Muskegon Community College’s Board of Trustees voted on Friday to permanently close the college’s Lakeshore Health and Fitness Center. MCC purchased the former YMCA in 2015, spending $2.5M to acquire the building and make major repairs. During the nearly five years of operation, MCC also lost approximately $2.5M on operations.
According to MCC, the LHFC had about 3,800 subscribers, 96% of whom were members of the general public. “If the community was fully aware of how much money we’re losing in this facility, I think we would lose the support of the community for not being good fiduciary persons running this facility,” said Trustee Roy Portenga.
MCC Vice President of Finance Ken Long told Trustees during the Friday meeting that the LHFC would likely generate $1.5M in revenue in the upcoming fiscal year, but it would also incur $2M in expenses. Memberships cost $62/month for residents and $25/month for students. MCC considered raising the membership fees, but consumers already consider its current fee structure high.
MCC Board Treasurer Kathy Moore said, “As the board’s treasurer, and understanding the continued deficit of the college, I agree that we as a college cannot continue to bear the burden of this operation single-handedly.”
The MCC Trustees voted last year to support the operation of the Lakeshore Health and Fitness Center, but also indicated that they would not make a long-term operating commitment. At that time, MCC had lost $2M on fitness center operations.
Trustees expressed ongoing concern about the high cost of building maintenance. In January 2019, the Trustees approved $190,000 to replace the boiler for the swimming pool and hot tubs. MCC operated the pool without the heater for a time but canceled classes there when the pool temperature dropped below 76°F.
Fitness center operation requires enormous expenditures
Although the WCC administration is all-in on its own Health and Fitness Center, despite its exorbitant operations and maintenance costs. The Administration insists that the building operates at a profit. The bills keep raising questions about that, though.
When you look at the budget transfers related to the Fitness Center, the revenue coming in doesn’t balance the expenses going out. VP Bill Johnson said as much in the September 24, 2019 Board Meeting when he said:
“I think I mentioned in the Strategic Value Presentation that we had growth in the Health and Fitness Center. That’s strong, and that’s really important that it stay strong because we need to return all of that margin we get from the Fitness Center to help support the debt service, which is about $1.1 million a year, and the deferred maintenance. ”
WCC has to make a bond payment every year on the Health and Fitness Center to repay the money it borrowed to build the building. It also has to pay for maintenance on the building, as well as
deferred maintenance neglect.
Every year WCC “defers” a project, the cost of the project goes up. Think of it as interest on a maintenance debt, or a premium WCC pays to put something off until later. In FY2019 WCC budgeted $992,000 for neglect repairs at the HFC. Remember, that figure represents projects that WCC should have done earlier but did not. It does not include any of the regular maintenance that WCC presumably performs on the building, or the WCC personnel assigned to the building.
Operating the Health and Fitness Center isn’t sustainable
So a debt of $1.1M and deferred maintenance projects of very nearly $1M add up to nearly $2.1M in costs directly attributable to the HFC. And that’s just for one year.
MCC found out the hard way that operating a for-profit fitness center is irrationally expensive. Fortunately for MCC, its Board of Trustees gave up on trying to make things work after a little less than five years. WCC’s Board of Trustees doesn’t seem inclined to do that, even when the writing is on the wall.
This year, the neglect debt includes resurfacing the pool, which will cost more than $90,000. The rebuild of the men’s hot tub will take another $165,000. The rehab work on the family locker room is budgeted at a cool $625,000. The laundry room expansion will cost another $60,000. That’s $940,000, if you weren’t adding up the numbers. The good news is that the locker room rehab, some unbudgeted flooring replacement and the laundry room project have been “deferred” due to newly discovered budget constraints. Those projects will be back next year, and they’ll be more expensive, because that’s how neglect works.
There is no getting ahead of the maintenance on this building. Circumstances will always require WCC to plop down $150,000 here, $200,000 there and the occasional $500,000 for some critical repair – because that’s how health clubs work.
If you believe the subscription figures that Bill Johnson provided in the September 24, 2019 Board Meeting (and why wouldn’t you?), the facility is stuffed to the gills. In fact, it’s overstuffed. Which is good from a revenue perspective and bad from an expense perspective.
Except for the moment because the building is closed until further notice. So the HFC still has plenty of expenses, but no actual revenue to pay them.
It is time for some honest discussions about the HFC
It is time for some really honest discussions about the HFC, which include lining up all of the building’s debts, operating expenses, revenues, subscriptions rates, required maintenance, deferred maintenance, anticipated maintenance and building capacity limitations. Open the books and see how much WCC is (making) on the HFC.
It is time to talk about the construction quality at the HFC and whether the building can tolerate being significantly oversubscribed indefinitely. How much has the lousy construction cost the taxpayers over time?
It is also probably a good time to look at what happens when the recession relieves the oversubscription problem but leaves the HFC short on operating revenues. Who gets to pick up that tab?
It is also time to look at the commitment of resources (which seems to favor something in the neighborhood of $1M per year) on a never-ending list of deferred maintenance projects. The Board of Trustees must ask whether or not operating a for-profit health club with an abundance of expenses should really be high on WCC’s priority list. (How did it even get there in the first place?)
These questions are important, especially when WCC is permanently laying off staff in part to keep the HFC afloat.
Photo Credit: Dan Moyle , via Flickr