Private sector vs. public sector Recreation- Dan Rodgerson

Have often faced the challenging question during my career in regards to utilizing public funds to construct and subsidize facilities that compete with the private sector. There has also been proposed legislation in the state of Utah which would prohibit this. Looking for research, articles, comments, thoughts.

John-  This proliferation of anti-government, “down with the public sector” rhetoric, is truly dismantling what our predecessors bestowed to us. No one truly cares anymore about the wonders of the public enterprise, only it’s “waste.” Yes, directors, supervisors, and administrators must be diligent and dutiful with their resources, yet without the funding from local governments and large state bodies, the recreation and parks community would be devastated. In that reality, recreation will once again be a leisure activity for the upper middle class and high income earners, as it was in the Roaring Twenties. If anything, public departments and agencies should find creative methods to implore the citizenry the exclusive opportunities afforded them by their programming and park ventures. Let’s get Parks + Recreation off of the chopping block!

Carrie- To be good stewards of the public funds, govenment funded facilities should exist to serve an unmet need in a community. A community with a variety of private or quasi-public fitness centers, reaching all income levels, probably does not perceive a need for the park department to open a fitness center. However, a community with limited or no private fitness centers may perceive a strong need for a park funded fitness center. In many cases, privately owned facilites tend to arise where public facilities succeed. If enough private fitness centers come into the community to serve the majority of the need, the community may shift its perception and the park should shift its operation to fit the new level of perceived need – or lack thereof. PROS Consulting did a terrific job of walking our department through a process to determine which services that we offered were Essential (fully subsidized) Important (partially subsidized) and Discretionary (fully self-sustaining).

Nancy-  It’s important to differentiate between a “Fitness Center” designed for fitness only purposes for teens and adults and a “Community Center” which has elements of community programming for the citizens and families. Overtime we have seen community centers offer fitness components to meet the needs of the families which they serve and some private centers begin to offer some family elements. I believe that both can coexist and meet the needs of different clientele. Typically, the public community centers also house recreation and program needs that require subsidies for low income citizens and families which I have not seen offered in the private sector. These include everything from wellness programs to financial assistance programs to after school programs, swim team, etc. etc.

John-  I believe that public parks and recreation should steward public funds by maintaining, improving, and increasing parks and recreation infrastructure. Parks, trails, open space, and recreation facilities are the infrastructure that the private sector is not willing to provide. Government should do this to create access to recreation for all. Programming these facilities is where the private sector can excel; especially the private non-profit sector. In my ideal world, parks departments provide the infrastructure, the private sector brings the people. It seems like parks and recreation departments put a heavy burden on themselves and their local government entities by creating and administering so many programs requiring many employees, many small expenses, and management of inventories, advertising, registrations, and fees. Stop acting like you are a business that can make a profit and serve the entire community; and start focusing on maintaining the recreational skeleton of our communities. Relieve yourself of the heavy burden you carry and place it on the private sector. If you build it, they will come.

Dan Rodgerson • Thanks for all of the comments! Jonathan, we are on the same side and I agree with your thoughts. Recreation needs to get off the chopping block. But how? In municipal organizations, many time parks and recreation need to compete for limited municipal dollars with departments like Police, Fire and roads. It is often a losing battle. Who has not heard those phrases “do more with less” or Look for “alternative funding sources”

In some cases expectations of public centers seem contradictory. “Be good stewards over public funds but not too good that you actually make money” The enterprise funds and Revenue bonds have burst on the scene and has been used to create several private sector like complexes and amenities. Is this a good thing for municipalities struggling with funding issues?

I have the unique opportunity to work on both sides. 14 years in the municipal recreation sector but the past 2 years for a private club. Yes Nancy they can and do co-exist. The question is how. I have taken the position that two hotels across the street from each other do not necessarily compete with each other.

I am still a bit unsettled about private sectors paying governments taxes and the utilization of those funds to at times directly or indirectly competing with that group. Are there other government situations where that occurs?

My love and passion has been in the public sector. I am just trying to find that that line or rather the roles of each sector.

Carrie, are you saying the public sector simply needs to be flexile to meet the un-met ever changing community needs?

John are you suggesting that municipal organizations act less business like? Focus on the infrastructure and no the programs?

Love the comments and the passion!

Linda- John, Are you saying that private sector should be able to use public facilities for profit. If so, who would decide which private entities have priority for use and how would we be able to ensure that the low income as well as the high income families would have equal advantage to the programs operated in a public facility (maintained by public funds).

I also believe it is not wrong in some cases that programs operated by the public sector make a profit. For instance, if adult sports leagues operate with a 150% cost recovery after direct costs, those additional funds can be used to support much needed senior programs which in many cases operate below 10%. The adult sports leagues in essence provide additional much needed funding for senior programs.

What is important is to ensure that the public entity communicates and understands its citizens needs and that the citizens understand why some programs operate in a higher deficit than others. Using private business tactics is not a bad thing especially as public funds become more scarce. In any case, it would be very wrong to leave public facilities unused and sitting empty because we are afraid of what we will look like if we make a money on a program.

Carrie- Dan – P&R does need to be flexible and willing to let go when the private sector comes in and fills the needs of the community. Personally, I have run programs years past their natural death because of emotional attachments. Live and learn. The cue for me is when we start talking about the fact that our program participation is losing market share to other groups or businesses and we are struggling to make ends meet with the low participation. That’s when its time to evaluate what – if any – needs are not being met by the other groups or businesses – and then work towards filling those needs. For example, when youth sports groups start popping up and the park leagues are dwindling, maybe a partnership is in order and the parks can fill the needs of the entry level program and the club sports program and let someone else run the competitive leagues.

Linda – As for how to decide who gets to use the space, this seems like a strategic decision. If I had a community center, I would schedule the needs of the park department first, and then assess what service gaps exist and set a criteria to fill the spaces with programs that meet the needs in the gaps. When creating a contract for those programs, it seems logical to contract for a certain number of low cost or free classes as part of the deal – introductory level classes. Then – its a feeder program for the for-profit classes, and the parks are serving the community need for affordable opportunities. Win-win.

Finally – for being on the chopping block. Two dynamics played a role in the current situation of not having enough resources to maintain our programs and facilities. First, we spent much of the 70s and 80s and even the 90s acquiring as much land and facility as possible with the intention of getting it while we could and worrying about how to maintain it later. “Later” – is now. We knew this day would come. And secondly, there are diminishing tax revenues across the board. We are called to make tough decisions, cutting programs and facilities that are close to our hearts, but are marginal or discretionary. It is tough to accept that some of what we do IS marginal or discretionary. When we let go, others will pick up the pieces – not all of them, but some, if we provide the space. Adults will organize their own softball leagues. Hobbyists will provide classes to teach others their craft. And groups will form to provide youth sports leages as well. Maybe John has a point – and our greatest responsibility is to provide the spaces.

With our diminishing tax base, many of us are looking towards revenue producing ventures to help fill the gap, but we are not in service to make money, so it ruffles feathers. My litmus test for justifying a revenue producing venture is 1) does the facility serve an unmet community need AND 2) does it have a pricing structure to accommodate low income residents as well? That is our charge as a public service.

I worked for an agency that built a waterpark and it makes plenty of revenue that is dispersed throught the park system to support many programs and facilities that cannot create their own revenue. 1) There was an unmet need – In the service area, there were very few community pools and no other waterparks for almost 100 miles. One private venture jumped on board after the fact, but they were not in existance when the park venture began building. 2) They priced the facility to reach as many people as possible.- The waterpark has many discount days and times, coupons, and specials. It serves school groups and it allows guests to bring their own food if kept in a restricted area.

We need to be creative in our funding and intentional in our resource allocation. We need to think like a sustainable business and act like a community service. A shift in our thought process is imminent.

Treadwell-  I have to say I love the thoughtfulness of this discussion. I am an advocate for public private partnerships. I have some insight on working with public / private recreation facilities in Germany. They were aquatics facilities which operated at loss for the cities and were turned over to a design build management team. The results varied but it did lead to the trend of the surrounding communities becoming more inclined to provide facilities that did help out the bottom line by building better facilities that bring in money to meet operations cost and reduce subsidies. here is an example of one http://www.h2o-herford.de

Scott-  There is no doubt that recreation and leisure services have undergone a dramatic evolution, especially in the last 50 years or so as those services have increasingly matriculated from public sector to private sector, expanded and segmented the market to create a new a stratified delivery system comprised of individuals, loosely formed groups and public, non-profit and private organizations. In my opinion of these five types of providers individuals and loosely formed groups now seem to be responsible for the largest growth in the spectrum of activities as the internet and social networking provide the mechanism for individuals to connect with others of similar interests in assemblies of activity, alliances of exercise, and confederations for leisure.

Individuals and self managed groups are organizing and growing at an astounding rate as the barriers to participation are removed and the tools for self organization become more readily available. Through apps like Facebook, Yahoo Groups, Meetup and Sportaneous individuals with niche interests, select geography and precise time availability find one another to share information, resources and personal experiences. More and more again, as it was decades ago the participant is the provider and the provider is the participant. The primary difference being the plethora of pastimes and participants as age range elasticity and gender equity have lead to increased interest and involvement.

In five decades public park and recreation has evolved management has evolved from being the singular provider, to joint provider, to shared provider, to provider in a mixed environment, to a provider in an integrated environment of individuals, groups, public, non-profit and private providers. Government is not agile enough, smart enough or resourced enough to keep pace with the notion of recreation; anything, anytime, anywhere of today’s constituent.

It seems to me that the future for public recreation is increasingly to become frameworks for fun, infrastructure for innovation and involvement and platforms for play. Government needs to stop trying to be everything for everybody in a world of declining fiscal resources, increasing legislative regulation and legal timidity and a political and social environment currently favoring smaller government and private sector solutions.

Crowdsourcing recreation and culture is our future I believe. What do you think?

Dan Rodgerson • I think there is a fundamental problem if a private sector- for profit group or business is making money from a highly subsidized municipal organization. I do think that this can be counter-balanced by a differential pricing structure for each group. An example is a local Boy Scout group would pay a different rate than the for profit karate company who rents space in a community center.

Maybe a discussion for another forum but I have always had challenges with citizens differentiating between which programs are offered by the municipal organization and which are contracted out. How can you control content and quality? Liability?

Carrie- I love the refreshing honesty. “I have run programs years past their natural death because of emotional attachments.” I wrote an article for a state publication one year titled “Know when to say when” in regards to programs. We need to get out of the rut and be willing to change. There are always so many new ideas and trends out there.

Maybe a topic for another forum as well but my personal belief is that municipal organizations simply need to determine their mission and vision. Why are we here? What are we trying to accomplish? Many times we try to be everything to everyone and that is nearly impossible. I believe that mission and vision needs to be followed up by a fees and charges policy which determines a rationale behind what you charge for each program and why. Can a revenue producing golf course or waterpark help fund other youth programs? Sure!

My belief which I understand is not shared by all, is that municipal organizations should focus on the masses or rather the wide end of the funnel. The instructional and introductional side. (Is introductional a word?) This has also helped my private/ public argument at times. Many people become interested in fitness, exercise and as they become more specialized move into private programs or facilities.

Carrie- The chopping block. I agree with you and wanted to add one more thought. The cost to build and develop a facility opposed to the cost of maintaining it. (Another forum) Many times we are excited about the funds we have received to develop and forget the on-going maintenance costs. The “cost” of running and maintaining a community center to a municipality can be three times the construction cost over time. Often time’s officials and politicians push to have these built for their own political agendas and forget the long term financial costs. My dad always had a saying. “There is a right way to do something- a wrong way and the political way”

I would simply like to see a bit of a change in how municipal funds are allocated. I remember being a young programmer and encouraged to spend all of the money in my budget because it I didn’t they would not give me the same amount next year. I remember creating a program that generated nearly $100,000 in revenue which disappeared into the general fund. There was almost an anti-incentive to control costs or try and produce revenue. I also presented at a state convention a session called “A private sector state of mind” The idea of introducing private sector ideas, incentives and accountability into government. It was not well received.

Treadwell, thanks for the input. I am quite familiar with public- non-profit partnerships but not public/ for profit. (YMCA, Boys and Girls Clubs, Kroc centers) Intrigued.

Steadman- As has been mentioned previously, I also believe that public park and recreation departments need to be more flexible and more creative. I will not address the ‘unmet needs’ that public providers must address (and it is very important that they do so).

If your department needs to subsidize the cost of a facility or program to compete with the private sector in all things, then it is doing something wrong. How can a private facility offer a program at a profit (cost plus margin), when the public agency must subsidize a program or be revenue neutral? Higher scales for fixed cost for government services and (presumably) lower wages for government salaries/contractors should drive the price down below what the private sector can offer. The question is, why is this not happening?

Why are public parks and recreation departments scared to make a revenue or be revenue neutral for all offerings?

Scott- Interesting comment Steadman. Here in California we actually have State legislation and local policy that mandates that fees cannot exceed the actual direct/indirect costs of providing services and there have been individual challenges to specific fees on that basis.

In San Diego we are required to be able to justify each fee based upon the cost of delivering that service and our fees cannot exceed the cost of delivering the service. This is our City Attorney and City Council interpretation of the law. Recently we had a signficant challenge to the cost of a $25 resident golf ID card that went on several months before City Council which required us to calculate all costs associated with the production and management of the resident ID program. Ultimately we were able to show that the ID Card program was part of a larger program and the costs for that program package were inclusive of the ID component, but this exhibits the level of sophisticaton and interest the public is taking on the fee issue in the public sector.

This is one of the reasons more and more we are moving to the use of Recreation Council’s at our recreation centers as a means to contract with instructors and services to run programs. The Recreation Council’s are community based non-profit entities operating within the centers under three year special use permits and they have the ability to offer a wider range of programming content and a broader range of fees than we could. In addition we do a significant amount of facility rentals to recreation service providers and community sports organizations.

The public really doesn’t see the difference. They register at the community center, and soon online, through a City portal and the Recreation Council fees are directed to the Council and the City fees are directed to the City account. The City receives a portion of the Recreation Council revenues for facility use and non-resident participation.

There are many benefits from this type of fusion organization which I believe is the future in our business. An integrated service delivery strategy involving self organized, group sourced, providers and consumers delivered from government owned physical resources.

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