SUPPORTS ITEM NO. 5
CS&B COMMITTEE AGENDA
APRIL 25, 1996
ADMINISTRATIVE REPORT
Date: April 14, 1996
TO: Standing Committee on City Services and Budgets
FROM: Director of Finance
SUBJECT: 1996 Park Board Global Budget
RECOMMENDATION
A. THAT Council approve the Park Board global budget base of
$35,330,700 for 1996; source of funds to be the 1996
Operating Budget.
B. THAT Council approve Added Basic funding of $441,000 to be
added to the Park Board base budget recom-mended in A above;
source of funds to be the 1996 Operating Budget.
CONSIDERATION
C. THAT Council approve transition funding of $356,000 to give
full affect in 1996 to the global budget adjustments
proposed by the Park Board; source of funds to be the 1996
Operating Budget.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Service RECOMMENDS approval of A
and B and submits C for CONSIDERATION, noting that, if the
transition funding is not provided, Park Board will have
difficulty achieving its global budget for 1996.
COUNCIL POLICY
In March 1992, Council established the Park Board global budget
arrangement in which funding for Park Board parks and recreation
programs are provided as a global amount with the Board taking full
responsibility for the decisions affecting program delivery.
Council approves annual adjustments to the global budget, including
the addition of added basic funding reflecting the cost of new program
expenditures arising from the Park Board capital program.
PURPOSE
The purpose of this report is to request Council approval for the 1996
Park Board Global Budget and to submit a request from the Park Board
for transition funding as requested by the Board.
BACKGROUND
On March 24, 1992, Council adopted the principles of a global budget
for the Park Board and approved the funding base for the first year.
This base took into consideration the basic operating revenues and
expenditures that supported the program-ming and services offered by
the Park Board. Within that global amount, the Board has full control
over its operating budget, including the ability to reallocate funding
to deal with emerging priorities and to add or delete programs and
staff based on its needs. Where Board decisions have budget
implications, it is intended that necessary adjustments within the
global amount will be made to fund the cost of these decisions without
cost to the City.
Each year the global budget is adjusted to reflect the same
inflationary growth in expenditures as is provided to City
departments. The global budget is also adjusted each year for items
over which the Board has no direct control, including additional costs
arising from collective agreement and fringe benefit costs. In
addition, the park Board is required, as a minimum, to increase
revenues at the same rate as costs increase; in other words, to
maintain the traditional operating margins on its revenue programs.
In cases where the Board increases fees or charges beyond the level of
local inflation, the City shares in the increase on a 1/3 City - 2/3
Park Board basis.
Funding for capital purposes is provided outside of the global budget
process. However, new operating costs arising from these capital
programs -- referred to as added basic -- are provided for in the
annual adjustment of the global budget.
The global budget recognizes that many of the Park Board revenue
programs are seasonal or weather sensitive. The primary
responsibility for dealing with these problems lies with Board; when
revenues decline, it is intended that the Board will to react by
reducing expenditures where possible to maintain operating margins.
In order to insulate the global budget from uncontrollable factors
such as weather, a Revenue Stabilization Fund was established. This
fund is a notional allocation from the City's revenue surplus account
which is intended to smooth the peaks and valleys inherent in the
operation of rinks, pools, outdoor concessions and golf courses. In
years where there is a surplus in these programs, the Revenue
Stabilization fund increases; in years when short-falls occur, the
account provides funds so that other Park Board programs are not
jeopardized. If the global budget is appropriately set, in the longer
term, the ups and downs in the Revenue Stabilization Fund should
balance.
THE GLOBAL BASE BUDGET
The interim estimates that Council considered on April 16, 1996,
include a provision for the 1996 Park Board global budget. This
provision has been calculated by City and Board staff according to the
agreed upon principles. Based on these adjustments, the 1996 global
budget is recommended as follows (with 1995 comparable figures):
1996 1995 % change
Gross Revenue $23,589,700 $21,720,300 8.6%
Gross Expenditures 58,920,200 56,302,600 4.6%
1996 Net Budget $35,330,500 $34,598,300 2.1%
There are variety of changes in the estimates that comprise the
adjustments included in the proposed base budget. Salary and wage
costs have increased as a result of funding provided for the 1995 and
1996 wage settlement (compounded to 3.02%) and, in addition, $220,000
of salary, wage and fringe benefit costs have been added as a result
of specific reclassifications and one-time costs associated with staff
retirements. Inflationary adjustments in other expenditure areas have
averaged approxi-mately 2.0%. Finally, the budget has also provided
for the annualization of costs associated with added basic approved
for a partial year in 1995.
This global base amount was approved by Park Board on April 1, 1996.
BASE BUDGET ADJUSTMENTS
When the global budget was first established, there was concern that
some of the revenue estimates in the base would prove to be too high
to be achieved and that adjustments might have to be made in
subsequent years to bring the global budget to a level where it could
be obtainable. In addition, there has been several structural and
operational changes in Board programs that have affected its ability
to stay within the global budget.
One of the more significant of these has occurred in Stanley Park
where the phase-out of the Zoo and the introduction of pay parking
appear have reduced visits to the park and a reduction in revenue
generated from concessions and the zoo operation.
While the Board exercised some control over in these changes, there
are others that are outside the Board s control. For example, closure
of the Chilco bus loop has had an impact on revenues at the Lost
Lagoon concession. Public use of beaches and beach concession stands
has diminished in recent years. In addition, after years of being
dominant in the public golf course market, the Board has faced
increased competition from new golf courses in the lower mainland and
Washington state which has resulted in fewer rounds being played on
Board courses, and less revenue. The Board has also noted declining
trends in attendance at its fitness facilities and indoor pools and an
inability to generate the revenues anticipated from it pay parking
operations.
The impact of these changes, which are compounded by weather related
problems on many of its outdoor programs, is that the Board has been
unable to achieve the global budget in any year since its
establishment. The accumulated shortfalls have grown to $2.87 million
(see Appendix A) and represent a draw against the Revenue
Stabilization Fund. In effect, this draw is a measure of the amount
by which the City's accumulated surplus has been reduced over the four
years of the global budget. However, if the Revenue Stabilization
fund concept works, in the longer term, this "draw" will be offset by
excess revenues generated in peak years. To achieve these peaks,
adjustments will have to be made to the global budget, either by the
City, the Park Board or both.
The City has responded to many of the revenue problems identified in
recent global budgets. In the 1993 and 1994 global budgets,
additional funding of $200,000 (net) was provided to deal with revenue
programs. In 1995, in an attempt to address difficulties that the
Board was experiencing in Stanley Park, Council agreed to provided
additional funding of $210,000.
In developing its 1996 global budget, the Park Board has identified
additional adjustments to revenue programs totalling $765,000 that
they believe should be funded in the global budget. Details of these
adjustments are included an March 20, 1996 Park Board report entitled
"Global Budget - Base Adjustment" which is attached as Appendix B.
However, rather than requesting further adjustments to the global
budget base, the Board has proposed adjustments within the global
budget to correct these problems. These adjustments include a
combina-tion of new revenues and expenditure reductions that will
offset the identified shortfall. The adjustments are reviewed in an
April 11, 1996 Board report entitled "Global Budget - Base Adjustment"
which is attached as Appendix C. By proposing to make these
adjustments, the Board has acknowledged it shares the responsibility
for making adjustments to the global budget which arise because of
changes to its operations.
Council is not requested to take any action on these specific
adjustments. The decisions are within the authority of the Board
under the global budget arrangement. However, the Board has requested
that Council provide transition funding for several of its new
initiatives in 1996 to give them time to be fully implemented. The
Board has requested transition funding totalling $356,000 as outlined
in its April 11 report (Appendix C).
Staff concur that the Board has addressed the most pressing problems
in the global budget in the adjustments it proposes. Whether these
adjustments will bring the global budget to a position where the base
is obtainable and the Revenue Stabilization Fund can become workable
in the long run can only be proved in time.
Staff also concur that the requested transition funding is necessary
if the impact of the changes in revenue and expenditure programs
approved by the Board are to be neutral in the 1996 budget. Unless
the full amount of transition funding is approved, the Board will have
to seek other adjustments to the global budget to keep from starting
the year in a shortfall position.
1996 ADDED BASIC
As noted earlier, the global budget arrangement provides for an annual
adjustment to the base budget for new operating costs arising from the
Park Board capital program.
Following discussions between City Finance and Park Board staff it has
been agreed to recommend that Council add $441,800 in added basic to
the global budget in 1996. This includes increased funding in the
following areas:
Fieldhouse and Recreation
Facility Renovations $ 25,200
Park Improvements 40,000
David Lam Park Maintenance 8,200
New Playgrounds 13,600
South Granville Slopes Park 14,500
Douglas and Falaise Parks 22,000
Street Tree Maintenance 67,500
Evans Service Yard 32,000
Collingwood West - Phase I 47,300
Other 12,100
Subtotal $ 228,400
Roundhouse Community Centre 159,400
Total $ 441,600
The funding request for the Roundhouse Community Centre is part of a
larger request for $1.2 million in added basic funding for this new
centre in the Roundhouse district of Concord Pacific s development on
the north shore of False Creek. The centre is scheduled to open early
in 1997. In addition, the Board is seeking an additional $200,000 in
capital funding to complete the outfitting of the new centre. These
requests will be the subject of a more comprehensive report to Council
in the latter part of May. The 1996 funding will allow the Board to
begin the staffing of the new centre and will not prejudice decisions
Council may make when considering the overall operating plan and
funding for the new complex.
CONCLUSION
The recommendations in this report will complete the develop-ment of
the 1996 Park Board global budget, including provision of funding for
new operating costs arising from the Board's capital program. Should
Council approve these recommendations, the only remaining adjustment
to the global budget will be the addition of new and non-recurring
funding, an item to be added before the 1996 Operating Budget is
finalized. The Board has approved several adjustments to its revenue
and expenditure programs to correct some on-going problems in the
global budget and while Council approval is not necessary for these
adjustments the Board has requested that Council provide transitional
funding for 1996 so that these adjustments can be fully reflected in
the global budget. In addition, the Board has requested that Council
waive its 1/3 of new revenues being proposed within these adjustments.
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