TO: Members of the Colorado Parks and Wildlife Commission FROM: Danielle Isenhart, Regulations Manager DATE: July 27, 2018

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1 Policy and Planning Unit 1313 Sherman, Room 111 Denver, CO P TO: Members of the Colorado Parks and Wildlife Commission FROM: Danielle Isenhart, Regulations Manager DATE: July 27, 2018 SUBJECT: Implementation of the Future Generations Act: Application and Preference Point Fees and Discounted Bear Combination Licenses With the passage of the Hunting, Fishing, and Parks for Future Generations Act (Act), exciting new opportunities exist for Colorado Parks and Wildlife (CPW) to increase its revenue in order to fulfill its mission and the goals and objectives outlined in the bill. The Act allows not only for the adjustment of most wildlife license prices annually with the Consumer Price Index (CPI), but also allows the Commission to make other policy and regulatory decisions to help recoup costs, raise additional revenue, implement new outreach efforts and enhance the management of Colorado s parks, wildlife, and natural resources. This memo summarizes an assessment by staff on the second round of potential policy and regulatory options that the Commission will begin discussing in August. The Commission already addressed keeping wildlife license prices static for the remainder of 2018 at the June Commission Meeting. This round of discussion will focus on application and preference point fees, ways to address preference point creep and drawing odds, and the potential for bear combination licenses. Application Fees Using 2018 prices and application rates, the total cost to operate the draw for both limited big game and turkey licenses is around $4.9 million annually (including vendor fees, credit card fees, and staff time to run the draw). CPW generates about $2.1 million annually in revenue from current application fees (priced at $3), which means it loses about $2.8 million annually to operate the draw, using the pay-after-you-draw system. (Note: CPW saved around $3 million in 2018 instituting the pay-after-you-draw system.) Given the prices approved in the Act, the cost to operate the draw is estimated to increase to $5 million in 2019 due to higher license prices and associated vendor and credit card fees. However, the Act also allows the Commission to increase application fees up to $10 for residents and $20 for non-residents and adjust this fee amount annually with the CPI. Assuming current application rates, if the Commission raised application fees to the statutory limit for 2019, the agency could generate $9.4 million in revenue annually, which would be about $4.4 million in additional revenue after accounting for the costs to operate the draw (i.e., net profit). Staff advised the legislature in 2018 that the application fee needed to be increased to enable CPW to recover the cost of conducting the drawing. The amount authorized was Bob D. Broscheid, Director, Colorado Parks and Wildlife Parks and Wildlife Commission: Robert W. Bray Marie Haskett Carrie Besnette Hauser John Howard, Chair Marvin McDaniel Dale Pizel James Vigil, Secretary Dean Wingfield Michelle Zimmerman, Vice-Chair Alex Zipp

2 somewhat higher than today s costs (and included CPI) to build in the ability to recover higher future costs. If the Commission decided not to increase application fees to the maximum amount, one way to generate enough revenue to cover the cost of running the drawing given prices approved in the Act, would be to adjust the application fee to $7 for residents and $8 for non-residents. This scenario would generate about $5.1 million in revenue, making operating the draw essentially revenue neutral. The possibility of discounting application fees for youth and resident turkey licenses was also discussed, since the price of these licenses is much lower than other limited licenses. Under this alternative, application fees could be set at $8 for resident adults, $9 for non-resident adults and $3 for resident and non-resident youth and resident turkey applications to cover draw operational costs. Application fees could be tied to the CPI or left at a specified amount for a certain number of years, based on the Commission s preference. In our regulations we could track the statutory cap for application fees, in case the Commission wanted to adjust them in the future based on the current price of the draw. Application fees could also be rounded up to the nearest whole dollar amount, as long as that amount was under the statutory cap. Preference Point and Pay-to-play fees In the Act, preference point was added to the statutory definition of a license within (27). This addition removed any uncertainty on whether or not the agency could charge a fee for a preference point. Since no price is stated for a preference point in statute, the price for such a fee would fall under the provisions of (1.5)(b), not to exceed $100. Currently the agency does not charge a preference point fee, but instead, charges a pay-toplay fee of $40 (or $30 for resident deer and pronghorn) per species to those individuals who applied for a preference point or were unsuccessful on their first choice and also did not hold an annual license (excluding turkey) for the previous year. With the recent change to legislation, the Commission now clearly has the authority to charge a preference point fee (up to $100) in lieu of or in addition to the pay-to-play fee. When discussing options related to preference point and pay-to-play fees, CPW staff identified the following goals: While the goal of an application fee is to help cover administrative costs of the draw, the goal of a potential preference point fee or pay-to-play fee is to ensure that everyone who participates in the draw also contributes to wildlife conservation. This could be by buying a preference point itself or by incentivizing the purchase of a license. Staff also analyzed associated OIT costs and staff time required under each scenario, attempting to avoid these extra administrative costs whenever feasible. Lastly, a desire to reduce regulatory complexity was another priority for agency staff. Staff is not recommending a specific alternative at this time, however staff did narrow down the list of possible alternatives to three scenarios:

3 1. Status Quo. No preference point fee and keep existing pay-to-play fees as currently stated in regulation. 2. Discontinue pay-to-play fee. Instead, charge a preference point fee upfront on each application. Variations under this scenario include one fee for everyone, or differential pricing based on residency, species, or number of applications submitted. 3. Keep the pay-to-play fee, but make it one price for all species. The applicant would not need to pay this fee if they held a big game license from the previous year. Another variation would be everyone pays the fee, but it is greatly reduced if they held a big game license from the previous year. Under the second variation, it would be called a preference point fee instead of a pay-to-play fee. In terms of complexity, there is a benefit to only charging one of the two fees (either preference point or pay-to-play). Overall staff felt that the preference point system and how the draw is operated is too complex of a topic to fully address at this time, particularly with limited time and lack of recent public involvement. Instead, CPW staff commits to further exploring this topic through upcoming commission meetings as well as other processes that involve appropriate stakeholders for the 2020 seasons and beyond. Potentially a LEAN process improvement could to be used as one way to involve agency staff and the public in a targeted and non-biased way to make the draw more efficient, while promoting fairness. Black Bear Combination Licenses Another opportunity provided by the Act is the option to create discounted combination licenses. This could potentially include a deer or elk/bear combo license, which has had expressed interest from the Commission in the past. While creating bear combination licenses could get more bear licenses in the hands of existing deer and elk hunters, it could also lead to a loss in license revenue. Based on a 5-year average of license numbers from , 93% of bear hunters held a deer or elk license already. If bear licenses were discounted by $10, CPW would need to sell about 3,700 more resident combination bear licenses to offset the loss. If bear licenses were discounted by 50%, CPW would need to sell about 600 more nonresident and 7,600 resident combination bear licenses to offset the loss. If the goal is to achieve additional bear harvest in DAUs that are over their population objective, alternative management tools could include discounting all bear licenses (up to 50%) in those over-objective DAUs, as well as potentially creating multiple September rifle seasons (when the majority of bear harvest occurs), through the season structure process. Discounting bear licenses alone, not as combination licenses and without creating additional new season opportunities, could increase hunter crowding. We acknowledge that the Commission has requested the hunting public to also bring forward proposed changes for 2019 to the August Commission meeting for consideration, in addition to the possibilities included here. CPW has also been compiling recommendations and alternatives already provided to the Commission by the public, both as public testimony and through correspondence (attached to this memo as Appendix 1).

4 If any of these changes are to be implemented for the 2019 turkey and big game seasons, these proposals will need to be approved by the Commission no later than the November Commission Meeting. In addition to these proposals, the Commission will also hear other Future Generation recommendations, including making adjustments to all license prices for the 2019 season at the September 2018 meeting.

5 Appendix 1: Suggestions from Public Regarding Changes to Preference Points and the Limited License Drawing Reinstate pay-before-you-draw system Reinstate pay-before-you-draw system for moose, sheep and goat licenses Charge a preference point fee upfront with differentiated pricing depending on species and residency Increase license fees to cover transaction costs (vendor fees, credit card fees) Pass transaction costs (vendor fees, credit card fees) on to the customer and allow option of paying with a bank withdrawal instead of a credit card Require cash payments instead of credit card payments Increase application fees with differentiated pricing depending on residency to cover costs/recover previous losses/up to the statutory limit ($10 resident/$20 nonresident) Increase application fees for moose, sheep and goat licenses to $200 Require a base hunting license or small game license to apply Charge 50% of the license fee upfront and refund by credit card if unsuccessful Make moose, sheep and goat once-in-a-lifetime male species for successful drawing or harvest Change the way weighted preference points are calculated and applied