Operating deficit estimate doubles to $247,000 for this year
Morgan Hill – The pool at the city’s Aquatics Center is filling up with red ink.
For the second time in its two-year history, the center’s budget gap is widening as the year progresses. This year’s deficit has more than doubled in the last four months, to $247,000. And it may get worse, city staffers say.
“That may get better, and we’re trying very hard to make it better,” said Rod Cooper, the city’s interim recreation manager. “If we have bad weather, that could have an adverse impact.”
Last year, the estimated deficit for the center increased significantly from early staff projections. It was first projected to at $274,000 in the red during a May budget meeting, then $358,000 in August. The actual deficit was $403,000.
Cooper and City Manager Ed Tewes pinned the ballooning deficit to a 36 percent drop in attendance in August. Tewes said attendance dwindled because it was noticeably cooler this past August than it was a year ago.
“Attendance correlates with temperature,” he told the city council this week, adding that the Aquatics Center would perform better if staff could change prices without council approval based on the weather and other factors. “We’re not quick enough to respond to the information we gain in a short season.”
But according to the National Weather Service, August 2005 was actually hotter than August 2004.
Of the 28 days for which information was available for both years, 20 days in August 2005 had higher temperatures than the same day the year before. It was 104 degrees the first Saturday of August 2005 and three of the four weekends were warmer than in 2004. There was no rain either year.
At Wednesday night’s meeting, Councilman Mark Grzan, without seeing the weather data, challenged the assertion that the attendance problem was simply a result of temperature. He suggested that attendance may be falling off because the novelty of the center, which opened in summer 2004, may be wearing off.
“Maybe we’re seeing a truer number of residents coming out, and this isn’t an anomaly,” Grzan said, repeating his concern that the center, which was projected to break even, will continue to be a drain on city finances. Last year, the center lost $403,000.
“This came to us as a facility that would break even, but we’re seeing that this is not an achievable outcome,” Grzan said. “This is a wonderful facility, but I’m concerned about the strategy we’re using to promote public facilities. … With a new indoor rec center coming in the future, I see additional debt coming our way. We need to do something now to address that.”
Other council members are more optimistic. Larry Carr compared the center to a new business that the city is just learning how to run and said he was encouraged by the 5 percent drop in expenses.
Larry Tate said he believed the Aquatics Center will perform better when all of the city’s recreation facilities open in the coming years.
“There will be a synergy when all the recreation centers are open,” Tate said. “Maybe we won’t make money on them, but we’ll be able to paddle along and hold our head above water.”
In an interview, Tate said he recognizes that there may be a day when the city can’t afford to lose hundreds of thousands of dollars each year on recreational facilities, but thinks the city will get better at budgeting for the center as time goes on.
“Public safety is always your highest priority,” he said. “The initial projects are totally out the window, but there’s not enough there yet to have new projections, to really do it solidly.”
The Aquatics Center made $1.02 million in its first year and is now projected to earn $1.09 million for the year ending June 30, 2006. It will cost the city an estimated $1.4 million to operate.
The city raised the price of adult resident ticket prices from $5 to $7 in May and attendance was down in June, July and August, when the Aquatics Center needs to make the bulk of its revenue. City leaders have considered closing the center for as much as nine months of the year, but decided against closure because the facility needs constant maintenance.
“Once you add the salary and maintenance costs, even in the off season, you would need a huge revenue stream in the summer and we just don’t have that,” said Melissa Dile, assistant to the city manager.
Cooper, who joined the city in September said his staff would try to find ways to keep to center up-to-date and attract repeat business.
“I’m encouraged by the staff and how they’ve been able to keep expenses down,” Cooper said. “It’s incumbent upon us to keep the place fresh, keep it exciting, keep it going.”
