STAFF REPORT

March 8, 2000

To: Economic Development and Parks Committee

From: Joe Halstead, Commissioner Economic Development, Culture and Tourism

Subject: Recreation User Fees and Welcome Policy - Preliminary Evaluation

All Wards

Purpose:

This report will provide an initial assessment of the impact of the implementation of the new Harmonization of Recreation User Fees and Welcome Policy and outline some preliminary strategies adopted by the Department to address a number of challenges. A further report with additional supporting statistical information will be distributed on the supplementary agenda.

Financial Implications and Impact Statement:

The new policies are significantly impacting projected revenues from recreation user fees. Revenue shortfalls experienced in 1999 present a significant challenge to the ability of the Department to generate sufficient revenue to meet current and future budget expectations. Strategies within the parameters of the approved policy aim to keep this revenue pressure to $5.1 million in 2000. This has been identified as a budget pressure in the CAO recommended 2000 budget.

The Chief Financial Officer and Treasurer has reviewed this report and concurs with the financial impact statement.

Recommendations:

It is recommended that:

(1) Committee and Council confirm the strategies undertaken by the Department to maximize participation, utilize existing capacity and address unmet demand for Parks and Recreation programs within the policy parameters as set out by Council in April and July 1999;

(2) the Department continue to explore opportunities for revenue enhancement and program capacity maximization through the development and testing of pilot programs and cost recovery pricing strategies in keeping within the broad parameters of the approved policy;

(3) the Department continue to collect a range of user data so that accurate and timely information is available to support comprehensive analysis and informed, effective decision making;

(4) the Department continue to monitor the impact of the User Fee and Welcome Policies and report back on alternative policy options for the consideration of Council for implementation in 2001; and

(5) the appropriate City Officials be authorized to take the necessary action to give effect thereto.

Background:

At its meeting of April 26, 27 and July 6, 7, 8, 1999, Toronto City Council approved a new policy on the harmonization of recreation program user fees (Attachment No. 1 overview of the policy). The new policy was developed following a comprehensive evaluation process of policy options as well as thorough public consultation. An interim Welcome Policy was also approved by Council in July 1999 to enable high need individuals and neighbourhoods to continue to access programs at no cost.

At the Strategic Policies and Priorities Committee meeting of March 10, 1999, the Council meeting of April 26, 27, 1999 and the Policy and Finance Committee meeting of July 19, 1999, the Department was directed to report back to Council on the impact of the approved policy.

Comments:

The new User Fees and Welcome Policies were fully implemented across the City in the fall of 1999. This report provides an initial assessment of the implementation of the User Fee and Welcome Policies, and outlines some interim and longer-term strategies that the Department has undertaken to address some of these impacts.

Key Findings

Key findings described below are based on available and sample data collected from the full fall 1999 session, as well as preliminary data from the winter 2000 session.

Program participation:

(a) Total number of registrations -- Members of the public continued to respond positively to the range of programs offered through the Department. Total fall 1999 registration, when compared to fall 1998 registration, remained stable at approximately 105,000 registrations.

(b) Demand for free programs -- There was a high demand for free programs, resulting in extensive waiting lists.

Free programs made up more than 80% of registrations for children under 6, and 60% of registrations for children ages 6 to 12. As a result of the high demand, there were significant waiting lists for free programs, with 17,000 clients in fall 1999 and 11,600 in winter 2000. High demand programs include child introductory swimming lessons, child introductory sports, and child introductory skating programs.

It should be noted that the number of listings on a waiting list does not necessarily reflect demand. Analysis from fall 1999 indicate that individuals joined many waiting lists, with the hope that one space would become available.

Council allocated $300,000 (50% of the requested $600,000) to allow the Department to respond to increased demands for free programs in fall 1999. These funds were used to serve an additional 6,000 clients and offer a range of basic programs, reducing the waiting list from 17,000 to 11,000. There was no funding to provide this enhanced level of service in year 2000.

(c) Take-up rate of paid programs -- The take-up rate of paid programs declined by 21% and was lower than expected -- 55% in fall 1999 and 43% in winter 2000, compared to the anticipated 70%.

(d) Multiple registrations -- The fear of the public registering for large numbers of programs did not happen. On average, each registrant registered for two programs. Less than 3% of people registered for 4 or more programs.

(e) Registration by non-residents -- Less than 1% of registrations were from non-residents

(f) Participation in drop-in programs -- A sample of 8 swimming pools and 6 arenas pointed to an increase in participation in drop-in programs. Visits to free indoor public swim (leisure or family swim) increased by 20% from fall 1998 to fall 1999. Similarly, visits to free indoor skate (leisure or family skate) increased by 6% from fall 1998 to fall 1999.

Welcome Policy:

(a) Individual participation -- The interim Welcome Policy provides for a subsidy of one program per individual per session. Application for assistance was based on an individual's financial need. There were a total of 1,250 individual requests for support through the Welcome Policy in fall 1999 and winter 2000. This represents less than 1% of the total number of registrations in fall 1999.

(b) Priority Centres -- The Welcome Policy also designates 25 community centres as priority centres, where all programs offered are free. A comparison of fall 1999 and winter 2000 registrations at 5 priority centres to their fall 1998 and winter 1999 registrations showed an increase of more than 80% in the number of program registrations at these centres.

Residents from neighbourhoods around priority centres continued to form the bulk of the program registration at these centres. However, the ratio of local residents in program registrations have declined slightly - from 80% in fall 1998 to 70% in fall 1999, and from 81% in winter 1999 to 67% in winter 2000.

Revenue impact:

Original revenue projections of the new recreation user fee policy were based on a number of assumptions. First, revenue loss due to the free programs was to be partially offset by setting new fees at a level that harmonized existing fees across the city and added 20%. In addition, revenue loss in districts that formerly collected fees was to be compensated by revenue generated in the South and Central Districts (former City of Toronto), where no fees existed previously. Thirdly, projections were based on existing patterns of consumer usage and service levels. Based on these assumptions, the revenue shortfall was estimated to be $800,000 in 1999 ($1.9 million annually).

Initial statistics demonstrate that the decrease in paid usage and hence revenue in the paid programs did not offset the revenue loss generated by the free programs. This, combined with the market responses to the high levels of fees and to the introduction of fees itself, resulted in a revenue shortfall of $ 4.0 million in 1999.

This substantial revenue impact was also the result of individual policy components that were modified in the final approved policy. For example, Council's direction to categorize AquaKids as a basic service with no user fees resulted in more than $615,000 in revenue loss. Furthermore, the inter-relationships between these policy components created a situation whereby participation trends and revenue levels have had more dramatic impacts than originally anticipated.

Assessment and Strategy

A conclusive analysis and policy modifications of the Use Fee and Welcome Policies are not recommended at this time as the policies have only been implemented for one full session during fall 1999. Program offerings traditionally vary from session to session, with different participation levels, program mixes and patterns. A comprehensive evaluation of the User Fee and Welcome Policies should be based on at least one full year of implementation experience.

A longer study time frame will also allow the Department to isolate the effect of other changes, including amalgamation and harmonization of registration methods, when evaluating impacts and developing recommendations concerning user fees. Attachment No. 2 outlines the template whereby user data will be monitored and evaluated during 2000 and which will assist in providing further analysis of usage and revenue projections on a city-wide basis. The Department will report back on alternative policy options for implementation in 2001.

Based on preliminary experience, the Department has identified a number of issues specifically related to the new User Fee and Welcome Policies. This includes the increased demand for free programs, the increased number of new users for recreation programs, the high drop-off rate of attendance in free programs, the decline in adult registrations and the need to address pricing for adult and older adult programs.

The Department has implemented a range of strategies in order to address these issues and to contain revenue shortfall to $5.1 million in Year 2000. These strategies are described below:

Modification of registration policies

A number of registration policies and procedures have been put in place to enable more members of the public to access free recreation programs. This includes limiting participant registration to themselves and their immediate family, and limiting registration of free programs to one aquatic and one non-aquatic instructional program per session, and two weeks of free camps (during the initial registration period). Non-residents were allowed to register for programs only 10 days after resident registration (6 weeks for summer camps), and additional fees are applied.

Monitoring of program attendance

Staff are monitoring closely attendance in classes, particularly free programs. Following two incidences of non-attendance, participants are contacted and may be withdrawn from the program in order to accommodate others on the waiting list. Although this is an effective strategy in some cases, it may not be effective in progressive, skill-based programs.

Change in program mix

Former municipalities that charged user fees based on a cost recovery model had the flexibility to add popular programs as the incremental costs of facility and staff were covered by additional revenues. When no fees are collected, the fixed expenditure envelope limits the ability of offer additional programs.

In the former City of Toronto, the constraint of fixed resources led to the offering of more high-participation programs (drop-in programs) and fewer specialized classes, so that the maximum number of participants could be accommodated.

The Department is looking at new program mixes in order to accommodate additional demand and generate revenue. For example, a new general summer camp will be offered in additional to the free basic and the premium specialty camps. This will provide an additional value camp choice for parents.

Innovative programming

The introduction of passports for fitness and wellness programs, including aquafit, for unlimited flexible access to community centre programs has received extremely positive response from the public. This will provide a new revenue stream for the Department.

Enhanced product value

Fitness and Health Club memberships in individual facilities have been expanded to provide additional value to the public. Two categories of fitness club membership enable residents to access any Department-operated Fitness Clubs throughout the City within that category. More marketable fitness club memberships will enhance revenue through higher number of memberships sold.

Adjustment of pricing

Pricing levels for programs will be examined and changed in order to bring registration in paid programs, especially for adult paid programs, to the projected 70% capacity level. Specific price adjustments are being made in key locations to better reflect the competitiveness of the program and the amenity level of the facility. Price reductions of 10% to 20% will be made in some adult programs to enhance competitiveness and enhance registration.

Use of discounts

Older adults (aged 60+) receive a 50% discount for adult programs (some exceptions). This aims to enhance utilization of program capacity in paid adult programs.

Greater programming flexibility

Staff have the flexibility to extend adult and older adult paid programs past the end of the standard session for current participants on a cost-recovery basis. A 9-week program, for example, can be extended to 12 weeks, thus generating additional revenue.

Change in program design

A pilot study will be conducted on a new aquatic program design that will enable the department to meet the high demands for free learn-to-swim programs for children and youth in a more cost-effective way.

A three-level "mass" participation aquatic instructional program will be tested at the Douglas Snow Aquatic Centre in the North District during the summer session. The program will adopt a simple and focused approach on the development of core aquatic safety and swimming skills. The results of this pilot project will be evaluated to determine whether there are opportunities to expand the program to other areas in the City, as well as to other instructional programs.

Change of registration method at priority centres

The Department will conduct a pilot test on limiting registration at two priority centres to in-person registration only. This aims to encourage program participation at a priority centre to a defined catchment area, and to reduce cost by discouraging registrants from outside the community.

Information on programs offered at these two pilot study priority centres will be provided locally at the centre, and will not be included in the widely distributed Toronto FUN. In addition, registrants will have to line up to register for programs, and will not be able to use touch-tone automated nor operator-assisted telephone registration.

Longer Term Initiatives

The Department proposes to conduct a comprehensive evaluation over the first full year of implementation of the User Fees and Welcome Policies and report back on alternative policy options for the consideration of Council for implementation in 2001 to address revenue recovery issues.

As directed, the Department will also report back to Committee and Council on a number of other initiatives. These include the rationalization of programs, in particular therapeutic seniors programs and delivery models; market analysis, including comparative pricing and policies of other service providers; Smart Cards and membership options; definition of high needs communities; and Glamorgan (East District) preliminary needs assessment review.

The approved User Fee Policy also directed staff to study and make recommendations on other areas following the policy's initial implementation. These include a stable pricing strategy to ensure that future adjustments are gradual, as well as a fee schedule based on cost recovery pricing, and measured benefits to the user and the community.

Conclusions:

The issue of recreation program user fees remains a high priority, reflecting the need and value that Toronto residents share for access to city recreation services. Public opinion varies on user fees as a source of funding for recreation programs. These differing views continued to be voiced throughout the implementation period.

The implementation of the new User Fee Policy, approved by Council in 1999, has been a difficult challenge. Although there are many positive outcomes of the new policy, there was also a high level of compromise associated with the policy's development, resulting in a number of unanticipated and unwanted outcomes.

Customer dissatisfaction, reduction in participation in some paid programs, high drop-off rates in free program attendance, less than optimal capacity utilization, and the large revenue shortfall, all point to the need to fully investigate other policy options.

One of the most troubling outcomes of the User Fee Policy is the revenue shortfall. Immediate changes, within the parameters of the approved policy, have been initiated by the Department to contain this revenue loss to $5.1 million. The Department will continue to monitor the implementation of the policy and to report back on alternative policy options for the consideration of Council for implementation in 2001.

Contact:

John A. Macintyre

Acting General Manager, Parks and Recreation Division

Tel: 397-4451

Fax 392-8565

Jmacint@toronto.ca

Joe Halstead

Commissioner Economic Development, Culture and Tourism

List of Attachments:

Attachment No. 1 - User Fee Policy Overview

Attachment No. 2 - Data Template for Ongoing Monitoring and Evaluation