A Proposal to Increase the Efficiency of the Leach Recreation Center

By: William Bright, Kyle Campbell, Julian Falgons, Carlos Graterol, Aaron Locke, Jeremy
Moore, David Ramos, Diana Saenz, Nathan Smooha, Elizabeth Woodruff

The Leach Recreation Center, known simply as “the Leach” is the gym and general

recreation center provided by Florida State University to serve students. Currently, the Leach

Recreation Center is financed by revenues from the Student Activities Fee. This is a general tax

fund that provides for all student activities, so the Leach must compete with other student

activities for its share of the collected revenue. This setup provides open and free access to all

current students. However, access is offered to non-student members of the community for a fee,

which is a fixed user charge, allowing unlimited use of the facility for a specified period of time.

The inefficiency caused by a general tax placed upon students and the serious congestion of the

leach; especially during peak hours, presents the Leach with some major problems. Our group

believes that a more efficient finance plan, such as a mixture between earmarked taxes and user

fees, could be implemented to provide better incentives for the efficient use of the Leach Center.

Economically, it is always inefficient for an individual to pay a general tax based on a

share of total benefit received from a public good. Students are obligated to pay the student

activities fee; which is charged and included in their tuition, even if they do not use the Leach.

The cost of the Leach to these individuals is greater than the benefit they receive from the

facility, and this is inefficient. So, enacting a user fee on direct consumers of the Leach would

eliminate some of the inefficiency caused by the general tax. However, the existence and

operation of the facility does confer some marginal external benefit on non-users. They derive

benefit knowing that the facility is available and that they have the option of using it should they

ever choose to do so and also from the increased health quality of some students.
 Since this external benefit is widely dispersed among a large number of non-users, it is

still efficient to finance their share of marginal operating and capital costs from taxes. For that

reason, a combination of both taxes and user fees should be enacted to make the funding of the

Leach more efficient. Moreover, the taxes received by the Leach should be earmarked and

separate from the general tax of the student activities fee. To explain, if the Leach currently

receives a different amount from the general tax every semester, then the user fees will change

accordingly to cover the balance of the capital and operating costs. Instead of having the Leach

compete with other organizations for the revenue to cover part of its costs, it should receive the

same amount every semester, so that the user fees can stay consistent. The earmarked tax should

be equal to the benefit that non-users receive from Leach, be charged to all students, and cover

only a portion of capital and operating costs. The balance of the remaining costs will then be

charged to all the direct users of the Leach. Therefore, the overall amount of taxes that students

have to pay should decrease.

Remember that a majority of the current costs are covered by the general tax. If only a

portion of these costs were to be covered by an earmarked tax, as stated above, then the student

activities fee would fall by a substantial amount. The earmarked tax for the Leach would be less

than the share of the general tax it now receives. Hence, efficiency will increase as the total

amount of taxes that students pay is reduced and will be closer to amount of marginal benefits

they receive from the use of the Leach.

Also, to increase the efficiency of the utilization of user fees, there will be an hourly

charge placed upon all patrons instead of the fixed rate that Leach charges non-students. With

fixed user charges, people pay a fee upfront, and then they have unlimited use of the facility for a

specified amount of time like a month or a week. Even with this setup, people still have the
incentive to over-consume their time at Leach. On the other spectrum, the fixed fee may exclude

those people whose marginal benefit of using the Leach is positive, but is not equal to the charge.

This is inefficient because the cost of this additional consumer is relatively low. Thus, a charge

based on hourly usage seems to be a more efficient option. This type of fee would grant the

ability for people to make decisions based on the margin easier, and it may also bring the fees

that people pay closer to their marginal benefit. To elaborate, if a student wanted to work out for

thirty minutes, he may be reluctant to do so if he has to pay a fee that is greater than his

willingness to pay for the that time. Conversely, if he only has to pay per hour, then he may be

more inclined to pay the fee.

Furthermore, a congestion fee will also be included with to help resolve the major

problem of overuse and overcrowding. It is important to note that the demand for the Leach

fluctuates by time of day. Efficiency requires higher charges during the peak periods than during

the off-peak periods even though the operating costs are the same in both periods. Charging an

elevated price during these high demand periods provides incentives for efficient use of the

facility. This type of user charge is efficient because it includes a component to cover the

operating costs and a component to compensate for the congestion costs. Even with the efficient

user charge, there will still be some congestion. However, the amount of congestion is “optimal”

or efficient because the marginal benefits of using the Leach during its busy hours outweigh the

marginal cots of congestion. Next, it could be possible to increase the amount of hours Leach is

opened. To elaborate, the congestion charges generate surplus revenue since they are in excess

of any operating costs. If the surplus revenue is greater than the cost of additional hours of

operation, then that is a signal that the value to users of additional capacity exceeds the cost, so

an increase in hours is efficient.

 Finally, the implementation of the user fee would be based on existing technology

currently in use; yet there needs to be added measures, which includes another card swiping

machine at the exit and an employee to monitor it. Whenever individuals enter and exit the

Leach, a time stamp would be placed on their card. So, new software is required that monitors

people’s time there, and then sends them a monthly bill for the user charges via email. Non-

students will be able to purchase a Leach Center membership card on a semester basis, with the

cost being equivalent to the earmarked tax that the students pay. Even with these additional

procedures, the costs associated with collecting users would be relatively inexpensive. In this

case, the user fee can serve the functions of prices in a private competitive market; it can be used

to help ration the demand for Leach, provide information about its consumption, and provide

incentives for more economical use by its patrons. Lastly, this user fee is efficient because

specific identifiable individuals obtain most of the benefits of Leach, collection costs for the user

fee are low, the demand for the facility is relatively elastic, and the user charge will be based on

the marginal benefit of the individual.

We think that all these measures together would increase the efficiency of the Leach

Recreation Center and in turn lower both the positive and negative externalities of the Leach

center. With the Leach Recreation Center being more efficient, more students and non-students

will be able to reach their preferred amount of exercise and it will only further benefit all of FSU.