Absorption costing for sports facilities: Making money is not the aim of the game In the area of sports facilities, the only fully functioning market is formed by fitness and leisure businesses, colleges of physical education and a number of commercially viable trend sports. Large stadia are also able to cover their running costs by cross-subsidising sport through auxiliary enterprises, concerts and other events. Where other sporting areas such as youth-oriented or mass-market sports are concerned, it is not possible to impose cost-covering charges on the key users. Despite this, given their status as basic municipal services, sports facilities are provided in the interests of the general public and are subsidised directly or indirectly. Whilst we do not wish to question these subsidies in any way, it is essential that constructors and operators of sports facilities are aware of the actual costs and know exactly what they are subsidising and why they are doing so. Operating sports facilities: the facts and the fantasy The operators of mass-market sports facilities sometimes claim to have balanced the books. In many cases, not all of the real costs will have been taken into account; revenue will have been generated through non-sports-related activities; "unsporting" charges may be applied, and subsidies may be posted as income. Moreover, attempting to circumvent the problem by privatising sports facilities is often no more than a short-term solution. If interest and infrastructure amortisation are disregarded, loans are not paid off and provisions are not formed, the moment of truth inevitably arrives as soon as the first repairs are needed.
Sportanlagen in ZĂźrich/Sports facilities in Zurich Stadion/Stadium “Letzigrundâ€? Sporthalle/Sports hall "Im Birch" Historisches Flussbad/ Historic river bathing area "Unterer Letten" 46
The reality is somewhat different: - The cheapest sports facilities are those that are never built! - The second cheapest are those that are (nearly) always closed. - The best way to generate income is to focus on non-sports activities (such as concerts) or a high-spending clientele (which does not include young people or sports clubs).
Despite all of this, sports facilities continue to be built, managed, kept open year-round and delivered to the public under preferential conditions. Clearly, the operators are motivated by considerations other than profit. Their motivation is to promote sport - a public duty that bears comparison with the promotion of culture. Subsidy levels from 70% to 97% In common with nearly all municipalities in Europe, the City of Zurich has a large number of sports facilities. Some of these are farmed out at nominal rental rates to clubs, which run the facilities with (and sometimes without) public subsidies. However, the main facilities are managed by the city sports department, which opens them to clubs and the general public at attractive prices. Depending on the sport, subsidies amount to around SFr. 10 to 25 per user per day (see diagram 1). In percentage terms, the level of subsidy ranges from 70% to almost 100% (see diagram 2). The effective operating costs (personnel and material costs) are charged to the sports facilities in question on a 1:1 basis. Costs linked to interest payments, amortisation and value maintenance in relation to properties - along with the costs of construction-related upkeep rendered by local building authorities - are invoiced in the form of rent. The interest charges on working capital as well as overhead costs must also be taken into account. Sports policy must lead the way The sports policies of individual local authorities must reflect the value they assign to sport and the extent to which they are prepared to subsidise those who use their sports facilities. They must make their own decisions as to what sports and what kind of facilities they want to support; where distinctions are made, these must be acknowledged and justified. In other words, local authorities must be aware of the true costs of investment and operation. To make this possible, absorption costing is necessary. The critical issue is not the question of whether sports is supported directly (by means of subsidies to clubs or privately sb 04/2006