HomeMy WebLinkAboutNB 1 CLASS FEE REV 11-02-92NEW BU51NESS NO. 1
11-2-92
GEN,',A1
Inter -Com
UST
DATE: OCTOBER 22, 1992
TO: WILLIAM A. HUSTON, CITY MANAGER
FROM: COMMUNITY SERVICES DEPARTMENT
SUBJECT: CLASS FEE/CONTRACT REVISION PROPOSAL
_YI;V--1! •
To negotiate contracts with new contract instructors at a
65/35 percent split of the class fee beginning Summer 1993 as
recommended by the Parks and Recreation Commission and the
Community Services Staff. Existing contract instructors would
continue at 70/30 percent fee split then negotiate new
contracts at 65/35 percent beginning Winter 1994 .
I. Negotiate contracts with new contract instructors at a
65/35 percent split of the class fee beginning Summer
1993. Existing contract instructors would continue at
70/30 percent fee split then negotiate new contracts at
65/35 percent beginning Winter 1994.
II. Ask all current instructors to raise class fees ten
percent beginning Summer 1993.
BACKGROUND:
As a matter of practice the Community Services staff reviews
class fees and instructors' contracts to assure that fees
recover program costs. The current contract fee split, 70
percent to the instructor, and 30 percent to the City, was
adopted by the City Council in 1981 with Policy 4-05. The
Policy requires that users be charged an appropriate share of
the operational costs for providing special recreation
programs, classes and leagues.
Renegotiating the contract to 65/35 percent would provide an
additional five percent net revenue. Based on the revenue
generated last year, that would be an additional $8,200 net
revenue. The City's portion of the fee is used to cover
overhead costs of registration, maintenance and utilities for
City facilities, postage for the brochure, part of the Lambert
~ lease, liabilitycoverage, and miscellaneous supplies. to
promote the programs. (Attachment A)
As independent contractors, instructors set their own
schedules for classes, class fees, and the size of the class.
These instructors are not City employees. The IRS defines the
role of the contractor as having complete and authoritative
control over the mode and manner of work performed.
The instructors' portion of the class fee, 70 percent, covers
all the instructors' costs for providing the program. This
includes supplies as well as state and federal taxes, and self
employment taxes which includes Social Security benefits
coverage. That means taxes and supplies account for 30 to 50
percent of the contractor's income.
Most instructors set class fees based on market rates and the
perceived value of providing services. Because these
instructors are independent contractors, staff can suggest
that the class fees be raised but the instructor does not have
to do so. If all instructors were to raise class fees ten
percent, under the current instructor split of 70/30 percent,
the City would only get $4,900 in additional net revenue. If
the City portion of the contract was increased five percent,
the City would net $8,200 which would be used to cover future
cost increases for maintenance and improvements in.current
facilities as well as the renovated Community Center and the
new gymnasium.
Staff conducted a survey of other Orange County cities
(Attachment B). Of the cities surveyed, the average fee split
for Orange County cities is 68/32 percent. Currently, Brea, La
Habra and Los Alamitos have a 60/40 percent split. Four
cities (Buena Park, Cypress, Fullerton and Irvine) have a
65/35 percent split. Laguna Beach has a 69/31 percent split.
San Juan Capistrano has a 75/25 percent split for current
instructors and 60/40 percent for new instructors. All other
cities surveyed have a 70/30 percent split.
In a comparison of seven popular classes in the Orange County
cities, Tustin is slightly above the average class fee in
children's dance, youth tennis, gymnastics, and adult dance.
Tustin is below the average in dancaerobics, adult tennis, and
Jazzercise.
According to the latest class evaluations, students are
extremely satisfied with the class instructors. Except for
the nonresident fee, 97.2 percent of the participants agreed
with the evaluation statement that the fees are reasonable.
The last five quarters have been record setting revenue
producers.
2
-- Facilities for classes have improved and will continue to
improve. Classes scheduled in the Tustin Area Senior Center
have greatly increased attendance over the past three and one-
half years. The renovated Community Center should be
available for the Fall 1992 or Winter 1993 classes. The new
gymnasium should be completed in time for the Winter or Spring
1994 classes. These new facilities should also enhance
attendance.
ANALYSIS OF ALTERNATIVES:
I. Write contracts for all new instructors on a 65/35
percent split beginning with Summer 1993 quarter. The
Summer contract cycle will begin on February 16, 1993.
Write current instructors contracts with a 65/35 percent
split beginning with Winter 1994 quarter. The contract
cycle for the Winter 1994 quarter will begin August 9,
1993. This would give current instructors six months
notice that the percentage would be changing.
A. Advantages
1. Fees would be raised incrementally. If a $50
class increased to $55, the instructor's
revenue would remain about the same. There
would be less chance of canceled classes and
more opportunity for increased net revenue.
2. The contract change would increase net revenue
by five percent for all new classes beginning
in Summer 1993 and all classes beginning in
Winter 1994.
3. Current instructors would have six months to
adjust to the contract change.
4. Overhead costs such as electricity and postage
have increased since 1981. These support
services are necessary for the instructor to
provide the program.
B. Disadvantages
1. Fees could be raised as instructors adjust to
reduced revenues. Increased fees could result
in canceled classes and reduced net revenue.
2. The instructors' percentage would be under
the Orange County average. The reduced
percentage could result in a disadvantage to
the City in attracting instructors.
Ki
II. Ask instructors to raise class fees ten per cent
beginning Summer 1993.
A. Advantages
1.• Net revenue could increase by three per cent.
2. Revenue to instructors' would increase by
seven percent and instructors' would be
pleased.
3. Split would remain below the average contract
fee split of other Orange cities.
B. Disadvantages
1. All class fees could increase ten percent
simultaneously. Because of the current
contract split the instructor would receive
seven percent and the City only three percent.
2. Some instructors may not want to increase
fees. These instructors would not want to
price their class out of current market range.
If class fees were not raised, there would be
no new revenues and costs might not be
covered.
3. If class fees were raised over the current
market value and classes were canceled, there
could be a revenue loss.
The Community Services staff recommends Alternative I;
Authorize the staff to negotiate new contracts with a 65/35
percent split of the class fee beginning Summer 1993.
Existing instructors would continue at the current 70/30
percent fee split until Winter 1994.
Tustin is average with other Orange County cities in contract
instructors 'percentages. Tustin has a 70/30 percent split and
the county average is 68/32 percent. Other cities are also
evaluating their contract percentages. Changing the contract
percentage would increase the amount of revenue kept by the
City. Instructors could raise their fees to compensate for any
percentage loss. However, instructors would be given six
months notice in which to make adjustments. Class fees would
4
then have the opportunity of rising incrementally as
instructors would not price themselves out of the market.
Asking instructors to raise class fees ten percent could cause
class cancellations and a reduction in revenue due to poor
registration. If instructors opted not to raise fees, there
could be no revenue increase.
Changing the instructors percentage to a 65/35 percent split
would increase net revenues for the City two percent more
than by raising class fees ten percent. Current instructors
would have six months to adjust to the contract changes. The
fee differential retained by the City would cover all overhead
costs.
/% Ju Rowland
[/ Recreation Supervisor
5
Susan M. Jones
Recreation Superintendent
Total fee differential retained by the City
for the past four quarters:
Class expenses:
Recreation Assistant
Envelopes/Receipt paper
Computer Software subscription
Postage for Tustin Today
Portion of Lambert Lease
Maintenance and utilities
Supplies and Repairs
Total
jr.ro".ce
0
Attachment A
$49,800
14,375
700
1,000
10,536
13,020
10,526
757
$50,914
FEE PER CLASS Attachment B
CITY
CON-
CHILD-
YOUTH
GYMNAS-
DANCE
ADULT
ADULT
JAZZER-
TRACT
RENS
TENNIS
TICS
AEROB-
TENNIS
DANCE
CISE
%
DANCE
ICS
Anaheim
70/30
$3.88
No
$6.25
$2.90
No
$3.00
No
Brea
60/40
$4.50
$6.00
$2.67
$2.00
$5.00
not
not
offer.
offer.
Buena
65/35
$2.67
$2.40
$2.67
$2.00
$5.00
$2.25
not
Park
offer.
Costa
70/30
$4.00
$8.00
$5.20
not
$5.30
$6.67
$2.00
Mesa
offer.
Cypress
65/35
$2.70
$4.40
$3.60
not
$5.50
$3.00
$2.75
offer.
Fount.
70/30
$4.88
$5.00
$6.00
$4.15
$5.00
$4.33
$4.00
Valley
Fuller-
65/35
$3.00
$6.20
$7.00
$3.25
$7.40
$2.75
$_3.13
ton
Garden
70/30
$3.75
$2.38
$3.13
$1.50
$2.25
$6.67
$4.00
Grove
Irvine
65/35
$6.00
$4.00
$7.50
$2.92
$9.00
$4.00
$3.34
Laguna
69/31
$6.00
$5.00
$6.00
$5.00
$6.00
$6.50
$1.75
Beach
LaPalma
70/30
$4.00
$3.34
not
$3.20
$4.17
$3.00
not
offered
offered
LaHabra
60/40
$3.38
$4.38
$3.13
$3.71
$5.40
$2.50
$1.88
Los
60/40
$3.00
$4.67
not
$2.30
$7.00
$2.30
$3.13
Alamitos
offered
Saddle-
70/30
$6.00
$6.00
$6.00
$3.55
$6.00
$11.66
not
back
offered
(M.V.)
Newport
70/30
$5.60
$4.80
$8.00
$3.12
$4.90
$6.50
not
offered
Orange
70/30
$5.00
$6.34
$7.60
$1.80
$6.30
$6.60
not
offered
Placen-
70/30
$4.75
$7.60
$6.75
not
$7.60
$3.50
$4.75
tia
offer.
!ITY
CON-
CHILD-
YOUTH
GYMNAS-
DANCE
ADULT
ADULT
JAZZER-
TRACT
RENS
TENNIS
TICS
AEROB-
TENNIS
DANCE
CISE
%
DANCE
ICS
San
Clemente
70/30
$5.00
$3.00
$6.00
not
$5.00
$5.34
$2.75
offer.
San Juan
75/25
$5.00
$5.83
$6.25
not
$5.83
$5.84
not
Capistr.
offer.
offered
Santa
70/30
$2.50
$5.00
not
$1.56
$8.75
$2.50
not
Ana
offered
offered
Westmin-
70/30
$3.25
$3.30
$7.00
not
$5.70
$10.00
$3.57
ster
offer.
Tustin
70/30
$5.50
$5.00
$6.88
$2.75
$5.00
$6.60
$2.88
Average
68/32
$4.29
$4.81
$5.73
$2.83
$5.71
$5.05
$3.07
JR:A:Feepercl.sur