed by City staff on a case by case basis and honored if the expenditure will not cause the Recreation Fee Waiver Program to go over the current budget of $113,195. The program would be reopened as of July 1, 2006, when the new fiscal year begins.

BACKGROUND

The Parks and Recreation Department provides a wide range of high quality recreation programs and activities to the community. The majority of these services have some sort of fee attached to them. Participant fees range from no cost (programs such as the mobile recreation program), to $5 for drop-in activities, to several hundred dollars for summer youth camps. In order to assure that economically disadvantaged Sunnyvale residents have access to recreation programs, the City of Sunnyvale has offered a fee waiver program to individuals and families since 1981.

Currently, eligible Sunnyvale residents are granted a waiver for recreation fees up to $250 per family member. As established by City Council action in October 1990, the maximum fee waiver amount per eligible individual is determined using a base figure of $180 in 1990, adjusted annually by the Consumer Price Index (CPI). Eligibility for the Recreation Fee Waiver program is determined by Sunnyvale Community Services using the income guidelines and definition of low income established by the Community Development Block Grant Program (CDBG). Eligibility for the Recreation Fee Waiver Program is met by any individual or family in the “Low Income” category and below:

Sunnyvale Community Services (SCS) plays a major role in the administration of the Recreation Fee Waiver Program. SCS qualifies eligible fee waiver participants based on the CDBG guidelines shown above. Any Sunnyvale resident, and their family members, whose household income meets the “Low Income” category or below is eligible for fee waiver assistance.

Once individuals have been screened for eligibility, SCS staff and volunteers provide information about available City recreation program and services. Once a recreation activity has been selected, SCS staff prepares a fee waiver authorization form that allows the individual to participate in the City recreation activity of their choice. SCS tracks how much of the fee waiver amount is used each time until the individual reaches the $250 maximum for the fiscal year.

Since FY 1980/1981 when the City’s fee waiver program was established, SCS has consistently provided support to the City by screening applicants for eligibility in the program based on their residency and income. SCS partnered with the City for over twenty years and provided these services at no cost to the City. Beginning in FY 2004/2005, the City began to pay SCS $10,000 per fiscal year to offset a portion of the costs associated with Sunnyvale Community Service’s administration of the Recreation Fee Waiver Program on behalf of the City. This payment comes out of the funds allocated to provide fee waivers for economically disadvantaged members of the Sunnyvale Community.

The initial budget for the Recreation Fee Waiver Program in FY 1980/1981 was $1,000. This budget has been periodically increased to the current level of $113,195; however, use of the fee waiver program fluctuates dramatically from year to year making it difficult to project demand in future years. It is interesting to note that there has been a trend towards increased demand for Recreation Fee Waivers over the past three years.

The following chart shows how demand for the Recreation Fee Waiver Program has varied since FY 1995/1996:

In FY 2002/2003, 1,313 fee waiver authorization forms were processed which resulted in an expenditure of $80,451 in fee waivers. The use of fee waivers from that year resulted in 14,782 participant hours. The following year, FY 2003/2004, 1,837 fee waiver authorization forms were processed and $118,103 was spent on fee waivers. This resulted in 16,852 participant hours. In FY 2004/2005, 2,045 fee waiver authorization forms were processed and $159,041 was spent on fee waivers. This resulted in 20,450 participant hours.

EXISTING POLICY

DISCUSSION

As noted earlier in this report, staff is projecting that the Recreation Fee Waiver Program will exceed its FY 2005/2006 budget of $113,195 if fee waiver authorization and use continues at its current pace. The current projection represents an anticipated over-expenditure of anywhere from $51,000 to $76,000. Staff is bringing the situation to City Council’s attention at this time to request direction on how to address the potential over-expenditure in the Recreation Fee Waiver Program. A number of strategies for dealing with this situation may be considered.

Current Practice

There are no limitations currently placed on the number of individuals that Sunnyvale Community Services may qualify for the Recreation Fee Waiver Program each year. Anyone who is identified as being eligible for the fee waiver program is provided with information about City recreation programs and services. Qualified individuals may request fee waiver authorizations for any amount up to the maximum established for that year. The current maximum is $250 per eligible Sunnyvale resident.

For FY 2003/2004, fee waiver recipients may be divided into three age categories:

For FY 2004/2005, fee waiver recipients may be divided into three age categories:

As reflected in the two preceding charts, the greatest increase in fee waiver use between FY 2003/2004 and FY 2004/2005 is in the 50 years of age and older category. Based on feedback from SCS and staff at the Senior Center, staff believes that the use of fee waivers for the Senior Lunch Program is the primary reason for this increase.

No distinction is made between the level of fee waiver support available to adults, children or seniors. Records are not available to show how many eligible individuals use the full value of their fee waiver in any given year and how many people use only a portion of what they are eligible for. Fee Waivers may be used for any City provided recreation program or service. In addition, fee waivers are provided to participants (in accordance with formal agreements) in youth sports leagues operated by the City’s community partners, activities at the Sunnyvale Tennis Center and aquatics programs at the Fremont High School pool.

Three-Year Historical Analysis

Peak use of the fee waiver program occurs during the Pop Warner football season and the last two to three months of each fiscal year as families use their fee waivers to register for summer camps. In FY 2004/2005, 30% of fee waiver expenditures were reported during the last three months of the year when summer registrations were accepted. 44% of fee waiver expenditures for FY 2003/04 were reported during the last three months of the year when summer registrations were accepted. 38% of expenditures were reported during the last three months of FY 2002/2003. It is important to note that the use of fee waivers increases at the end of the fiscal year, because the current minimum projection of $51,000 for FY 2005/06 is based on year-to-date figures only. If the pattern of increased fee waiver use in the spring is taken into account and no action is taken now to control costs, the projected over-expenditure of the Recreation Fee Waiver Program budget is likely to be as much as $76,000, for a total of $189,195 in fee waiver expenditures the current fiscal year.

As shown in the ten-year historical chart located on Page 4 of this report, use of the Recreation Fee Waiver Program fluctuates widely from year to year. This makes it difficult for staff to make budget projections for future years. The budget for the fee waiver program is adjusted every two years based on actual use during the previous two years; however, staff is not proposing an increase in the Recreation Fee Waiver Program budget in FY 06/07 pending the outcome of the Study Issue that will be presented to Council in September 2006. Depending on the outcome of the study, Council may chose to manage demand for the program with different eligibility criteria or direct staff to prepare a Budget Modification at that time.

How the Program is Publicized

The fee waiver program is referenced on all City generated flyers and brochures publicizing recreation programs. General information about the fee waiver program is included on the Registration Information page of every Recreation Activity Guide and Senior Activity Guide. The Summer 2005 Quarterly Report included an article about the Recreation Fee Waiver Program.

Options for City Council Consideration

There are seven options that City Council may want to consider at this time:

1.      Direct staff to maintain expenditures for the Recreation Fee Waiver Program within the current budget of $113,195.

2.      Approve a Budget Modification in the amount of $76,000 funded by the General Fund 20-Year Resource Allocation Reserve and increase the subsidy to the Community Recreation Fund by the same amount.

3.      Approve a Budget Modification in the amount of $76,000 and direct staff to offset this amount by an equal reduction in recreation service levels.

Options 4, 5 and 6 below are offered as possible strategies to reduce the projected $76,000 over-expenditure in the Recreation Fee Waiver Program; however, there is no way to accurately predict the specific savings that would result from these actions.

4.      Immediately change the eligibility criteria for the Recreation Fee Waiver Program to reduce the maximum dollar value of fee waivers allowed per individual from $250 to $180 and to limit income criteria to “very low” and “very, very, low” income categories as was done last fiscal year.

5.      Require all youth sports organizations seeking fee reimbursement from the City’s Recreation Fee Waiver Program to absorb 50% of each fee waiver issued to one of their participants.

6.      Discontinue use of Recreation Fee Waivers in the Senior Lunch Program at the Sunnyvale Senior Center and direct low-income seniors to the Sunnyvale Nutrition Lunch Program at the United Methodist Church in Sunnyvale and to the Second Harvest Food Bank for assistance in meeting their nutritional needs.

7.      Any combination of options 1 through 6 above.

8.      Direct staff to continue monitoring the Recreation Fee Waiver Program and take no action at this time.

Option 1 - Direct staff to maintain expenditures for the Recreation Fee Waiver Program within the current budget $113,195.

There is no way to accurately predict outstanding liabilities from individuals who have been qualified by Sunnyvale Community Services, but have not turned in their fee waiver authorization forms to the City. Staff would notify Sunnyvale Community Services to stop issuing fee waiver authorization forms. Any outstanding fee waivers issued by Sunnyvale Community Services prior to this notification would be reviewed by City staff on a case by case basis and honored if the expenditure will not cause the Recreation Fee Waiver Program to go over budget.

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