Between now and 2020, the Foothills Park & Recreation District will face flat revenues as costs continue to rise — in some cases by roughly 25 percent annually.
The findings come as part of a set of "assumptions" district executive director Ronald Hopp presented to the board of directors May 27. The assumptions are a way for board members and district staff — and eventually the residents that fund the district through taxes and user fees — to get a complete picture of the district’s financial future in a world where fuel costs are rising fast and fewer people have the discretionary income to partake in leisure activities like golf and swimming.
The analysis comes in the wake of the district’s second failed bid for a tax increase in less than two years.
Yannick LeRolland, the district's director of information technology, said it's clear that something has to give in this scenario.
"We may have to visit areas of the organization where we're going to have to outsource more," LeRolland said. "That's twofold: It's reduced salary and personnel costs and to reduce equipment replacement costs and maintenance." He wouldn't speculate on what could be outsourced.
LeRolland added that admission and rental fees may have to be increased and a discussion will have to occur on the possibility of closing some district facilities.
Hopp stressed to the board and LeRolland reiterated later in a conversation that the initial assumptions are open to change over the next couple of months as managers, staff and board members weigh in and more detailed analyses are performed on certain trends.
The district basically has three sources of income: taxes paid by district residents, admission fees and fees paid for equipment and facility rentals. The analysis assumes that most sources of revenue will remain flat, and will drop a little in areas like a Pepsi contract worth $50,000 annually that will likely end in 2012, and a marketing deal with Exempla worth $25,000 annually that will end in 2009.
In 2008, the district pulled in $24,316,000 in revenue and paid out $23,946,000 in expenses.
On a key source of revenue — property taxes — the district relies, in part, on projections from Jefferson County. Board chair Janet Shangraw said that the district should take a close look at those projections because "they're always a little bit off."
Expenditures will increase in almost every area, Hopp told the board, and in some cases by as much as 25 percent per year.
LeRolland said the district has been lagging behind in paying comparable wages to its employees, so it is committed to "catching up" by increasing salaries by 4.5 percent in 2009, 2010 and 2011. After that, salaries will increase about 3 percent per year through 2020, LeRolland said.
Hopp projected supplies and outside service costs to each increase by 3 percent each year, but after discussion with the board and other staff, that estimate doubled to 6 percent annually.
Hopp told the board that fuel costs will increase about 7 percent per year, which drew laughter from the board and audience members. Colin Insley, the district's director of parks, planning and construction, said the district saw a 46 percent increase in fuel costs over the last few months even with the district paying a bulk rate and not paying state taxes. LeRolland said after the meeting that "we think it's probably going to (increase) 20 to 30 percent" annually, but it's impossible to know if that trend is going to be sustained over 10 or 12 years.
"That's why we're doing an analysis, and that's going to be really hard," LeRolland said.
Utility costs for the district are projected to increase by 10 percent annually, but LeRolland said "that's probably low." Fuel formerly was considered a utility, but the erratic nature of fuel costs forced the district to separate it from electricity, water and gas, LeRolland said.
Insurance costs will increase at 5 percent annually, LeRolland said. Capital repairs and equipment will cost the district $2 million per year, but when inflation and increasing construction costs are factored in, that number will balloon to $5.7 million per year by 2020. Equipment replacement follows a similar pattern: Equipment replacement is projected to cost $1 million per year, and inflationary factors bring that annual number to $1.5 million per year by 2020.
The district paid $5.5 million in debt payments for 2007. From 2008 to 2011, the district will pay $4.3 million annually in debt payments, and starting in 2012 the payment will go back up to $4.8 million.
Hopp told the board that this is the beginning of the projection process, and although a few categories need additional research, he wants district staff to "get our arms around the full financial picture."
"One thing we're trying to do is being straightforward with the board and the community as to what we're trying to do," LeRolland said. "We're not trying to hide anything." Community meetings will discuss facility closures if it comes to that point.
"But we're not there yet," LeRolland said.