Chevalier: Proposal for Sedona Rec Center is too expensive
by  Paul  Chevalier

Proposed rec center site at the Posse Grounds

Editor’s Note: Chevalier is the Chairman of Sedona’s Art and Culture Commission. He is a retired Senior Executive of a major retailer where he was responsible for law and personnel. He holds a Degree in Government from Columbia College, a Law Degree from Columbia Law School  and Business Degrees from both Columbia     and Harvard Business Schools.

Soon the citizens of Sedona will have a chance to vote on whether or not the proposed Sedona Indoor Recreation Center is something we want and is something we believe the City of Sedona (us) can afford to pay for at this time.

For at least a decade, our city government has been hearing from citizens who want an indoor recreation center. In response, and to find out the wishes and possible patronage for an indoor recreation center, our city government initiated both public meetings and two community-wide surveys. As a result of that imput, the City requested a feasibility study. In November, 2000, our city received the final feasibility study report recommending a 46,310 square-foot Sedona Indoor Recreation Center. This report was prepared by an experienced architectural firm hired to study the issue.

According to the report, the proposed Center would be open daily, year-round. It would be staffed by 6.25 full-time employees and 770 hours a week of part-time employees (which equals 19.25 full-time employees for a grand total of the equivalent of 25.5 full-time employees). This would not be a small operation.

• It would have an AQUATICS ROOM  with a 25-yard, 6-lane lap pool, and a separate zero-depth entry leisure pool, which would have a 20-foot high water slide.  The lap pool also would have spectator seating.  In total, 14,600 square feet would be devoted to the aquatic room, of which 1,200 square feet would be for pool equipment.

• It would have a RECREATIONS PROGRAM SPACE, including a full basketball court, two half  basketball courts, and a volleyball court (total 8,600 square feet), an elevated indoor running track with 16 laps per mile (2,700 square feet), a fitness center (3,000 square feet), a dance/exercise room (1,200 square feet), and two classrooms (1,800 square feet) for a total of 17,300 square feet,

• It would have 800 square feet for short term CHILD CARE.

• Locker rooms would use 2,600 square feet of the Center,

• The LOBBY would be 2,500 square feet and restrooms total 550 square feet,

• Vending, staff offices, elevators, stairs, storage total 7,960 square feet.

Photo on right: Proposed rec center site at the Posse Grounds

As stated earlier, the total planned inside space of the proposed Center would be 46,310 square feet.

This is a ambitious design and provides ample space for many activities. In my opinion, the proposed Center contains features that are not needed.

For example, the participants in the 1998 and 1999 indoor recreation center surveys, sponsored by the City, showed little interest in having day care. Day care is a high expense/low revenue item according to the feasible study report. In the 1998 survey report only 10% of respondents said they would like day care included. In the 1999 survey report, no figures were made available about day care interest but it was not listed as one of the top eight activities requested (only the top eight were listed).

If the vast majority of survey respondents showed little interest in having day care as part of the recreation center, and it is a high expense item, then why should we add this expense?  I also believe that the proposed reception/lobby area, which is planned to be 2,500 square foot, is excessive in size. It provides no recreation activities, and 2,500 square feet is costly to build. I do not think we need a reception/lobby this big.

If you like the plan for the proposed Center, and if you live in Sedona and choose to vote, the question you need to decide next is whether or not it is prudent for the City of Sedona (US) to take on the burden of the cost of building and maintaining a center of this size and scope. The City government tells us that the estimated cost of construction of the proposed center is $8 Million and the estimated cost of operation and maintenance of this center would be $885,000 in 2003.

The proposal we are voting on requires the City to pay all but $1 Million of the $8 Million cost of the Center. Having the City paying 7/8ths of the cost (or for that matter paying any part of the cost) for this kind of facility is an abrupt change for Sedona.

To the best of my knowledge, Sedona’s government has not participated economically in such ventures in the past. I have been told that our library, and currently the Garland Teen Center, as well as all our art and cultural facilities, were built (or are currently being built) solely with private donations.

Frankly, I welcome the City’s change of heart, but I question whether going from no economic participation to taking on 87.5% of the financial burden is necessary or prudent for our city at this time.

To have the money to pay for this center, Sedona would have to assume a substantial amount of additional debt. If the City cannot pay back this debt out of its normal stream of revenue, then the City would have to borrow more money or the Sedona taxpayers would be required to pay additional taxes so that interest and principal on the debt is paid.

 Here is the detail of the costs that we are being asked to approve:

The Indoor Recreation Center proposal provides that the City (US) would pay Seven of the Eight Million Dollars estimated as the cost of construction.  The City would provide $2.1 million up front. This money would come from various City reserves plus the sale of 8.6 acres of land along Soldier’s Pass Road. To raise the rest of the money, estimated to be $4.9 Million, the City would obtain a 20-year loan. If interest rates remains at the quoted current level (5.2%)  over the 20 year life of the loan, then the City would pay approximately $400,000 a year in interest.

To maintain and operate the building in 2003, the feasibility study report estimates it would cost $885,000 and the City would be responsible for all of it.  I could find no cost projections for later years. The feasibility study report projects that revenue from membership, fees etc. would be $743,400 annually. The report proposes that the membership rate for adult residents (per person)  be $4.50 a day, $30 a month or $250 a year. Family membership (up to four members) for residents would be $55 a month or $475 a year. Non-residents would pay more. These rates compare vary favorably with the Sedona Racquet Club and the Ridge Spa, but are higher than the Cottonwood facilities.

 The report projects that the Center would sell 950 annual admissions, 700 monthly admissions plus 66,500 daily admissions each year. The report also estimates that 60% of daily users could be non-residents. (Would Cottonwood residents come and pay the higher fees for a better facility?) The City is relying on these figures and calls them conservative in its indoor recreation center newsletter update.

 If the projected annual Center income of $743,400 proves accurate, then the amount the City would have to contribute to pay annual maintenance and operating costs would be $141,600. The dollars the City now spends to maintain the current outdoor pool owned by the School district is $58,000. The City would no longer pay this amount and would apply it against the $141,600. By deducting this $58,000 from the total of $141,600 the City would have an additional expense over what it is currently paying of approximately $84,000 annually. (We are not told how the School District plans to make up for this lost money. Will homeowners be taxed more by the school district?)

The bottom line is that the City government estimates that the annual cost for debt service and the operation and maintenance of the indoor recreation center would be approximately $484,000 annually.

In deciding how to vote on this issue, I believe we should understand that the actual costs of construction and maintenance could be higher then the City has estimated due to a variety of considerations that do not appear to be factored into cost projections. For example:

• The projections of cost in the report are based on construction of the center in the 2001 building season. No money is factored in for inflation in 2002. (The report, which was finished in 2000, did factor in $300,231 for inflation to 2001).

• The projected debt interest rate of 5.2% for the loan could rise sometime during the 20 years of the loan.

• If this center is approved, competitors may react to compete for clients by upgrading their facilities or lowering their fees to maintain their clients. For the Center, this could result in a lower usage or lower fee charges then currently estimated.

• The feasibility study budget of $14,000 a year for maintenance and repair would rise once the Center is outside of the two-year new construction warranty period. The report acknowledges this fact but makes no cost projections beyond the first year of operation.

It is also possible that the actual cost of construction could be lower if the 5% contingency for construction change orders or other contingencies is not used. The city makes note of this in its newsletter. On the other hand, a 5% contingency may prove inadequate.

Leaving all these concerns aside for the moment and using the City’s debt assumptions for the Indoor Recreation Center, (an interest payment of $400,000 a year and an additional $84,000 a year for operating and maintenance cost), the question is: Where does the City get the money to pay this debt? 

The City has stated that the money would come from Capital Improvement funds. Currently, 20% of sales tax money is set aside for improvements to city parks.  I believe that amount is currently about $340,000 annually.  As I understand it, the City’s position is that this money would go for paying interest and principal on the Indoor Recreation Center debt. If this happens, it appears to me that there will be no money remaining in the budget for other city park improvements. If this is true, then we are creating one problem to help solve another.

To make matters worse, the City would still have a short fall of $60,000 to pay for interest on the Center loan even after using up all the money that is set aside each year for park improvements.  This $60,000 shortfall would have to come from other sources, as would the $84,000 needed for operations/maintenance of the Center. In total, $144,000 annually would have to come from other sources. “Other sources” means the City’s general fund.  And the general fund currently relies on sales and bed tax for most of its income.

Are we putting too much of the City of Sedona’s money into one idea?  I think so.

I am concerned that the indoor recreation center proposal we are being asked to vote on would hurt our city more than it would help it.  Here are my concerns:

• Our City government has other worthy causes to help support and we need to have sufficient money to do that.

• The City would add to the risk of not being able to pay future debt with revenues from current sources. Let’s not forget that Sedona still has a huge sewer debt of $63 Million.

• Our sales tax is 9.3 or 9.4% depending on which county you buy in.  That is much higher than surrounding communities. Practically all of us who live here are directly impacted by the sales tax. If the City Council has a problem funding future debt, it could decide to raise the sales tax again and that would negatively affect us all.

• If the City Council needs to raise more money to pay debts, and feels that the sales tax can not be raised higher, it may decide that it has no choice but to add a City Property tax.

These are serious concerns of mine. Yet, I believe that an Indoor Recreation Center is an achievable idea. But, I also believe in being prudent with taxpayers’ money. In my opinion, the City of Sedona (which is US) does not have to take on another huge debt burden to have an indoor recreation center. There are at least two other ways for Sedona to build an Indoor Recreation Center that would allow the City more financial security.

 One approach is to build the Indoor Recreation Center in stages as my wife, Maggie, suggests.  It would make more sense to first build an Aquatics Center, which provides the lap pool and leisure pool as described in the feasibility study. The City surveys results indicate that an indoor aquatics complex is the top priority of our citizens. So let’s make it our city’s first indoor recreation center project.

The City could first build the 14,600 square foot aquatics center and, as cash becomes available in future years, expand the Center for additional indoor sports and other activities.  I do not know what an aquatics center of 14,600 feet would cost and I think the City financial participation should be limited to the $2.1 million it expects to have available after selling the acres described above.

If, on the other hand, the feeling of the majority of the concerned citizens of our community is that we must have, all at once, the indoor recreation center as described in the feasibility study, then let’s wait until we have private commitments to pay for substantially more than 1/8 of the cost of construction of the center. I believe that with professional fund raising help, the City may also find a major donor who is interested in naming the center in return for generous financial support.

I believe that the City Council, if it wanted to, could follow both of these approaches at the same time. Sedona could build its Indoor Recreation Center in stages, beginning with an aquatics center, while, at the same time and using professional help, seek further financial aid from private donors, grants, endowments as well as county money.

I strongly believe that Sedona should have an indoor recreation center, but I do not believe that to get it the City needs to add on another $4.9 Million of debt and additional yearly expenses of $484,000 or perhaps even more. I will vote NO on the indoor recreation center proposal as presently drafted.