Agenda - 05-05-1997 - 10a - Laserfiche WebLink

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7 these towns (see Table 3b or Figure 1). We expect that the SportsPlex will attract most ice sports participants in the southern half of the county, since it is the only modern ice rink within 45 minutes of Chapel Hill. Similar participation in the pools is unlikely (with the exception of the two Chapel Hill High School swim teams and other swim clubs), since there are several pools already in Chapel Hill and Carrboro. Thirdly, a large number of users in all categories comes to the SportsPlex from outside Orange County, with Durham being most heavily represented(all sections of Table 3 and Figures 1-3). Presumably, many of these visitors would not often come to Hillsborough otherwise, and this suggests an opportunity for Hillsborough restaurants and services to become better known and expand their clientele. Finally, the SportsPlex is a popular resource for groups. Eighty-three church groups, mostly from outside Orange County, have come as private rental parties or with prior arrangement to public sessions during the 10 months of the data period(Table 3c, Figure 2). Similarly, the SportsPlex is a popular stop for all sorts of school and non-church groups from within and without the county (166 such groups in 10 months; Table 3d, Figure 3). The SportsPlex is in financial difficulty, but just how bad is it? It is widely known, having been reported in the press, that the SportsPlex is in financial difficulty. But a proper summary statement of the situation has never appeared publicly. That statement would be: "The SportsPlex income from operations, including the Orange County payment, covers all operating expenses and a large portion, but not all, of the bond repayment and interest obligation". A debt-free SportsPlex would be operating in the black. Since it is a non-profit organization, the excess revenues would be used to expand programs or physical plant, lower prices, or eliminate any need for Orange County support. At no time have these shortfalls been made up by Orange County. In the first year of operation, they were covered by unused construction funds and capitalized interest. In the second year, by a so-called Debt Service Reserve Fund that OCCAC was obliged to include in its bond total precisely for the case of insufficient revenues, particularly in the first years of operation. The SportsPlex is current on all other bills. The debt referred to is entirely the debt on the bonds. With a few exceptions, all other bills are current. For each of the exceptions, monthly payback schemes have been arranged with the suppliers, and the SportsPlex is current with these payback schemes. Why is the SportsPlex in financial difficuby? There are two main reasons for the difficulties. 1) The original business plan grossly underestimated operating expenses; it's estimate was only about half the real number. The plan also foresaw a high level of participation by advertisers and private and corporate donors which was unrealistic, at least for the initial years of operation. It is satisfying to be able to report that these revenues have been made up by the expanding usage of the building. Thus, with regard to operating income, the SportsPlex is actually close to the original plan. The optimistic business plan allowed for a larger bond offering than would have been possible otherwise, with the result that the debt on the building is very substantial. It is this high level of debt that is proving difficult to handle(see below). 2)The initial plans underestimated the high degree of expertise and energy required to run the SportsPlex successfully. The first management team was made up of individuals with expertise in business and sports (ice and water). In hindsight, it was unrealistic to expect such a team to be able to start up the business, manage its complex and multi-faceted operations, and adapt the business to the rather special demographic and geographic constraints of its market, all at the same time. Thus, much of the learning one would expect in the first year of operations was lost, and has had to be gained in the second year by RMSC, which was asked to take over by the Board in the fifteenth month of operation(June, 1996). Report to the Orange County Commissioners 5 May, 1997 page 5