Monday, November 24, 2008

Overdue Civic Center Rate Increase Counterproductive And Too Late

Prepared Comments Made to
November 24, 2008

For over a month Council has been discussing raising rates for the Civic Center in an attempt at reducing the Civic Center’s financial burden on the city’s projected budget deficit for 2009. Operating deficits have been the norm for the Civic Center and documented deficit spending for the Civic Center has averaged $92,943 a year over the last seven years totaling $650,604.

By comparison, the subsidy of debt service for Arrowhead Golf Course has averaged $144,338 per year for a total subsidy of $721,692 over five years. Why is this council singling out the deficit spending at the Civic Center and not the deficits at Arrowhead Golf course? Arrowhead Golf course provides no use for the city or its citizens while the Civic Center serves as the City’s official meeting house for municipal functions and has done so for decades.

Undoubtedly, the Civic Center has run a deficit for the years prior to 2001. The problem however, is the fact that the deficits were never brought to light and have been allowed to continue year after year in spite of the fact that the city has been under increasing financial pressure to reduce costs.

Council’s Chairman of Parks & Recreation is Mr. Doug Foltz, who frequently reminds council that he is a “Parks Man.” I guess my question to Councilmember Foltz is “Why have you waited until the eleventh hour to attempt to alleviate the burden the Civic Center places on the city’s budget. You have been Chairman of Parks & Recreation since 1995 and you have never brought up for discussion the fact that the Civic Center has operated with such a large deficit.

In 2002 and again in 2003, when I served on council with you, Mr. Foltz, I was a member of the Parks & Recreation committee which you chaired. Unfortunately, during that time, I never had the courtesy of any consultations with you regarding committee business, and consequently, I too was unaware of the large operating deficits of the Civic Center.

As you have said, Mr. Foltz, recreation is a cost that benefits the city in ways not easily identified on the bottom line. Unfortunately, the expense of providing recreational opportunities must be budgeted within the financial constraints of the city’s annual budget.

My point here is that many years have gone by in which reductions in operational deficits of the Civic Center could have been sought but were not addressed. The time for “trial and error” to tweak revenues and unburden the city’s budget has run out.

The proposal to increase rental rates at the Civic Center as outlined in tonight’s legislation, Ordinance 118-08, must work as the state does not allow deficit spending for cities in Ohio. Council President Revoldt has made that point clear in earlier discussions. Can the proposed rate increases wipe out the Civic Center deficits that have gone on for years? That remains to be seen.

What I can say is that bookings at the Civic Center from 2005 through 2007 are down fifteen percent over bookings from 1996 through 2004. When I spoke about Civic Center rental activity before council on October 13, 2008, I raised the prospect that ownership of the former Arrowhead Golf Course by the city and subsequent lease of the facility has seemingly resulted in a decline in bookings at the North Canton Civic Center. I still believe that to be the case.

What other reason could account for the decreased bookings at the Civic Center. The two North Canton facilities, both owned by the taxpayers, are competing with each other. And as the bookings of the Civic Center decline and the bookings of the former Arrowhead Country Club increase, the North Canton taxpayer loses. The operator of the golf course keeps profits from rentals at the clubhouse and through lost bookings to the golf course; the Civic Center continues to operate at a loss.

As for the rate increases proposed in tonight’s legislation, some of the rates have doubled. The Saturday rate for the Events Hall has gone from $600 to $1,200 for a Saturday booking.

Some might think that is a good way to increase revenue. Economics 101 would tell you differently. The relationship between the price of a product and the demand for that product is termed either elastic or inelastic. A good example of demand that is elastic is the recent spike in the price of gasoline earlier this year. Demand for gasoline dropped as the price increased.

The rate increases planned for the Civic Center may very well further depress the number of bookings at the Civic Center and thus not provide the increased revenue that is hoped for at this late hour.

The unfortunate lesson learned here is that years of wasteful expenditures cannot be remedied overnight. Council Chairmanship of a committee requires more than years of asking for funding until the money is all gone and then proposing a legislative fix that must hit a homerun the first time at bat.

Thank you,
Chuck Osborne
City of North Canton