Translate[Archived] Question #17: Can you provide the General Fund impact, both revenue and expenditures, of the operations of the Old Town Farmer’s Market?
Question:
Can you provide the General Fund impact, both revenue and expenditures, of the operations of the Old Town Farmer’s Market? Can you estimate the financial impact if the City were to solicit for non-profit/private administration of the market? (Mayor Wilson)
Response:
Operation of the Old Town Farmer’s Market (OTFM) is revenue neutral; the vendor fee revenue collected offsets the costs related to the OTFM operations. Over the past two fiscal years, an average of $56,402 in revenue was collected per year with average direct operating expenditures of $51,246 per year. The City’s expenses include a part-time market manager, overtime for City staff support, operating supplies, and clean-up.
Option to Privatize
The process to privatize a municipal farmers’ market generally involves a jurisdiction developing and issuing a solicitation, or Request for Proposals (RFP), for the management of the farmers’ market. In many cases, the jurisdiction will provide the space and either pay the contractor a fixed management fee, the contractor will pay the municipality a percentage of the gross vendor fee revenue collected, or the contractor may be permitted to keep all vendor fee revenue. In addition, the RFP, in many cases, may allow the jurisdiction to dictate how the market is operated and the vendor rules.
Many non-profits, Business Improvement Districts (BIDS), community groups, etc. operate their farmers’ markets very differently than the OTFM. For example, non-profit organizations such as Fresh Farms and Community Food Works, that manage farmers markets in Arlington, charge vendors a market fee equal to a percentage of a vendor’s total gross sales or revenue while the OTFM charges its permanent vendors a flat annual fee. The percentage-based fee structure may be attractive to smaller vendors but could have a significant impact on larger, higher grossing vendors. Organizations such as Fresh Farms also require that all farmers and producers carry $1.0 million in liability insurance; require standard signage; have stringent product eligibility guidelines; and are generally “Producer Only” markets (i.e. exclusively selling products that vendors have grown or produced – no reselling). Some organizations require that bakers use seasonal ingredients from the region and at least 60% of ingredients in the filling of fruit and vegetable pies and tarts must be from the farmer or producer’s own production or purchased from regional farmers and integrate locally sourced grains.
Due to the long history of the OTFM, revising the regulations to be that stringent may result in over 30 percent of the existing vendors’ inability to meet these more stringent regulations and may result in their withdrawal from the OTFM. This would likely be the case for many of those long-term vendors that were grandfathered into the market during the market refresh that occurred in 2013.
The cost to privatize the Old Town Farmers’ Market by contracting out the management and operation of the market to a third party is solely dependent upon the terms of the contract and the fee structure developed and agreed upon by the City and the contractor. These terms could include a flat management fee, a percentage of vendor fee revenue or retention of all vendor fee revenue by the contractor. However, based on the terms of the contract, the City most likely would no longer realize vendor fee revenue of approximately $56,000 per year as in most cases the market operator will prefer or negotiate to retain the vendor fees.
The market now is close to cost neutral with direct expenses close to revenues. If contracted out it is unlikely to become a substantial net revenue gain for the City. Therefore, when considering contracting out the market a determination as to purpose for contracting out needs to be identified. With that, a more in-depth analysis of the pros and cons of contracting out could be undertaken.