Finances Explained

Community Center Will Be Self-Supporting
By Neil Bicknell

During the summer of 2000, I was involved in establishing what came to be known as the Scarsdale Community Recreation Center Study Committee (the "CRC"). Recently, I joined the reconstituted committee and have been asked to summarize key aspects of the financial assumptions behind the committee's proposal for a Community Center, including an indoor pool, to be located adjacent to the current outdoor pool complex.

After an eight-month study headed by former School Board President and investment banker, Bob Macy, the CRC recommended in an April 2001 report that the proposed facility could be built and operated at no expense to Scarsdale taxpayers. Subsequent to receipt of the report, the Village Board engaged an outside consultant, The Thomas Group of Ithaca, New York, to validate construction estimates and the Village staff was asked to review the risk elements associated with the financial projections.

Revised Projections More Conservative

Current financial projections for the proposed Community Center incorporate changes recommended by the Thomas Group in their report and in subsequent discussions, as well as, changes recommended by the Village staff. Whereas the original report portrayed a set of assumptions showing how the Center could by paid for completely by user fees, the revised projections are now more conservative and contain less risk that taxpayers support will ever be necessary to cover a revenue shortfall or expense overrun.

The primary changes from the original projections include a 14% increase in the proposed membership rates (now $625 per year for a family and $400 for an individual) and the impact of an improved short-term interest rate environment. These improvements more than offset a 7.5% increase in projected construction costs (endorsed by the Thomas Group) and the effect of a 25% discount in the membership rate for seniors.

The result is a lower risk set of projections. First year revenue of $1.365 million is projected from the following sources: $850,000 from 1600 members (less than 60% of current outdoor pool membership); $120,000 from School swim team and summer camp user fees and access charges for opening the two new pools to outdoor pool members during the summer months; and, nearly $400,000 from aquatic and fitness programs and use of the multi-purpose rooms. First year operating expenses of $720,000 include the cost of eighteen full and part-time staff members, the costs of utilities and supplies and a 10% expense contingency partially offset by savings achieved through coordination with the outdoor pool. Debt service costs of $218,000 in each of the first two years of operations (interest only) increase to $670,000 in the third year and thereafter when the debt starts to be paid down.

Reserve "Cushion" Protects Tax Payers

With projected revenues exceeding operating and debt service costs each year, a projected reserve balance grows from more than $450,000 after year one to $1.6 million by the end of the fifth year of operations. In other words, even if revenues were below projections and expenses above, a cushion exists to protect against the need for taxpayer support.

To test the level of safety provided by this "cushion", the Committee has estimated the financial impact if only 75% of the projected membership is achieved and if only 50% of the projected income from aquatic and other programs is realized. Even assuming revenues fell short by these amounts and before any attempt to curtail expenses, the average annual "at risk" or negative cash flow position for the first five years of operation is $170,000, well within the acceptable "at risk" position of $360,000 per year cited by the Village staff in a memo to the Village Board of November, 2001. The maximum negative cash flow under this scenario is $326,000 in the fourth year of operations. Of course under actual operating conditions, staff reductions and other expense control steps taken in response to reduced revenue would significantly reduce the $170,000 average "at risk" position.

Subscription Program Further Mitigates Risk

As the ultimate step to insure that the proposed Community Center is will be self-supporting, the restructured Scarsdale Community Center committee has initiated a subscription program to sign up founding members. Rather than merely solicit community interest in the center, the Committee is seeking 1,200 members (75% of the projected total) to commit to membership for three years and to prepay the third year of membership. If this level of commitment can be achieved, the Committee believes that community support for the proposed Center will be demonstrated and that the risk of any taxpayer support ever being necessary will be negligible. The Committee also believes that if the subscription program is successful by this fall, the proposed Community Center can be open and operational by mid-year 2004.

In my comments above, I have gone into considerable detail to convey the care and thoroughness of the effort invested in the financial projections behind the proposal to construct a Scarsdale Community Center. The Committee subscribes to the proposition that such a Center should be self-supporting and that nothing should be done to jeopardize the Village's triple A debt rating. Co-location with the outdoor pool complex has critical financial advantages important to the viability of the proposal. But the ultimate determinant of feasibility is the level of community support. With this in mind, I encourage all interested residents to help make a Scarsdale Community Center happen by signing up for a three-year membership commitment and prepaying the third year of membership. If the proposed facility is not built or if you move from the community before it opens, all prepaid amounts will be returned. Please feel free to join us using the Membership Form available on our Join Us Page or to contact membership chairperson, Ruth Goldstein, at (914) 723-5454 for additional information.

Neil Bicknell is Vice-Chair of the Scarsdale Community Center Committee.