Y or Y-Not

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December 1, 2013 6:23 PM
From:  “Ted Noftall” <Ted@TedNoftall.com>
To:   “Patrick Nelan” <port.orange.us@gmail.com>  “Hank Springer” <poimages@outlook.com>
Y or Y-Not
The $ 1.3  million requested expenditure on the Port Orange Y  being advanced by  Mayor Green and Vice mayor Burnette  is neither  necessary nor wise.   While the Mayor has never seen a tax he did not like nor a public expenditure involving construction he did  not support, And while he may be expected to recite  his usual  song and dance routine of  ‘ visions of the past, community asset, quality of life’,  I am increasingly concerned about the financial bona-fides of the Vice Mayor with his recent willingness spend huge capital reserves on projects that have never been vetted in the Capital Improvements Budget.
 
The case for supporting the Y loan request
I have only heard two arguments advanced as justification for supporting the Volusia/Flagler  YMCA’s request to borrow $ 1.3 million from city taxpayers to expand the Port Orange branch Y.     Don’t worry be happy,  AND  The sky is falling.
1^st )   We should not concern ourselves with the perilous financial position of the Volusia/Flagler YMCA   because:  non-profits  always find a way to stay in business;  because non-profits will always find the money to survive from somewhere.
This argument is patently false,  as any review of a moderately sized phone book over a 4 or 5 year period will quickly demonstrate that non-profits come and go all the time.
None the less this  argument is frequently advanced  and actually has a nice rhythm you have probably heard before  —   Don’t worry be happy,,, in every life we have some trouble  and when you worry you make it double,,,, so  don’t worry be happy……  
2^nd )   The Volusia/Flagler YMCA  have been good tenants,  And if taxpayers will not bankroll their expansion they may  pull up stakes and take the Port Orange Y somewhere else leaving the City with an empty building.
This one defies all logic.    First of all where is the Volusia/Flagler YMCA  going to go in this immediate area and find an Olympic sized pool.   Second the Port Orange y has been a cash cow from which the Volusia/Flagler YMCA  administration has pulled  $1.3 million over the past  4 years alone,  to finance themselves,  their poor investments and other struggling Y’s.     And finally why would anyone would assume the building would remain empty or without an operator.  I would expect  that Palmer Chiropractic College would be more than a little interested in operating a facility to expand their therapy training including aquatic therapy.
We are likely to hear more of this hysterical argument  that disaster is imminent if we don’t fork over the cash Tuesday evening  from our own home grown Henny-penny and Turkey-lurkey    and from Deland’s Foxy-woxy.  City taxpayers need to remember well how that story  ended for Goosey-poosey, Ducky-daddles  and the rest of the barnyard animals.
Just writing this brings back memories of a  Council meeting  years ago when the Mayor and then Vice-mayor Martin said they could hear the sounds of tractors starting the next morning if   Port Orange  taxpayers  ‘aka. suckers of the universe’    did not purchase the Stanaki property for $5.6 million that very evening despite appraisals equaling only half that amount.
 
The case for  rejecting the  Y  loan request.  
Likewise there are two main arguments for rejecting the Parent Y’s $1.3 million expansion request at this time.   Economic and Financial.
1^st )  We are a capitalist driven economy – not a socialist driven one.    Our City government should not be in the business of  picking winners and losers by subsidizing  the non-profit Volusia/Flagler YMCA  to unfairly compete  with the private investors  who have pooled their resources and borrowing ability to invest in Port Orange by constructing  a multi-million  LA Fitness facility on Dunlawton Ave.
Government  needs  to be promoting private investment and the private sector jobs it creates – not competing with it.    It may be  one thing for government to provide a service  that  is not provided by the private sector but that is far from the case when it comes to fitness clubs.    I own and operate a  small business in Port Orange and I sure as heck would consider it more that un-fair if government were to subsidize a competitor of mine.
2^nd   )   The  loan request of $1.3 million over 30 years at 0% interest  with zero and reduced  payments  for the first 5 years,  is not  a loan at all,   but rather a thinly veiled subsidy .   If the Y’s loan request was able  to be placed commercially,  which is not possible given their  financial condition,   the terms would likely be in the 3 %  interest rate range over 15  years – a far cry from interest free for 30 years.
The financial statements of the Volusia/Flagler YMCA indicate that its management  has burned through $ 5 million  of cash over the past 5 years and have  cash reserves of less than $300,000  currently.       That trend cannot  continue forever, and yet the Y management  has presented no  viable cash flow solutions  beyond the   ‘non-profits always survive theory’  despite having been requested to produce Board minutes and Lender correspondence  addressing this matter,   AND though it defies all fiscal prudence and logic if news paper reports are accurate the Volusia/Flagler YMCA is planning multiple  simultaneous expansions  in other cities at this time.
The projected or Pro-forma financials of the  Volusia/Flagler YMCA have been revised at least 5 times  to date.   The latest revision of 10/16/2013 shows projected 9 year net operating Income of  $420, 000  which is a remarkable $ 900,000 turn-around  over the  $ 475,000 net operating loss  the Y projected in their 08/08/2013  Pro-forma’s
The Port Orange Y has experienced steady revenue declines over the past 5 years  and yet the Pro-forma’s project  steady revenue growth going forward despite the stiff competition  everyone acknowledges LA Fitness will provide.
Simply put the Volusia/Flagler YMCA has serious un-addressed cash flow problems,  AND  the  plausibility of the financial projections they have presented for consideration requires  the willing suspension of dis-belief.   Accordingly,   there is no financially sound  reason to expect  taxpayers to finance yet another likely  boondoggle.
 
What needs to happen next.   
The facility that houses the Port Orange Y is  owned by the City.    It is  severely overcrowded,  in need of serious repair and renovation,  and is poorly administered by an overpaid bureaucracy   in Deland  …….…in other words a typical government run operation.
Because this is a City owned property I would urge the following

• *)     Allow LA Fitness to provide a private sector solution to overcrowding at the Port Orange Y at zero taxpayer expense.

• *)     By all means repair and renovate  the pool deck,  the lockers, showers  and rest rooms, and  paint and carpet the place.

• *)     Seek out a new operator such as Palmer and encourage that operator through  a commercially sound lease to focus on those niche services        not being met by private sector fitness facilities in Port Orange.

The debate and vote at the next City Council meeting should be fascinating.
Ted Noftall