HomeMy WebLinkAbout2022-09-06 Finance Committee Agenda Packet1
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FINANCE COMMITTEE
Tuesday, September 6, 2022
Special Meeting
Community Meeting Room & Virtual
5:30 PM
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ACTION ITEMS
1.Review the FY 2022 Junior Museum and Zoo Update, Including
Scenarios for a Fully Cost Recoverable ProgramPresentation
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Finance Committee Special Meeting September 6, 2022
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City of Palo Alto (ID # 14584)
Finance Committee Staff Report
Meeting Date: 9/6/2022 Report Type: Action Items
City of Palo Alto Page 1
Title: Review the FY 2022 Junior Museum and Zoo Update, Including
Scenarios for a Fully Cost Recoverable Program
From: City Manager
Lead Department: Community Services
Recommendation
Staff recommends that the Finance Committee review the Junior Museum and Zoo after
six months of operations and scenarios for a fully cost recoverable program, as referred
by the City Council.
Background
Founded in 1934, the Palo Alto Junior Museum and Zoo (JMZ) is dedicated to enriching
the lives of children, ages 0 to 11, through hands-on exploration of the world.
Specifically, the mission is to engage a child’s curiosity for science and nature. This
mission is furthered through a variety of exhibits, a diverse community of live animals,
and educational programs for children, families and schools. About a decade ago, the
Friends of the Junior Museum and Zoo (Friends) launched the JMZ Initiative – a $25
million campaign to rebuild the outdated JMZ facility in recognition that the existing
structures were not adequately sized nor designed to 1) accommodate the JMZ’s vibrant
exhibits, expanded educational programs, current accessibility and seismic code
requirements, and 2) to meet best-practices in modern animal care and collection
management. The Friends met their fundraising goal of $25 million and the City
invested the remaining $8 million.
Construction of the new facility began in July 2018 with an intended reopening in
October 2020 as a larger facility with more animals and exhibits, however; due to the
ongoing pandemic the opening was delayed. Previously a free institution, the new JMZ
would charge an entrance fee and offer membership options and discounts. Background
on development of the fee structure is described below. On November 12, 2021 the
Palo Alto Junior Museum and Zoo reopened initially on a reduced schedule.
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Guests are required to purchase tickets in advance and make reservations for either a
morning or afternoon session and total reservations are limited for each session to
ensure space for social distancing. Some walk-up tickets are available for purchase. The
JMZ closes between sessions to clean high-touch surfaces.
Development of Fee Structure
Staff presented a preliminary operating plan for the new JMZ to the Finance Committee
on March 3, 2020, notably at the onset of the COVID-19 pandemic (Staff Report
11093). The Finance Committee voted unanimously to approve the proposed operating
plan, which included a ticket fee structure of $10 per ticket, membership fees ranging
from $110 to $245, and additional staffing needs. During the Fiscal Year 2021 budget
cycle, the financial impact to the City from the pandemic necessitated a re-evaluation of
the JMZ’s operating plan. On May 12 and May 13, 2020 the City Council discussed the
Fiscal Year 2021 proposed budget and budget reduction strategies, including a staff
proposal to increase the JMZ ticket price from $10 to $18, increasing the cost recovery
from 50% to 85%, based on estimated attendance. Membership prices were also
increased in this scenario, ranging from $150 to $430. Staff report 11222 and
corresponding Memo were presented as part of the Community Services budget review
on May 12, 2020. As part of the FY 2021 budget discussion, the City Council directed
staff to report back, six months after the JMZ reopening, on what it would look like to
eliminate the General Fund subsidy through a fully cost recoverable program (May 26,
2020 Action Minutes).
One year later, at the May 4, 2021 Finance Committee meeting, staff presented an
adjusted operating plan for the JMZ and recommended that the Committee recommend
an opening date and ticket fee structure to the City Council to be included in the FY
2022 Operating Budget. The Friends were concerned that the higher ticket price of $18
would make the new facility inaccessible to many visitors. Staff worked closely with the
Friends to re-evaluate the new operating plan and make recommendations to ensure a
successful opening. (Staff Report 12050)
At the FY 2022 Budget Adoption Council meeting (Staff Report 12307), the City Council
approved the $10 ticket price model, assuming an October 2021 re-opening date. Due
to onboarding and operational delays, the JMZ re-opened its doors a month after the
originally anticipated date on November 12, 2021.
Discussion
Six-month update Operations Report
The FY 2022 adopted pricing model projected revenues and expenses for an October
2021 opening date with an estimated 65% cost recovery level. The FY 2022 actuals
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from November 12, 2021 to June 30, 2022, resulted in a 54% cost recovery level; 11%
lower than what was estimated. The lower cost recovery was due to several reasons.
From November through December, the facility was open on weekends only and
returned to a regularly open schedule of Tuesday through Sunday in January 2022.
During the first few months of re-opening, revenue was impacted by COVID-19 surges
and limited capacity of visitors in the morning and afternoon sessions. This resulted in
fewer ticket sales, fewer class enrollments, and minimal facility rentals. Although there
were more memberships purchased than what was originally estimated, the adopted
budget assumed a greater number of non-resident memberships sold. The assumption
was that non-residents would comprise 80% of membership sales, but the actual sales
of non-residents was 62% of all memberships sold. It was also assumed that daily
attendance would be composed of 34% memberships and 66% general admission.
Instead, the ratio has been about 50% members and 50% general admission.
Members have overbooked reservations that they do not use. Members and ticket
holders are required to make reservations for each visit, and because reservations are
often booked for weeks in advance, members overbook reservations to hold space. As a
result, JMZ sells the unused membership reservations each morning to walk up guests,
but this has resulted in long lines for tickets and distracts staff from assisting guests
with other needs such as booking birthday and facility rentals. Rental revenue in FY
2022 was estimated at $120,000 while actuals came in at approximately $33,000. By
the fourth quarter, March through June 2022, the JMZ had greater ticketed admissions
and facility rentals. Overall, the greatest revenue-generating sources were ticketed
admissions and memberships.
The operating expenses for personnel and non-personnel expenses were associated
with caring for the animals, class, camp and school programming, and guest services.
Many of the personnel expenses were due to overtime accrued by existing staff to fill
the gaps of existing vacancies to meet customer demand. By the end of the FY 2022,
the JMZ had a vacancy rate of 12% due to difficulties with recruitment, retirements,
and resignations from staff pursuing full-time positions. Due to limited staff
capacity, there were some savings in contracts and supplies. Lastly, the allocated
charges were significantly lower than what was estimated in the adopted budget. Staff
continues to evaluate the existing proforma to ensure that all budgeted expenses are
accurately estimated. The table below compares the FY 2022 Adopted budget with FY
2022 actuals (for the time period November 12, 2021 through June 30, 2022).
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FY 2022 Adopted* FY 2022 Actuals*
Ticket Price $10 $10
Attendance 138,780 62,634
Membership Price Ranges $108 - $430 $125 - $288
# of memberships sold 2,000 2,917
Classes and Camps Revenue $933,200 $554,000
Facility Rental Revenue $120,000 $33,500
Total Revenue $2,285,000 $1,476,700
Staffing Expense $2,413,600 $2,380,600
Non-Personnel Expenses $408,600 $221,100
Allocated Charges** $675,000 $154,300
Total Expense $3,497,200 $2,756,000
General Fund Impact***
(subsidy)/contribution ($1,212,000) ($1,279,000)
Cost Recovery 65% 54%
* The revenues and expenses have been rounded to the nearest hundred.
** Allocated Charges include direct services such as electricity and refuse collection. They do not include General
Fund Cost Allocation Plan charges such as Human Resources or Administrative Services support, which are typically
included in determining cost recovery levels. Allocated Charges are generally budgeted at the department level, not
by specific facilities. Therefore, the estimates included in this report are the result of staff analysis of FTE and
building square footage ratios managed by the Community Services Department. These estimates will be refined in
collaboration amongst internal stakeholders and brought forward as part of the annual budget process as further
information becomes available.
*** A negative number in Net General Fund Impact indicates a subsidy is required from the General Fund for
operations.
Achieving a Fully Cost Recoverable Program
From the recent opening of a new facility to the uncertainty surrounding COVID-19,
staff has limited data to project what the next fiscal year will look like. Based on the
available data, a fully cost recoverable program will depend on ticketed admissions and
membership revenue and capacity. For the purpose of this pricing model, the FY 2023
adopted budget financial assumptions were used as a baseline to project full cost
recovery.
Since re-opening, ticket sales and memberships have been the largest revenue streams.
As a result, all scenarios include an increase in ticket and membership prices ranging
from no increase to 80% to achieve a fully cost recoverable program. All scenarios have
a revised number of memberships sold based on the actual memberships sold in FY
2022 and assumes that due to ticket price increases, some visitors may be more
inclined to purchase a membership. The table below summarizes these updates and
shows the fully cost recoverable options rounded to the nearest hundred.
Scenarios modeled for discussion include:
• Scenario 1 - 50% Ticket Price Increase
80% membership price increase for non-residents and residents
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• Scenario 2 - 60% Ticket Price Increase
50% membership price increase for non-residents and 40% for
residents)
• Scenario 3 - 70% Ticket Price Increase
10% membership price increase for non-residents and no increase for
residents
• Scenario 4 - 80% Ticket Price Increase
no membership price increase
FY 2023
Adopted *
Scenario 1
50% Ticket Price
Increase
Scenario 2
60% Ticket Price
Increase
Scenario 3
70% Ticket Price
Increase
Scenario 4
80% Ticket Price
Increase
Ticket Price $10 $15 $16 $17 $18
Attendance 138,750 138,750 138,750 138,750 138,750
Membership Price
Ranges $108 - $430 $225 - $518 $175 - $432 $125 - $316 $125 - $288
# of memberships sold 2,000 3,000 3,000 3,000 3,000
Classes and Camps
Revenue $935,700 $935,700 $935,700 $935,700 $935,700
Facility Rental Revenue $200,000 $200,000 $200,000 $200,000 $200,000
Total Revenue $2,518,800 $3,889,300 $3,889,900 $3,889,500 $3,998,000
Staffing Expense $2,552,100 $2,552,100 $2,552,100 $2,552,100 $2,552,100
Non-Personnel Expenses $408,600 $408,600 $408,600 $408,600 $408,600
Allocated Charges** $900,000 $900,000 $900,000 $900,000 $900,000
Total Expense $3,860,700 $3,860,700 $3,860,700 $3,860,700 $3,860,700
General Fund Impact***
(subsidy)/contribution $(1,341,900) $28,600 $29,200 $28,700 $137,300
Cost Recovery 65% 100% 100% 100% 104%
* The revenues and expenses have been rounded to the nearest hundred.
** Allocated Charges include direct services such as electricity and refuse collection. They do not include General
Fund Cost Allocation Plan charges such as Human Resources or Administrative Services support, which are typically
included in determining cost recovery levels. Allocated Charges are generally budgeted at the department level, not
by specific facilities. Therefore, the estimates included in this report are the result of staff analysis of FTE and
building square footage ratios managed by the Community Services Department. These estimates will be refined in
collaboration amongst internal stakeholders and brought forward as part of the annual budget process as further
information becomes available.
*** A negative number in Net General Fund Impact indicates a subsidy is required from General Fund for
operations.
As discussed in prior reports, staff is aware of the potential impacts that increased
pricing may have on visitation, including limiting accessibility for some families.
Variables that may impact assumptions on price and volume include:
• Ticket price increases could encourage visitors to purchase a membership.
o In scenarios with the high membership prices, such as scenarios 1 and 2
people may be deterred from purchasing a membership.
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o Scenarios 3 and 4 could encourage visitors, especially residents, to
purchase a membership given the reasonable membership prices
compared to the ticket price.
• Higher prices could pose a barrier to lower-income visitors, all scenarios include
the discounted entrance fees through the Museums for All program for qualifying
families.
o The Museums for All program is a cooperative initiative between the
Association of Children's Museums (ACM) and the Institute of Museum
and Library Services (IMLS) to offer free or reduced admission to
individuals and families presenting a Supplemental Nutrition Assistance
Program (SNAP) Electronic Benefits Transfer (EBT) card.
o Some families who do not qualify for SNAP benefits may still find it
difficult to pay higher ticket prices and may choose to visit free or lower
cost attractions instead of the JMZ.
• Adjustments in activities for classes and rentals may impact the overall revenue
generated, however, more experience is needed before revised estimates are
produced.
o So far in FY 2023 (July and part of August) facility rental and birthday
party revenue totaled $17,800. Projections anticipate bookings will
continue to be strong this year though fall below budgeted estimates
($200,000) at $90,000 in revenue from facility rentals and birthday
parties.
Pricing Comparisons
The ticket prices in the scenarios above are within the range of other nearby family
science and zoo-based attractions. However, the membership prices in scenarios 1 and
2 ($225 - $518 and $175 - $432, respectively) are much higher than other local
attractions. Many museums and zoo institutions have increased ticket prices recently,
including Happy Hollow in San Jose and Curiodyssey in San Mateo. Other local
attractions have pricing models as follows:
Ticket
Membership (Basic
Family)
Children's Discovery Museum - San Jose $15 $175
Happy Hollow Park & Zoo - San Jose $18 $300
Curiodyssey - San Mateo $19.95 Adult/ $15.95 Child $185
Children's Creativity Museum - San Francisco $20 $209
Children's Fairyland - Oakland $15 $129
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The chart above shows that the adopted pricing model for FY 2023 is below the ticket
fee for nearby attractions. Resident membership pricing is also below other nearby
attractions and non-resident membership fees are set at approximately the median in
this group. In a full cost recovery model, ticket prices for the JMZ lie within the range
of local attractions, however, a drastic increase of 50% within a year may impact visits
and deter patrons.
Ticket and membership prices for the JMZ did not increase from FY 2022 to FY 2023.
Should the Committee and Council wish to increase cost recovery levels, one approach
to consider is to develop a roadmap to achieve the desired cost recovery level. This
would likely reflect incremental changes to price such as an increase to prices by 10%
to 20% in the coming fiscal year to factor inflation and align with typical general rate
increases included as part of the municipal fee schedule. A gradual increase would allow
staff to engage with the community and keep community members updated. The
phased approach would also allow staff to continue to revisit the evolution of all
revenue streams including classes and facility rentals as part of the total cost recovery
calculation. Staff will continue to further analyze available data to understand the
impact of price increases on attendance and membership purchases.
There have been previous discussions about transitioning the JMZ into a public/private
partnership model to be operated by a nonprofit such as the Friends of the JMZ. The
Facilities Agreement between the City and Friends, which was approved by City Council
on February 5, 2018 (Staff Report #8851) states, “Within five years of re-opening the
new JMZ, the Parties will discuss the feasibility and desirability of transferring
governance from the City to the Friends.”
Recent Operational Changes
On August 1, 2022, the JMZ added an additional start time (12:30pm) for reservations
bringing the total number of start times from two to three each day. By opening a new
time slot and allowing guests to stay longer, the JMZ increased the reservation capacity
from 500 to 700 per day to spread-out arrivals and decreased the time customers need
to stand in line. Also, the JMZ stopped selling tickets at the service desk and are
requiring guests to purchase tickets online only.
The JMZ will be increasing the number of staff and volunteers available during peak
times to assist walk-up guests with their online purchases. Guests who purchase their
tickets in advance can scan their own tickets for entry. This will allow also staff more
time to assist guests with other needs including booking classes, camps, birthday
parties, and facility rentals.
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Resource Impact
Funding for the current operating plan of the JMZ is available in the FY 2023 Adopted
Operating Budget. This report does not recommend any resource adjustments. As
operational trends of the new JMZ emerge, staff will gain a better understanding of
where there are gaps in service, particularly in visitor services. Staff is evaluating the
current resource requirements and developing short-, mid- and long-term plans to
ensure adequate staffing levels for the safety and enjoyment of visitors. If additional
resources are recommended, those requests will be presented to the Council as a part
of the annual budget process. Any guidance from the Committee to staff or
recommendations to the full Council will be monitored for implementation as part of the
FY 2024 annual budget process.
Policy Implications
The operating model discussed in this report advance many important policy objectives
related to the City Comprehensive Plan Policy Goal C-1: Deliver community services
effectively and efficiently. These include:
• Policy C-1.4 Promote City parks, open spaces, recreational facilities,
libraries, classes and cultural activities for community members
recognizing that these facilities and services build and strengthen
community.
• Policy C-1.16 Provide arts, science and recreational activities that foster
healthy children, youth and teen development.
• Policy C-1.20 Leverage available funding to support the development of,
and improved access to, programs that address all types of developmental
disabilities, including physical, sensory, cognitive or social/emotional
needs.
Stakeholder Engagement
Community Services Department staff developed the adopted operating model in
careful coordination with other City departments including Human Resources and the
Office of Management and Budget.
Environmental Review
The changes to the JMZ admission charges discussed above are statutorily exempt
pursuant to CEQA regulation 14 CCR § 15273 as they are for the purposes listed in 14
CCR § 15273(a).
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