Planned Special Events: Cost Management and Cost Recovery Primer

Chapter 4: Strategies for Cost Minimization and Cost Recovery

The following strategies are designed to guide departments and agencies that desire to improve resource management and cost recovery. The methods fall into four groups: data collection, resource utilization, direct cost recovery, and indirect cost recovery, each with a few suggested strategies, as described in Exhibit 4.1. The strategies are provided merely as guidelines and a platform for featuring examples that jurisdictions may incorporate or learn from. Each strategy has its benefits and drawbacks, and each jurisdiction must weigh these with regard to their particular local needs.

PSEs can generate economic activity and provide communities with publicity and an outlet for community expression. Engaging in data collection and proper resource utilization prior to direct cost recovery will prevent unnecessary expenses from being passed on to other agencies, the federal government, or the public. This approach can be beneficial to the jurisdiction as well, since their goal is often to retain and promote special events when they benefit the city and its residents.

Data collection, a part of cost management, is necessary in part because agencies must collect costs before they can bill for them. However, engaging in cost management also provides accountability and transparency and can inform public policy. Data collection allows jurisdictions to understand their costs and quantify the financial burden and benefits of special events. In this chapter, we expand the concept of data collection to include fiscal effect data and non-financial items such as number of attendees and number of PSEs. Fiscal impact data is especially relevant to informing local policy on event recruitment and cost recovery. Fiscal impact data allows jurisdictions to understand the net effect of events, comparing the costs associated with planning and operations with the increased tax revenue.

Resource utilization is the application of asset management. Once the greatest costs are identified through data collection, targeted resource utilization strategies can be applied to reduce costs where they will have the most effect.

Direct cost recovery is useful when a jurisdiction feels that the event largely provides a private or individual benefit, rather than a public service. Direct cost recovery can also be used to offset a portion of costs and to pass some incentive along to event organizers to minimize costs. Fiscal effect data, if available, can be used to inform the policy debate on direct cost recovery.

Indirect cost recovery recognizes that the tax revenues generated by events may be captured by different agencies and jurisdictions than those responsible for facilitating the PSE. A budget line item can be used to capture the revenue necessary to cover costs. In other instances, an agency or jurisdiction may face costs for events for which they have limited responsibility for, such as a national event, and they may look to the Federal government for financial support.

Exhibit 4.1 Cost Recovery Activities Data Collection Data to be collected include the number of events, event attendance, information on the venues that host the events, the cost of disruptions or changes in normal traffic patterns due to the events, the costs to the various government agencies that have to plan for and manage traffic associated with the events, and the tax revenues associated with events such as sales taxes and lodging fees. This data provides information that is critical to the process of cost recovery. In this primer, detailed instructions are provided on three data collection strategies. These include: Strategy 1 – Collect Event and Venue Information Strategy 2 – Collect Cost Data Strategy 3 – Collect Fiscal Impact Data Resource Utilization Strategies to reduce costs and improve resource utilization include scheduling the time and location of events to minimize traffic disruption and traffic management costs. While these activities do not result in direct recovery of costs, they reduce the costs to be recovered by increasing efficiency. For jurisdictions that already engage in direct cost recovery, resource utilization strategies will reduce the cost to event organizers. In this primer, detailed instructions are provided for two mitigation strategies: Strategy 4 – Event Time and Location Planning Strategy 5 – Traffic Mitigation Planning Direct Recovery Costs A number of strategies can be used to directly recover costs associated with event traffic planning and management. Costs may be recovered from event organizers, event patrons, or major stakeholders such as a venue owner. In this primer, detailed instructions are provided for five direct cost recovery strategies: Strategy 6 – Institute a Pilot Program Strategy 7 – Develop a Retail-Like Environment Strategy 8 – Direct Negotiation with Major Event or Venue Operators Strategy 9 – Institute Special Event Parking Indirect Cost Recovery A number of strategies can be used to indirectly recover costs associated with event traffic planning and management. Costs may be recovered from government entities that collect taxes, or fees may be levied on the patrons at planned special events. In this primer, detailed instructions are provided for two indirect cost recovery strategies. Strategy 11 – Develop a Line Item Strategy 12 – Apply for Grants

Strategies

The following subsections contain descriptions of each strategy in detail, including an overview, discussion of strategy implementation, examples of jurisdictions that have employed such strategies, and additional considerations.

Data Collection

Exhibit 4.2 Example categories of Planned Special Events: College and Professional Team Sports Football Baseball Basketball Ice Hockey Other Professional Sports Auto Racing Horse Racing Boat Racing Golf Street and Park Events Marathons Walk-a-thons Bike-a-thons Parades Fairs Festivals Protests Political Events Shows & Concerts Expositions Conventions Trade Shows Concerts

Strategy 1: Collect Event and Venue Information Overview

It is important for officials to have an understanding of the number, frequency, type, and attendance of PSEs in their jurisdiction. This information is useful because it allows officials to plan resource allocations and activities to help facilitate these events and minimize the effects these events have on non-PSE government operations and the general public.

Implementation

Information about PSEs in most regions is largely fragmented and dispersed. There are a series of actions, however, that can be taken to develop meaningful estimates of the number of PSEs in a region, while at the same time minimizing the duration and effort of the data collection and estimation process.

Developing estimates is a four-step process. The first step is to identify the region of interest, whether it is a district, city, metropolitan area, county, state, or the entire nation. Planners can spatially bound their study area based on their area of responsibility, or segment the areas to delegate the data-gathering responsibility to small administrative units. It is important to consider, however, that an event in one area can affect departments in another. All event venues that affect the department should be considered a part of the study area, even if the event does not occur in that area.

The second step is to establish a minimum event attendance size to define PSEs. This attendance-determined definition decides the attendance level at which PSE traffic related congestion becomes an issue of concern. A small city may consider an event with 500 attendees to be a PSE that would have significant transportation-related implications, while a large city may consider an event with 5,000 attendees to be a PSE with large transportation implications. It should be noted that attendance is not the only factor that influences PSE-related congestion. Other PSE congestion factors include event location, parking availability, accessibility by public transportation, sufficient public transportation capacity, and use of transportation management technologies such as intelligent transportation systems. Nevertheless, attendance is a major contributing factor in PSE related congestion, and it is difficult to plan parking, public transportation needs, and transportation management systems without having estimates of the number of event attendees.

The third step is to identify events in the region of interest that are likely to have attendance levels that exceed the minimum attendance definition of a PSE in the region.

Next, micro- and macro-level approaches to data collection can be implemented to gather information from secondary sources, event organizers, event venue managers, governmental agencies, and event-related associations. The dual-level approach is useful because it helps overcome challenges in data dispersion and availability.

The micro-level approach involves contacting event venue officials, event organizers, and permitting authorities such as police departments. The macro-level approach involves collecting data from trade associations representing the relevant entities within various special events categories. The primary data items that need to be collected and estimated for each of the identified event types in a region are the following:

• Number of event days annually
• Average attendance
• Total attendance

Any of these three can be determined when the other two are known.

Additional Considerations

A useful reference on how to develop an estimate of PSEs in a region is a FHWA report by Jack Faucett Associates entitled "Planned Special Events – Economic Role and Congestion Effects" (FHWA-HOP-08-022). The report documents the development of the first-ever estimate of the annual average number of PSEs with more than 10,000 attendees in the U.S.

Additionally, if it is possible, revenue or spending-per-attendee estimates should be collected for each PSE category. This will help determine the economic and fiscal effects of local PSEs. Once this information has been collected and a better understanding of the number, frequency, and attendance size of PSEs in a region has been developed, the data can be used to effectively plan and facilitate PSEs.

Strategy 2: Collect Cost Data

Overview

It is important for transportation officials to collect cost data regarding the provision of goods and services related to facilitating PSEs. However, collecting cost information can be difficult for transportation officials due to frequent misunderstandings of costs concepts, the involvement of multiple agencies, and difficulty differentiating PSE-related activities from other activities. Chapter 3 provides a detailed description of how government agencies can track costs of PSE planning and operations.

Implementation

When detailed cost data for a number of events have been collected, it becomes easier to estimate the costs associated with similar events in the future. This is particularly helpful if the number, frequency, type, and attendance of PSEs are known. PSE facilitation cost information helps officials plan resource allocation and budget development. Additionally, when major cost categories are known, it is possible to analyze which services cost the most and might benefit from gains in service or technological efficiency.

Strategy 3: Collect Fiscal Impact Data

Overview

Estimates of the fiscal and economic effect of PSEs in a region have multiple uses. These estimates can help public officials determine whether specific PSEs cost the government more or less to facilitate than the event generates in positive economic and fiscal effects. If the fiscal effects of PSEs are found to be large, they may completely offset the need to recuperate PSE facilitating costs from event organizers, attendees, and other sources. However, PSE facilitation costs and fiscal effects may accrue to different agencies and are difficult to track.

Implementation

For example, in the FHWA study titled "Planned Special Events – Economic Role and Congestion Effects" (FHWA-HOP-08-022), a per capita multiplier was used to estimate the fiscal impact of the average number of annual PSEs in the U.S. with more than 10,000 attendees. The multipliers used in the FHWA study were based on a San Jose, California report, which estimated the fiscal effects of six different events that occurred in the city and was based on data collected from 10,000 event attendees. Source: Skolnik, J., Chami, R., & Walker, M. (2008). Planned Special Events- Economic Role and Congestion Effects. Washington DC: U.S. Department of Transportation, FHWA.

Fiscal impact can be calculated by estimating tax revenue collected from economic activity associated with PSEs. Taxes can be levied on good and service sales, hotel stays, and event tickets. Attendance at PSEs often increases demanded for goods and services provided at or near PSE venues. These goods and services, which are often taxed, include food, beverages, and fuel. However, many local and state governments do not tax food and beverage sales.

To estimate the fiscal impact of a PSE, the first step is to develop estimates of average spending per attendee on goods and services related to an event. These estimates can be developed from surveys and secondary sources. As noted earlier, attendees spend money on event merchandise, food, beverages, hotels, and transportation. The next step would be to collect the applicable tax rate for each of these expenditure categories. Lastly, multiply average spending per expenditure category, the applicable tax rate, and the total number of event attendees. The sum of this value for all the expenditure categories is equal to the total fiscal impact of the PSE.

A 2007 study performed for the City of San Jose provides an example of this estimation process. The types of tax revenues that were estimated in the San Jose study include: sales, hotel occupancy, hotel business improvement district fee, ticket, and gasoline.¹

Additional Considerations

It is important to estimate and consider the fiscal effects PSEs have on different agencies and groups. Since different levels of positive and negative effects can accrue to different stakeholder groups, it is necessary to address questions of equity and responsibility with regard to PSE facilitation and PSE effects. In order to address these issues meaningfully, it is also necessary to attempt to quantify the positive and negative fiscal effects of PSEs. However, this is not an easy task. Tracking the costs and benefits of facilitating PSEs is difficult and often involves estimates that can vary widely based on specific assumptions, such as event participant spending and fiscal effects.

Resource Utilization

Strategy 4: Event Time and Location Planning

Overview

Resource utilization is a central element of cost management. Simple changes, such as having marathon courses loop rather than extend from a fixed point, can reduce traffic management costs. These changes are dependent upon having the ability to negotiate with event organizers.

Implementation

Seattle structures its permitting system such that the Seattle DOT assesses costs involved and attempts to minimize them prior to granting a permit. To be able to engage in such resource management, a department must be able to have recourse to deny the event or certain elements of the event. Resource management is also about assessing available opportunities and alternatives. For example, the city of Rockford, IL is considering replacing some of its police traffic personnel with trained volunteers to reduce costs.

Marketing to encourage the use of public transportation and alternative modes of transportation, such as biking and walking, can also prove cost-effective. The city of Washington, D.C. uses money obtained through a CMAQ grant to aid event organizers in providing alternative transportation options to patrons. Similarly, just before the opening of Nationals Stadium and the Pope's visit in 2008, Metro engaged in large marketing campaigns to encourage ridership and defray downtown congestion. For more information on resource management, see Chapter 2.

Additional Considerations

Proper resource utilization can often be beneficial. For many events, changing the start time or day may be undesirable, but the additional costs incurred from having an event during overtime hours should always be recognized and considered. The goal of resource utilization is to increase efficiency, a topic that may at times be complicated and difficult to address, but is otherwise desirable. However, increasing efficiency and evaluating all events' use of resources can raise political issues as resources are shifted.

Strategy 5: Traffic Mitigation Planning

Overview

Simple changes, such as stretching event start and end times to avoid traffic clustering and locating venues or events near each other to take advantage of shared resources, can reduce costs. Some ideas and examples are provided below, but the only thing this strategy really requires is creative planning that makes the most of available resources and identifies opportunities for cost-saving measures.

Implementation

Events held within a few days of each other at the same location or in close proximity can reduce setup costs; equipment can be left in place between events, as well, and would only need to be unloaded and loaded once. Cones and barriers can be collected and held near the event site; signs can remain displayed for events that are only a few hours apart and be bagged between events, rather than taken down for events held a few days apart. The two events will be able to use either the same or very similar traffic management plans, and personnel will already be familiar with the desired traffic pattern and associated challenges. Some cities have adopted similar strategies for permanent venues. Philadelphia and Detroit both have several large venues built in close proximity to each other to take advantage of shared resources, such as parking capacity and signage. This strategy also allows equipment to be stored nearby, which reduces transit and provides the opportunity to employ a staff dedicated solely to these venues.

Alternatively, very large events can benefit from stretching out their start and end times to reduce the clustering of traffic flows. At the Indianapolis 500, NASCAR held a free car show prior to the actual race to encourage some portion of patrons to arrive over a two-hour time period rather than just before the official start of the event. Some minor league baseball teams, such as the Scranton Wilkes-Barre Yankees, allow children onto the field to run around the bases, thus stagger the rate at which patrons leave the event. Holding fireworks or concerts after events is another popular approach. Often, staging these before-and-after events is less expensive than paying for the additional personnel that would otherwise be needed to maintain traffic flow.

Additional Considerations

The start and end times for events held near each other can be staggered as much as possible to prevent congestion caused by traffic clustering. Permanent venues located near each other may sometime be unable to stagger appropriately and may occasionally lack adequate parking capacity. With festivals and other similar events, changing the event days to facilitate resource-sharing may be unrealistic or undesirable. When creating before-and-after-event plans, it is worthwhile to consider whether the benefits outweigh the costs.

Direct Cost Recovery

Strategy 6: Initiate a Pilot Program

Overview

For departments that historically do not recover costs from event organizers, but are currently considering billing for certain city services, a pilot program is a good approach. A pilot program that allows cost recovery to be phased in over time will allow for feedback, adjustments, and lessen the burden on event organizers. A pilot program should include disseminating information about cost recovery regulation, fee structures, and fee exceptions to event organizers and will most likely include elements from Strategy 7 "Developing a Retail-like Environment."

Implementation

Initiation of a pilot program should begin with discussions regarding cost recovery goals, pilot program objectives, fee structure, time-frame for the program, and whether certain events will be exempt. Consideration of the fee structure should include whether to reduce fees for non-profit or community events, ways to ensure access to city services for small groups lacking funding, and a decision regarding which types of events are considered to have First Amendment rights and therefore will be exempt from cost recovery. While almost all jurisdictions differentiate between First Amendment gatherings and other planned special events, jurisdictions often follow different guidelines. For example, the City of San Francisco considers parades to be cultural expressions akin to First Amendment rights and therefore does not seek cost recovery for such events. Other jurisdictions consider a march, but not a parade, to be a First Amendment right. Additional fee structure options include a flat permit fee, a permit fee based on attendance or a fee levied as a percentage of actual city expenditures. For example, the City of Seattle found attendance to be highly correlated with event management cost.²

Jurisdictions should also consider the economic activity and revenue generated by each event when designing a fee structure. While the City of Seattle recently instituted greater cost recovery for barricade set-up and take-down, it continues to provide this and other services free of charge for more than 20 long-standing city special events such as Seafair. These costs can be significant: the cost to the city in 2006 for set-up and take-down of barriers at Seafair alone was $85,000.³

A person or committee can be designated to oversee the implementation of the pilot program. This entity will then be responsible for soliciting and coordinating reviews, public comments, and internal department communication regarding the program. Evaluations can be completed after each planned special event and include commentary from event organizers and all departments affected by the new program. The department can also provide a forum for public comment and consider the feedback provided from the public, event organizers, and other city officials or departments in revising the program. The department will need to engage in communication efforts to inform event organizers of the new fees.

Additional Considerations

The department can consider the costs of staff time and resources that will need to be committed and compare this to the anticipated returns of the program. The department may also want to carefully consider whether direct cost recovery is appropriate for their jurisdiction.

Strategy 7: Develop a Retail-like Environment

Overview

Recovering costs from event organizers in a consistent manner can be facilitated by the use of a retail-like environment, which includes the ability to hold deposits, bill the appropriate party, generate receipts or other proof of payment, reconcile actual payments received against amount owed, and provide refunds as necessary.⁴ This retail-like environment may also include the set up of a designated place to pay fees in person or a virtual payment center where fees can be paid online. All forms should clearly state where payments can be made. In addition to the physical capacity to handle billing and tracking of payments, providing clear information to event organizers regarding estimated costs or fees is an important component of creating a retail-like setting.

Implementation

This strategy requires a reliable system for handling payments and deposits. In addition to this, departments may consider making fee structures more transparent and providing this information to event organizers as they begin to plan the event.

A clear, detailed, and readily available fee structure accomplishes two objectives. In addition to allowing the department to bill parties and reconcile payments with greater ease, it can allow event organizers to be active participants in applying resource utilization and lowering costs. A published fee structure that includes options and shows cost differentials will allow event organizers to minimize costs subject to their constraints. Organizers may then choose to reduce their costs by holding their event during non-overtime hours or holding the event in a different location, if possible. Jurisdictions or departments, where such interdepartmental coordination is too difficult or not possible, may want to consider having one location where all permits and fees can be gathered and paid and information regarding all fees and fee exceptions is available. Currently, it can be very difficult for event organizers to gather such information, as it is frequently provided separately by each agency, is difficult to aggregate, and in some cases may only be available after the event details have been finalized. Sharing cost information with event organizers as they develop the event will give them an incentive to work with the city and be more active participants in the effort to reduce costs. While this is not a substitute for the department engaging in optimal resource utilization, as discussed in Chapter 2, this can enhance that effort.

Research conducted by the Federal Highway Administration found that many departments are not set-up to engage in retail-like activities and may therefore not be collecting all applicable fees.⁵ One city audit found that the police department had waived administrative overhead costs (normally 22.6%) for several organizations without proper authority, despite availability of a legitimate channel to waive or reduce fees upon demonstration by an event sponsor that it is unable to pay the full fee.⁶ Inconsistent fee collection can reduce department credibility and will often result in fewer available funds. Departments that already engage in direct cost recovery may wish to ensure proper payment and processing of received funds prior to increasing cost-sharing.

Additional Considerations

Fees for events held by non-profit organizations or events considered to be expressions of free speech are often waived or reduced. If waiving fees, the department should be sure to look at whether optimal resource utilization has been used, since event organizers are insulated from the cost.

For small cities that do not hold many planned special events, the costs of implementing this strategy may outweigh the benefits. However, jurisdictions should keep in mind that the benefits include not just increased cost recovery, but also a more consistent application of a rule, which may be a goal in its own right. The strategy would involve staff time and may also require physical space, the services of a consultant to create a virtual space, a physical space, or specialized accounting software. An additional consideration is that creating a "one-stop shop" for all permits requires a high level of inter-departmental cooperation and support from the city.

Strategy 8: Direct Negotiation with Major Event or Venue Operators

Overview

Many departments of transportation have successfully persuaded other stakeholders to incur certain costs associated with planned special events. While this strategy may be employed for any large event, it is particularly useful for recurring events or events held at permanent venues, such as convention centers, stadiums, and arenas, which may rely heavily on city resources. Negotiations should stress that all parties involved in the execution of an event are partners.

Implementation

The negotiation process starts with preparation, which sets the tone for discussions. Enter negotiations with the understanding that a "win-win" solution is possible and frame the negotiation as a problem-solving process in which all the partners bear a responsibility. Clearly communicate the city's willingness to collaborate and find alternative solutions while remaining focused on the overarching goal established during preparations. A thorough understanding of the conditions is needed before contacting special event partners.

• Establish goals for engaging event holders in negotiations.
• Identify major stakeholders, such as venues, event organizers, event sponsors, and local economic development authorities. Chart who is involved in each event. The most obvious party may not be the one who steps in to contribute. In Washington, D.C., the D.C. Sports and Entertainment Commission provided funding to compensate for police overtime at late ending baseball games.
• Calculate the costs of the services provided for events, considering all costs: policing, disruptions, changes to traffic patterns, and anything else. Be prepared to discuss benefits as well, especially the effect on city tax revenue.
• Develop an engagement strategy that prioritizes who to negotiate with, and how cost recovery from each event contributes to the overall cost recovery goal. Start with events or venues that cost the city the most on a yearly basis. Regular event holders with an investment in the city, such as sports teams, are usually a good place to start. Prepare to engage all the major players who have a stake in the events and determine what you hope to achieve from each negotiation.
• Understand all event partners' assets and liabilities in individual negotiations; these can be used as bargaining chips and facilitate a quid pro quo between negotiators. For example, in return for receiving compensation for traffic disruption, a city can shift a portion of city resources to event area road improvements and beautification.

In the proper environment, negotiating directly with major event partners can recover a significant amount of special event costs. Cities like Washington, Phoenix, San Francisco, and New York all successfully negotiated with major event holders to at least partially recover their costs. The San Francisco Giants and the 49ers currently pay 31% of the cost of providing police coverage at 3 Com Park, and The Office of the Budget Analyst has recommend that the city pursue further negotiations with the two teams prior to the opening of a new downtown ball park. The New York City Department of Parks and Recreation has a twenty-year lease agreement with the Brooklyn Cyclones granting the Cyclones exclusive use of Key Span Park. The rent is based on, among other things, a per-ticket fee, actual game attendance, special event income, advertising, and the Surf Avenue retail area. BBC, the company that owns the Cyclones, is required to deposit $27,670 into a sinking fund that permits the Parks Department to perform capital improvement projects at the stadium.

Additional Considerations

Major event holders may feel unfairly singled out with this strategy. To ensure that the concerns are mitigated, consider establishing a well-justified distinction between their events and those that will not be targeted. The media can play a role in swaying public opinion on the matter and should also be considered as a factor.

Strategy 9: Institute Special Event Parking Fees or Taxes

Overview

For jurisdictions that do not wish to bill event organizers directly for costs, a special event parking fee is one strategy that can provide some level of cost recovery. Benefits of the strategy include the potential for the fee to encourage people to carpool or take public transportation, thereby reducing congestion and the associated expense of traffic control. Charging a fee for parking during times of high parking demand can "manage parking demand, manage vehicle traffic, and generate revenue."⁷ Unlike individual parking meters, wireless pay stations have a centrally-controlled system that can that be programmed to charge a certain amount during certain hours.

Implementation

City parking garages that do not charge for parking on evenings and weekends can begin charging during a special event or charge a special event fee in addition to any fees already in place. Jurisdictions may choose to charge a premium for parking that is especially close to the venue. If there are no pubic garages near the event, jurisdictions may also consider implementing an additional special event tax on privately-owned parking garages located near the event.

In 2007, the New Jersey Legislature approved the imposition by any municipality of a special event parking tax,⁸ and the City of Tampa has implemented special event parking rates at city garages and certain venues like the Tampa Bay Performing Arts Center, Tampa Convention Center, St. Pete Times Forum, and the Tampa Library.⁹ The city garage rates are a flat fee per event, but vary between facilities. The fees are generally $5 to $10. At Nationals Stadium in Washington, D.C., which is located in an area with little available parking space, valet parking is available for $50, nearby parking is available for $20, and free parking and shuttle service are provided from RFK Stadium, which has excess capacity.¹⁰ The City of Ithaca implemented a special event parking fee of $3 this year and recovered $3,000 at their last event, the Ithaca Festival. Estimated city costs for the Ithaca festival were between $45,000 and $60,000, but city officials view special events as a net benefit for the city and were pleased with the additional income generated by the parking fee, even though it was a small portion of the costs.

The City of Pasadena has implemented pricing on street spaces which had previously been free of charge.¹¹ The city felt the pricing was necessary to improve parking availability. Initially, local merchants opposed the idea, but they consented when the city offered to dedicate all revenues to downtown improvements. This policy has been extremely successful. Parking revenue funding has resulted in extensive downtown redevelopment including new street furniture, trees, and pedestrian facility improvements, which have attracted new visitors. Local sales revenue and sales tax revenue has also increased.

Additional Considerations

While one benefit of this strategy is that it will generate revenue without restricting access to the event, the percentage cost recovery from this method is likely to be small relative to the cost of city services.

Strategy 10: Institute a Ticket Tax

Overview

Implementing a traffic management tax on special event tickets is another method of direct cost recovery. The tax would be collected from event patrons when they purchase a ticket. However, the tax is also likely to affect event organizers. A small tax on a small ticket price is likely to have little effect. For events with tens of thousands of attendees, a flat tax of just a few cents per ticket can be enough to cover traffic management expenses. However, the implementation of a 15% tax on relatively expensive tickets, such as those for sporting events, could have a negative effect on both event organizers and event patrons. As with all taxes, the burden of the tax depends on the sensitivity of demand to a change in price. The tax could also be extended to cover merchandise sold as part of the event.

Implementation

The tax rate on tickets and merchandise at the Verizon Center in D.C. was recently increased from 5.75 percent (D.C. sales tax) to 10 percent, part of a plan approved by the D.C. Council to pay for $50 million in renovations at the sports arena.¹² The D.C. Council also recently considered raising taxes on Nationals tickets, concessions, merchandise and parking from 10 to 15 percent to cover a shortfall in revenues and pay down the stadium debt.¹³ While such "stadium district" taxes have traditionally been used to fund development, the City of San Jose charges a 5% "gate fee" on gross admissions revenue for special events. The tax revenue is paid to the city, but earmarked for the Festival, Parade, and Celebration grant program.

Additional Considerations

Ticket taxes only work when there are tickets. This strategy would not work with many large recurring events, such as the Washington, D.C. Cherry Blossom Festival, that are free to the public and feature small vendors likely to deal largely in cash. There also may be considerable opposition to implementing a tax on tickets. Michigan recently considered a tax on tickets to professional sporting events, shows, movies and concerts. The tax was expected to generate $100 million a year, but faced considerable opposition by the public, who viewed it to be an unnecessary additional tax on activities that contribute to quality of life.

Indirect Cost Recovery

Strategy 11: Develop a Line Item

From a political and administrative perspective, adding a line item for planned special events can lead to better decisions. The line item reveals the cost of events and enables discussion as to whether special event cost recovery policy is meeting the needs of the community. Additionally, it helps legislatures manage costs, because public administrators required to predict and justify the budget are accountable to manage resources effectively to meet the stated budget. A discussion of line item implementation is provided in Chapter 5.

Strategy 12: Apply for Grants

Jurisdictions should make an effort to discover whether federal funding is available to defray PSE transportation costs. Sources of federal funding are discussed in Chapter 6.

Conclusion

As part of effective cost recovery, when a Department of Transportation or other entity considers which of these activities to undertake, it must evaluate the resources involved and the expected benefits. Once such an evaluation is completed, a set of appropriate activities can be selected and implemented to help them improve cost recovery efforts.

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