Yes, I am starting right out with Cost Recovery so I can first dispel the myth.
Cost Recovery is not a philosophy, it is a strategy in the much larger context of how we secure and allocate resources, that allows us to maximize services. As publicly financed park and recreation systems, we provide a basic level of services, i.e. social services, for the benefit of the community in exchange for tax dollars.
However, fees and charges and other methods to recover costs are considered a responsible and necessary means to supplement tax revenue, just not at the expense of some of our most critical programs for our most at risk populations.
Resource allocation is especially important during, and after, the pandemic because there will be a shortage of tax revenue. And this will eventually impact all agencies — some sooner than later. We are already responding to requests from leadership to significantly cut back, this fiscal year and next.
Parks and Recreation: Essential?
Our field has struggled for a long time with the issue, “are parks and recreation essential?” We’re getting valuable insight into this subject right now. People are crowding our parks and open spaces. The takeaway here and the message we must convey to our local governments is that this is evidence of how much people need the kind of release that Parks and Recreation provides for their mental and physical health. P&R spaces are a physical and psychological lifeline right now.
However, that does not mean that everything we provide is essential.
We provide social services for those who cannot provide for themselves. We also provide fee-based services that deliver necessary revenue to offset the cost of recreation programs and facilities.
Janet Bartnik, Executive Director of the Mountain Recreation District in Colorado, made a great point in the Virtual Panel Event hosted by SmartRec last month. We have to find the "sweet spot" between social services and a business model. I want to take that a step further and say that “sweet spot” is our business model.
Dr. John Crompton says in his article in Parks and Recreation magazine (January 2020), for fee-based services: “the appropriate policy is to charge the break-even price to higher income cohorts [using the Benefit Principle] and meet the Ability to Pay Principle by giving discounts to low-income users, rather than offering the service to everyone at a reduced price,” or charging everyone the break-even price and effectively excluding the low income cohort.
This philosophy underlies the business model that is encouraged by a responsible resource allocation approach, including cost recovery strategies, and that provides the framework for discussing and addressing this element of social equity.
Demonstrating our Value
We must be able to articulate the benefit we provide our communities.
We can’t rely on intuitive thinking by our policy makers and decision makers. In whatever communication opportunities we get, we have to be prepared to clearly state our value and our sound decision-making. Our funding will depend on the clarity, conviction, and credibility with which we are able to convey the blending of the Benefits Principle and the Ability to Pay Principle and the insight and precision with which we are going to manage our revenues and make necessary program and service adjustments.
We are in a more powerful position when we understand the distinctions of our diversified offerings. We have to make sure that the right message gets across.
Keeping a Solid Foundation, While Providing for Our Communities
Should we prioritize programs with the broadest community benefit? Or given that our agencies are in a weakened financial position, should we prioritize programs that have the highest cost recovery?
There will be a push to increase the generation of revenue outside of tax resources in order to keep our systems afloat. We must both meet the needs of the broader community and rebuild the foundation for our fee-based offerings. Cost recovery decisions must be made carefully, with information and insight, so that agencies can recover appropriate costs without compromising essential services to the widest public. Misapplied cost recovery expectations sometimes cut the wrong programs. Cost recovery needs to be thoughtful, deliberate and based on understanding — not reactionary or driven by stress.
P&R agencies have to deliver their services cost-effectively, but they cannot do that if they can’t identify and track costs.
Those that use the next month or two to evaluate each type of business within their programming and services portfolio, and use zero-based budgeting, will be in a position to move forward more comfortably and correctly.
One of the best things we can do is assess the cost of delivering various programs and think about who benefits from each program. We can then make careful and informed decisions instead of broad or across-the-board decisions that could be damaging. Sometimes thoughtful analysis is overlooked or bypassed. With the normal pressures on our schedules, it can feel hard to take the time to do this. But the results are invaluable and provide relief and stability that permeate all our other processes. It’s incredibly helpful and worthwhile to make the time.
Informed resource allocation and cost recovery decisions give agencies flexibility and durability in evolving situations like the one we’re in right now. Let’s take the steps we can now, with the time we have now, to make things better this summer and fall, and for the future.
Chris Dropinski is Senior Principal at GreenPlay, a Parks and Recreation Consulting Agency.