CITY OF MERCED, CA | Play on Purpose2026 - 2030 PROS MASTER PLAN 1 Financial Analysis & Sustainability
Report
Supplement E
CITY OF MERCED, CA | Play on PurposeSupplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN 2 What’s Inside
Financial Analysis
Financial Sustainability Strategy
p. 3
p. 7
Supplement E – Financial Analysis & Sustainability Report CITY OF MERCED, CA | Play on Purpose 3
Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Analysis
Overview
The City is currently operating in a period of fiscal constraint, making it increasingly difficult to provide the level of service the community desires and expects. Budget shortfalls require thoughtful prioritization, and in some cases, even revenue- generating services face scrutiny as broader financial pressures impact the General Fund. In this environment, fiscal stewardship is not optional, it is foundational.
Strategic use of taxpayer dollars lays the groundwork for a stable, trusted, and resilient parks and recreation system capable of serving the community not only today, but well into the future.
FY Actual FY Actual FY Actual FY Actual
2022 2023 2024 2025
Total Revenue 326,423$ 465,632$ 639,563$ 908,817$ Total Expense 3,985,373$ 4,502,302$ 5,590,506$ 6,416,899$ Net Revenue (3,658,950)$ (4,036,670)$ (4,950,943)$ (5,508,082)$ Cost Recovery 8% 10% 11% 14%
Parks & Community Services,
Applegate Park Zoo, and Public
Works Parks Maintenance
Figure E.1: Total Department Operating Budget
Strategic financial management balances immediate fiscal realities with long-term obligations. By aligning investments with community priorities and maintaining a disciplined, transparent approach to resource allocation, Merced can build a park and recreation system that remains equitable, resilient, and sustainable for generations to come.
Figure E.1 shows the four-year history of the Department’s total operating budget, including total revenues and expenses, for recreation, parks maintenance, and the Applegate Park Zoo.
During the 2025 fiscal year, each of the three areas impact on the Department’s operating budget is as follows:
Parks Maintenance does not generate any revenue and incurred expenses of $3,191,798, or about 50% of the Department’s total expenses (shown in Figure E.2).
Recreation generated $749,285 in revenue, over 80% of the Department’s total revenues, and incurred expenses of $2,553,310, or nearly 40% of the Department’s total expenses. This resulted in 29% cost recovery performance (shown in Figure E.3). Applegate Park Zoo generated $65,611 in revenue, about 18% of the Department’s total revenues, and incurred expenses of $671,791, or 10% of the Department’s total expenses. This resulted in 24% cost recovery performance (shown in Figure E.4).
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Analysis
FY Actual FY Actual FY Actual FY Actual
2022 2023 2024 2025
Total Revenue 260,812$ 367,400$ 505,003$ 749,285$ Total Expense 1,413,478$ 1,627,186$ 1,927,675$ 2,553,310$ Net Revenue (1,152,666)$ (1,259,786)$ (1,422,672)$ (1,804,025)$ Cost Recovery 18% 23% 26% 29%
Parks & Community Services
Figure E.2: Recreation Division Operating Budget
FY Actual FY Actual FY Actual FY Actual
2022 2023 2024 2025
Total Revenue -$ -$ -$ -$ Total Expense 2,371,801$ 2,657,983$ 3,304,772$ 3,191,798$ Net Revenue (2,371,801)$ (2,657,983)$ (3,304,772)$ (3,191,798)$ Cost Recovery 0% 0% 0% 0%
Public Works Parks Maintenance
Figure E.3: Public Works Parks Maintenance Operating Budget FY Actual FY Actual FY Actual FY Actual
2022 2023 2024 2025
Total Revenue 65,611$ 98,232$ 134,559$ 159,531$ Total Expense* 200,094$ 217,134$ 358,059$ 671,791$ Net Revenue (134,483)$ (118,901)$ (223,500)$ (512,259)$ Cost Recovery 33% 45% 38% 24%
Applegate Park Zoo
Figure E.4: Applegate Park Zoo Operating Budget
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Analysis
FY Actual FY Actual FY Actual FY Actual
2022 2023 2024 2025
Contributions 5,556$ 49,463$ 54,052$ 70,567$ Cost Recovery -$ 5,833$ 23,905$ 477$ Grants 28,960$ 120,168$ 190,236$ 400,690$ Investments 2,599$ 504$ 680$ 2,206$ Miscellaneous 8,321$ 8,296$ 8,105$ 12,155$ Fees & Charges 280,987$ 281,370$ 362,585$ 422,721$ Revenue by Source - Parks &
Community Services and Applegate
Park Zoo
Figure E.5: Total Parks & Community Services Revenue Sources Merced’s recent financial analysis confirms that the City’s current revenue structure is not keeping pace with the true cost of operating and maintaining its extensive system of dedicated parks and specialized amenities. While the Community Services and Parks Department has been proactive in pursuing grants and cultivating partnerships, evidenced by investments supporting the Zoo, community events, and expanded outdoor programming, these efforts, though commendable, are not sufficient to offset the system’s structurally high subsidy level. Ongoing pressure on the General Fund remains, particularly as capital maintenance needs continue to grow and deferred maintenance compounds over time. Strengthening and diversifying revenue sources, including evaluating a dedicated funding mechanism, will be necessary to align ongoing operating and lifecycle costs with sustainable funding. Until revenues are better aligned with obligations and cost recovery improves where appropriate, the City should avoid adding new amenities that create additional long-term financial commitments.
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Analysis
Taxes (sales, property)
Bonds
Impact /Development Fees
Fees & Sales
Other Taxing Methods
(tourism, etc.)
Traditional Sources
Alternative Sources
Philanthropy
Grants
Partnerships
Donations
*In-kind Service
(*offsets expenses)
Single Agency
Multi-Party
Sponsorships
Figure E.6 shows a diversified funding approach. Combining General Fund support, program and service revenues, partnerships, grants, sponsorships, and potentially dedicated funding sources will be essential to stabilizing service levels and reducing volatility. Over time, exploring dedicated revenue mechanisms may provide greater predictability and allow the Department to align community expectations with sustainable financial capacity.
Figure E.6: Revenue Sources
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Overview
The Financial Sustainability Three-legged Stool illustration builds on the philosophy of 110%’s Parks and Reconomics© - how parks and recreation organizations manage their finite financial resources.
The Department embraced this philosophy and the exercise of creating a Cost Recovery Strategy for its parks and recreation services by following these principal steps (as illustrated in the graphic below).
Service
Categories
Cost of
Service
Beneficiary of Service
Tax Use/Revenue
Enhancement Philosophy
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Overview
Service Categories
The development of categories which include
services that are alike in "purpose" is important
when it comes to justifiable and equitable
allocation of subsidy, cost recovery levels, and
assignment of budget and general ledger lines to
account for a category’s fiscal performance.
Service categorization can lead to the
diminishing of special interests and social values
that can drive arbitrary investment and revenue
decision making
Beneficiary of Service
Beneficiary of Service evaluates each service
category based on who benefits, who should pay
(and to what degree).
Common Good services are accessible, of benefit
to the community, and provide universal value.
Essentially, they contribute to the “common
good” and can be characterized as essentially
having community-wide interest and far-
reaching impacts.
Exclusive Benefit services provide exclusive
benefit to the individual(s) and can include
constraints or barriers to access. Essentially,
these services benefit the individual more than
the community as a whole and can be
characterized as discretionary with less of a
community-wide impact.
Cost of Service Analysis
Completion of an operational cost-of-service
analysis allowed the department to understand
its cost-of-service of doing business, ultimately
revealing each service’s cost recovery and
subsidy investment level. Operational revenues
(fees and charges, sponsorships, grants,
donations), direct costs (expenses associated with
the delivery of a service; without the service, the
cost would not exist) and indirect costs (expenses
that would exist with or without the provision of
any one service) that the department provided
were captured and attributed to all services as
part of this work, providing several insights that
would inform the design and development of the
Department’s Cost Recovery Strategy.
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Beneficiary of Service Beneficiary of Service
The development of categories which include services that are alike in "purpose" is important when it comes to justifiable and equitable allocation of subsidy, cost recovery levels, and assignment of budget and general ledger lines to account for a category’s fiscal performance. The benefits of this type of approach are two-fold:
1. It is inefficient for the department to determine cost recovery expectations by each individual service including facility, activity, or event
2. Categorizing by “type of service” or “likeness of service” discourages attempts to determine fees and charges (and therefore cost recovery decisions) based upon special interests, age-based services, or individual values.
Service Categories are listed in order from those perceived to be Common Good Services (#1) to those seen as providing a more Exclusive Benefit (#10).
Common Good Services or cause and purpose driven services intend to impact social, economic, and environmental issues and needs and align with the fundamental purpose and mission of the department. Typically, there are no like services provided by the non-profit/Non-Governmental Organizations (NGO) or private sectors.
Exclusive Benefit Services or specialized services, intend to serve personal interests. Typically, there is competition with the non-profit/ Non- Governmental Organizations (NGO) and private sectors which offer like services.
Common Good Services (justification for greater subsidy investment)
Community building
Provides accessibility to marginalized/under-represented populations Broad appeal to a wide audience
Services contribute to greater equity, cultural awareness, and make EVERYONE’s life better
Exclusive Benefit Services (justification for greater cost recovery expectations)
Individualized, special interest
Requires higher competency/ability level to participate Specialized activities
Individualized services are often accessible outside of the parks and recreation system
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Service Categories
Service Categories
1. Open Access Activities Access to parks, park amenities, and/or recreation facilities which does not include supervision or oversight by staff and/or volunteers. Examples: parks, trails, playgrounds, non-reservable outdoor sport courts or fields, splash pads, dog park, Bocce court
2. Community Events Mass interest events planned to be appealing and accessible to the broader community regardless of age, ability/skill, family composition, etc. Registration or entry is not required. Examples: Movies in the Park, Nightmare on Main Street Parade, Earth Day, Block Party Trailer parties, National Night Out, Cops for Critters, Adopt a Park Green Scout Initiative, Community Clean Ups
3. Beginner/Introductory Level Activities Classes, clinics, workshops, leagues, and other led and/or instructed activities in which the primary intent is to acquire or learn a skill.
Examples: Jiu Jitsu, Folklorico Dance classes, Karate, Merced Sunday Dance, Senior Beginner Line Dancing, Children’s Tap and Ballet Dance classes, Parent & Me swimming lessons, Beginner Prep swimming lessons, Jr. Giants Baseball, H.I.T.S Tennis, Junior NBA Basketball, NFL Flag Football, Tiny Tot Sport Clinics
4. Education & Enrichment Activities Classes, clinics, workshops, and other led/or supervised activities in which the primary intent is to provide socialization, interaction, and life skills development with a focus on education and lifelong learning.
Examples: Youth Council, Trail Blazers
Outdoor Recreation Trips, Stargazing Nights, Senior Social activities, Zoo School Tours
5. Drop-in Activities Activities where participants can join at their convenience which may or may not require registration. These activities include staff/volunteer supervision or oversight. Examples: open gym pickleball, open gym badminton, Senior Pinochle, Senior Crafts, Yoga in the Park, Zumba, Recreational Swim, Merced Applegate Zoo entry
6. Special Events Events designed for a niche’ market or a specific interest with registration or entry being required. Examples: Breakfast with Santa, Zoo Boo, Gateway to Yosemite 5K/10K, Lights Before Christmas at the Zoo, Mermaids and Pirates, Earth day @ the Zoo
7. Intermediate/Advanced Level Activities Classes, clinics, workshops, leagues, and other led and/or instructed activities in which the primary intent is to master a skill and/or participate in a competitive environment. Examples: Stroke Technique swimming lessons, Adult Slow Pitch Softball Leagues, Adult Basketball Leagues, Senior Advanced Belly Dancing
8. Rentals Space and facility reservations for exclusive use by an individual or group. Examples: ball field tournament rentals, park shelter rentals, Rossotti Ed-zoo-Cation Center, Merced Senior Community Center-Main Hall, Rotary Scout Hut, Merced Open Air Theater, Ada Given Pool, Seasonal Sports Field Rentals, Gymnasium
9. Resales Consumable goods and non-consumable goods and services available for purchase. Examples: concessions items, vending items, zoo gift shop
10. Personalized Services Private or semi-private activities and instruction. Examples: private swimming lessons, Hunting Permits CITY OF MERCED, CA | Play on Purpose 11
Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Cost of Service Analysis Cost-of-Service Analysis
Completion of an operational cost-of-service analysis allowed the department to understand it cost of doing business, ultimately revealing each service’s cost recovery and subsidy investment level. Operational revenues (fees and charges, sponsorships, grants, donations), direct costs (expenses associated with the delivery of a service; without the service, the cost would not exist) and indirect costs (expenses that would exist with or without the provision of any one service) that the District provided were captured and attributed to all services as part of this work, providing several insights that would inform the design and development of the Department’s Cost Recovery Strategy.
NOTE: Capital expenses, which are a large portion of the Department’s total budget, were not included as they do not relate to the cost-of-service delivery Open Access Community
Events
Beginner /
Introductory
Education &
Enrichment
Drop-in
Activities Special Events Intermediate /
Advanced Rentals Resales Personalized
Services
Actual CR % 0% 17% 15% 33% 11% 35% 31% 47% 0% 11%
Target CR % 3% 5% 18% 18% 18% 30% 40% 60% 80% 90%
0%
17%
15%
33%
11%
35%
31%
47%
0%
11%
3%
5%
18%
18%
18%
30%
40%
60%
80%
90%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
SERVICE CATEGORIES
ACTUAL TO TARGET COST RECOVERY %
Actual CR % Target CR %
Figure E.7: Service Categories Actual to Target Cost Recovery % CITY OF MERCED, CA | Play on Purpose 12
Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Cost of Service Analysis Process
The consulting team worked closely with the Merced team to ensure all expenses and services were identified, and to develop meaningful divisions, facility, and park areas to facilitate the appropriate attribution of expenses to services. The result is a clear picture of the total cost-of-service guiding the development of cost recovery/subsidy investment goals.
Results
Results of the analysis provide a comprehensive review of fiscal year 2024/2025, encompassing July 1, 2024 – June 30, 2025. The full results from the analysis and interactive features are available in the Cost-of-Service Results excel file provided separately. Selected results from the analysis are included below.
Summary of Results by Service Category
Number of
Offerings
Participations/
Quantity Sold Total Hours Total Revenue Direct - Service Direct - Facility Indirect Total Expense Subsidy Amount Subsidy % Cost Recovery %
Community Events 11 2,501 93 10,300$ 48,391$ 942$ 10,601$ 59,934$ 49,634$ 1% 17% Beginner / Introductory 26 1,782 8,739 80,974$ 242,167$ 194,421$ 93,818$ 530,406$ 449,432$ 8% 15% Education & Enrichment 3 3 2,914 219,639$ 276,486$ 276,059$ 118,736$ 671,282$ 451,643$ 8% 33% Drop-in Activities 2 30,636 62,383 147,691$ 667,390$ 402,007$ 229,802$ 1,299,198$ 1,151,508$ 20% 11% Special Events 5 141 46 18,994$ 43,796$ 1,270$ 9,684$ 54,750$ 35,756$ 1% 35% Intermediate / Advanced 7 108 780 61,006$ 123,568$ 38,462$ 34,818$ 196,848$ 135,842$ 2% 31% Rentals 8 628 3,136 174,134$ 111,771$ 190,540$ 64,963$ 367,274$ 193,140$ 3% 47% Resales 1 1 2,500 -$ 25,362$ 2,929$ 6,079$ 34,371$ 34,371$ 1% 0% Personalized Services 2 7 13 940$ 5,455$ 1,315$ 1,455$ 8,225$ 7,285$ 0% 11% Total by Service Category 65 35,807 80,603 713,676$ 1,544,387$ 1,107,944$ 569,957$ 3,222,287$ 2,508,611$ 44% 22% Open Access - - - -$ -$ 2,629,550$ 565,062$ 3,194,612$ 3,194,612$ 56% 0% TOTAL 65 35,807 80,603 713,676$ 1,544,387$ 3,737,494$ 1,135,019$ 6,416,899$ 5,703,223$ 100% 11% Cost Recovery ResultsSubsidy
Service Category
Stats Expenses
Figure E.8
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Cost of Service Analysis Summary of Results by Service Area
Number of
Offerings
Participations/
Quantity Sold Total Hours Total Revenue Direct - Service Direct - Facility Indirect Total Expense Subsidy Amount Subsidy % Cost Recovery %
Aquatics 3 2,561 5,693 27,123$ 144,208$ 124,612$ 57,766$ 326,586$ 299,464$ 5% 8% Enrichment 11 916 4,365 20,779$ 115,045$ 327,756$ 95,153$ 537,954$ 517,175$ 9% 4% Sports 23 642 7,939 99,461$ 224,669$ 167,161$ 84,200$ 476,030$ 376,569$ 7% 21% Events 15 2,641 115 13,010$ 53,768$ 2,183$ 12,023$ 67,974$ 54,964$ 1% 19% Rentals 9 629 3,137 174,134$ 112,900$ 190,540$ 65,206$ 368,645$ 194,512$ 3% 47% Zoo 3 28,417 59,354 159,531$ 640,321$ 295,691$ 201,139$ 1,137,150$ 977,619$ 17% 14% Outdoor Recreation 1 1 1 219,639$ 253,477$ -$ 54,470$ 307,947$ 88,308$ 2% 71% Total by Service Area 65 35,807 80,603 713,676$ 1,544,387$ 1,107,944$ 569,957$ 3,222,287$ 2,508,611$ 44% 22% Open Access - - - -$ -$ 2,629,550$ 565,062$ 3,194,612$ 3,194,612$ 56% 0% TOTAL 65 35,807 80,603 713,676$ 1,544,387$ 3,737,494$ 1,135,019$ 6,416,899$ 5,703,223$ 100% 11% Stats Expenses Cost Recovery Results
Service Area
Subsidy
Figure E.9
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Cost of Service Analysis Expense Insights
Expense insights provide context and a greater understanding of how the district spends its operational budget. Results below detail the Department’s Divisions and category breakdown.
Expense Insights by Division Expense Insights by Category Division Summary Amount % of Total
Youth Council 12,847.00$ 0.20%
Parks & Comm Svc - Admin 1,387,527.05$ 21.62%
Parks & Comm Svc - Zoo 671,790.70$ 10.47%
Parks & Comm Svc - Facilities 500,315.63$ 7.80% Parks & Comm Svc - Recreation 155,114.06$ 2.42% Parks & Comm Svc - Youth Sports 159,270.38$ 2.48% Parks & Comm Svc - Adult Sports 75,944.79$ 1.18% Parks & Comm Svc - Outdoor Recreation 253,477.42$ 3.95% Parks Comm - Admin 8,814.00$ 0.14%
Parks Maintenance 3,191,797.92$ 49.74%
Total Department 6,416,898.95$ 100.00%
Expense Category Summary Amount % of Total
Personnel 2,956,911.82$ 46.08%
Admin 597,669.58$ 9.31%
O&M 2,240,636.83$ 34.92%
Utilities 621,680.72$ 9.69%
Total Department 6,416,898.95$ 100.00%
Figure E.10 Figure E.11
CITY OF MERCED, CA | Play on Purpose 15
Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Continuum
Tax Use/Revenue Generation Strategy
Merced Parks & Community Services’ Cost Recovery Continuum presents the degree to which financial resources will be spent and expenses will be recovered and managed. This strategy shifts from one which suggests that all services should be provided at no or low cost for everyone to an equitable philosophy where subsidy allocation decisions are based upon “beneficiary of service”. In this conceptualization, each type of service has a set of specific characteristics that provide a rationale for who should pay (e.g., taxpayers, the individual, or both) and to what degree. Ultimately, this aligns subsidy allocation, cost recovery goals and expectations with beneficiary of service. The Cost Recovery Continuum includes the department’s Service Categories and cost recovery goals and expectations. The continuum, shown on the next page, is a graphic representation of the department’s tax use and revenue enhancement strategy and philosophy.
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Supplement E: Financial Analysis & Sustainability Report | 2026–2035 PROS MASTER PLAN Financial Sustainability Strategy Continuum
Figure E.12