01/15/09 — Consultants project $1 million shortfall for Rec Center

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Consultants project $1 million shortfall for Rec Center

By Anessa Myers
Published in News on January 15, 2009 1:46 PM

The Community Recreation Center might cost the city between $2.14 million and $2.64 million to operate in its first year, and that number is likely to continue to increase annually after that.

The Sports Facilities Advisory, a consulting firm hired to estimate operating costs for the new center, has delivered its draft report to Goldsboro officals.

A final report will be finished in the next few months, SFA representatives said, and according to the feedback given to the company by the city, the numbers might change.

In the draft report, SFA projected costs for two types of centers -- a baseline facility and an optimized facility.

A baseline facility is considered "a conservative and realistic measure of the current market and economic conditions," the report states, while an optimized facility includes "the implementation of an aggressive marketing program and introduces new programming and uses for the proposed amenities of the facility."

In short, baseline costs are bare-minimum operating costs, while optimized operating costs are for a more interactive and efficient facility.

In the center's first year of operation, baseline expenses are expected to total $2.14 million.

That amount includes $1.12 million to pay staff; $208,108 in administration fees including advertising, insurance, office supplies, postage and software; and $189,435 in utilities and maintenance.

But then the city must think about the debt service on a $12 million loan, which translates to $643,234 in principle and $351,203 in interest payments yearly.

If the new recreation center is a baseline facility, it is expected to receive some revenue from memberships, programming and rental fees, but the facility won't have enough money coming in to cover the money going out. Total operating revenues for the first year are expected to be $1.78 million -- more than $360,000 less than expenses.

And that pushes the baseline facility's bottom line to a loss of $1.35 million in year one.

SFA projected costs for the first five years of each type of facility.

Both types are likely to see an increase in revenues and expenses as the years continue, but the optimized facility makes more money -- and creates less debt -- faster.

Optimized facility expenses are expected to total $2.64 million with revenues expected to come in at $2.55 million -- about a $90,000 difference compared to the baseline facility's more than $300,000 difference.

But then debt service comes into play.

The mortgage principle and interest amounts would remain the same for the optimized facility, pushing its yearly total to a loss of $1.07 million.

Over time, both types of facilities are expected to recover more and more costs.

At the end of five years, the city will have likely recovered 73 percent of its costs with a baseline facility, the consultants reported.

If city officials choose to go with an optimized facility, they will likely see an 89 percent recovery of costs at the end of five years.

SFA completed a market analysis of other recreation facilities in the area, state and nation, and the company found that the city's proposed recreation center would fit well with the trends for other newly built facilities.

The report states that the proposed facility is about the size of the majority of those being built, but the operating costs are a little higher than the $1.5 million to $1.8 million annual average.

Also, SFA found that the population the center is meant to serve -- which the report stated was a 20-mile radius, not overlapping that of the Family YMCA so that both facilities could be utilized -- is relatively low, with 31,079 people compared to the recommended 50,000 people.

The population is also projected to grow at a slower rate than the national average and is older than the national median age, which could cause problems with establishing and maintaining programs and service offerings.

The median income of the area is much lower than the national average as well, showing a need for "an extensive scholarship program" with membership fees.

Still, SFA finds that the Community Recreation Center is a "viable project that supports the mission and vision for making a tremendous positive impact in Wayne County and the City of Goldsboro."

The report continued that if the facility was "optimized with best practices in programming and operational efficiency," SFA expected that the facility could be operated a "near self-sufficient status" with little money necessary from the city over the course of the first five years.

Goldsboro city officials will likely look over the draft and send feedback to SFA next week.

City Manager Joe Huffman said the city council has not yet discussed the cost projections, but is expected to do so at its Jan. 20 meeting.

"Right now, we need to have the Rec Center Committee meet and discuss the report and see if the company missed anything," he said. "We want to take the time to think about this and do this right."

The final report is expected to be complete within the next few months.