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