Financing Public Recreation Services

Paul Sanderson

One of the important public services provided by several municipalities in New Hampshire is an organized recreation program. Different recreational programs may be provided to residents of all ages. Recreation programs can vary in requirements.  Some may require significant investments in facilities and equipment, while others may require staff to administer or provide the program, and yet others may just involve the dedication of public property for individual leisure, such as with parks.


What all of these programs have in common is the difficulty to forecast accurately both the exact number of potential participants and the actual costs incurred to provide each program. The number of participants may vary annually based upon the number of families in the town, the popularity of staff, whether last year’s teams had a successful record, competition with privately operated alternatives, and competition with other public providers such as schools. The costs may vary annually with the experience and availability of staff and volunteer assistants, costs of insurance and transportation, costs of referees, costs of training for staff and volunteers, costs of background checks, and costs in acquiring new equipment necessary.


In recognition of this difficulty, the legislature has determined that recreation may be financed by several different methods, as set forth in RSA 35-B:2. Let’s compare and contrast the alternatives. For the purposes of this article, we will assume that the municipality has created a recreation commission in accordance with RSA 35-B: 3. In cities or in towns with charters, their governing charter documents may create a different management structure, such as a department head reporting to a town or city manager.


General taxation, including the ability to borrow money for a recreation purpose.

This method works well when the voters have a specific purpose in mind, and that purpose has a known set of costs. An example is an appropriation for an annual fireworks display, or an appropriation to support an “old home day” or “summerfest”. It can also prove successful when the need is to finance the construction or repair of a facility with a long useful life, such as a playing field, a tennis court, outdoor basketball court, or a building where a construction or repair estimate may be created and a set sum appropriated.


This method does not work well when the number of participants may vary over time, and the cost to deliver the program varies with the number of participants. If the program director estimates the participation level too low, there may not be enough funds to provide the program to everyone who wants to participate. If the estimate of participants is too high, then the money spent on tickets to an event, transportation, equipment, league fees, uniforms, referees, and the like may appear to be “wasted” because the program is not full.


In most cases the amount of an annual appropriation that is not used by the end of a fiscal year must lapse to accumulated fund balance and cannot be used until it has been appropriated at a future legislative body meeting. RSA 32:7. Voters could easily conclude that lapsed funds simply “were not needed” and assume they will not be needed in the future. Thus amounts requested are often reduced in the budget review process, or are appropriated by the legislative body to other public purposes. The relative instability and unpredictability of this source of funding only exacerbates the problems in future accounting periods arising from incorrect estimation of the number of program participants.


Some voters may not support the of use general taxation dollars to create a recreational program that is used only by some residents, or if the program is geared to serve only a single age group. That is, older voters may not support appropriations to a recreational program designed to only offer team sports to children. Conversely, younger families may not support a recreational program geared only toward adult courses, bus tours, and the like.


Some members of governing bodies may prefer the use of general taxation dollars, since such appropriations remain available for transfer during the year. RA 32:10, I. Thus, the “surplus” from a program that did not meet expectations could be transferred during the budget year to non-recreation purposes. The power to transfer is lost if the program is supported by fees, since the fees are deposited into a non-lapsing fund that is only to be accessed by order of the recreation commission.


Fees and charges to the users of recreation services or facilities.

This financing alternative resolves many of the issues that arise when the program has a variable number of participants or incurs variable costs to provide the program. If a program is offered on a fee basis, the fee may be adjusted to reflect the actual cost of the program. This alternative is fair to all taxpayers, as only those who use the program contribute to the cost, while other taxpayers are relieved from making a contribution. If the interest in the program is too low, the program may be cancelled entirely and the fees refunded. If the interest in the program exceeds expectations, the fees collected permit additional equipment or services to be purchased to provide the program to all who desire to participate.


A key consideration in the process of setting the fee is to assure that the amount reflects the actual cost of providing the program or service. As our Supreme Court has explained on several occasions, a “fee” is an amount collected to reimburse the governmental unit for the cost of providing a service or a license. If the amount collected exceeds the amount needed to reimburse costs, then it becomes, “…an enforced contribution to raise revenue and not reimburse …for special services”, which is the definition of a “tax”. See American Automobile Association v. State of NH, 136 N.H. 579 (1992).  A key requirement of taxation is that the obligation be levied proportionately upon all taxpayers. Starr v. Governor,148 N.H. 72 (2002).


The amount of a fee will be sustained so long as “…it is not grossly disproportionate to the regulatory expenses…that is, it may cover incidental expenses incurred in consequence of the activity regulated, provided that the resulting ‘fee’ does not become unreasonable.”  D’Antoni v. Commissioner, NH Department of Health and Human Services, 153 N.H. 655 (2006). Therefore, a “fee” is fair if designed to cover the actual program cost, which means the variable items that are consumed in the provision of the program, or which are unique to the program. That is, it is fair to charge for a uniform item that is given to the participant, but less fair to charge for the full cost of a uniform that is returned and reused in the future. It is fair to charge for the cost of the referee, whose service is completely consumed during the team event.



With a recreation commission in place, the amount of the program fee is set by the recreation commission. See RSA 35-B:3, IV. This is somewhat unusual, in that virtually all other program fees are set by the governing body, using authority delegated to them by town meeting in accordance with RSA 41:9-a. While the governing body must hold a public hearing prior to altering a fee, there is no such requirement for the recreation commission. The Right to Know Law does, however, require that such action be taken at a public meeting, and that the public have a right to attend and observe that meeting. The recreation commission may not take action on any matter, including the setting of fees, by taking a secret ballot among the members. See RSA 91-A: 2, II. The recreation commission should be careful to document the costs that the fee is designed to cover. If the fees climb to a point where there is a “profit” from the program, the fees will be subject to attack as a “tax”. Thus, while it is permissible to have some amount of the fee revenue collected available after the program has concluded, this amount must be reasonable. The excess should be based upon efficient program administration, rather than an initial design to “make a profit.”


The fee may also be set and altered from time to time to reflect the need to replace certain equipment used in programs on a recurring schedule. For example, if the program is youth football, the equipment manufacturers have strong suggestions as to the useful life of critical safety equipment such as helmets. Uniforms in team sports have a life of greater than one year, but they certainly need to be replaced regularly. Other equipment closely related to program operation, such as utility costs for lighting, program specific scoring equipment, and the equipment used to prepare and sell food items during program operation need to be regularly inspected, repaired, and replaced.


The recreation program fee model does not work well when it is asked to cover the entire cost of a facility also in use by other citizens during times that the program does not operate. In fact, since the non-paying taxpayers would receive a benefit without the payment of an obligation, such a fee may well actually be a type of illegal taxation due to the lack of proportional assessment. For example, why should the recreation program pay for the entire cost of a tennis court, if the court is also open to the public at all times there is no organized tennis program in operation?  For this reason, most recreation programs seek an appropriation from the general fund for the costs of creation, operation, and maintenance of facilities open to all members of the public, but rely upon fee revenue to cover the costs of organized programming open only to a limited group of participants.


Fees and the Recreation Revolving Fund

If the fee alternative is selected, all program fee revenue must be placed into a “recreation revolving fund” created in accordance with RSA 35-B:2, II, or into a “special revenue fund” created in accordance with RSA 31:95-c. These two financial tools are not the same, and we will deal with the special revenue fund in a bit. If the revolving fund option is selected, note that it is not subject to the same rules and restrictions as a revolving fund created pursuant to RSA 31:95-h. That statute deals with the same concept, but is limited to a different set of public purposes.


The recreation revolving fund is a “fund,” rather than an “account.” All of the revenues must be deposited with the town treasurer. The recreation commission may not create or hold its own checking or savings account for any reason. This is true whether the revenue comes from program fees, gate receipts at games, operation of “50-50” raffles, food sales at a concession stand, or any other purpose. Note also that the recreation commission does not have the authority to accept gifts or donations of money or property. That authority is left to the governing body by RSA 31:95-b or RSA 31:95-e, because such donated funds or property are, if accepted, property of the municipality, rather than property of the recreation commission.


Once placed into the recreation revolving fund, program revenues remain there until expended upon order of the recreation commission. They do not lapse at the end of the fiscal year, and they are not subject to transfer by the governing body to fund other public purposes. Thus, the program participants are assured that their fees will not be used to fund non-recreation obligations of the municipality. The recreation commission may access this fund as obligations are created, and can pay its bills as often as the accounting system of the municipality permits. So long as the fund has a positive balance, such funds are available to support recreation programming. This includes payments for the services of staff, subject to the personnel policies and rules of the municipality.


There are many additional duties that the municipality assumes as an employer when staff is employed to administer or deliver recreation programming. These are beyond the scope of this article, but should be of concern to the recreation commission.


If the use of a gift of money or property is restricted by the donor, the restricted gift is in the nature of a trust, and is held by the trustees of the trust funds until local officials determine to use the property as designated by the donor. It is not placed into the general fund or the recreation revolving fund. For example, suppose a donor gives the town $2,500.00 for the purpose of buying new uniforms for the soccer program. If accepted by the selectmen, these funds reside with the trustees of the trust funds until recreation officials create a purchase order with a vendor showing the purchase of qualifying soccer uniforms.


Note that the recreation revolving fund is not designed to work as a “capital reserve fund.” That is, the amount of the fund should not be allowed to grow and hold amounts that could be used in the future to create facilities available for use by all citizens. The “capital reserve fund” financial tool is controlled by RSA 35. A recreation commission cannot hold a capital reserve fund; such funds must be created by the legislative body, and held by the trustees of the trust funds. There is no authority within RSA 35-B for a recreation commission to create a capital reserve fund, or to vote to hold some or all of the recreation revolving fund aside for a capital funding purpose.


Fees and the Special Revenue Fund

The local legislative body also has the option of directing some or all program fee revenue into a “special revenue fund” created pursuant to RSA 31:95-c.  A primary difference is that such deposited revenues are not available for immediate expenditure by the recreation commission. Instead, they may only be expended as a result of a later appropriation by the legislative body.


Thus, this is not the financial tool to be used to fund short term program operations or short term maintenance objectives on recreation facilities. In most municipalities, such funds could only be accessed following a specific warrant article appropriation at a town meeting. Why, then would such a fund have advantages?


Note in RSA 31:95-c, II(b) that the special revenue funds created pursuant to this section are to “[P]rovide special capital improvement plan funds from appropriate revenues, which include any portion of town revenues otherwise allocated to the general fund except property taxes... .” Thus, assume that a recreation facility generates income from sources such as gate fees and food concessions. These are not direct program revenues from participants, but could be used as a source to fund ongoing maintenance or improvements of the facility. For example, assume that a facility would be improved by the addition of an underground sprinkler system. Rather than using general taxation funds for the purpose, an appropriation from a special revenue fund that collected gate receipts and food concession profits could accomplish this purpose within a reasonable time without impact to the local tax rate. When the legislative body is convinced that the purpose is adequately funded, it may appropriate to the purpose at an annual meeting.



As can be seen, municipal officials and budget committees have an array of tools at their disposal that allow for the creation of a recreation program for the benefit of all citizens in the municipality. For the creation of facilities to be enjoyed by all, general taxation may be the appropriate choice. When the program needs equipment, facilities, or services that provide for a smaller group, user fees deposited into a recreation revolving fund may be most appropriate. When a facility has a specialized purpose, but may generate revenues on its own, the special revenue fund may be the right tool to reserve revenues to fund longer term maintenance objectives or improvement projects at the facility.


Paul Sanderson is Staff Attorney for the New Hampshire Municipal Association.  He may be contacted at 800.852.3358 ext. 3408 or at