time for appropriate cost recovery – now, more than ever

From the — Fall 2017Email: [email protected]

A recent article in NRPA’s Parks and Recreation

magazine suggested that many local government budgets are still strained following the last recession, putting additional pressure on park and recreation agencies to compete for the limited dollars communities get from taxes, bonds and various fees. At the same time, several studies suggest that local officials, “agree that park and recreation services provide a ‘moderately high level’ of benefit for communities in the form of positive youth development, promoting health, economic prosperity, resource conservation, and social equity.” (Mowen, Graefe, Barrett, & Godbey, 2015)

Although Parks and Recreation enjoys strong support from government officials (across both major parties),

communities faced with stagnant or reduced budgets from traditional funding sources may consider parks and recreation funding as being “more discretionary than other local government-provided services such as education, police, fire, hospital/health and transportation.” (Roth, 2017, p. 12). Additionally, many citizens have choices for how they spend discretionary dollars for recreation including private sector facilities such as water parks, sports complexes, field houses, adventure parks, health clubs, ice rinks, theme parks, and even YMCAs.

Start Cost Recovery Today

Today, more than ever, parks and recreation agencies need to look at how they allocate financial resources, and consider developing new areas where they can recover costs, or a portion of costs, through the use of revenues that supplement taxes.

Cost recovery is a complex subject, but essentially, it represents a parks and recreation agency’s decision to generate revenues by charging fees for some, or all, of its programs and services. A community may target total cost recovery or recovering some percentage of cost based on a variety of considerations. Most agencies considering this approach utilize the services of a consultant to help them analyze their financial situation and assist in evaluation of programs and services from which they expect to recover costs.

Pyramid Methodology

GreenPlay, LLC, a leading parks and recreation consulting firm, offers a number of approaches to financial sustainability, alternative funding and cost recovery. GreenPlay has applied and improved the “Pyramid Methodology” for helping agencies create an overall philosophy and

© 2017 GreenPlay LLC. All rights reserved.

Time for AppropriateCost Recovery –Now, More Than EverBy Chris Dropinski, CPRE, and John Rainey

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methodology for determining consensus on values, mission, allocation of subsidy resources, and pricing programs, and assisting in evaluation of expected cost recovery. This method is invaluable for creating cost recovery and prioritization strategies that are equitable, defensible and can be implemented at all levels. These are based on the value of the services to the community, not just a comparative evaluation of “what has been done before” or what others are doing.

Lisle Park District Case Study

As an example, in 2014, GreenPlay was engaged by the Lisle Park District, in the Chicago area, for a Cost Recovery, Resource Allocation, and Revenue Enhancement Study. We recently followed up with Dan Garvy, Director, to see how things were going after completion of the process. Garvy responded: “It’s going well. It was tough, to be honest. It’s a lot of work and it takes a lot of time.” Garvey thought the Cost Recovery process was, “a terrific experience, the whole project itself was an eye-opener on every level. But in order to maintain and manage, it’s a big commitment. We weren’t totally prepared to do that initially. The biggest challenge is tracking all of our indirect costs, like our marketing costs, our incidental costs like special event setups or setting up rooms for rentals, and so on. Our people track all that and input the data. But, administratively, we’ve been struggling to keep everything current on the cost recovery side.”

After having gone through the process, Garvy is a strong proponent.

“If someone is on the fence about doing cost recovery, they might say, ‘I don’t want to take that on; that’s a big hassle,’” said Garvy. “Yes, it is in a sense. But the return you get, the knowledge, and information you glean from it is incredibly

useful — that’s the plus side of it. So whatever administrative struggle you may experience in going through it, the payback is that you are 100% confident in your financial performance and the impact that any given program or service has on your agency.

“We bought into it, and I swear that it is every bit as helpful, administratively, as our Master Plan

was — maybe even more so, because I involved my staff at every level in the process: cost recovery, the pyramid, public meetings — and just seeing the impact it had on my staff was nothing short of incredible,” said Garvy. “That can’t be undervalued. I’m so happy and proud that we decided to involve everybody in the process — our recreation supervisors, our front desk staff, facility managers, park managers — they got to see the community engagement portion of it and they got to see and hear resident reactions, first hand, on our process, as well as the public’s opinions of our services, the direct and indirect costs and all that stuff. I had heard from other agencies that cost recovery would be a big adjustment for the staff. They warned that staff might see that their program is losing money and think they might lose their jobs. I listened to that, and I decided to get everyone involved on the ground floor. You’ll learn right away if you get their buy-in or not. If you’re truly engaged in the process, and committed to the field


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Dan Garvy, Director Lisle Park District, Illionis

I swear that it [Cost Recovery] was every bit as helpful, administratively, as our Master Plan…

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of Parks and Recreation and working for local government, you understand that your top priority is to make sure the taxpayers feel they’re getting a big return on their investment. So what better way to do that than letting residents identify and decide which programs they want a greater return on and which ones they are OK with subsidizing. It was extremely eye-opening for us and our board, too. It got them even more engaged and more knowledgeable about the challenges we deal with and how we price-out the cost of services.

“I don’t know how else to say it. It was just such an eye-opening experience. The way that the GreenPlay consultants engaged not only with our staff and board, but with the residents too — it was just such a refreshing, honest approach. It was incredibly empowering, and it builds confidence. Now, if I get grief from someone asking why we do something a certain way, I have the information: here’s what the community said, these are the categories, this is the level on the pyramid on which it fell and so our target recovery is between this and that. Maybe a program is falling short, or maybe it’s over-performing, so we might adjust things in accordance.”

Garvy said he’s seen a steady increase in revenue, which is good. But what he looks at more is general participation. That’s up too. In fact, the District has been up every month, every year for the last few years. This year, their participation is up 20%. A lot of that has to do with his staff engaging the residents at programs and events, and through social media. This enables them to have

a “good pulse” of everything and they’re able to provide programs and things that people want. They saw an increase during the Cost Recovery process because they were “all over the media.” They publicized their meetings and engaged the press. Their newsletter and brochure encouraged participation, and they reported on what they were doing.

Another change has been how they pursue grants and alternative funding. For example, during the sorting process, residents indicated that they wanted greater cost recovery for special events. That led the District to redirect some sponsorship efforts. Now they are asking businesses and community groups to sponsor the Movie in the Park program instead of the swim team.

Using the “Pyramid Methodology” for establishing an effective and sustainable cost recovery program

The Pyramid Methodology is an effective management tool currently being utilized by agencies across the country to articulate the level of benefit that services, facilities and programs provide as they relate

to the Values, Vision and Mission of an agency. The process engages stakeholders, including community members, collaborators, decision-makers and agency management and staff. This proven design leads to a logical determination of resource allocation and subsidy/cost recovery goals, and future fees and charges. Establishing guidelines and a methodology for such critical operational issues is imperative to sound fiscal responsibility, governmental accountability and decision-making.


Establishing a well-crafted philosophy for cost recovery and subsidy allocation is the foundation for developing strong, sustainable financial management strategies and a cost recovery program. A solid philosophy will allow staff to recognize where subsidy is being applied, to determine if it is at an appropriate level and to justify an agency’s pricing structure, including costs for new services. Staff members are an integral part of the decision-making process for setting expectations. They learn how to apply agency tools and budget expectations to set equitable pricing based on consensual vision, values, and mission for your agency.

Get a Handle on your Finances

Having a Cost Recovery Model and Resource Allocation Philosophy in place can help an agency answer challenging questions such as:• Are your programs priced fairly

and equitably?• How will you continue to fund your

agency’s facilities and services in relationship to future budget constraints?

• Are you using your funding in a responsible manner?

• Do you have a methodology for subsidy distribution? If so, is the process transparent?

• Does the way that you charge for services (facilities, programs, etc.) support your agency’s values, vision and mission?

Parks and Recreation agencies are not in business to generate a profit. Their business is to provide places, programs and services for which the community has expressed a need, and agencies need to demonstrate that they are being efficient and equitable with the allocation of those limited resources. Agencies are simultaneously accountable

for maintaining a functional, sustainable system that attracts the overall community and one that also responds to the interests of individuals. Revenues have an obvious impact on their ability to do this.

Cost-Benefit and the Balanced Use of Tax and Fee Revenues

Cost recovery reserves tax revenues for those things that really should be supported by the entire local population. Public park, recreation and conservation agencies are entrusted with taxpayer dollars. As such, they are responsible for providing as many high quality services as possible, without placing an exceptional burden on the taxpayers. By determining the appropriate balance of tax and fee revenues, recreation managers can decide confidently how to broaden participation and serve the expectation of their constituents.

Resources:

Mowen, A.J., Graefe, A.R., Barrett, A.G. & Godbey, G.C. (2015). Americans’ use and perceptions of local recreation and park services: A nationwide reassessment. NRPA Publications. Available at: http://www.nrpa.org/uploadedFiles/nrpa.org/Publications_and_Research/Research/Park-Perception-Study-NRPA-Full-Report.pdf.

Roth, PhD. What Drives Public Officials’ Budget Priorities? Parks and Recreation (NRPA), October 2017, 12-13.

Lisle Park District, IllinoisCost Recovery, Resource Allocation, and Revenue Enhancement Study, April 2015. Available at: http://www.lisleparkdistrict.org/costrecovery.html


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time for appropriate cost recovery – now, more than ever

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