City Officials: Community Center a Financial "Success Story"

Editor’s note: This article is the second in a two-part series looking into the finances of the city’s golf course and community center. To read the first installment, .

What do you do with a community center that is bleeding money?

That’s the question that faced the Inver Grove Heights City Council in 2006, after five years of significant operating losses at Veterans Memorial Community Center. In 2004, the center had a net loss of $643,000, followed by a $568,000 net loss the next year, according to an operational audit of the building.

Faced with a potential loss of as much as $800,000 in 2006, Councilor Chip Grannis called for the closure of the debt-laden facility. Grannis’ request echoed the sentiments of a number of community members, who felt the center was a financial burden on the city.

Instead, the council chose to conduct an operational audit of the community center to re-evaluate the programming, expenditures and purpose of the facility. In the five years since the council took action on the community center, the facility’s net losses have stabilized to as little as roughly $348,000 in 2010.

While the community center is still losing money—albeit at a slower rate—the city’s ongoing effort to reduce the annual losses incurred by the facility is a success story for the community, Mayor George Tourville said. 

Corrective Action

Closure of the community center, as Grannis had advocated for, wasn’t a feasible option for the city in 2006. Construction of one portion of the community center—the Grove Aquatic and Fitness Center—cost $7.5 million alone. Shutting down the center would put an end to any revenue generated by the facility, but the city would still be saddled with a substantial debt from the construction of the building, city officials said.

But the city couldn’t indefinitely sustain the significant operating debt of the facility, Grannis felt.

“To me it just seemed like we didn’t have a plan to improve it,” Grannis said. “Were we going to keep throwing more money at it and hope that things improved?”

To address the problem, the council approved a roughly $50,000 contract with Maryland-based consultants CEHP Incorporated. The firm was tasked with conducting an operational audit of the facility and preparing a plan to reduce its operating debt.

The study, which began in July 2006, came back with a 10-page report and a list of recommendations for city staff. The recommendations included creating a comprehensive marketing plan to bolster revenue, conducting an energy audit to boost energy efficiency and broadening the programming at the center, among other options.

The city, Parks and Recreation Director Eric Carlson said, followed many of the recommendations put forth by the consultants. Over the last several years, the city upgraded the refrigeration system for the ice arenas and installed energy efficient lighting that have led to financial savings, Carlson said.

The city also combined the community center and Parks and Recreation Department staff, Carlson said, and was able to eliminate positions, including the community center manager position. Combining the two staffs freed up more space in the building that the city is now considering for a massage therapy business, Carlson said. Bringing such a business into the center would complement the city’s pre-existing athletic programs and generate more revenue for the community center, city officials said earlier this year.

The council also approved a plan earlier this summer to upgrade the furniture in the building—part of a plan to make the center warmer and more visually appealing, which was one of the recommendations suggested in the operational audit.

Although the refrigeration system and other capital projects drove up expenses for the community center in 2008 and 2009, Carlson said, they will lead to more savings in the long run.

A Community Resource

The reduction of expenses at the center has eased the concerns of Grannis, who was one of the more vocal critics of the community center's financial position in 2006.

“I think we have improved the financial performance [of the community center],” Grannis said. “It’s still a concern, but less of a concern.”

Ultimately, Carlson said, the city aims for a 90 percent revenue over expense ratio. In other words, the city hopes to recover 90 percent of its expenses through its revenue. Prior to 2006, according to the operational audit, the city was recovering as little as 75 percent of its costs through revenue. In 2009, the city recovered 91 percent of its expenses, according to an annual financial report released by the city. Last year, the report said, the city recovered 84 percent of the center’s expenditures through revenue.

“From all accounts, I think we have been success over the last few years with the community center and how we operate it, if we talk about the financial part of it,” Carlson said.

But Carlson looks to more than the community center’s bottom line when he measures the success of the building. The center was never designed to make a profit, the parks and recreation director said. Instead, Carlson and Tourville said, the facility is a community resource built to improve the quality of life in Inver Grove Heights.

“We also look at it as a community service,” Tourville said. “I think it’s an important part of making us not just a city, but making us a community.”

Annual Net Loss of the Community Center*

*Information courtesy of the CEHP Operational Audit of Veterans Memorial Community Center and the city of Inver Grove Heights.