|
9
<br /> 5) A County-built pool would have cost substantially more. There used to be frequent calls for a
<br /> pool in northern Orange County, and it is the Board's understanding (an informal one, to be sure) that cost
<br /> was always a prohibitive factor. In 1993, as part of its effort to determine whether the SportsPlex proposal
<br /> might bring a pool within financial reach and made good sense, County government calculated the cost of a
<br /> County-constructed and County-run pool of comparable size in northern Orange County. The estimate for
<br /> the combined debt service payment and operating costs ranged from$760,000 in year 1 to$656,000 in year
<br /> 10, for a total of$7.056 million(analysis presented at the Commissioners' meeting of 21 September, 1993).
<br /> 6) The SportsPlex will increasingly be a stimulus to business in Orange County. The maintenance and
<br /> support needs of the SportsPlex have brought new business to the suppliers of goods and service in the area.
<br /> As the SportsPlex expands its programs that bring people to the area from outside, it will further impact
<br /> local business, in particular the hotel and restaurant business in both Chapel Hill/Carrboro and Hillsborough.
<br /> These programs include events such as the Doug Leigh Skating Clinic, other figure skating clinics and
<br /> competitions, hockey events (tournaments, camps, even the routine youth travel league games against away
<br /> teams), and others.
<br /> The members of the Board of Directors are firm in their belief that the SportsPlex is a fine facility and
<br /> a true asset to the County and to the town of Hillsborough, built with the best possible motives for all the
<br /> citizens of Orange County. We also believe that the original plan, in which Orange County was to assume
<br /> ownership of a handsome, profitable facility for a fraction of its true cost, was developed with the finest of
<br /> intentions. As things have turned out, the optimism of that plan was unrealistic. However, we believe we
<br /> will find a way out of the resulting difficult situation, and we believe that Orange County, in addition to
<br /> being proud of its fine facility, can be confident that the facility was obtained at a favorable cost.
<br /> II. The detailed financial situation and debt issues
<br /> In the foregoing, we established that the SportsPlex is profitable on operations, but is having trouble
<br /> paying off its construction debt. The obvious question, therefore, is what do we intend to do about the debt?
<br /> We can not answer this question with surgical precision, but we can offer a reasonable plan.
<br /> Precisely where are we now?
<br /> In an important early action, RMSC set up a new budget that was based on the poor existing data from
<br /> the first year of operation plus best guesses. The resulting budget, approved by the Board in December,
<br /> 1996, predicted a net operating profit of$330,000, all of which would be applied against the debt. For the
<br /> months of January through March, 1997, operations are averaging approximately $17,000 per month net
<br /> revenue above that budget, for a total of approximately $52,000. While we don't suppose we will regularly
<br /> be so fortunate, the trend is up and for now it appears that finishing the year$100,000 over the budget is
<br /> within reach. In this case, approximately$430,000 would go toward the debt. This falls$424,000 short of
<br /> the scheduled annual payment of$854,000.
<br /> How much better do we have to be?
<br /> As mentioned above, past shortfalls have been made up from the Debt Service Reserve Fund. It is
<br /> essential, therefore, that we increase net revenue from operations at such a rate that full debt coverage will
<br /> be achieved before or no later than the time the Debt Service Reserve Fund becomes exhausted. Using
<br /> reasonable assumptions, we calculate that this will require that we increase our operating income (not
<br /> including the County contribution, which is fixed)by 17-20% per year over the next two and one half years.
<br /> This number, 17-20%, has to be approximate, but we are certain it can not be too far off. Obviously,
<br /> any success above the number, cuts in operating costs, infusion of new funds, or leniency on the part of
<br /> Eaton-Vance would extend the time frame and/or reduce the necessary % growth for achieving this
<br /> objective.
<br /> What does this mean in practical terms?
<br /> The 17-20% number is daunting. Nonetheless, the Board feels a very good attack on it can be made,
<br /> and we intend to make it.
<br /> Report to the Orange County Commissioners 5 May, 1997 page 7
<br />
|