TO: Mayor and Members of City Council
THRU: Adam Lindsay, Assistant City Manager
FROM: Michael Gibson, Parks, Recreation and Maintenance Director
DATE: October 14, 2024
RE:
Title
Recreation District Cost Allocation & Funding
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
Goal IV: Desirable Place to Live, Work and Recreate
Executive Summary:
The City and County are working towards an amendment to the 2004 Operating Agreement that led to the formation of the very successful consolidated City of Fayetteville and Cumberland County parks and recreations department. The principal reason for the City requesting a change is related to the $60,000 indirect cost that the County pays to the City, per the agreement. Because that charge has not kept up with inflation and other cost increases, the City and County are working out a new method that both elected bodies will need to approve.
Background:
Recreation services were consolidated in the City of Fayetteville and Cumberland County’s Recreation District in 2004. The “recreation district” refers to those areas within the county of Cumberland that contribute their recreation tax to consolidated services. At the time of consolidation, the City and County entered into two agreements: an Interlocal Agreement and an Operation Contract. The Interlocal Agreement dictated the terms of the consolidation, to include the transfer of employees from the County to the City. The Operations Agreement defined responsibilities moving forward, to include the financial responsibility of $60,000 to be paid annually from the County to the City for indirect administrative costs. That amount has remained unchanged for 20 years and is being evaluated.
Indirect cost allocation involves distributing shared administrative expenses (like HR, IT, or finance) to various departments or programs that benefit from these services. Since these costs can't be directly linked to a single department, the City uses an accepted accounting standard and a third party (Maximus) to calculate them. This ensures a fair distribution of overhead costs, allowing each department to account for its share when budgeting or seeking grants. It also complies with state and federal reporting requirements, ensuring transparency and accurate cost tracking.
As per the Interlocal Agreement, the County pays direct costs for operating expense components supported by the County Recreation District. This includes facilities and positions located in the County Recreation District, the administrative positions the City absorbed from the County, and any additional positions the County agreed to fund following the consolidation. Administrative positions funded annually total $1,200,000 (including benefits and insurance).
In recognition of the specialty facilities (senior centers, aquatic centers, and the adaptive recreation center) located in the City of Fayetteville, but utilized by residents in the County Recreation District, the County also provides a direct cost reallocation annually to fund 50% of the operations for those facilities. Shared operating costs for each organization total approximately $850,000 annually.
City staff notified County staff of the need to update the annual cost allocation amount on April 25, 2023. On June 12, 2023, Council directed City staff to meet with County staff to discuss the Operating Agreement and return to Council with recommended options. Communication between City and County continued throughout the remainder of 2023 and 2024.
On April 16, 2024 City staff met with County staff to discuss the desired updates to the operating agreement from each party, in recognition of the need for an update to the indirect administrative costs paid annually based on a fair market value of services provided. Updates desired by both parties included not only the increase in indirect administrative costs, but the removal of references to J.P. Riddle Stadium from the agreement (as it is no longer a County asset), and also the set timeframe of 10 years for the updating of the Parks & Recreation Master Plan (a timeframe was not previously included). A copy of the proposed agreement is attached.
City staff presented a proposed Amendment to the Fayetteville-Cumberland Parks and Recreation Operating Agreement to City Council on May 6, 2024 at the scheduled Work Session. The presentation was informational to ensure awareness, as a final document incorporating changes was still to come for Council consent. The proposed agreement references the indirect cost analysis tool provided annually by a third party. At that meeting there was a consensus vote taken to let the County know that the City needs these changes in order to continue the partnership as currently operating.
Maximus, of Richmond, Virginia, provided the City an updated and comprehensive Cost Allocation Plan. A copy of the final report is attached. This plan was created based on actual expenditures for the fiscal year ending June 30, 2023. Via the Cost Allocation Plan, Maximus determined that the amount applicable for the County Recreation District is $580,804 (as shown on page 22 of the attached). A copy of the draft Cost Allocation Plan including that amount was shared with County staff on September 9, 2024. City staff received feedback from County staff September 27, 2024 about their need for clarity and their intention to share their proposal.
Issues/Analysis:
Since the middle of 2023 to present the County has received all documents that they have requested in order to analyze the proposed amendment. Some of the documents were delayed but the City believes it was responsive. The City initiated all follow-up on this topic. While the numbers changed, because point-in-time data is constantly changing, the methodology has not changed since first shared mid-2023.
Since 2004, several new facilities and numerous programs and services have been added to a very successful consolidated department approach that serves almost the entire population that resides within Cumberland County and everyone within Fayetteville. Our third partner, the School System, is also a significant part of the great success. Consolidated services are a tremendous benefit to the community served, but both the City and the County will need to work together to ensure continued success in these operations.
Budget Impact:
Options:
Receive this report and direct Staff to work with County for a deadline to finalize agreement amendment.
Other actions as directed.
Recommended Action:
Allow staff to work with County and consider their proposal within the next ____ days
Attachments:
Type here