City and YMCA will share management, risks of new Indoor
Recreation Center
Morgan Hill – After four years of negotiations, the city and the local YMCA finally have reached an agreement to manage the new Indoor Recreation Center – a new approach officials hope will make the IRC the first recreation facility built with redevelopment funds that benefits the city’s bottom line.
“This is a time for celebration,” Morgan Hill Mayor Dennis Kennedy said as the city council voted unanimously to approve a joint-management proposal. “This is a wonderful thing.”
Under the agreement, the city and YMCA will sign a five-year operations contract with Morgan Hill holding an option for an additional five years. The city will hire the center’s manager, who will report to both parties, and have final say on all unresolved issues. The YMCA will staff the center and have a 35 percent stake in any financial gains or losses beyond the annual budget. The center is due to open in September.
“In a perfect world, I think a city-run center, with some role for the Y, is best,” Kennedy said. “In light of the city’s difficult budget situation I think it makes sense to go with a partnership model.”
City leaders and YMCA officials believe this will be the only operating agreement of its kind in California. What will separate the center from the typical municipal recreation facility is an economic model based on annual passes instead of drop-in fees.
An annual pass for an adult will cost $624. A family pass, for two adults and children younger than 18, will cost $876. Members also will be allowed to use other YMCAs in Silicon Valley. A day-use pass will cost $7. The center is projected to break even in its third year, mostly due to the management expertise of the YMCA.
“The best chance we have to be self-sustaining is a model that relies on an annual pass,” Interim parks director Rod Cooper said. “It would take us quite a bit longer because we’d be starting from scratch. The Y gives us an infusion of expertise.”
A recent survey found strong support from residents for a YMCA-run facility, but members of the city’s parks and recreation commission, and council member Mark Grzan, said the survey was slanted and based on incomplete financial data. Critics of the survey say the city’s commitment to the YMCA is short-sighted and is tantamount to a giveaway of the first redevelopment project that could actually help Morgan Hill’s bottom line. This year, the Aquatics Center and Community and Cultural Center are estimated to lose about $1 million.
Councilman Steve Tate said the survey proves that the YMCA is a respected brand name that will attract business and a safety valve if the center doesn’t meet expectations.
“When you have someone sharing risk with you, I don’t know how anyone can say it’s an advantage to go it alone,” Tate said.
Grzan voted to approve the agreement, but said he may not support the final contract because he believes the center is priced too high and will be out of reach for many residents. He thinks the city should have explored other management options.
“Is there a different model out there that would lower the rate and make it affordable for Morgan Hill residents to use the center?” he asked. “I feel pressured to make this decision this evening. I wish I had more time.”
But Cooper said the center will lose money if the city runs it solo. Under either model, the center will attract 455,000 visits each year and make about $2.6 million, according to estimates. The city would save about $139,000 in overhead costs each year, but be saddled with a $65,000 bill for a senior nutrition program and have to pay an additional $203,000 in labor costs. A $10-an-hour trainer position at the YMCA would cost Morgan Hill $15.50 an hour because the city’s pay scale is higher.
City finance director Jack Dilles has projected the center will cost the city about $205,000 in the fiscal year ending June 30, 2007, and about $144,000 the following year. A city-run center is projected to lose $67,000 in its third year, but a center managed with the YMCA is predicted to make $62,000 in year three.
“You’re not going to make money in the first year,” Councilman Greg Sellers said. “You’re always better off adding partners, particularly when they have expertise you don’t have. If we are careful in the way we approach this, we can enhance our services [for low-income residents].”
The Mt. Madonna YMCA serves all of South County and operates a number of youth and senior programs out of the Friendly Inn. When the IRC opens, the city will handle the youth and senior programs, manage the pool and swimming lessons and be responsible for building maintenance. The YMCA will sell memberships, run fitness and gym programs, handle daycare and perform equipment maintenance.
“I’m very excited; I think it’s a great thing for the community,” YMCA Executive Director Debra Cupp said. “There’s still a lot of work to be done, but I think that together with the city we will do great things for the community.”
A New Partnership
Morgan Hill leaders predict the Indoor Recreation Center to turn a profit in three years thanks to a joint operating agreement with the YMCA
Highlights of the deal:
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Five-year contract
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City-hired manager answers to Morgan Hill and YMCA
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City has last word in disputes
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Members have access to other area YMCAs
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YMCA assumes 35 percent risk of budget shortfalls; receives 35 percent of extra revenues
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YMCA provides $60,000 in scholarships for low-income residents
