First quarter amendments to the Rochester Avon Recreation Authority's (RARA) 2018 budget intended to grow the authority's fund balance were approved on Monday, February 26, by the Rochester Hills City Council.
The amendments, which include cutting total expenditures by $290,211 from its originally approved FY 2018 budget, should add an additional $65,041 to RARA's fund balance. The amendments are an effort by RARA to restore its fund balance to about 20 percent of its overall operating budget within the next three years. That goal was set by city council in December as one of several financial oversight measures imposed on the recreational authority that stemmed from a $663,243 reduction in RARA's fund balance in 2017 that took its reserves from about 20 percent to one percent of its total budget.
The amended budget calls for $150,271 to be added to RARA's fund balance by the end of the fiscal year.
RARA generates about 75 percent of its overall budget through membership fees, programs and facility rentals. About 25 percent of its budget comes from tax millages levied in Rochester and Rochester Hills.
Ronald Jewell, RARA's executive director, said in December that the reduction in fund balance was related to the build out of the authority's new facility at 480 E. Second Street, which includes about 22,000 square feet of space for recreational purposes. The new facility and renovation are part of RARA's long-term plan to provide additional services to the greater Rochester area.
While the new facility was included in RARA's long-term plans, Jewell said last year that the property became available sooner than expected, forcing the authority to use a significant portion of its fund balance or lose out on acquiring the new facility. Further, while RARA's FY 2017 budget was submitted as if the 480 building was fully operational and running all projected programming, those projections weren't realized prior to the end of the fiscal year in December. The shortfall from the original projections, which were tied in large part to anticipated new memberships, led Rochester Hills City Council to impose a number of financial oversights of RARA by the city's fiscal division. Those oversights include a requirement for RARA to submit quarterly budget amendments, rather than annual amendments, with Monday's amendment the first since the oversights were put in place.
"Last time you were here in front of us we talked about some rather disappointing enrollment figures," said council president Mark Tisdel. "How are we doing?"
"I'm happy to report that the first month of the fiscal year, in terms of membership alone, we hit right around 25,000, which is one quarter of the budget amount we have for the entire fiscal year," Jewell responded. "So that number will hopefully translate into very positive months.
"The first couple months of the year are typically real well. Summer gets a little lull, but the back three or four months of the year pick up, so we are anticipating that number to grow."
Rochester Hills Chief Financial Officer Joe Snyder said Monday that the proposed amendments and budget include conservative projections with realistic goals that are attainable.
Overall, the budget amendments approved Monday include a reduction of about $157,211 in operating expenditures and $133,000 in capital outlay expenditures, the latter which were attained by deferring projects to future budgets, rather than cutting projects.
"We didn't cut any critical capital outlay in the budget. They were deferred," Snyder said. "The most critical component for this year is to restore that fund balance back, then we can explore roofs and parking lots."
In addition to the reduction in expenditures, the amended budget includes a reduction of $225,170 in total revenues, due to a conservative review of revenues based on recent prior year trends and realistic projections of future revenue, Snyder said.
"This budget amendment is a great first step, and from that we can extrapolate out and do multiyear planning and include a capital improvement plan," Snyder said.
Council commended Jewell and the RARA board for their work on the budget and efforts to restore the authority's fund balance. Rochester Hills Mayor Bryan Barnett also commended RARA, and noted the value it provides to the community in terms of quality of life.
"The message was clearly sent from city council in redefined expectations from RARA leadership and the RARA board, and I think RARA heard that," Barnett said. "I've had several conversations with Mr. Jewell and I think he took great action to make sure the council's wishes were implemented.
"As a personal statement, if you haven't checked out RARA in the last year — this isn't your parents' RARA anymore... it's an exceptional facility and I think it's in great hands.