The Rochester-Avon Recreation Authority (RARA) on Monday, September 10, presented its proposed three-year budget to city councils in Rochester and Rochester Hills, which includes a 2.2 percent increase in revenues and plans to restore the agency's fund balance to 25 percent by 2021.
The budget also calls for increases in salaries that would help bring staff closer to the minimum wage levels recommended by a recently completed RARA wage and compensation study. Additionally, the budget includes the development of a seven-year capital improvement plan.
RARA Executive Director Ron Jewell said revenue tied to memberships has increased by about 15 percent, with overall membership up by about 33 percent over the past seven years. He said new registrations are directly correlated to new program amenities available by RARA expanding a new 22,500-square-foot recreation center at 480 E. Second Street, adjacent to its location at 500 E. Second Street.
Jewell came under fire from several council members from both municipalities last December after RARA spent down more than $600,000 of its fund balance related to the new building acquisition and development. The spending resulted in its total fund balance dropping to about one percent of its overall expenditures. The authority has traditionally maintained a fund balance of about 20 percent of overall expenditures. The issue resulted in additional oversight of RARA's budget process, with Rochester Hills Chief Financial Officer Joe Snyder appointed as RARA's treasurer to provide additional financial oversight.
Jewell and Snyder on Monday presented a forward looking budget that included restoration of RARA's fund balance over the next three years through contributions from a structural surplus, meaning the authority has a consistent budget surplus, with exception of two years related to its expansion costs.
By moving to a rolling three-year budget format, it is anticipated that by 2021 year-end, RARA fund balance could be over $620,000, which represents 25.7 percent of annual operating expenditures and would put RARA in compliance with RARA's recently approved fund balance policy, which states that a minimum of 20 percent of annual operations shall be reserved in fund balance, Snyder said.
"The 2019-2021 plan addresses two critical issues," Snyder said. "One is the restoration of fund balance to 20 percent of expenditures, the other is recognition of the recently completed RARA wage and compensation study."
The study found that nine of RARA's staff are currently compensated below the minimum wage levels recommended by the study. Those wages ranged from 10 percent to 29 percent below the minimum level.
Snyder said bringing all employees to the minimum level in one year would "be a significant hit to RARA's budget and it's timely restoration of it's 20 percent fund balance goal." Therefore, it was recommended staff receive two percent cost of living increases and a five percent annual catch-up for those below the minimum recommended level.
"When I approached Mr. Jewell to do this, he said, 'what if I took a zero percent increase next year, instead of seven percent, and that it's redistributed to my staff that are further behind,'" Snyder said.
By Jewell forgoing any increase in the 2019 budget, Snyder said all staff would be just under 11 percent below the minimum recommended level, with Jewell remaining about 11.4 percent below it. Further, he said, it allows all staff to be brought up to the minimum recommended level within three years, rather than four or five.
"I'm glad Ron stepped up and took the Jim Harbaugh approach... I tip my hat to you," said Rochester councilman Ben Giovanelli.
Overall, the budget includes a 2.4 percent increase in expenditures from 2018, totaling about $2.5 million. Revenues will total about $2.7 million, which is a 2.2 percent increase over the previous year. The result is a $149,720 balance, which will be contributed to the fund balance reserve, bringing the total fund balance to $275,745 by the end of 2019, or 11.8 percent of the annual RARA operating expenditures.
Both city councils unanimously accepted the proposed RARA budget, with Rochester City councilwoman Kim Russell absent.