ADMINISTRATIVE REPORT
Date: June 21, 1995
TO: Vancouver City Council
FROM: General Manager, Park Board
SUBJECT: Reserve Fund for Andy Livingstone Artificial Turf Playing
Fields
RECOMMENDATION
A. THAT City Council approve that the revenue from the user fees
from the Andy Livingstone Artificial Turf Playing Fields be
placed in a reserve account to be used for improvements or
replacement of artificial fields.
B. THAT City Council approve that interest be added to the
reserve account each year to offset the effect of inflation.
GENERAL MANAGER'S COMMENTS
The General Manager of Parks and Recreation RECOMMENDS approval of
A and B.
The General Manager of Corporate Services does not support the
payment of interest to the Artificial Turf Reserve and RECOMMENDS
that Council NOT approve Recommendation B for the reasons outlined
in the body of this report.
COUNCIL POLICY
City Council approval is required for the establishment of a funding
reserve.
BACKGROUND
On January 5, 1987, Council approved the establishment of the Eric
Hamber Artificial Turf Reserve. This approval was based on a
recommendation from the Park Board indicating that a new user fee
schedule had been approved for this field and recommending that these
user fees be put aside and be placed in a reserve account for the future
replacement or repair of this expensive field.On the same date, Council
also considered the Park Board's request that interest be added to this
reserve each year. This request was not approved. The motion passed as
follows:
- That revenue from the user fees be placed in a reserve account to
be used for future improvements to the artificial turf playing
field at Eric Hamber School.
- That no interest be added to the reserve account.
Subsequent to the above, in early May of 1995, Concord Pacific turned
over Andy Livingstone Park to the City. As part of the development
agreement, the construction of this park was completed prior to turnover
and was fully paid for by the developer.
The park contains two artificial turf fields and a ball diamond of the
same calibre as the Eric Hamber field. In anticipation of assuming and
operating these fields, the Board approved the following resolutions at
its May 1, 1995, meeting:
- That the Andy Livingstone Turf Playing Field user fees be the same
rates as those established at the Eric Hamber Artificial Turf
Playing Field as outlined in Appendix I.
- That the Board request that the revenue and the interest from the
user fees from the Andy Livingstone Turf Playing fields be placed
in a reserve account to be used for improvements or replacement of
artificial turf fields.
DISCUSSION
The original logic for the establishment of the Eric Hamber Reserve was
based on the fact that the field provided a higher level of service than
regular fields and that the users should contribute by way of a user
fee. Also, it was estimated that within 10 to 12 years the Park Board
could be faced with costs estimated at $550,000 allowing for inflation,
to replace the synthetic turf. The accumulation of user fees in a
reserve together with interest would provide most of the funding
required at replacement time (10-12 years).
This same logic applies to the Andy Livingstone Park Artificial Turf
Fields and the Board is again requesting Council approval to transfer
these user fees into a reserve account. The Board is also requesting
that the City add annual interest to this account in order to offset the
annual inflation. The interest rate would be the average rate earned by
the City on its investments of surplus funds. This request is being
made in spite of the fact that interest was not allowed on the Eric
Hamber Reserve. The reason being that the circumstances related to the
Livingstone Park Reserve are different than Eric Hamber. In the case of
the Hamber fields, the City incurred additional annual debt servicing
costs on the $900,000 debt incurred to pay for this field. However, in
the case of the Andy Livingstone Fields, this rationale does not apply
as the construction costs were paid for by the developer and no
additional debt was incurred by the City. Therefore, the Board feels
justified in requesting the addition of interest to the new reserve
being requested.
The established user fees are expected to produce annual revenues of
approximately $80,000. In 1995, this will amount to $40,000 as the
fields will be open for a half of the year. It is estimated that in 10
to 12 years the turf will have to be replaced at a current cost in the
area of $1.0 to 1.5 million. At an inflation rate of 3% per annum, this
would amount to $1.3 to 2.0 million in 10 years. Assuming that user
fees are inflated by 3% per year and that these are placed in a reserve
earning 6% interest per year, at the end of a 10-year period the funds
available would be around $1,350,000. At the end of 11 years it would
amount to $1.53 million which would provide most of the funding required
for replacement.
COMMENTS OF THE DIRECTOR OF FINANCE
The new facility at Andy Livingstone Park will add significant new
operating costs to the Operating Budget. The Park Board has requested
additional funding of $160,000 annually for the park, of which $85,000
was added in 1995. The decision to direct user fees to the reserve
means that these additional maintenance costs would increase the Board's
Global Budget. Alternatively, these fees could be used to offset
operating costs, as is the case with other Park Board operations.
Payment of interest to the reserve would further increase the City s
operating costs, and possibly at the expense of other city operations.
The City has generally limited the establishment of reserves to provide
for the replacement of trucks and equipment. Replacement of other
capital assets is provided through capital funding allocations which are
determined during the course of developing the City's three-year capital
plans. Since a precedent has already been established with the Eric
Hamber field, it seems reasonable to continue with the practice for the
Andy Livingstone facility.
The Director of Finance does object to the payment of interest on
reserve balances, and recommends that Council NOT approve Recommendation
B of this report. Council should note that the Park Board budget is not
charged for the debt servicing costs that arise from capital borrowing
for park and recreation purposes, and to allow interest on reserved
funds which are derived from capital expenditures on park facilities,
whether those funds are provided by the City or not, is not consistent
with that debt policy. CONCLUSION
The establishment of this reserve will ensure that the users of these
high cost high quality playing fields pay for the future replacement
costs. This will ensure that the necessary funding is available and
will not have to be included in future debenture capital borrowing which
would be repayable by a levy against all property owners.
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