TO:                  Mayor and Town Council


FROM:            W. Calvin Horton, Town Manager


SUBJECT:       Consideration of Issues Related to a Potential Day Care Center at the Town Operations Center


DATE:             September 8, 2003

REISSUED:   October 27, 2003



The purpose of this memorandum is to discuss issues related to the proposed development of a day care center at the Town’s future Operations Center.  The attached resolution would authorize the Manager to report back to the Council with a process and costs related to development of a business plan for such a center if the Council desires to pursue this concept.




On June 23, 2003, the Council discussed the possibility of including a day care center in the Town Operations Center facility on Millhouse Road.  At that time the Council asked the Manager to survey Town employees to determine the extent of employee interest in a possible Town sponsored day care center at that location.




Below we address a number of issues related to the concept of provision of day care facilities by the Town.  The following discussion is separated into 4 areas, including:


·        The potential demand of Town employees for a day care center on Millhouse Road.

·        The capacities and costs of currently existing day care providers.

·        Policy issues and questions related to provision of a day care center.

·        Process related to development of a business plan if the Council decides to move forward with the project.



Our assessment of employee preferences is based on the results of a recently distributed employee survey (Attachment 1) and anecdotal information derived from conversations with employees who have children.


Preparation and Major Results of the Child Care Needs Assessment Survey:  The child care needs assessment survey was developed to gather information on Town employees’ interest in and willingness to pay for child care services at the Town Operations Center.  Please see the attached report (Attachment 2). The staff took several steps prior to completing and distributing the survey:






Of the 630 surveys distributed we received 284 responses, a 45% response rate. Following are some of the major findings of the survey:



It is important to note that we asked for information from employees asking them to state their opinions and desires at the present time.  We do not know if our work force in 2007 would have similar characteristics.  We believe that if a day care center is established, it is possible that people with children would be more likely to seek employment with the Town.  If so this could raise the proportion of the work force with pre-school children. 


The survey addressed the topic of willingness to pay, because the Council had talked about the Town subsidy being in the form of the provision of the facility and, possibly, of utilities.  However, the experts we consulted made it clear that the most significant costs of good day care are for qualified staff.  We note that day care subsidy funds available through various agencies are inadequate for the known needs.  Some respondents indicated that they cannot currently afford to pay for day care, or that they pay nothing now.


Based on the results of the survey, it would appear that the number of persons interested in a Town-sponsored day care may be relatively small when compared to the total number of respondents to the survey.  However, we believe that employees interested in Town-sponsored day care would be more likely than uninterested employees to respond to the questionnaire.  Therefore, the numbers of potentially interested employees would be overstated, rather than understated, if extrapolated from this survey.  


We have heard informally from employees several reasons that may explain this level of interest. These include:





We performed two surveys of day care operations in the Chapel Hill area to learn about existing rates, experience with capacities, and rating levels.  The initial survey of 8 centers addressed monthly fees charged to participants.  We found that the monthly cost of care ranges from about $700 to $1,120.


We subsequently surveyed 19 day care operators and asked them whether they typically fill their spaces and asked about their rating levels.  One of those operators reported that they would soon close.


Some of these centers are filled to capacity on an annual basis, while others currently have numerous openings.  The reasons for the openings are unknown to us at this time, however, we think that a combination of reputation, cost, and ratings are probably the main reasons some centers have vacancies while others are full.  Of the 18 operators we surveyed we found that 10 “sometimes” or “usually” had openings at any given time.  The remaining 7 were usually full and maintained waiting lists.


Most day care operators are rated by the State in a 5 tier system. The highest ratings require more highly educated staff.  Therefore, centers with the highest ratings tend to cost more and, in Chapel Hill, tend to fill to capacity at a faster rate. Of the 18 respondents we found that eight centers had a 4 or 5 star rating, four centers had a 3 star rating, and one center had a 1 star rating. The remaining centers used an alternate accreditation system or were open less than 4 hours, which eliminates the requirement for State oversight.


Our conversations with representatives of Day Care Services Association and Orange Smart Start indicate that there are long waiting lists for subsidies available to Orange County residents through the Department of Social Services and other organizations.  Most subsidies are available through County agencies and are distributed based on place of residence, not place of work. 



We have compiled a number of issues that we believe the Council may wish to consider prior to moving forward with a day care center operation.


Who would operate the center?

Running a day care center is a complex task that requires specialized training and adherence to many State laws and regulations. The Town could build a facility and either lease it to a non-profit organization or operate the center with Town staff.


Should any day care center be open to non-Town employees?

Given the small number of Town employees who indicated an interest in using a child care center at Millhouse Road, we believe that it would be necessary for the Town or another operator to accept children of non-employees in order to provide a reasonable opportunity to have a financially feasible operation. We believe that children of non-employees would have to be Chapel Hill residents to receive subsidies.


Is the location suitable for a day care center?

The Operations Center is in the extreme northwest area of Town. While it is close to I-40, it is not very close to other centers of employment. Several comments written on the surveys indicated that the location was unsatisfactory, either because it was not close to the employee’s home or, in the case of employees of departments outside of Transportation and Public Works, because it was not close to the employee’s work place.  


What level of service should the Town attempt if the Town develops a day care center?

Day care centers are rated by the State on a 5 tier system. Centers with the highest level of service usually charge more than centers with lower ratings. Centers with higher ratings also cost more to operate due to the required training and staffing levels.  Based partly on the experience of the YMCA staff, and partly on the focus groups held with Town employees, we believe that if the Town offers day care services it should meet the requirements of no less than the fourth tier.  Our employees deserve good care for their children and the public who are willing to pay unsubsidized tuition generally look for high quality care.


If day care operations are subsidized, should it be through payments directly to the operator or through tuition subsidies that are specific to families of Town employees?

General subsidies are less effective in helping Town employees, because they would be assisting children of others as well.  Tuition subsidies would target Town employees.


If day care operations are subsidized through tuition should the operator be charged for lease of the building?

If the building is provided free of charge, then non-Town employees would benefit as well as Town employees. The operator would not have to factor in costs for use of the building unlike private day care operations that generally pay mortgage or rent.


If day care operations are subsidized, should they be subsidized based on a formula that takes into account income and family size?

The Council could subsidize any day care operation in a number of ways. Most social service providers analyze each family’s conditions prior to assessing fees. In that manner, subsidies would rise as income decreases.  


Would Town subsidies for day care operations result in unfair competition for day care operations run by private and non-profit providers?

The provision of a Town sponsored and subsidized day care could result in reduced attendance at private, non-profit and school-based day care centers. It is also likely that some of the children would be coming from family care or other arrangements.  Tuition subsidies to Town employees for use at other day care centers would more likely be seen as an advantage to day care providers in general, rather than increased competition.


Would it be fair to subsidize some employees who have children, but not others who have no children or who choose not to use the Town-subsidized center?

It is likely that a subsidy large enough to be effective would need to be in the range of $300 – 600 per month, or $3,600 - $7,200 annually. A subsidized day care center could be perceived as an unfair benefit by those who do not receive the benefit.  Comments written on some surveys have made this point.


Would it be more cost- effective to simply subsidize the day care costs at another facility?

We believe that a new center to house 65 children would cost about $1.5 million to build and equip. (Please see the preliminary cost projection in Attachment 4.  It is more detailed than what we were able to provide in June.  It is based on a 6,500 square foot building that could house about 65 children in an environment meeting standards of the top two categories of quality day care.) 


We know that some current day care providers have space for additional children. For example, the Holmes Day Care Center has been renting space at the Hargraves Center since before the time that the Town began operating the center.  It currently has 20 openings. If it is the Council’s objective to provide first priority for employees’ children in a child care center, we might be able to negotiate such a preference as a clause in the Holmes Day Care Center lease when it is up for renegotiation in 2006. 



We believe that if the Council wishes to pursue the concept of a day care center on Millhouse Road, the Town should develop a business plan for development and operation of the center. Such a plan could do the following:





Based on the results of the employee survey, it appears that Town employees would not provide enough business to fill a day care center with or without subsidies. However, we know from speaking with day care professionals that there is a significant demand for child care in Orange County, especially for lower income families. Organizations that provide subsidy funding have reported long waiting lists. This might mean that a day care center that accepted both children of Town employees and children of other Chapel Hill residents might succeed.


Provision of a day care operation is a major undertaking. Capital expenditures would be expected to be about $1,500,000 for construction of a suitable building and provision of equipment and supplies. Operational costs would likely to be relatively high due to the costs associated with meeting the State requirements for operating a high quality day care center; although at this time we do not have enough information to provide cost estimates.




Manager’s Recommendation: If the Council wishes to pursue the possibility of providing a day care center on Millhouse Road we recommend adoption of  the attached resolution authorizing the Manager to prepare a business plan to more fully explore optional costs and revenues, as well as advantages and disadvantages of offering such a service.




  1. Attachment 1 – Cover letter and child care needs assessment survey (p. 8).
  2. Attachment 2 - Report on survey methodology (p. 10).
  3. Attachment 3 – Breakdown of Responses to Question Related to Willingness to Pay for Child Care Services (p. 12).
  4. Attachment 4 - Preliminary Cost Projections Daycare Facility (p. 13).





WHEREAS, on June 23, 2003, the Council discussed the possibility of including a day care center in the Town Operations Center facility on Millhouse Road; and


WHEREAS, at that time the Council asked the Manager to survey Town employees to determine the extent of employee interest in a possible Town sponsored day care center there and to return with a report that addressed major issues; and


WHEREAS, the surveys have been distributed and analyzed, and


WHEREAS, the Council desires to continue the process of exploring the possibility of providing a day care center at the Town Operations Center facility on Millhouse Road, and


WHEREAS, the development of such a center would require a detailed study and development of a business plan,


NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes the Manager prepare a business plan to more fully explore optional costs and revenues, as well as advantages and disadvantages of offering such a service at the Millhouse Road facility.


This the 27th day of October, 2003.





Cover letter and Survey


RE:  Child care needs survey




The Town of Chapel Hill is in the early stages of planning the new Town Operations Center in northern Chapel Hill.  The Transportation and Public Works Departments, as well as the Housing Maintenance division and probably a department currently located at Town Hall will be located at the new center.  The Town Operations Center is expected to open in early 2007.


In planning for the new location, there has been discussion of facilities and services that could be provided there.  One suggestion is that the Town of Chapel Hill consider including a child care facility at the Town Operations Center for use by Town employees.  We want to research this idea to see how many employees might use child care services at the Town Operations Center, and the reasons why.  The attached survey is designed to measure the level of interest in child care services if they were offered at the Town Operations Center.


The suggested site for the child care center would be located off of Eubanks Road; there is a map on the next page that shows the exact location in relation to current Town facilities.  The child care facility would be located approximately:



Your answers to the survey questions are very important, because they will help the Town Council decide whether or not a child care facility should be built at the Town Operations Center.


As you complete the survey, please answer the questions as they relate to you and your family this year.  If you have questions about the survey or the Town Operations Center, please talk to the head of your department for additional information.  Or, you can call me at 968-2742.


Thank you for your help.  Please return the survey to your department or Town Hall by August 6.





Sonna Loewenthal

Assistant Town Manager



Report on Survey Methodology



Child care needs assessment survey and focus groups


The Town of Chapel Hill child care needs assessment survey was developed in response to the Council request for additional information on Town employees’ interest in and willingness to pay for child care services at the Town Operations Center.  Meetings with child care experts, research on child care services and focus group meetings with Town employees contributed to the development of the survey.  This portion of the memo outlines the methodology used to create and administer a survey to all Town employees.


  1. Meeting with child care experts

The development of the survey began with a meeting with representatives from the Orange County Partnership for Young Children, Smart Start, and the North Carolina Child Care Resource and Referral Network.  This meeting provided guidance on the best way to proceed with developing a needs assessment survey that would capture the necessary information from which the Town Council could make decisions about the feasibility of a child care center at the Town Operations Center.  Information about child care in Orange County was provided, as well as realistic cost figures and subsidy information about child care expenses and the thresholds for subsidized child care. 


  1. Research on child care services and assessing need

The next step in developing the survey was researching child care services and evaluating needs assessment surveys done by other organizations.  Information from the National Network for Child Care ( provided information on the components of a sound needs assessment, and the types of information most commonly used in the child care community when assessing the need for child care services or resources.  Literature from the National Child Care Information Exchange (, the League of Cities ( and the North Carolina Star-Rated License Information was also consulted to determine the best questions to ask on the survey.


  1. Development of a draft survey and cover letter

An early version of a child care survey and cover letter was drafted.  The cover letter was designed to introduce the possibility of child care services at the Town Operations Center, and included distances from current Town offices to the new site, as well as a map that showed current Town offices in relation to the new site.  The child care survey was in draft form and included questions as researched from the child care experts and the online resources.


  1. Review and revisions by Town Department contacts

After completing a draft version of the child care survey and cover letter, copies were distributed to the Parks and Recreation, Public Works, Transportation, Police and Fire Departments for comment and review.  Feedback from these larger Departments provided language, graphic design and content edits that resulted in a survey that was easier to complete and understand.


  1. Focus group meetings with Town employees

Small meetings with employees from the Fire, Police and Public Works Departments provided additional feedback about the survey and cover letter.  Feedback was provided on both the specific documents and more broadly on the concept of child care at the Town Operations Center.  Significant changes to the cover letter and survey tool resulted from these focus groups, and also lent additional perspective on the needs and expectations that employees might have regarding a child care facility.


  1. Distribution of cover letter and child care needs survey

After making the revisions as suggested by the Department contacts and the focus group participants, copies of the cover letter and needs survey were distributed to 630 Town employees.  Each cover letter was printed on Town letterhead and was individually labeled with the employees’ name and department.  Cover letters and surveys were given to Department heads for distribution as most appropriate for each department.  Surveys must be returned to the Manager’s Office by August 6 for compilation and analysis.





Breakdown of Responses to Question Related to Willingness to Pay for Child Care Services


The following responses were taken from question 11 of the child care needs assessment survey. They indicate amounts people were willing to pay for full time day care.

Number of People

Amount People are Willing

Willing to Pay

to Pay Per Month




Between $500 and $799




Between $400 and $499




Between $300 and $399




Between $100 and $299









August 27, 2003



Town of Chapel Hill, Project #0226










6,500 SF @ $150/SF





Site Cost

6,500 SF @ $18.50/SF






6,500 SF @ $8.00/SF





Playground Equipment

Lump Sum





Water and Sewer

Lump Sum











Contingency (10%)












Inflation (6%)












Soft Costs (10%)












Artwork (1%):