Port Orange City Council was warned in their secret meetings with the CEO of the parent YMCA !

Port Orange ‘Y’ Money Needs to Stay in Port Orange
cash-money-300x149There 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.
Secret Understandings
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.
Not Financeable 
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.
Ted Noftall
 


—–Original Message—–
From: Kisela, Greg [mailto:gkisela@port-orange.org]
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.
 
Greg Kisela
City Manager


 
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
Greg,
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.















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