Confirming Capacity

The scope of capital projects often escalates in proportion to the level of enthusiasm among those involved. The more partners involved, the higher the likelihood for “scope creep.” This “creep” is not only a product of enthusiasm but also is driven by partner-specific spaces that may not exist in a single occupancy scenario. Funding for common areas or those areas with obvious community benefit may have a higher funding priority than facility areas required by only one partner. If funding gaps develop, they must be underwritten or scope must be adjusted. Typically, facility scope will eventually reach a point where value engineering (the process of determining preferred vs. essential features for each primary user) will help define the financial investment of each partner. The terms “layered funding” or “gap funding” are commonplace in the private development arena and refer to a scenario where a predominant funding source is supplemented by others. This method of funding is also commonplace in the public/private partnership process.

For example, a municipality may determine that their bonding capacity is limited to funding 75% of the total project. In this scenario, the YMCA has the choice to underwrite the remaining 25% on its own or—with the municipality’s approval—seek a compatible partner or partners to participate in the process and bridge the funding gap. There is no standard formula for this process. Each scenario is unique and must be addressed according to specific community needs.

When utilized effectively, a RFP process similar to the one referenced in “Creating the Perfect Storm” will identify potential partners that may have the capacity and interest to assist in the gap-funding process.

While the gap-funding process may sound foreign or complicated, it essentially requires the same skill set that YMCA professionals have been using for decades. In a very simplistic  analogy, the traditional YMCA operating budget depends upon additional funds to supplement membership and program revenue. Supplemental revenue sources are the YMCA’s version of “layered” or “gap” funding. Within the YMCA movement, the typical operator possesses an awareness of the inconsistencies surrounding supplemental funding sources. This awareness drives the YMCA professional to be entrepreneurial, collaborative and successful in identifying and securing alternative support. This combination of relatable skills should be leveraged as a value that the YMCA brings to the partnership process. This mindset, so inherent to the YMCA’s business culture, is not always a fundamental norm within the culture of municipalities. As a result, the expectations of the YMCA as a partner often include the proactive leadership role in securing gap funding.

Unresolved gap funding is a common barrier to advancing a successful partnership. Gap funding solutions should be addressed during the MOU process. Unresolved funding gaps will not garner the council and voter support necessary to secure the primary funding source. Partnerships dependent upon public support will typically require an MOU for the primary
funding partner as well as secondary gap funding partners. Educated voters expect and appreciate the total picture with regard to shared accountability. As with the primary partner
agreement, the supplemental funding partners’ primary commitments may also be contingent upon securing public support. It is a tightly-woven process of trust where the formal partnership hinges on a result that could not take place without every partner’s commitment rooted in hope and faith.