DEPARTMENT OF RECREATION AND PARKS: PRIVATIZED MANAGEMENT OF SPECIAL FACILITIES

4-A & 4-B
DEPARTMENT OF RECREATION AND PARKS:
PRIVATIZED MANAGEMENT OF SPECIAL FACILITIES

Problem Identification:
The Department operates five special facilities (two soccer, two ice rinks, and one rowing facility) that annually lose money, are underutilized and provide sub-par services, and are aging inordinately fast because of a lack of operating and capital funds for proper maintenance.

Recommended Action:
Explore the feasibility of transferring the management and marketing of the City’s special facilities to a professional facility management company. Competitively award concession and pouring rights at the Department’s special facilities.

Classification:
Cost Savings, Organizational, Revenue Enhancement, Service Improvement

Functional/Operational Area:
Special Facilities

Estimated Annual Impact:
$500,000 cost reduction, possible $100,000 revenue enhancement

Estimated Implementation Costs:
None

Barriers to Implementation:
None

Projected Implementation:
180 days

Next Steps:
Develop a request for proposals for the management of the Department’s special facilities, follow the City’s public bidding procedures, evaluate responses, negotiate with preferred bidders, and finalize a contract for the installation of a professional facilities management company.

Analysis:
The Department currently operates its special facilities at a loss. Because of these operating losses, the City has had limited ability to invest in the upkeep of the facilities resulting in premature deterioration of these assets. Because there is no financial incentive for the Department’s managers to cover their respective operating costs, these facilities continue to be underutilized. Additionally, revenue opportunities (concessions) are ignored deterring participants from using the facilities and returning again.

Information shared by the Department showed that while the special facilities annually generate approximately $1,000,000 in revenues, each of the facilities loses an average of $100,000 a year. Were the City to implement this recommendation, steps would need to be taken to ensure that any lease entered into with a private vendor would cover not only the expenses to maintain and run the facility but also capital costs. Such an agreement should also provide an opportunity for the City to share in any potential financial gain should the facility become more popular (similar to the City’s management agreement for the municipal golf courses). These issues could be addressed through the establishment of a minimum annual guarantee (MAG) that the operator would pay to the City each year to operate the facility and a specified revenue-sharing agreement when the facility reaches a certain level of profitability.