Planned Special Events: Cost Management and Cost Recovery Primer

Introduction

This purpose of this primer is to aid jurisdictions and agencies, especially Departments of Transportation, with identifying and managing the costs of planned special events (PSEs) and forming policy for cost recovery. Cost management — the effective, overarching control of an organization's finances — is a part of general management and creates accountability and transparency within the budget. Currently, in most cities the management of planned special events is fragmented across multiple agencies, and the costs and benefits of such events are not usually quantified or reported in any manner. The strategies and examples provided herein are meant to inform the reader on the basics of cost management and cost recovery, thereby facilitating more knowledgeable decision-making and encouraging further discussion among jurisdictions, agencies, and departments.

Organization

Chapter one discusses the current state of the practice of PSE management and profiles case studies from selected cities. Chapter two defines cost management and cost recovery. This chapter provides both an introduction to the basics of proper cost management and a discussion to aid jurisdictions in determining when cost recovery is appropriate. Chapter two also presents best practices in cost management and cost recovery. Chapter three contains information about tracking costs that is designed to aid departments in their implementation of the basic practices discussed in chapter two. Chapter four presents specific strategies that jurisdictions can employ to implement cost management and cost recovery. Chapter five provides an example to show jurisdictions and departments how to create a PSE line item in their budget. Chapter six discusses available sources of federal funding.

Fiscal Impact of Planned Special Events

PSEs include sporting events, concerts, festivals, and conventions at permanent multi-use venues (e.g., arenas, stadiums, racetracks, fairgrounds, amphitheaters, and convention centers). They also include public events at temporary venues such as parades, fireworks displays, bicycle races, sporting games, motorcycle rallies, seasonal festivals, and milestone celebrations.¹ PSEs involve substantial costs and generate substantial revenues to private industry and governmental entities. A recent FHWA study conducted by Jack Faucett Associates estimated there are 24,000 large-attendance events in the U.S. annually.² The report defined PSEs as events with more than 10,000 attendees. The study also found that direct in-event revenues are about $40 billion annually in the U.S., but direct outside-of-event spending and secondary economic effects raise the total economic effect of large PSEs to $164 billion dollars. Government revenue from these events is estimated to be approximately $4 billion. The largest event category in terms of economic effect is professional team sports, at about $60 billion.

The number of planned special events held annually around the nation is growing and this growth increases the strain on the budgets of many cities. Around the U.S., cities and towns are attempting to limit the effect of special events on public finances. The Portland Tribune recently published an article noting that in 2006, the traffic division of the Portland Police Department spent $363,000 in overtime expenses alone for special events, out of which the department recovered only $48,000. Recovering only a small percentage of expenses is a common occurrence, as special events are often held on evenings and weekends and personnel are frequently paid overtime. Many events, such as concerts and professional team sports, can be held only on evenings and weekends. Government agencies involved in planning and operations for planned special events frequently lack sufficient budgets to accommodate such large overtime expenses. However, with planning, normal duty hours can cover many elements of set up and day of event activities.

The effort to reduce public spending on PSEs while retaining their many benefits includes cost tracking and improved cost recovery methods, and has garnered public attention and media coverage. Some examples of how various jurisdictions have grappled with the problem are provided in Exhibit i.

Document Contents

The information provided in this document is intended to:

• Provide departments with background information on PSE management in the U.S. and highlight additional resources.
• Help departments take a comprehensive look at their use of resources.
• Help departments weigh the merits of whether to institute a cost recovery program and assess how far its reach should be.
• Help departments track costs specific to PSEs.
• Help departments engage in appropriate cost recovery by providing a range of possibilities for cost recovery strategies.
• Initiate discussion among agencies, departments, and planned special event partners regarding implementing cost management and determining cost recovery policy.

Exhibit i: Special Event Cost Recovery in the News Naples, FL (Naples News) August 12, 2008 – The Community Services Advisory Board in Naples voted to increase special event fees and reduce assistance to non-profit organizations in order to improve the city's balance sheet. Following the vote the city anticipated increasing application and vendors' fees at the city's art fairs, concerts, road races, and parades, which would recover an additional $56,000 per year. The board also voted to eliminate funding previously extended to non-profit organizations to pay a portion of the organizations' responsibility for police and fire services at events. Eliminating that program was estimated to save the city $25,000 each year.1 Solvang, CA (Santa Maria Times) July 27, 2008 – The Solvang City Council recently considered whether to charge event organizers directly for an array of city services provided at special events. These would include sheriff's services, City staff's time, and rent of traffic control devices. The sheriff's department already bills the City for additional services at special events, and this cost would be passed on to event organizers. Additionally, the City would account for staff time spent notifying residents of sidewalk and road closures and bill event organizers accordingly.2 Charlestown, RI (The Providence Journal) July 2, 2008 – City officials in Charlestown considered altering the fee structure for events at one of the city's parks from a flat rate of $2,500 per day to a percentage of the event's gross revenue. The city hoped that the proposed fee structure would be more equitable to smaller events and would enable the Parks and Recreation Commission to raise more money to pay for improvements to the park. Regular event organizers complained that, despite paying roughly $200,000 to the city during the previous decade, they have seen little improvement and have funded some improvements themselves. Event organizers were concerned not only about paying more, and how the money was spent, but were also wary of the city auditing their accounts for each event. At least two of the four major events held at the park each year were seeking a new venue at the time the article was published.3 Gettysburg, PA (The Evening Sun) March 2, 2008 – Gettysburg city officials considered pricing plans that would affect both annual and weekly events by charging vendors for the space they use. One example was a proposal to raise the rent for a parking space at the semi-annual antique show to $1 per hour. The prospect of increased fees caused wine festival and antique show organizers, as well as farmers' market vendors, to threaten to find new venues. A critic of the plan noted that special events draw more patrons to the municipal parking garage and argued that policy makers should not ignore that effect on the city's finances.4 Tulsa, OK (The Journal Record) March 7, 2007 – The Tulsa City Council discussed an increase of 38%, from $36 to $50 per hour officer-hour, for police services at special events as part of their effort to distribute costs to event organizers. The original cost reflected the police department's calculations of average cost per officer at the overtime rate; a system that had been in effect since 1993. The proposed fee was a more comprehensive cost calculation that included the cost of fuel for police vehicles used at events. The increased fee drew concern over its potential effect on events sponsored by non-profits and charities.5 Sources: 1Buzzacco, J. (2008, August 12). Naples may increase revenue by raising fees for special events. Retrieved August 15, 2008, from naplesnews.com: http://www.naplesnews.com/news/2008/aug/12/naples-city-council-look-revising-special-events 2Times Staff. (2008, July 27). Solvang may hike fees for special events. Retrieved August 8, 2008, from MSNBC: http://www.msnbc.msn.com/id/25881400 3Armental, M. (2008, July 2). Ninigret event planners, panel members joust on fee hikes. Retrieved August 15, 2008, from Rhode Island News: http://www.projo.com/news/content/SC_CHARLESTON_PARKS_AND_RECREAT_07-02-08_VJA_v53.403ee18.html 4James, E. (2008, March 2). Event-fee hike could end up costing downtown Gettysburg. Retrieved August 20, 2008, from Evening Sun: http://www.eveningsun.com/ci_8425910?source=most_viewed 5Shepherd, G. (n.d.). Special-event billing rate increase proposed by Tulsa City Council. Retrieved August 20, 2008, from BNET.com: http://findarticles.com/p/articles/mi_qn4182/is_20070307/ai_n18719755/print?tag=artBody;col