65B - SERVICE FINANCIAL REPORT - Laserfiche WebLink

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I. THE STUDY CONTEXT INTRODUCTION In an effort to continually improve and enhance services and overall organizational effectiveness, PRCSA participated in an extensive process to address financial sustainability through the creation of a Resource Allocation and Cost Recovery Philosophy, Model, Policy and Services Assessment. This process and its outcomes will guide PRCSA in evaluating its service provision strategy to ensure it is running at its optimal level, and the system is sustainable in the long run. This study looks at how the community's tax investment is used to support the programs and services of the PRCSA. This is represented by a subsidy level and ultimately measured by taking the tax investment and dividing it by the cost of providing a service. It is expressed as a subsidy level percentage. What is not covered by the tax investment is often referred to as cost recovery. The measure of cost recovery is a simple equation: Revenue generated divided by the cost of providing a service, represented as a percentage. This measurement is complementary to the measurement of subsidy level. Cost Recovery is a complex subject. Essentially, it represents a decision to generate revenues by charging fees, or other types of revenue, for some, or all, programs and services relative to the total operational costs to provide them. It can be controversial if not understood. Cost recovery does not imply that the target is total recovery of the cost; however, a target is established according to a variety of considerations and may range from zero percent to more than 100 percent of what has been determined to be the primary cost of providing a service. How tax subsidy and other financial resources are allocated in public park and recreation systems is a complex subject. Cost of Service is an identification and calculation of what is required financially to produce or operate a service. Looking at how those services are funded provides the opportunity to meet the needs and desires of the community by supplementing the tax subsidy with other financial resources, which may include fees, sponsorships and donations, and/or pursuing cost saving measures including partnerships, collaborations, and efficiencies. Undertaking this study does not imply that the target is a reduction in the use of tax subsidy; however, a target is established according to a variety of considerations and may range from 100 percent tax subsidy (0% cost recovery) to zero percent tax subsidy (100% or more cost recovery) to support a particular type of service. Establishing a well -crafted philosophy for subsidy and resource allocation is the foundation for developing strong, sustainable financial management strategies. A solid philosophy will allow staff to: • Recognize where subsidy is being applied, and determine if it is at an appropriate level; • Justify a pricing structure, including fees for existing and new services; and • Evaluate service delivery mechanisms; all to maximize services to the public while assuring equity in service delivery. The process required aligning with the City's and the Agency's mission, vision, and community priorities. It included a review and assessment of services, programs, and facilities (services); categorization of agency services based upon the level of community versus individual benefit; discussion of direct and indirect costs; and an evaluation of current pricing methods. All of the components of the process directly influence current cost recovery and tax investment allocation levels, the establishment of future cost recovery and tax investment allocation goals, and future pricing strategies and methods. The transforming process also included an analysis of core services, a market study, and consideration of g 1' 65B-21 r-'=