Document Redmond_doc_f1adedc208

REDMOND, WA PARKS AND RECREATION COST OF SERVICE UPDATE M A R C H 202 2 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 2 Mayor and City Council Mayor Angela Birney Councilmembers Jessica President Vanessa Kritzer, Vice President Jeralee Anderson David Carson Steve Fields Varisha Khan Melissa Stuart Parks and Recreation Project Team Loreen Hamilton, Interim Director of Parks & Recreation Marty Boggs, Recreation Program Administrator Amanda Deml, Recreation Manager Ryan Edwardsen, Senior Financial Analyst Katie Fraser, Recreation Program Administrator Jeffrey Guptil, Recreation Program Administrator Jeff Hagen, Recreation Program Administrator Zach Houvener, Recreation Manager Cindy Johnson, Recreation Program Administrator Brittany Pratt, Events and Marketing Administrator Ryan Spencer, Recreation Program Administrator Chris Weber, Cultural Arts Administrator Consultant Team BerryDunn/GreenPlay, LLC For more information about this document, contact GreenPlay, LLC At: 1021 E. South Boulder Road, Suite N, Louisville, Colorado 80027, Telephone: [PHONE REDACTED] Email: [EMAIL REDACTED] www.greenplayllc.com Acknowledgements ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 3 Table of Contents I. 6 The Original 7 Cost of Service 7 The Pyramid 8 II. Study 10 Understanding Resource Allocation and Cost 11 Category of Service 12 Staff and Stakeholder 13 A Consensus 14 Cost of Service 15 III. Key Findings and 18 Cost Recovery Tier 18 Policy 20 Administrative 20 Cost Savings and Revenue Generation 21 Suggested Policy 23 IV. 26 27 Appendix A: The Pyramid Methodology 27 Appendix B: Redmond Categories of 35 Appendix C: Developing a Pricing 41 Table of Tables Table 1: FY19 Cost Recovery 16 Table 2: Cost Recovery Tier 19 Table 3: Policy 21 Table 4: Administrative Task 21 Table 5: Cost Savings and Revenue Generation 22 Table of Figures Figure 1: Redmond Consensus 14 Figure 2: 2017/2022 Tier Target 19 Figure 3: Redmond Pyramid 20 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 4 THIS PAGE INTENTIONALLY LEFT BLANK ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 5 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 6 I. Introduction In 2017, the City of Redmond’s Parks and Recreation Department (Department) began an extensive project to review pricing and cost recovery for its programs and services. The significant undertaking was to provide a foundational philosophy, policies, and best practice model for the organization. Its intent was to be flexible and responsive to changing conditions, allowing the Department to allocate its resources wisely and provide valuable information for decision-making and priority setting for improvements to the system. Over time, the Department was to implement recommended policy and practice changes while annually evaluating its cost of service and recalibrating existing parks and recreation fees to meet established goals. Year one was recommended as a planning year, allowing additional research into programs and services and a better understanding of potential cost savings and fee adjustments that could be used to meet new cost recovery targets. Year one was to also include staff training and process improvements. Much has changed in recent years including staff and policy-maker turnover and a pandemic of proportions that created an unprecedented major impact on the community and the City’s operations, as well as a change in community views on the benefits of parks and recreation services. This has disrupted the ability for a smooth implementation of the 2017 Cost of Service recommendations. In Summer 2021, the Department determined it was time revisit those recommendations as they began to recover from the COVID-19 pandemic. This Cost of Service Update (Study) provides an opportunity for the rethinking of financial goals and helps to create a sustainable model for the Department into the future. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 7 The Original Study The original study was driven by policy direction in PR-33 of the Parks, Arts, Recreation, Culture and Conservation (PARCC) Plan calling for the establishment and implementation of financial goals, cost recovery targets, and a subsidy allocation model to inform recreation program decision-making. In 2017, the Project Team • Became familiar with the Pyramid Methodology; • Reviewed existing policy, guidelines, and practices; • Defined categories of programs and services; • Worked with staff, the commission, and citizen stakeholders to understand community values through sorting workshops to place categories of services on appropriate pyramid tiers using a benefits filter; • Determined appropriate methodology for allocation of overhead and indirect cost; • Compared select proposed fees with those of other comparable jurisdictions; • Recommended the best cost recovery practices; and, • Acknowledged current cost recovery levels using 2015 data and used them to determine cost recovery goals for the future. As a result, City Council adopted an umbrella policy statement setting the underlying principles of the cost recovery and service pricing approach and an aggressive goal to recover 100% of direct cost for tiers 2-5 by 2025. Cost of Service Update The Pyramid Model has allowed the aligning of service benefits with the form of revenue best suited to support the service, whether taxes, fees, or other forms of revenue. Through a combination of cost- saving measures and annual adjustments, the Department has made strides towards meeting the cost recovery goals established in the 2017 study; however, the Department recognizes the need to refine those goals to better serve the Redmond community. Cost Recovery must be done carefully, with information and insight, so that Redmond can recover appropriate costs without compromising essential services to the widest public. Cost Recovery needs to be thoughtful, deliberate, and based on understanding — not reactionary. Through this update, we have refreshed and refined the Department’s categories of service, updated the placement of all programs and services within those categories, evaluated the cost of service calculations in use, and refined the Department’s cost recovery goals. The 2017 effort mainly engaged a smaller group of stakeholders for input. This update includes a more robust community engagement effort. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 8 The Pyramid Methodology The Pyramid Methodology used in this Study is built on a foundation of understanding who is benefiting from park and recreation services to determine how the costs for service should be funded. The model illustrates a pricing philosophy for establishing fees commensurate with a target Cost Recovery level based on the benefit received. Descriptions regarding each level of the pyramid are provided in Appendix A; however, the model is intended as a discussion point and is very dependent on agency philosophies to determine what programs and services belong on each level. Cultural, regional, geographical, and resource differences play a large role in this determination. The resulting pyramid is unique to each agency that applies this methodology. The development of a financial Cost Recovery philosophy and policy is built upon a logical foundation rooted in Redmond’s values. Mission and vision represent principles that create a philosophical framework to serve as the foundation for organizational decisions and processes. They also help determine those community conditions that the Department wishes to impact, guiding often difficult management decisions, substantiating them, and making them justifiable and defensible. The application of the Pyramid Methodology begins with the Mission of Redmond Parks and Recreation but must also address other considerations: • Who benefits from the service - the community in general or only the individual or group receiving the service? • Does the individual or group receiving the service generate the need (and therefore the cost) of providing the service? • Will imposing the full cost fee pose a hardship on specific users? • Will the level of the fee affect the demand for the service? • Are there competing providers of the service in the public or private sector? ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 9 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 10 II. Study Approach The Study commenced in August of 2021, included three workshops in September, December, and February, and concluded with final recommendations at the start of 2022. A Project Team comprised of staff from the Department was established to review practices and existing policy, become familiar with the Pyramid Methodology, and work with the public to understand its values. Team Members attended an initial Orientation and Training Workshop in September 2021. This was followed by additional workshops, where staff identified key themes by reviewing existing policy, guidelines, and practices, becoming familiar with the Pyramid Methodology, and examining current resource allocation practices. Staff defined categories of programs and services, participated in sorting workshops to place categories of services on appropriate pyramid tiers, hosted virtual community workshops, and tackled the challenges of identifying measurable costs associated with providing programs and services. The execution of the model is broken down into the following steps: A detailed description of each step is provided in Appendix A. Step 5: Defining direct and indirect costs Step 4: Sorting the Categories of Service onto the Pyramid Step 3: Developing Redmond’s Categories of Service Step 2: Understanding the Pyramid Methodology, and the benefits filter Step 1: Building on Redmond’s values, vision, and mission Step 9: Implementation Step 8: Understanding and preparing for Influential Factors Step 7: Establishing Cost Recovery goals Step 6: Determining Cost Recovery levels 10 Step 10: Evaluation 9 8 7 6 5 4 3 2 1 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 11 Understanding Resource Allocation and Cost Recovery Resource allocation is how limited tax dollars and alternative funding sources are utilized. Cost recovery is the percent of the annual operating budget cost that can be offset by funding other than General Fund taxpayer investment (whether derived from property, sales, or other sources). Parks and Recreation services provide economic, environmental, and social benefits to the community. Tax dollars support these “core services.” Beyond those benefits realized by all residents, Redmond is also able to provide specific activities and services that benefit individuals. There are not adequate tax dollars to completely support this level of activity, and it is appropriate and common to charge at least minimally for these services. For example, if an individual takes a swimming lesson or participates in a senior trip, there are certain levels of skill-building, social engagement, or entertainment that accrue to that person. However it can still be argued that there is a benefit to the community as a whole by teaching people water safety and through the social capital and health gained by keeping seniors active and in touch. This warrants covering at least a portion of the cost of a program or activity through tax dollars. Other opportunities, such as the rental of a space for a private party, warrant a fee to cover the entire cost of providing that service. Although fee adjustments are possible, the goal is not to simply generate new revenues through fees, but to ensure a sustainable system into the future by using tax revenues and fees in the most appropriate ways. These are also supplemented where possible by grants, donations, partnerships, and other sources of alternative revenues. Taxes should support “core services,” whereas fees and charges are appropriate for activities and services benefiting the individual partaking in the service. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 12 Category of Service Development Critical to this Study’s success was the review and update of the 2017 Categories of Service. The 2017 Study included 37 categories. The project team took on the rigorous task of reviewing and analyzing the existing categories to determine if they were meeting the needs of the Department. Through the assessment, a few categories were carried forward, many were refined, and some were found no longer necessary. In the end, thirty (30) categories resulted as listed below. All Categories of Service with a full description and listing of programs and services within can be found in Appendix B. • Adaptive Recreation • Adult Enrichment Activities • Adult Sports Leagues • City Signature Events • Commissions, Committees & Service Groups • Community Gardens • Concessions, Vending, and Merchandise Sales • Cultural Arts Programs • Equipment Rentals • Facility Rentals - Commercial Use • Facility Rentals - Community Use • Family Enrichment Activities • Field Rentals • Human Services • Idylwood Lifeguards • Long-term Lease or Partner Agreements • Miscellaneous Permits • Monitored Drop-in Use • Non-monitored Drop-in Use • Party Packages • Permanent Public Art • Private/Semi-Private Lessons • Recreation Community Events • Special Event Permits • Special Interest or Informal Social Use • Trips & Tours • Volunteer Programs • Youth Day Camps & After School Programming • Youth Enrichment Activities • Youth Sports Leagues ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 13 Staff and Stakeholder Engagement The Department hosted four virtual workshops between November 29 and December 13, 2021, with the goal of gathering input from staff and resident stakeholders. The charge to both was to sort the Department’s Categories of Service onto appropriate levels of the pyramid model based on who they benefited (the benefit filter). Those categories ranged from mostly benefiting the community as a whole to programs and services mostly providing an individual benefit. The effort was based on a community values-based conversation. During public workshops, 24 community members each dedicated 1.5 hours of their time. This approach, which provided 36 hours of meaningful volunteer deliberation, allowed staff to understand the values of the community and participants to better understand their fellow residents’ perspectives. The sorting process was a challenging step and was led by objective and impartial facilitators in order to hear all viewpoints. The process generated discussion and debate as participants discovered what others had to say about serving the community regarding a variety of topics and priorities, such as: adults versus youth versus seniors, advanced versus intermediate and beginning programs, special events, athletic fields, and rentals involving the general public, non-profit and for-profit entities, etc. It was important to push through the “what” to the “why” to find common ground. The sorting process helped create ownership for the philosophy, while participants discovered the current and possibly varied operating histories, cultures, missions, and values of the organization. This process developed consensus and allowed everyone to land on the same page. Ultimately, the efforts were a reflection of the community and the mission of the Department. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 14 A Consensus Pyramid Using the Pyramid framework, a consensus pyramid from the staff and public sorting process was created with each Category of Service placed in the appropriate tier of the pyramid based on the benefits filter. By using feedback from the community to look at programs and services in this way, staff can set a program’s cost-recovery goal relative to the amount of community benefit a category of service provides. Figure 1 represents the Department’s consensus pyramid. Programs and services considered to have higher individual benefit will be recommended to have a higher cost recovery ratio. Figure 1: Redmond Consensus Pyramid The value is in the discussion, “ownership,” and “buy-in” from staff, decision makers and the public. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 15 Cost of Service Analysis For this Study, GreenPlay engaged the services of Amilia, a park and recreation software company. Amilia specializes in helping agencies organize and sort their data efficiently by guiding them in the use of Amilia’s Cost Recovery software tool. Cost of Service was measured using FY19 data to provide a baseline of data for evaluating current cost recovery due to the lack of data for FY20 due to the pandemic. No measurement of Cost Recovery is possible without a clear definition of what is being counted as “cost.” The definition of direct and indirect costs can vary from agency to agency. The most important aspect to understand is that all costs associated with running a program or providing a service are identified and consistently applied across the system. ― Direct cost includes all the specific, identifiable expenses (fixed and variable) associated with providing a service or program. These expenses would not exist without the program or service and often increase exponentially. ― Indirect cost are those costs that are not directly attributable to a program or service, but are necessary to support the effort and are incurred for a common objective. For the Study, the Department evaluated only the direct costs associated with programs and services. Identifying cost was highly intensive and required a deep dive into the Department’s financials. All revenue and expense data were compiled, then uploaded into Amilia’s Cost Recovery Software Tool. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 16 Table 1 shows the average cost recovery across all 800 programs evaluated. Table 1: FY19 Cost Recovery Distribution Tier Activities Revenue Revenue as % of System Expense Expense as % of System % Cost Recovery T5 5 $80,601.83 3% $80,531.24 1% 100% T4 159 $1,119,202.94 37% $859,791.26 14% 130% T3 270 $537,328.17 18% $1,793,439.53 34% 30% T2 340 $1,063,860.31 36% $1,721,731.59 30% 62% T1 26 $187,337.39 6% $1,155,684.27 21% 16% Total: 800 $2,988,331.64 $5,611,177.89 53% ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 17 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 18 III. Key Findings and Recommendations The main purpose of this Study has been to update and refine the Department’s approach to cost recovery. This endeavor has allowed the Department to reimagine its financial goals through a new lens. The extensive effort undertaken during this Study has brought to light key findings that are critical to addressing financial goals, cost recovery targets, fee setting, and decision-making. Key findings and recommendations have been developed and grouped into the following themes: A. Policy Actions B. Administrative Tasks C. Cost Savings and Revenue Generation Strategies The recommendations will act as the implementation catalyst and internal work plan and are intended to guide goals, objectives, and decision‐making while creating service sustainability for the Department. Some recommendations are scheduled to occur in the near future, and others will take time to put into place. Sensitivity to fee tolerance levels must be considered as fee adjustments are made. The first year of implementation will continue to be a learning year as more data is generated and analyzed. It is likely that some adjustments will be made during or at the end of year one, including: • Further clarification or addition of categories • Possible movement of a category to a more appropriate tier • Possible movement of a program or service to a different category • Reassignment of costs or recalculation of cost recovery levels • Refinement of targets based on any or all of these bulleted items Cost Recovery Tier Targets After the data collection and import into the Amilia software concluded, staff viewed Redmond’s Cost Recovery Tool and the cost of service analysis results. This data and supplemental reports included the direct cost to provide each service in the system and current cost recovery performance results. The Cost Recovery software provided an analysis of where the department is currently and delivered metrics to help the department move forward in a fiscally responsible manner. Current cost recovery performance results will guide Redmond in establishing fees and making other informed financial decisions moving forward. As costing of services and matching revenues is a very revealing process, realistic and feasible targets have been recommended to align with the pyramid model and also to meet specific financial objectives for recovery of direct cost. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 19 The following tier target ranges are recommended: Table 2: Cost Recovery Tier Targets Tier FY19 Tier Aggregate Actual Range Min and Minimum Goal Range Max Range Midpoint [ecommended goal] Category Actual CR vs. Range Midpoint T5 100% 131% 160% 145% -45% T4 130% 101% 130% 116% 14% T3 30% 71% 100% 86% -56% T2 62% 11% 70% 41% 21% T1 16% 0% 10% 5% 11% Figure 2 shown below represents 2017 tier targets, FY 19 cost recovery performance, and the recommended tier targets for the future. When the 2017 goals were put into place, it was widely acknowledged that the Department was taking on a very aggressive goal of 100% direct cost recovery for tiers 2-5. Progress towards the 2017 tier targets was made through a combination of cost saving measures and fee increases; however, establishing realistic goals for the future will provide more sustainability in the system. Figure 2: Tier Target Comparison ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 20 The proposed tier targets vary from the 2017 goals, in that 100 percent cost recovery is not introduced until tier 3. Tier 2 represents programs and services with a considerable yet variable community benefit; thus, tier 2 cost recovery is recommended at 11-70 percent. Fee reductions are not a recommendation or outcome of the Study. Some categories and programs are performing above the recommended tier target; however, the tier aggregate is the focus. The tier aggregate is a measure of all of the services on each tier. It is not uncommon for programs in the same tier to perform differently. The updated cost recovery goals reflect community values and should be used when evaluating program performance and developing new programs. The Redmond Pyramid Model with tier target ranges is shown in Figure 3. Figure 3: Redmond Pyramid Model ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 21 Policy Actions Table 3: Policy Actions Administrative Task Table 4: Administrative Task Key Finding One: The Department needs to evolve its financial policy regarding cost recovery to guide its program pricing. 1.1 Seek City Council approval of the updated and recommended policy language for the Cost Recovery Policy and tier targets as indicated in this Study. 1.2 Recognize the Redmond Consensus Pyramid (Figure 1) as a fundamental component of the Cost Recovery philosophy. 1.3 Review existing policy and procedure to assure full integration with the approved overall Cost Recovery philosophy. Key Finding Four: The challenge of cost accounting at the activity level requires refinement and training. 4.1 Further refine all of the expenses for programs and services and investigate the feasibility of implementing a cost recovery software solution to create a systemic approach to identifying cost recovery levels more efficiently. 4.2 Use the cost recovery philosophy, model, and policy as a department‐wide staff training tool and incorporate specific recommendations into annual staff work plans as appropriate. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 22 Key Findings Five: Deliberate and timely fee setting and adjusting is necessary for a sustainable system. 5.1 Review the performance toward cost recovery goals on an annual basis. 5.2 Adjust fees to reflect the Department’s Cost Recovery philosophy, being sensitive to fee tolerance, and implementing over time as necessary. 5.3 Set initial pricing for programs and services at a fee level that considers cost recovery targets, market rates, and willingness to pay. 5.4 Manage program lifecycles through monitoring registration, attendance figures, and cost recovery goals on an ongoing basis. Cancel, retool, and/or replace under- performing services. 5.5 Review all fees for annual adjustments at the staff level and provide an update to City Council through the budget process. All fees should be considered for an annual adjustment to keep up with the increasing cost of providing the service. Cost Savings and Revenue Generation Strategies Table 5: Cost Savings and Revenue Generation Strategies Key Finding Six: Low cost recovery could be an indicator of high expenses 6.1 Continue to review internal management practices to identify cost savings. Expenses may be minimized through avenues such as restructuring of programs, management efficiencies, and partnering. 6.2 Engage staff in budget development and discussion of annual expense budget and revenue goals. Partner with the Finance Department to provide an annual staff training on the budget process. 6.3 Explore alternative funding sources that strategically align with the Department’s mission including potential partnerships. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 23 Key Finding Seven: The current goal of 100 percent cost recovery for tiers 2 - 5 is not obtainable. 7.1 Tier 5: Mostly Individual Benefit Tier 5 represents activities determined to provide a very high level of individual benefit. These programs are the least related to the fundamental purpose of the Department, although they complement other activities. For this reason, direct cost for these categories should not be subsidized. Review the structure of programs in all categories on tier 5 to ensure 130% cost recovery by 2027. 7.2 Tier 4: Considerable Individual Benefit The categories of programs on tier 4 represent considerable individual benefit and should not be reliant on tax resources to support them. Modify program delivery to increase tier 4 cost recovery to a minimum of 101% by 2027. Strategies may include restructuring of the offering, decreasing expenses, and/or increasing fees. 7.3 Tier 3: Balanced Individual and Community Benefit Tier 3 is a large tier with a variety of programs and services, and a large capacity for volume. Within each category of service, there are areas that suggest a closer look at program structure, consistency, and refinement of the cost accounting. Review the structure of programs in all categories on tier 3 to reach a tier aggregate of 71% cost recovery by 2027. 7.4 Tier 2: Considerable Community Benefit/Tier 1: Considerable Community Benefit Focus the use of General Fund Subsidy on activities primarily found in tier 1 and tier 2 of the Pyramid Model that provide mostly community benefit to the taxpayers of the City. 7.4.a Further evaluation of the multi-day, specialized recreation camp programs placed in the Day Camps and Afterschool Programing category is needed. Consideration should be given to placing these types of camps in the Youth Enrichment Activities category on tier 3. 7.5 Continue to provide ongoing opportunities for community input. To gauge perceptions about programs and services over time, a survey or similar tool may be used. Surveys should be administered at least every other year. 7.6 Cost recovery targets may need refinement over the first year of implementation, so preliminary targets should be re-evaluated prior to year two. These targets are set to be in addition to what is needed to keep up with inflationary expenses and will have to be carefully considered in the wake of the impact of COVID-19. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 24 Suggested Policy Language A formal policy regarding pricing and cost recovery levels for services was not adopted in 2017. The following overarching policy language is suggested. As a publicly financed park system, the Redmond Parks and Recreation Department provides a basic level of Parks and Recreation services for the public, funded by tax dollars. However, fees and charges and other methods to recover costs are considered a responsible and necessary means to supplement tax revenue and regulate park use where appropriate. Critical to the success of service delivery are affordability, fairness, and equity. The intent of this policy is to ensure that the approach for the use of tax dollars as well as alternative forms of revenue will result in these qualities. In establishing fees and charges, the Department will determine the costs of providing services based on an identified and consistently applied methodology. This calculated cost will be used to measure current and future levels of cost recovery and to help establish appropriate cost recovery goals to support services. The appropriate level of cost recovery will be based on an assessment of who is benefiting from the service provided. If the benefit is to the community as a whole, it is appropriate to use taxpayer dollars to completely or primarily fund the service. Examples of services that primarily provide community benefits are trails, play areas, parks, and City signature events. Cost recovery goals are used to establish and/or adjust fees to reach these goals. As the benefit is increasingly offered to an individual or select group of individuals, it is appropriate to charge fees for the service at a decreasing level of subsidy and an increasing rate of cost recovery. Supervised or instructed programs, facilities, and equipment that visitors can use exclusively, as well as products and services that may be consumed, provide examples where fees are appropriate. The Department shall also consider available resources, public need, public acceptance, and the community economic climate when establishing fees and charges. In cases where certain programs and facilities are highly specialized by activity and design and appeal to a select user group, the Department shall additionally consider fees charged by alternative service providers or market rates. The Department may further subsidize services for persons with economic need or other targeted populations, as allowable, through tax-supported fee reductions, scholarships, grants, or other methods. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 25 ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 26 IV. Conclusion This Study examined all programs and services from a cost recovery perspective. Knowing the current status allows the setting of specific performance measures for the future. This first year of implementation will allow communication of the revised categories and their tier placement. It will also allow staff to see the implications for overall cost recovery goals, identify any currently unknown market, historical, and political filters, and experience using the updated model. Having broken down the financial picture to the activity level will allow all Department staff responsible for budgeting for the services they deliver to be proactively engaged in reaching the desired result. The Department will need to remain flexible in refining targets as new systems for tracking expenditures will provide a more accurate picture with each passing year, especially the shift from the first to the second year. The Pyramid model has allowed the aligning of service benefits with the form of revenue best suited to support the service, whether taxes, fees, or other forms of revenue. It has been our pleasure to assist the City of Redmond and work with the Department to evolve its sustainability efforts. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 27 Appendix A: The Pyramid Methodology Process ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 28 The GreenPlay Pyramid Methodology, used in the development of the Subsidy and Resource Allocation Model, is built on a foundation of understanding who is benefiting from park and recreation services to determine how the costs for service should be paid. The Model illustrates a pricing philosophy based on establishing fees commensurate with the benefit received. Descriptions regarding each level of the pyramid are provided; however, the model is intended as a discussion point and is very dependent on agency philosophies to determine what programs and services belong on each level. Cultural, regional, geographical, and resource differences play a large role in this determination. The resulting pyramid is unique to each agency that applies this methodology. Application of the pyramid methodology begins with the mission of the organization, but must also address other considerations: • Who benefits from the service - the community in general, or only the individual or group receiving the service? • Does the individual or group receiving the service generate the need (and therefore the cost) of providing the service? • Will imposing the full cost fee pose a hardship on specific users? (The ability to pay is different than the benefit and value of a program, activity, or service, and therefore, should be dealt with during the implementation phase of pricing and marketing.) • Do community values support taxpayer investment for the cost of service for individuals with special needs (for example, people with disabilities or low-income)? • Will the level of the fee affect the demand for the service? • Is it possible and desirable to manage demand for a service by changing the level of the fee? • Are there competing providers of the service in the public or private sector? THE PYRAMID METHODOLOGY The application of the model is broken down into the following steps: Step 1: Building on your organization’s values, vision, and mission Step 2: Understanding the Pyramid Methodology, the benefits filter, and secondary filters Step 3: Developing the organization’s Categories of Service Step 4: Sorting the Categories of Service onto the Pyramid Step 5: Defining Direct and Indirect Costs Step 6: Determining (or confirming) current tax investment/cost Step 7: Establishing tax investment goals/subsidy level targets Step 8: Understanding and preparing for influential factors and considerations Step 9: Implementation Step 10: Evaluation ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 29 Step 1: Building on Your Organization’s Values, Vision, and Mission Critical to this philosophical undertaking is the support and buy-in of elected officials and advisory board members, staff, and ultimately, citizens. Whether or not significant changes are called for, the organization should be certain that it philosophically aligns with its constituents. The financial resource allocation philosophy and policy is built upon a very logical foundation based upon the theory that those who benefit from parks and recreation services ultimately pay for them. Envision a pyramid sectioned horizontally into five levels: Step 2: Understanding the Pyramid Methodology and Filters The philosophy and policy are key components to maintaining an agency’s financial control, equitably pricing offerings, and helping to identify core services including programs and facilities. The principle of the Pyramid is the Benefits Filter. The base level of the pyramid represents the core services of a public parks and recreation system. Services appropriate to higher levels of the pyramid should only be offered when the preceding levels below are comprehensive enough to provide a foundation for the next level. The foundation and upward progression are intended to represent public parks and recreation’s core mission, while also reflecting the growth and maturity of an organization as it enhances its service offerings. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 30 MOSTLY COMMUNITY Benefit Level One is the foundation of the pyramid and therefore the largest, and encompasses those services, including programs and facilities, that MOSTLY benefit the COMMUNITY as a whole. These services may increase property values, provide safety, address social needs, and enhance quality of life for residents. The community generally pays for these basic services via tax support and they are generally offered to residents at a minimal charge or with no fee. A large percentage of the agency’s tax support funds this level. Examples of these services could include: the existence of the community parks and recreation system (park maintenance), the ability to visit facilities on an informal basis, park and facility planning and design. NOTE: All examples given are generic – individual agencies vary in their determination of which services belong on which level of the Pyramid based upon agency values, vision, mission, demographics, goals, etc. CONSIDERABLE COMMUNITY Benefit Level Two represents services that promote community and individual physical and mental well-being, and may begin to provide skill development. They are generally traditionally expected services and/or beginner instructional levels. These services are typically assigned fees based upon a specified percentage of direct (and may also include indirect) costs. These costs are partially offset by both a tax investment to account for CONSIDERABLE COMMUNITY benefit and participant fees to account for the Individual benefit received from the service. Examples of these services could include: staffed facility and park use, therapeutic recreation programs and services, senior services, etc. BALANCED INDIVIDUAL/COMMUNITY Benefit Level Three represents services promoting individual physical and mental well-being and providing an intermediate level of skill development. There is a more balanced INDIVIDUAL and COMMUNITY benefit and should be priced accordingly. The individual fee is set to recover a higher percentage of cost than those services falling within lower Pyramid levels. Examples of these services could include: summer recreational day camp, youth sports leagues, summer swim team, etc. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 31 CONSIDERABLE INDIVIDUAL Benefit Level Four represents specialized services geared toward individuals and specific groups, and services that may have a competitive focus. These are not highly subsidized and may be priced to recover full cost, including all direct expenses. Examples of these services could include: Trips, advanced level classes, competitive leagues, etc. MOSTLY INDIVIDUAL Benefit At the top of the Pyramid, Level Five represents services that have potential to generate revenues above costs, may be in the same market space as the private sector, or may fall outside the primary mission of the agency. In this level, services should not be supported by subsidy, should be priced to recover full cost, and may generate revenue in excess of cost. Examples of these activities could include: Private lessons, company picnic rentals, other facility rentals for weddings or other services, concessions and merchandise for resale, restaurant services, etc. Step 3: Developing the Organization’s Categories of Service Prior to sorting programs and services onto the Pyramid, each must be reviewed, analyzed, and sifted through to create the agency’s Categories of Services, including definitions and examples. “Narrowing down” facilities, programs, and services and placing them in categories (groups of like or similar service) that best fit their descriptions, allows a reasonable number of items to be sorted onto the pyramid tiers using the Individual and Community Benefit filter. There is not a pre-determined number of categories, however, ultimately every program and service offered must fit within a category, so carefully naming, describing, distinguishing, and providing examples for each category is critical to a successful effort. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 32 Step 4: Sorting the Categories of Service onto the Pyramid The sorting process is where ownership is created for the philosophy, while participants discover the current and possibly varied operating histories, cultures, missions, and values of the organization. The process develops consensus and allows everyone to land on the same page. The effort must reflect the community and align with the mission of the agency. The sorting process is a challenging step led by objective and impartial facilitators in order to hear all viewpoints. The process generates discussion and debate as participants discover what others have to say about serving the community; about adults versus youth versus seniors; about advanced versus intermediate and beginning programs; about special events; athletic fields; and rentals involving the general public, non-profit and for-profit entities; etc. It is important to push through the “what” to the “why” to find common ground. There is also the consideration of additional filters (discussed in Step which often hold a secondary significance in determining placement on the Cost Recovery Pyramid. Step 5: Defining Costs The definition of direct and indirect costs can vary from agency to agency. The most important aspect is that all costs associated with directly running a program or providing a service are identified and consistently applied across the system. Direct costs typically include the specific, identifiable expenses associated with providing a service. These expenses would not exist without the service and may be fixed or variable costs. Indirect costs are costs shared among services. It is up to each agency to determine how best to allocate indirect costs, and the default is often the consequence of the agency’s accounting software’s ability to track and assign costs at the programmatic level. Step 6: Determining (or Confirming) Current Tax Investment/Subsidy Levels The agency will confirm or determine current subsidy allocation levels by category of services based upon the definition of costs. Results of this step identify what it costs to provide services to the community, whether staff has the capacity or resources necessary to account for and track costs, whether accurate cost recovery levels can be identified, and whether cost centers or general ledger line items align with how the agency may want to track these costs in the future. Staff may not be cost accounting consistently, and these inconsistencies become apparent. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 33 Step 7: Establishing Cost Recovery/Tax Investment Targets The steps thus far work to align who is benefiting from programs and services with the sources of funding used to pay for them. The tax investment is used in greater amounts at the bottom levels of the pyramid, reflecting the benefit to the Community as a whole. As the pyramid is climbed, the percentage of tax investment decreases, and at the top levels, it may not be used at all, reflecting the Individual benefit. Targets take into account current subsidy levels. As costing of services and matching revenues is a very revealing process, realistic and feasible targets are recommended to align with the pyramid model and also to meet specific financial objectives for recovery of direct and indirect cost. These targets will be identified for each tier of the agency’s Pyramid Model. Step 8: Understanding and Preparing for Influential Factors and Considerations Inherent to sorting programs onto the Pyramid Model using the Benefits and other filters is the realization that other factors come into play. This can result in decisions to place services in other levels than might first be thought. These factors can aid in determining core services versus ancillary services. These may include participant commitment, trends, political issues, marketing, relative cost to provide the service (cost per participant), current economic conditions, and financial goals. Step 9: Implementation The agency sets goals based upon its mission, stakeholder input, funding, and/or other criteria. Completion of steps 1-8 position the agency to illustrate and articulate where it has been and where it is heading from a financial perspective. Some recommendations are scheduled to occur immediately, and others will take time to put into place, while some will be implemented incrementally. It is important that fee change tolerance levels are considered. Step 10: Evaluation This process is undertaken to articulate a philosophy, train staff on a best practice ongoing approach to subsidizing services in public parks and recreation, and enhance financial sustainability. Performance measures are established through subsidy level targets, specific recommendations are made for services found to be out of alignment, and evaluation of goal attainment is recommended to take place annually. ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 34 THIS PAGE INTENTIONALLY LEFT BLANK ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 35 Appendix B: Redmond Categories of Service ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 36 Service Category Tier Definition Examples Private/Semi-Private Lessons 5 lessons arranged for one to three students with a specific instructor and/ or time private fitness instruction/ personal training Facility Rentals - Commercial Use 5 rentals for exclusive use of facilities on a one-time or on-going basis by organizations charging their participants or attendees for program/ entry or for a profit. Commercial uses of a facility are those activities that involve advertising, promoting or selling of merchandise and/or services. Includes Anderson Cabins, Picnic Shelters, and facilities ticketed events, activities, fundraisers, private/for- profit use of facilities. Equipment Rentals 5 various department-owned equipment available to renters for exclusive use sports equipment, banquet chairs/tables, audio/video equipment, stage, etc. Concessions, Vending, and Merchandise Sales 5 items, food, and beverage conveyed to individuals for use or consumption may be contracted or self-operated Idylwood and Hartman concessions, vending in community centers, t-shirt sales at events/community centers Trips & Tours 4 day and extended trips for entertainment purposes that provide opportunities for participants to visit selected destinations entertainment based outings to museums, local attractions, restaurants, etc. Adult Sports Leagues 4 scheduled multi-game athletics for participants of multi-skill levels and various age groups that are organized and/or managed by agency, may or may not be officiated and/or judged, and may or may not be scored, providing a team experience for participants with the intent to play a game/match-format or to compete on a recreational level softball, soccer, volleyball, basketball, baseball Party Packages 4 rental of space as well as an organized and monitored activity by staff; may or may not include food, cake, entertainment, and favors farm birthday parties, party packages at community center Facility Rentals - Community Use 4 rentals for exclusive use of facilities on a one-time or on-going basis by the general public and that do not charge admission to participants. Includes Anderson Cabins, Picnic Shelters, and facilities interest groups, private gatherings, cultural/ religious organizations, weddings ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 37 Service Category Tier Definition Examples Field Rentals 4 rentals for exclusive of sport fields on a one-time or one season basis by any entity sports fields Miscellaneous Permits 4 non-rental allowable services that require a permit by the City film and photo permit, concessionaire permits, Miscellaneous Use Permits Adult Enrichment Activities 3 entry or multi-level group recreational and/or instructional programs and activities requiring registration with no prior skills required fitness classes, driftwood, arts, education Youth Enrichment Activities 3 entry or multi-level group recreational and/or instructional programs and activities requiring registration with no prior skills required arts, STEM, outdoor education Youth Sports Leagues 3 scheduled multi-game athletics for participants of multi-skill levels and various age groups that are organized and/or managed by agency, may or may not be officiated and/or judged, and may or may not be scored, providing a team experience for participants with the intent to play a game/match-format or to compete on a recreational level basketball Family Enrichment Activities 3 programs that require parent or guardian participation parent/child music and movement classes, multi age art classes, farm tours, etc. Long-term Lease or Partner Agreements 3 Long-term lease or agreement of a facility for use by a community organization that has partnered with the city to supplement city recreational offerings Redmond Historical Society, Nature Vision Preschool, interlocal agreement, Wave Aquatics Monitored Drop-in Use 3 drop-in use of a park/facility/activity that is monitored by agency staff pickleball, volleyball, fitness centers Community Gardens 3 assigned, dedicated garden plot provided by the City, requires upkeep by participant, and operates during growing season. Juel Gardens ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 38 Service Category Tier Definition Examples Special Event Permits 3 use of park and/or recreation facilities for private organizations or businesses to conduct a special event. Events are open to the public. use of public facilities for festivals (Ananda Mala, Cinco de Mayo), bike/ running events (Captain Jacks Treasure Run), World Whiskey Day, etc. Adaptive Recreation 2 specialized recreation opportunities for people with disabilities designed and managed to be specific to the physical, cognitive, social, and affective needs of these populations adaptive sport leagues Youth Day Camps & After School Programming 2 generalized after-school program and camps with a supervised social, teen, recreational or enrichment focus school break day camps (full and half days), afterschool programs at OFH Special Interest or Informal Social Use 2 self-managed, sanctioned special interest group meetings or get- togethers; includes scheduled support or social club for individuals with common interest, and unscheduled, informal facility use during standard hours of operations. Use complements City programming senior interest groups, community sing along, teen drop-in activities, senior drop-in activities Recreation Community Events 2 community events providing recreation, entertainment, or social connection produced by the recreation division Beat the Bunny 5K, Big Truck Day, Rockin’ on the River Cultural Arts Programs 1 public art programs bring arts into the community by hiring artists to engage with the public poet laureate, Redmond Art Season Grants, artist in residence, Public Art Intensive Eastside, Moving Art Center Human Services 1 services offered to the community to meet basic needs such as food, shelter, physical, mental, or emotional needs; may be internally provided, contracted, or partnered Meals on Wheels, teen services such as YES and FOY, senior lunch program, teen summer lunch programs ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 39 Service Category Tier Definition Examples Non-monitored Drop-in Use 1 drop-in use of a park/facility/activity that is non-registered and non- instructed, and is NOT monitored by agency staff/volunteer supervision trail use, playgrounds, passive and active park areas, pick-up games, dog exercise areas, skate park, self-guided tours, public art, FM Barnyard Idylwood Lifeguards 1 monitored drop-in use of Idylwood Beach by lifeguards Idylwood lifeguards City Signature Events 1 City signature events produced by the Parks & Recreation Department that are free to the public; community-wide events typically offered on an annual basis that do not require registration Derby Days, Redmond Lights Permanent Public Art 1 Redmond’s permanent art collection is presented for the benefit of the public, contributing to the city’s cultural identity, character, and aesthetics, while providing points of community gathering and dialogue. Includes 2D, 3D, and integrated artworks Buoyant Pavilion, Signals, The Erratic, Fan Tail Bird, Sky Painting Parking Lot Volunteer Programs 1 managing individuals or groups to donate their time and effort to a structured or scheduled experience, support educational or service requirements, provide facility improvements Green Redmond, Senior Program volunteers, teen volunteer programs, event volunteers, basketball coaches Commissions, Committees & Service Groups 1 management of appointed service groups RYPAC, SAC, PTC, RACC ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 40 THIS PAGE INTENTIONALLY LEFT BLANK ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 41 Appendix C: Developing a Pricing Strategy ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 42 Pricing of services must be done on a service-by-service basis. As the final step in the development of the comprehensive Cost Recovery Study, pricing strategies were considered. This discussion should continue in the future, and the following topic areas should be included and applied. Understanding Financial Trends The increasing complexity and resulting shifts of our society’s economy have led to what can be deemed as constant fiscal change in government. Public sector administrators and managers must be prepared to respond to the fiscal realities that have resulted from these economic shifts. Trends impacting fiscal and pricing decisions include: • Increased governmental accountability • Increased demand for people’s “leisure dollar” • Ongoing or increased demand for services with no/limited additional funding, or decreased funding • Disinterest in service reductions or increased fees and charges • Increased operating expenses (utilities, fuel, personnel, supplies, etc.) Understanding the budget process and fiscal year cycle Budgets are viewed as annual financial plans and include planning and forecasting, as well as establishing priorities and a way to monitor fiscal process. This overview allows for an abbreviated look at the process and how it is impacted by pricing. Understanding the costs of service provision Prior to making pricing decisions, it is important to understand the different types of service provision costs. Having this knowledge allows staff to make better informed pricing decisions. The different types of service provision costs are as follows: • Direct costs ▪ Fixed costs ▪ Changing fixed costs ▪ Variable costs • Indirect Costs Understanding the purpose of pricing There are many reasons to develop service fees and charges. These include, but are not limited to, the following: • Recover costs • Create new resources • Establish value • Influence behavior • Promote efficiency ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 43 Differential pricing Differential pricing is grounded in the notion that different fees are charged for the same service when there is no real difference in the cost of providing the service. There may be many reasons the Department may wish to consider this pricing strategy including: • To stimulate demand for a service during a specified time • To reach underserved populations • To shift demand to another place, date, or time Alternative funding sources In general, there has been a decrease in the amount of tax support available to public Parks, Recreation, and Senior Services agencies across the nation. The Department is forward thinking in its planning. As such, the need to look at alternative funding sources as a way to financially support services has become commonplace. Alternative funding sources are vast and can include: • Gifts • Grants • Donations • Scholarships • Sponsorships • Collaborations • Volunteer contributions Examining the dimensions of pricing In addition to the social and environmental issues surrounding pricing, the human elements of pricing must be considered. Regardless of how logical a price may seem; customer reactions and responses are their own and can be vastly different than what one might expect. The dimensions of pricing include: • Protection of self-esteem (pricing in such a way as to not offend certain users) • Price-quality relationship (value received for every dollar spent) • Establishing a reference point (worth of service in comparison to others) • Objective price (price has a basis in fact, is real, and impartial) • Subjective price (price based on factors such as personal opinions, feelings, or experience) • Consistency of image (perception of the brand and identification with product or service) • Odd pricing (perception of arbitrary or incongruent pricing) ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 44 Establishing initial price Establishing an actual price for a program can be based upon a variety of strategies including: • Arbitrary pricing: basing fees on a general provision such as raising all fees $.25 to meet budget goals which ignores market conditions and cost recovery goals. Arbitrary pricing is not encouraged, as it is impossible to justify. • Market pricing: a fee based on demand for a service or facility or what the target market is willing to pay for a service. The private and commercial sectors commonly use this strategy. One consideration for establishing a market rate fee is determined by identifying all providers of an identical service (Examples: private sector providers, municipalities, etc.), and setting the highest fee. Another consideration is setting the fee at the highest level the market will bear. • Competitive pricing: a fee based on what similar service providers or close proximity competitors are charging for services. One consideration for establishing a competitive fee is determined by identifying all providers of an identical service (Examples: private sector providers, municipalities, etc.), and setting the mid-point or lowest fee. • Cost Recovery pricing: a fee based on cost recovery goals within market pricing ranges. Understanding price revisions Once a price is established, there may be the need to periodically examine the need for revision. In some cases, “revised” may be viewed as “increased”; therefore, a systematic approach to pricing revision is important. Factors to consider in pricing revision include: • Customer tolerance: the degree to which small increases in price will not encounter client resistance. • Adjustment period: the period of time where the value of the service is assessed by the customer in relation to the price increase. The value of the service from the customer’s perspective must meet or exceed the impact of the increased cost. Adjustment periods may lead to diminished participation or termination of participation altogether based upon customer loyalty and other factors. • Customers’ perceived value of the service: the degree to which services including programs, facilities, and parks impact the public (individual and community), or in other words, the results or outcomes of services. Value is the judgment or perception of worth or the degree of usefulness or importance placed on a service by personal opinion. The intent or intention of a service is the purpose, aim, or end. The pricing process – developing a method Staff participating in the series of workshops engaged in interactive exercises that applied the cost recovery goals of their respective service areas. The workshops prompted discussions leading to recommended changes to selected current pricing practices with the intention of attaining recommended cost recovery and tax investment allocation goals and establishing a new method for setting fees and charges. This method is based upon using cost recovery goals as a primary pricing strategy, followed by either market pricing (for services with low alternative coverage – few if any alternative providers) or competitive pricing (for services with high alternative coverage – other alternative providers offering similar or like services). ---PAGE BREAK--- REDMOND PARKS AND RECREATION - COST OF SERVICE UPDATE 45 Criteria for Establishing Fees The following guideline provides criteria used to determine if a service should be included in the tier, keeping in mind that a service does not have to meet every condition. High or Full Tax Investment = Low or No Cost Recovery Tier 1 • The service is equally available to everyone in the community and should benefit everyone • Because the service is basic, it is difficult to determine benefits received by one user • The level of service attributable to a user is not known • Administrative costs of imposing and collecting a fee exceed revenue expected from the fee • Imposing the fee would place the agency at a serious competitive disadvantage • The service is primarily provided by the public sector Partial Tax Investment = Partial Cost Recovery Tiers 2 and 3 • User fees may recover only partial cost for those services for which the agency desires to man­ age demand, from those individuals who cannot pay full cost due to economic hardship, and if competitive market conditions make a full cost fee undesirable. • Services benefit those who participate but the community at large also benefits • The level of service use attributed to a user is known • Administrative costs of imposing and collecting the fee are not excessive • Imposing a full cost fee would place the agency at a competitive disadvantage • The service may be provided by the public sector but may also be provided by the private sector Low Subsidy = High Cost Recovery Tier 4 • User fees should recover most or all of the cost of services benefiting specific groups or individ­ uals, and for those services provided to persons who generate the need for those services. • The individual or group using the service is the primary beneficiary • The level of service use attributed to a user is known • Administrative costs of imposing and collecting the fee are not excessive • Imposing a substantial fee would not place the agency at a competitive disadvantage • The service is usually provided by the private sector but may also be provided by the public sector No Tax investment = Full Cost Recovery Tier 5 • User fees should recover the full agency cost, or more, for a service to offset other indirect costs necessary to support the service or to generate revenue above cost which may be used to support scholarship programs or other community benefits. • Individuals or groups benefit from the service and there is little community benefit • The level of service use attributable to a user is known • There is excess demand for the service; therefore, allocation of limited services is required • Administrative costs of imposing and collecting the fee are not excessive • The service is provided at market price by the private sector