Loading...
Council PKT 06-17-2008 Special AGENDA FEDERAL WAY CITY COUNCIL Council Chambers - City Hall June 17, 2008 Study Session/Special Meeting 5:30 PM (www.cityoifederalwav.com) .......................................................................... 1. CALL MEETING TO ORDER 2. COMMUNITY CENTER PROGRESS REPORT: ONE-YEAR REVIEW 3. ADJOURN ~ CITYOF , ~ Federal Way STAFF REPORT DATE: TO: FROM: SUBJECT: JUNE 13,2008 NEAL BEETS, CITY MANAGER IWEN WANG, ASSISTANT CITY MANAGER/CFO FEDERAL WAY COMMUNITY CENTER: ONE-YEAR REVIEW I. BACKGROUND At the Council retreat in January 2008, staff presented results of the Federal Way Community Center's first nine months of operations. Though the Center opened to great fanfare in April 2007, the first nine months produced poorer than expected attendance, rentals and overall financial performance when compared to the Center's adopted business plan. Since attendance and revenue cycles for community centers are not steady year-round, the Federal Way City Council agreed to postpone major changes to Community Center operations until staff had a chance to evaluate a full year of operations and revenue figures. The Council directed the City Manager to oversee smaller, interim changes that might boost performance in the meantime. This report gives a basic overview of the Community Center, details the first full year of operations, talks about the effect of the interim performance strategies, and then recommends next steps. II. ONE-YEAR OVERVIEW The Community Center is a 72,000-square-foot facility that features two pools, a walking and running track, three gym bays and one of the South Sound's only public climbing pinnacles. The Community Center boasts a seniors program, onsite daycare, and full-service physical fitness amenities such as group exercise classes and personal trainers. First-year numbers indicate that the pool is the anchor for admissions and three-month pass sales, and that group exercise classes are the anchor for adult annual passes. We achieved nearly 300,000 in daily attendance between April 1, 2007 and March 30, 2008. Here are other highlights from the first year: . 100,000 open swim participants . 35,000 drop-ins to the gym . 18,787 swim lesson participants . 10,500 group exercise participants . 2,300 climbers on the pinnacle . 1,025 swim meets . 520 birthday parties . 100 meeting rentals III. ONE- YEAR OPERATING FINANCIALS This section of the report provides an analysis of the financial performance of the Community Center. In general, the Community Center revenue has shown marked improvements during the first five months of 2008 as compared with the previous nine months of 2007. Although improvements were realized, the final operating results required a higher subsidy of $534k, $384k above the amount anticipated in the adopted business plan. The higher subsidy is made up of lower than anticipated revenues of $453k, offset by $69k in expenditure savings. In comparison with other City subsidy situations, the last annual subsidy for the Kenneth Jones Pool was $300k. Actual Business Plan Apr. 1,2007 - Mar. 31, 2008 Variance Community Center A vg Price Quantity Planned S A vg Price Quantity Actual S Revenues Daily Admission (360 days) $5 113,150 558,000 $4.58 132 339,959 (218,041 ) Generic Annual Passes*" $401 1,852 741,763 $591.00 56,899 526,125 (215,638) Employee Passes - 12,939 12,939 Open Gym/Indoor Playground - 327 327 Aquatics Programs-Lessons/Classes 142,240 115,181 (27,059) Childcare Fees (average daily hours) $2 13,464 26,928 $2.00 II 8,018 (18,910) Fitness Training Fees $15 1,250 18,750 $15.00 473 7,088 (11,662) Fitness Programs Lumpsum 20,000 800 (19,200) ToweVequipment Rentals - - - Pool Rentals/Competitive-Lap Lanes lumpsum 15,000 $12.00 2,981 35,771 20,771 Pool RentalslPrivate (hours/$ per hour) $150 32 4,800 $150 0 (4,800) Party/Birthday Rental $100 408 40,800 $125 384 47,956 7,156 Facility Rental (Event/Banquet/Meeting) $1,329 64 84,740 $1,329 69 91,136 6,396 Pro Shop Merchandise Sales 9,100 14,806 5,706 ConcessionsN ending 14,400 7,912 (6,488) Incremental Increase in Programs 5,000 (5,000) Investment Interest - 17,147 17,147 Miscellaneous 6,000 9,326 3,326 Total Revenue 1,687,521 1,234,492 (453,029) Expenditures Personnel Costs 1,211,080 1,069,880 (141,200) Supplies 138,254 154,080 15,826 Other Services & Charges 347,592 90,749 (256,843) Utilities and Permits - 323,386 323,386 Capital 22,000 5,085 (16,915) Internal Service Charges 119,118 125,792 6,674 Total EXDenditures 1,838,044 1,768,971 "'.073)1 Operating Rev Over I (Under Exp) (150,523) (534,479) 1383.956)1 $140,000 Cornnunitv Center Revenue bv Month IV. PROJECTED 2008 CALENDAR YEAR RESULTS: With only 14 full months operating data and with account coding corrections made through several months in 2007, making detailed monthly comparisons is difficult. To make the data comparable, some of the monthly revenue tables in the following section are estimated by allocating the corrections proportionally based on either overall revenue or specific revenue if sufficient data is available and therefore are labeled as "adjusted 2007." Even with these limited and imperfect data, we can still see revenues in 2008 are trending upward from the same period in 2007. $120,000 $100.000 $80.000 $80.000 $40.000 $20.000 $0 . Adj 2007 . 2008 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dee The overall status quo revenue projection for 2008 calendar year at this time is a little over $1.4 million, or .85% of the revenue estimated by the business plan, with a projected deficit of around $480,000. This is an improvem~nt from the first Fiscal Year result above, but highe.r than the budgeted deficit of $240k. Based on this preliminary review, staff believes the budgeted utility tax transfer for 2008 of $528k will be sufficient to cover the projected deficit, . leaving around a $40k increase in fund balance. The cumulative ending fund balance is projected to be around $65k at the end of 2008. 2008 Community Center Calendar Year 2008 Calendar Year BudgetlProjection Budget YTMay Projected Revenues Daily Admission (360 days) 541,907 194,814 467,554 Generic Annual Passes** 600,000 228,366 548,077 Employee Passes 35,000 14,051 42,156 Open GymlIndoor Playground 16,000 Aquatics Programs-Lessons/Classes 148,000 39,149 93,958 Childcare Fees (average daily hours) 10,000 212 509 Fitness Training Fees 5,000 800 1,920 Fitness Programs 1,477 3,546 T o\o\CI/equipment Rentals 8,000 - - Pool Rentals/Competitive-Lap Lanes 36,000 8,194 19,665 Pool RentalsfPrivate (hours/$ per hour) - - PartY/Birthday Rental 73,000 12,035 28,884 Facility Rental (EventlBanquetlMeeting) 125,000 67,696 162,470 Pro Shop Merchandise Sales 21,000 20,107 48,257 ConcessionslVending 19,000 Incremental Increase in Programs 25,500 Investment Interest - 1,371 3,292 Miscellaneous - - Total Revenue 1,663,407 588,272 1,420,287 - Expenditures Personnel Costs 1,232,385 477,291 1,232,385 Supplies 133,254 59,273 133,254 Other Services & Charges 173,591 50,165 73,59 I Utilities and Permits 22 1,000 143,578 321,000 Capital 22,000 - 22,000 Internal Service Charges 119,531 49,805 I19,531 Total Expenditures 1,901,761 780,112 1,901,761 U peratlDg Rev Uver I (Under Exp) (238,354) (191,839) (481,474) V. REVENUE BY ACTIVITY Four revenue sources make up 91% of the Center's first-year operating revenue. Pass sales at 44%, drop-in activities at 28%, followed by rental at 11 % and aquatic programs at 9%. Passes include all extended passes as well as multi-visit passes. Rental revenues include pool and lane rental, climbing pinnacle rental, weddings, birthdays, events, and other pre-scheduled uses of the facility. 1. Pass Revenue Pass sales are the single largest revenue source at the Community Center. Overall, the total passes sold during the first year are 2,404, excluding multi-visit passes. Total 1st Yr Pass Sol, 3 ~NTH 6 t.tDNTH ANNUI\L ANNUAL WlM1thly a=r Total % of Total Active (fQ 3/31/2008 3 MONTH 6 MONTH ANNUAL ANNUAUMnthly EFT Total % of Total Adult 424 91 21 68 604 25% Adult 146 40 16 72 274 25% 1st Year Revenue By Activity Jlj) Other $101,195 8% P<luatic Program s $115,181 9% Rental $139,092 11% Fam/t+l Senior Teen 669 226 62 184 74 7 114 33 9 322 17 46 1,289 350 124 54% 15% 5% Youth 36 1 37 2% Total 1,417 356 in 454 2,404 100% % 59% 15% 7% 19% 100% % 36% 13% 10% 41% 100% As of March 30, 2008, there are 1,109 active extended-period, fee-paying pass holders who are not City employees. 51 % are annual pass holders, with 41 % paying via monthly electronic fund transfers or direct credits. Family/household is the largest single pass-holder group and represents 61 % of all active passes. Another observation of the pass data is the higher proportion of 3-month passes in adult and senior pass holders. It highlights the importance of on-going customer services and experiences for the Center to retain the customer base. Fam/l+l Senior Teen 169 60 15 79 29 1 75 15 3 358 18 4 681 122 23 61% 11% 2% Youth 8 1 9 1% Total 398 149 109 453 1,109 100% During the first five months of 2008, pass sales revenue appears to have stabilized at around $45k per month. The impact of a proposed pass-fee change will be discussed later in this report. 2. Drop In Uses Drop-In Drop-in uses account for the second-largest revenue category Adj 2007 2008 representing approximately 28% of the Fiscal Year revenue. Jan 42,983 This is an area we do not have accurate monthly data for 2007 Feb 42,426 due to corrections in account coding month-to-month. The Mar 37,070 monthly figures are smoothed-out based on estimates. Apr 6,870 41,999 May 18,845 30,336 The 2008 data averages $39k per month, a healthy 61% Jun 35,029 Jul 22,870 improvement over the $24k average per month in 2007. Even Aug 22,375 with this projected increase, however, drop-in revenue is still Sap 21,437 below (about 84%) the business plan's expectation. Oct 22,477 Nov 42,235 Dee: 25,343 3. Rental Revenue 217,481 109,406 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dee All Re ntal Adj. 2007 2008 13,330 12,802 13,536 18,561 17,606 Combined rental revenues (including pool, meeting, wedding/events, and birthdays) represent 11% of the first year's operating revenue, with wedding/event rental represent more than half (52%) of the total rental income, followed by birthdays (27%) and pool rental (21%). 10,151 10,737 10,812 23,111 28,497 .22,023 23,629 23,365 11,142 163,468 Rental revenue is one area out-performing the business plan projections. The booking continues to be very strong during weekends, holidays, and other peak-time periods. Weekday business hours rentals are not as strong. Any rate 49,703 modification to boot off-peak rental will help to boost revenue form this area. However, discounts for groups hours could negatively affect our rental revenues and should be during peak monitored. 4. Aquatic Programs Aquatic programs/lessons generated $115k revenue or 9% of the first year's total revenues. This is 81 % of the original business plan projection. Based on the activities during the first five months of 2008, it is behind in projections but the summer program is larger than the school year and revenues are expected to increase. Aquatic Adj 2007 Jan Feb Mar 11,756 Apr 17,190 May 8,937 Jun 9,840 Jul 15,697 Au!) 8,517 Sep 8,067 Oct 7,227 Nov 8,067 Dee 1,454 96,750 2008 5,308 4,474 8,650 10,432 10,286 29,368 5. Other Miscellaneous Revenues The remaining 8% of revenues are from other activities such as fitness classes, training, concessions, pro-shop merchandise, towel rental and childcare--activities that are designed to enhance the overall customer experience at the Center. Some of these services were not immediately available when the Community Center opened. Some other services are still being implemented. Because of the implementation delays, the first fun year's revenue from these revenues achieved less than 50% of the business plan's expectations. Improvements are expected in the calendar year 2008, but they still are expected to fall short of the budget. VI. EFFECT OF RATE AND OTHER CHANGES As mentioned earlier, the City Council directed the City Manager to oversee interim changes that might boost performance between the nine and 12-month marks. They included: · Discounts for off-peak rentals and for local non-profit organizational rentals · A cut in the gym rental rate · Pass fee changes, redefining who is a member 1. Off-peak and Local Non-Profit Facility Rental Discount Rates for rooms rented during off-peak hours, defined as Monday through Friday, 8 a.m. to 5 p.m., were reduced substantially. In addition, rates were reduced for local non-profit organizations. No significant impact on revenue is expected. Of the 752 room rentals booked during the first year of operation, only around 2% occurred during the newly-designated off-peak period, and a similar portion of rentals are from eligible local 501 (c)3 organizations. While the purpose of discounting rental rates is to boost use of the meeting rooms and to create a welcoming environment for local non- profits, it is not likely we will see material increase in off-peak uses or uses by eligible local non-profit groups. 2. Gym Rental Rate The Center's gym rental rates were found to be higher than the local market will bear. Rates were cut substantially in March 2008. Some positive fiscal impacts are anticipated but not likely to be material. We have not seen an actual increase in gym rentals yet. However, the change was not widely publicized, and rental dates tend to get locked in for the school year and since our fee change took place mid-stream, most groups were not inclined to switch locations. Revenues are expected to increase next year. Change in Gym Rental Rates Space Time Period Resident Non- Off Peak Off Peak FW Non- Discount Resident Business Business Profit Rate- Rate Mtng, Mtng. 30% M-F,8-5 M-F, 8-5 Resident Non- Resident 1/3 Community Room Per hour $150 $173 '113 "3lI .. (min. 2 hrs) 1/3 Community Room 4-8hrs $477 $548 $358 1411 P (addU $140/hr) 2/3 Community Room Per hour $250 $288 $188 Dl~ 1m (min. 2 hrs) 2/3 Community Room 4-8hrs $953 $1,096 f11S 1123 - (addU. $140/hr) Full Community Room Per hour $375 $431 1281 132:1 (min. 2 hrs) Full Community Room 4-8hrs $1,300 $1,495 $975 '" ,121 .HI (addtl. $140/hr) Classroom Per hour $125 $144 194 1101 ",5t'J Senior Lounae Per hour $150 $173 113 ~ -WI 1 Birthdav Party Room Per hour $100 $115 75 2 Birthdav Party Rooms Per hour $175 $202 131 1152 , G.Y'" Bey~ I'er hOt,Q 110 117.110 nla nla nla JecreatlonallAthletic .-eNon-Prlme Houl'8 2 Gym Beys. .... ~~; JIG ",f.5Q nla nla nla l::l'8atlonallAthletiC Non-Prlme Hou", a Gym Bays. Per hoUt $130 "41." nla nla nla I!tecreatlonallAthletic l&ntJls. Case by Ca. Llvah,latJoft 1 Gym Bay 4-8hrs $477 $548 nl. Id .. EvenUCamplT ournament (addtl $140/hr) 2 GYm Bays 4-8hrs $953 $1,096 11I1. i111 ~ EvenUCamplT ournament (addU. $140/h r) 3 Gym Bays 4-8hrs $1,300 $1 ,495 mla Ole 101 EvenUCamplT ournament (addU. $140/hr) Kitchen - available with Per hour $25 $29 n/a nla nla assianed rental Lap & Leisure Pool Per hour $150 $173 nla nla nla Amphitheatre-Free Per hour $150 $173 n/a nla n/a w/use of Community Rooms Entire Facility 4 hr. event $3,500 $4,025 n/a n/a Case by case 8 hr. reservation 3. Pass fee changes, redefining who is a member A number of changes around pass fees and defining "member status" have been instituted this spring and/or are proposed to begin this summer. The following changes are the ones may have a noticeable impact on overall pass revenue. A. Change of eligibility definition: ~ Household/family from 4 persons to up to 6 persons ~ Expand household to 1 grandparent ~ Raise young adult dependent age from 21 to 23 ~ Lower senior pass eligibility from 65 to 60 These changes will likely eliminate all "extra member" charges for membership. The total "extra person" revenue for the first year was around $13,000. B, New fee category for Adult+ 1 and Senior+ 1: This may have the single largest impact on revenue. We anticipate this change will create some shift from existing pass holders. The shifts likely to occur are from Senior passes to Senior+ 1 and from Household passes to Adult+ 1. It is less likely for 2 single adult passes to convert to Adult+ 1 as they could have selected household passes currently at lower costs. Assuming 60% of all Senior pass holders were to switch to Senior+ 1, and 10% of the existing Household pass holders converts to Adult+ 1 passes the estimated net impact would be $32k or approximately 5% of overall pass sales revenue. Therefore, to make up this difference, a 5% overall membership growth would help to offset the impact. Revenue Old Adult Adult +1 Fam/HH Senior Senior +1 Teen Youth Total 3 M:lNTH 52,576 - 124,434 20,114 - 4,588 2,232 203,944 6 M)NJH 21,476 - 65,136 12,580 - 994 - 100,186 AIINJAL 9,450 - 76,950 10,692 - 2,430 - 99,522 ANNUAL WlMlth 24,480 - 173,880 4,406 - 9,936 180 212,882 IIIlJl.. T1-vlSrr 18,410 - - - - - 3,745 22,155 Total 126,392 - 440,400 47,792 - 17,948 6,157 638.689 Revenue new Adult Adult +1 Fan'l1HH Senior Senior +1 Teen Youth Total 3 M)NJH 52,576 5,084 111,991 8,046 9,153 4,588 2,232 193,670 6 M:lNTH 21,476 2,677 58,622 5,032 6,105 994 - 94,907 AIINJAL 9,450 3,135 69,255 4,277 5,287 2,430 - 93,833 ANNUAL WIM'lth 24,480 7,084 156,492 1,763 2,179 9,936 180 202,113 I\IIJL Tl- vlSrr 18,410 - - - - - 3,745 22,155 Total 126,392 17,981 396,360 19,117 22,723 17,948 6,157 606,678 Revenue Loss - 17,981 (44,040) (28,675) 22,723 - - (32,012) C, Other Rate Changes: Some other minor rate adjustments are also recommended. The most significant change would be to adjust the adult annual pass rate from $450 to $420 before tax. Staff is recommending reduction of the annual pass to so that it equals 60 times the daily admission fee. This is a selling strategy that allows staff to market the pass more effectively-if a patron uses the pass more than 5 times a month the annual pass will save the patron money. This will have minimal impact ($2k) impact on overall pass revenue. Other changes will be rounding the daily drop-in fees to the full dollar with sales tax included to reduce the need of making small changes. None are expected to make significant impacts on revenues. Proposed Rate Changes Dail /Multi-Visit Daily Multi- Category Fee Visit w/ tax w/ tax Free Free Resident Pass Rates 3. 6- Month Month w/tax w/tax Free Free Annual w/tax Free $67.58 $128,62 $245.25 $20.44/ month $294.30 $24.53/mont h Teen (13-17 yrs) $154.78 $80.66 135.16 $257.24 . ($490.50) $38. 15/mont h iot+1 *House hold N/A NA N/A NA Non-Resident Pass Rates 3- 6- Annual Month Month W/ta)( w/tax Free F~ F~ $77.39 $25.80/ month $92.65 $30.881 month $155.87 $51.96/ month $111.18 $37.06/ month $233.26 $77.75/ month $148.24 $24,711 month $177.67 $29.61/ month $295;39 $49.23/ month $282.31 $23.53/ month $338.99 $28.25/ month $564.62 $47,051 month $213.64 . $406.57 $35.611 $33.881 month month $443.63 $73,gav month $845.84 $70.49/ month "Household for the purposes of pass sales is defined as: Six (four) members, with up to two adults and one additional senior (spouse, partner, parent) living in a household. Dependents are eligible to until the age of 23 (21). At age 23 (21), an individual with a disability or an elderly parent who is claimed on an adult pass holders' tax return will remain eligible, if residing in the same household for the Household pass. Proof of residency and verification of household status is required. VII. NEXT STEPS While revenue is expected to increase after the full effect of the interim and proposed changes are felt, staff believes more can be done when it comes to getting the word out about the Community Center both to Federal Way residents and to the surrounding community. Using City Manager contingency funds, staff is proposing to develop a communications and marketing plan to improve the visibility and profile of the Federal Way Community Center, resulting in increased pass sales, drop-in usage and event rental. The communications and marketing plan will refine the Community Center's identity, develop positioning statements, and create a strategic plan with recommendations to inform, excite and persuade current and new audiences about the programs and activities of the Community Center. Staff is proposing to retain Cipalla Communications, the firm that has done the tourism maps, brochures, events and other marketing for the City the past two years. The cost of the contract would be $23,500. Key work includes: · Identifying key audience groups important to the city and the community center. . Identifying messages for each audience that will be compelling, distinctive and meaningful. · Exploring messaging that will work in conjunction with other citywide messaging efforts. . Review the City's Year 1 Business Plan including (but not limited to) baseline usage statistics, pass sales information, demographics, survey results and financial performance. Deliverables include: . A communication audit that summarizes current communications and makes recommendations for streamlining, improving and focusing the messaging. . An identity that will be targeted, strong and memorable; and graphic standards that will guide use of the identity. . A strategic communications and marketing plan with short- and long-term implementation recommendations, schedule and cost estimates. STRATEGYI DESIGN CONSULTINGI SERVICES TOTAL WRITING TASK 1: KICK OFF MEETING AND COMMUNICATIONS BRIEF $1.200 TASK 2: DISCOVERY . REVIEW YeAR 1 BUSINESS PLAN AND OTHER DATA $1,200 . IDENTIFY TARGET AUDIENCES AND KEY MESSAGES F'OR EACH. . DEVELOP POsmONING stATEMENT FOR CENTER $2,400 . COMMUNICATIONS AUDIT $1 800 SUBTOTAL $6 600 $6 600 TASK 3: MESSAGES. STANDARDS . DEVELOP. AND DESIGN MARKETING MESSAGES & MATER.IALS $2,900 $3,500 . GRAPHIC STANDARDS MANUAL $ 750 $ 850 SUBTOTAL $3 650 $4 350 $8 000 TASK 4: STRATEGIC COMMUNICATIONS AND MARKETING PLAN $6,000 . SHORT-TERM & LONG-TERM IMPLEMENATION RECOMMENDATIONS . SCHEDULE . COST ESTIMATES SUBTOTAL $6 000 $6 000 CUEN'I' CONFeIlE...C~"G; ACCOUNT MANAGEMENT $2,300 (3 HRS/5 $2,300 MO.) $ 600 OUT"'OF-POCKET TOTAL $23,500