TO: Mayor and Members of City Council
THRU: Type here
FROM: Adam Lindsay, Assistant City Manager
DATE: May 6, 2024
RE:
Title
Amendment to Fayetteville-Cumberland Parks and Recreation Operating Agreement
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
Goal 4 - The City of Fayetteville will be a highly desirable place to live, work and recreate
Goal 5 - The City of Fayetteville will be a financially sound city providing exemplary city services
Executive Summary:
The agreement to consolidate Parks and Recreation in Cumberland County is 20 years old. The original Operating Agreement is unchanged over that time period and needs to be updated. The most significant change needed is the provision by which Cumberland County pays for indirect administrative costs to the City of Fayetteville. In order to charge Cumberland County for actual indirect administrative costs, an amendment is required that must be adopted by both elected bodies. The proposed change will ensure that the indirect administrative costs are passed along to Cumberland County in accordance with accepted accounting standards.
Background:
Last year, Council directed staff to work with Cumberland County to amend the Operating Agreement. The Operating Agreement governs the consolidated department partnership and specifies how the transition would take place and assets and people would be merged in addition to operational procedures and expectations. Until now, the 2004 Agreement has not been modified and the provision dictating the administrative costs that Cumberland County pays to City of Fayetteville was locked at $60,000 annually.
City Of Fayetteville ACM Adam Lindsay, Cumberland County ACM Brian Haney, and FCPR Director Michael Gibson met several times to discuss changes. At the County's request, we considered and are prepared to make other changes to the agreement in order to align with current practices and in acknowledgment that some things originally intended did not happen as initially imagine.
Issues/Analysis:
For your consideration, attached is a red-line version of the 2004 Operating Agreement that shows the original language with strike throughs and new proposed language, if necessary, in areas we are recommending amendments. The Amendment document captures all of the proposed changes in a standalone document and, once approved by both governing bodies, will permanently attached to and amend the 2004 Operating Agreement in those places. You will note that the Operating Agreement has largely been followed and served its purpose in allowing for the effective merger of assets and people and continues to serve as one of the strongest partnership examples between Fayetteville and Cumberland County. That historical capture of how the merger happened was largely left untouched as it stands as a reminder of how we arrived at where we are today.
Twenty years ago, the Operating Agreement set a fixed sum of $60,000 as an administrative fee to be paid annually by the Cumberland County to City of Fayetteville.
That provision reads as follows:
18. The COUNTY shall pay to the CITY in each fiscal year the sum of $60,000 for recovery of its indirect administrative costs in operating the consolidated department.
The actual costs to provide services to the County District are much higher but the original agreement does not allow for any increases or changes. This omission is addressed and amended in the following proposed revision:
18. The COUNTY shall pay Indirect Costs related to the operation of the parks and recreation district to the CITY as determined in the most recent Cost Allocation Plan for the CITY. The CITY shall provide such Indirect Costs information to the COUNTY by March 1 of each fiscal year.
The City already uses a third party each year to update an indirect cost analysis tool that aligns with GAAP (Generally Accepted Accounting Principles) to determine the costs born from the City's oversight over County District services. This cost exceeds over $500,000 annually.
As proposed, moving forward the indirect cost charge to Cumberland County will adjust as costs to provide services adjust and will be based on accepted accounting standards for calculating those costs.
Other changes to the Operating Agreement are minor compared to this significant change.
Budget Impact:
Will increase annual revenue from $60,000 to more than $500,000.
Options:
Informational for now to ensure awareness. County Commissioners and City Council will both need to adopt the same changes for this to take effect. Once we have a final document that incorporates this change and others agreed upon, it will come to Council as a Consent item.
Recommended Action:
Type here
Attachments:
Fayetteville-Cumberland Parks and Recreation Operating Agreement
Amended Operating Agreement