Port Orange ‘Y’ Money Needs to Stay in Port Orange
There are several reasons why the “thinly veiled YMCA subsidy” of $1.3 million as Councilman Ford characterizes it needs to be rejected. The first one alone should be reason enough to view this deal with total distain.
If Counsel were to approve this subsidy they will destroy their own credibility and that of their Manager as they received information to which the public has not been made privy. Counsel in their secret meetings with the CEO of the parent YCMA were advised that with the opening of LA Fitness — the decline in revenues at the Port Orange Y are expected to be far sharper that what the pro-forma financials are depicting.
Now I don’t know for sure what the CEO of the Y was planning but it would appear to include releasing a revised pro-forma, ( the initial one actually showed revenues increasing ) depicting a modest decline in revenue and secure the $1.3 million subsidy by stampeding Council into a hasty decision, after telling them in secret that expected revenue declines could well in the 40% range. This is a matter of credibility and if what I have been told is true the Y does not have any.
If it were not for the integrity of one Councilman who alerted me to this disclosure I would not have known to quiz the others for confirmation of same.
These secret meetings must stop and Cory Berman’s instinct to ask Councilman to explain in a public meeting what they were told in secret was spot on. Sadly Mayor Green did not allow Counsel to answer Cory’s question the last time it was asked. I do not think that will be the case at tomorrow night’s Council meeting.
It is important to understand that the Port Orange Y is only a branch of the parent Y, the Volusia/Flagler Family Young Men’s Christian Association, Inc. a Florida Non Profit Corporation and (F/K/A West Volusia Family Young Men’s Christian Association, Inc.) having filed a name change amendment on June 26th 2008.
The 5 year audited financial statements provided for the parent Y indicate that it is a financial basket case with *revenues in decline, * that no longer meets its existing debt service covenants, * has derivative exposure from interest rate swaps, * is fraught with related party transactions, * and has burned thru 2009 cash reserves of $1.7 million by in excess of $1 million in just 4 years, while at the same time, * providing its CEO with salary and benefits in the $200,000 range.
The Port Orange Y’s continued ability to contribute upwards of 25% of the parent’s revenue, in the face of severe completion from LA fitness cannot prudently be relied upon going forward. Its loss will place severe strain on the already struggling parent operation, AND IT should not be unexpected to see the parent Y request relief in the form of a reduction in the current rental payment made to the City of port Orange before the lavish compensation of the CEO and her staff are cut.
This whole loan/subsidy discussion has no basis in reality as these duplicitous pro-forma’s themselves are unable to portray anything close to a reasonable commercial repayment of this $1.3 million expansion …… 1% interest for 30 years with no payments for the first 2 years and then only $ 10,830 in the 3rd year……. Council has to know the taxpayers of Port Orange are being played for suckers as the lender of last resort for a non-commercially financeable proposal pushed by the CEO of an organization that is itself in eminent danger of running out of cash.
Port Orange Money Needs to Stay in Port Orange
The Port Orange branch is a donor to the parent Y in every sense of the word. The FY 2012 internally generated financials indicate the Port Orange branch contributed $343,037 towards parent overhead plus a further $46,916 in debt service payments on the Y facility in Deland. That near $390,000 dwarfs the $204,000 the parent Y pays the City in rental payments.
If the parent Y has any measure of confidence in this nose to nose competition with LA Fitness let them tighten their belts for just a couple of years and finance this $1.3 million expansion out of the $390,000 they suck out of Port Orange and send to the Deland head office each year.
Port Orange money needs to remain in Port Orange – not in Deland or the other branches Port Orange is subsidizing.
Government should not be competing with the private sector
25 years ago Port Orange was a community of 10,000 that city leaders were determined to grow. Amenities such as the Cypress Head Golf Course and the YMCA contributed to that growth and likely would not have existed until years later if the City had not contributed to their financing. But as the saying goes that was then and this is now. I know if I were an owner or investor in the LA Fitness franchise in Port Orange and on the hook for the millions in investment it will take to open that facility and on which subsequent property tax will be paid I would not look favorably on the City unfairly subsidizing my competitor.
LA Fitness’s business model includes targeting areas with major Y’s that are in natural decline and the Port Orange Y revenues have been in steady decline over the past five years. Based on service levels being provided they will likely collapse further in the face of the consumer driven LA Fitness, AND THIS is not a bad thing. There was a time in this country when the President proudly proclaimed that the business of America was business.
Port Orange needs to decide if it is open for business, OR if it is in the business of growing government ???
Councilman Ford has expressed the legitimate concern that he does not want the City to have to take over the Y facility in Port Orange. Spending an additional $1.3 million on a fool’s errand will not forestall that possibility, but it would make it a lot more painful financially. To the extent the Port Orange Y has a viable future it will be as a result of un-hitching its wagon to the parent Y and self directing attention to niche markets like rehab and the after school program that are not served by the private sector.
From: Kisela, Greg [mailto:gkisela@port-orange.
Sent: Thursday, August 08, 2013 5:39 AM
To: Ted Noftall
Cc: City Council; Saunders, Wayne; Roberts, Margaret; Fenwick, Robin; Rivera, Cynthia
Subject: Re: Need Financials for Parent YMCA
Ted: you are correct that the current lease and proposed amendment is and will be with the family YMCA. I believe we have their at least their FY 2009, 2010 and 2011 financial reports as we have reviewed them. Last week they gave us their FY 2012 report. We have the Port Orange’s 2013 information for the first 5 or 6 months as this has been provided to the Mayor and City Council.
This information will be scanned and distributed.
From: Ted Noftall [mailto:Ted@TedNoftall.com]
Sent: Wednesday, August 07, 2013 2:10 PM
To: ‘Kisela, Greg’; ‘City Council’
Subject: Need Financials for Parent YMCA
It is my understanding that what is commonly referred to as the Port Orange YMCA is not an entity. Rather it is a branch of the Volusia/Flagler Family Young Men’s Christian Association, Inc. a Florida Non Profit Corporation and (F/K/A West Volusia Family Young Men’s Christian Association, Inc.) having filed a name change amendment on June 26th 2008. Is that correct ??
If so, am I correct in assuming that any contractual arrangements will be with the Volusia/Flagler Family Young Men’s Christian Association, Inc. ??
If that is the case then due diligence would dictate that financial statements for that entity be obtained and reviewed to assess both its financial strength, AND its reliance on the upstream contributions of the Port Orange YMCA relative to its other branches.
Would you please distribute 5 year financial statements including the 6 months ended June 30th 2013 for the Volusia/Flagler Family Young Men’s Christian Association, Inc. as soon as possible.