More facts on Community Center–and a recommendation on the vote

As the Nov. 6 election comes closer, the vote on the controversial Community Center must be made.

Here are some additional facts:

  • Sammamish has a dedicated parks and recreation fund in the budget and this money must, by state law, be spent on these uses. This, $14m of the city’s $25m for its share of the Community Center comes from this fund. If the money isn’t spent on the Community Center, it can only be spent on other parks projects, not roads or other capital projects. I asked one city council member what would happen if the Center project doesn’t go forward and the response was that other park projects “would move to the left.”
  • As previously noted, the City will lease land owned by the YMCA that’s next to the Pine Lake Middle School for $1/yr for 50 years if a deal with the Y moves forward for the Community Center. This is contingent upon the City coming up with a master plan within five years for recreational use on the property, which is valued at $1.5m, according to previously published news articles. Council member Nancy Whitten wanted the Y to deed this land over to the City as part of the deal for the Y’s management contract, but this didn’t happen. As another council member put it, for $1 per year for 50 years, what does it matter?
  • The requirement for a plan for the Y property doesn’t mean construction has to begin in five years.

What does all this mean? The City invests $25m into a building it will own (the City retains title–it is not a “gift” to the YMCA). The Y invests $5m into the building, another $1m into equipment, tenant improvements and personnel, and leases property valued at $1.5m to the City for 50 years. The Y would get a 40 year management contract of the Center on terms and conditions that haven’t been negotiated.

While the City says there is only a Memorandum of Understanding with the Y for the building and the Y’s land, there isn’t even an MOU for the management contract. And while the City says there isn’t a done deal with the Y, all the conversation has been as if there is one.

Once again, my take is that since the City is asking for citizens to “advise” on this proposal through Proposition 1, we deserve to know the contract details in advance, along with the risk factors if the Center is a money-losing proposition for the Y severe enough to cause the Y to seek renegotiation or termination of the contract.

In the absence of this information, it’s a huge leap of faith for citizens to give approval for the concept as currently outlined in the hopes that the City will get it right thereafter. Given how badly the City has mucked up sending this to the voters in the first place, this doesn’t give a lot of confidence the Administration and the Council will get it right afterwards. There should have been a formal Request for Proposal process to see if, indeed, the Y’s deal is the best deal that can be achieved. It’s hard to believe that a private enterprise would contribute $5m to the capital costs for a building it won’t own and throw in a $1.5m piece of property as well, but the absence of contract details at this stage for voters is very troubling.

Make no mistake: I think we need a Community Center. We’ve needed one since incorporation in 1999 and City officials have dithered way too long. I don’t have any issues, per se, with a public-private partnership.

Nor is this the “give-away” opponents suggest.

But as a businessman, I don’t like sole-sourcing without price-checking. While the City had some informal discussions with others, no RFPs were issued to see what the best deal might be. The Y could be the best deal. But maybe it’s not. In the absence of competitive bidding, the City doesn’t know–and neither do we taxpayers who are being asked to weigh in on Proposition 1.

It is for this reason, and this reason alone, that I will vote No on Proposition 1. It’s not because I don’t want a Community Center–I do. It’s not because the floor plan of the Community Center is bad–that was the case with the $64m, 90,000 sf Taj Mahal, but wiser heads prevailed on that and downsized the facility and the price tag. It’s not even because the Y is involved. It’s just because, in my view, the City didn’t exercise its full fiduciary duty to issue an RFP.

An RFP would allow the owner of the Pine Lake Club to make a bid. He says he can offer the City something for less cost and which will be better than the currently proposed deal. Let him try. Let others try. Let him decide if he wants to bid only on a management contract, if that’s the RFP’s terms and conditions.

I understand the concerns over the competition between a City-owned athletic facility and private enterprise. But I also look at the other amenities in the proposed Community Center, which are sorely needed.

The City needs to give the owner of Pine Lake Club a chance in a fair and open bidding process to respond to the RFP. The Y can bid and so can others.

That’s the way it should be for $25m taxpayer dollars.

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17 Responses to More facts on Community Center–and a recommendation on the vote

  1. Harry Shedd says:

    The CAPITAL dollars in the Parks budget have to be spent on parks, but not the General Fund dollars, which is $3 million / year in the current budget.That is where the drain is and the next budget asks for more people (Parks) and 15% (up from 13%) of the budget.

    • Vincent Cucinelli says:

      So are you saying that the funds they are talking about using is out of the general fund and not the Parks budget? Just trying to clarify..

      • cityhamilton says:

        Parks fund is one source and the general fund is the balance of the city’s share.

      • Harry Shedd says:

        Parks dollars come from various sources one of which is the General Fund. The General Fund is the OPERATING dollars for the entire city. The Parks Capital dollars come from taxes, grants, parks useage, etc. These latter dollars must be spent on Parks projects (simply). The operating dollars for Parks has to come from the General Fund. Fifty-eight per cent of the Parks budget is for salaries and benefits. We have grown in parks acreage from 50 acres to 500 acres. This means more personnel to maintain the parks and thus an ever growing cost (from the General Fund). Whereas the Community Center would supposedly be run entirely at the expense of the “Y”, one need little imagination to envision additional associated charges that the City would have to bear.
        Keeping the City “in the black” is a balancing act that can ill afford any “surprise dollars” going to unexpected eventualities. We should know up front what costs will be necessary and not tax the General Fund additionally to support the Community Center Project.

  2. Sean Smith says:

    This is more of a give from YMCA to the city. The $5mil they put into the building can’t be taken with the Y if some to-be-negotiated escape clause allows them to bail.

    There are network effects of having the Y continue to operate in the city (remember they have been here for years already, but in ugly facilities), and I can understand why the city would want to go with the Y and not open up an RFP process. This is going to be a close relationship between the city and the enterprise. You have to really like the folks you will be working with, and the Y is a quality organization. That’s not to say private companies couldn’t be better, but there is already a strong relationship here. Let’s run with that.

    I’ve listened to much back and forth on this issue. Nobody is pushing the position that the city should not have a community center. The devil is in the details. Not having a contract or MOU for the operations is troubling, but not critical.

    You elect representatives to get the best deal. If the council fails to get the best deal, you can vote them out. But since we voted them in, we must trust them to push hard for the best deal for Sammamish. They have said the vote for the community center is merely an advisory vote. They are just trying to get a pulse of the people on this issue. An RFP would have been appropriate if the vote is definitive. But again, this is just an advisory vote. I applaud their caution. They don’t want to take such a big chunk out of reserves unless there is a mandate-in-principle for a community center by the people. An advisory vote is the best way to get that mandate. The only alternative is to go forward and see if they get voted out. Their approach is proper in my opinion.

    I have actually been quite impressed with how the council have pushed on the Y to get the best deal. We have to give some to the Y for the risk they are taking in operating a top class facility in a geography that doesn’t justify the spend based on the demographics. We could wait until the city grows to make the numbers look good, or we can help the Y feel good about going forward ahead of the demographics.

    In watching the Y push back on giving their land to the city as part of the deal, I got the strong sense that the Y is right at their limit with the economics. That’s of course why they aren’t signing up for something like what Newcastle got. That should give everybody great pause.

    But my principle concern is the timing. I know we all want a facility now. But keep in mind that there are dark clouds on the macroeconomic horizon. I worry about lowering reserves in this time of global uncertainty. And with 40% turn over in the city (John Curly said this at the last city council meeting), and the fact almost all youth living in the city today won’t be here to enjoy anything that gets built, are people really going to be behind building a facility today that at best makes marginal economic sense? The saving grace might be the fact that the city keeps title of the building. At least then if things fail they can re-purpose the building or bring in another operator.

    • cityhamilton says:

      In talking with a council member (not Curley), this member said that if things went south with the Y’s management, the city could lease out space in the building to medical or restaurant-type interests. In theory.

    • Sean Smith says:

      I take back the part about this kids not being kids. Kids that are tweens now, and those younger will still be around.

    • Vincent Cucinelli says:

      you mention that your impressed with how the council has pressed the Y to get the best deal?? Its the only deal and nothing has been outlined, outside of the city will spend 25mil and the Y 5+expenses, but there’s no definitive outline for costs to residents, exact amenities, coverage of cost overruns, etc.. The risk to the Y is very little, they’ll have very little investment to a possible huge reward as their intending on charging the Sammamish residents the same as they do for all their other facilities yet they don’t have building costs of this facility. Which was way more than $5million… So I’m not impressed at all..

      • Sean Smith says:

        Many aspects of the operations need to be worked out. The proposition is to first determine community support for the broad strokes. Any one of many possible sticking points could kill the deal. A strong Yes mandate in the results does not obligate the city to consummate a deal, just as a strong No mandate doesn’t stop the council from going forward.

        The city made many stipulations, and tried hard to get the land the Y owns. They tried to include a discount off the Y’s normal fee schedule. They did get a special deal for swim programs for all residents, members or not.

        The risk to the Y is a potentially long term operational deficit which, depending on the contract details, may obligate the Y to cover, at least until the contract can be renegotiated. The Y can always cut and run. That is the nature of things. That is the risk Sammamish runs in this. But remember, the $25 million dollar spend by the city is for a retained asset. If the relationship fails, not much is lost. Also, if the city is cleaver, the contract will require the Y to pay money to walk away.

        I disagree that the Y has very little investment. Five million is HUGE to a nonprofit. Until they recoup that, they are swinging in the breeze, taking risks on a population that is undersized for any of their normal scenarios, with no assets to sell in order to sooth the pain of losses if it doesn’t work out. If this fails, they walk away with nothing. There has to be premium built in for taking that risk.

        Reading about all this, and going to the public meetings, I got the sense that the Y really is negotiating in good faith. This isn’t an organization with a profit motive. The Y may very well be padding, potentially a lot of padding. Would you blame them with all the unknowns here? They are being cautious, especially after being burned on other facilities. The city had to add enough sweeteners to overcome the demographic uncertainties.

        The absence in this deal of costs (for the Y) for amortization of a building is the premium Sammamish pays for building a community center that its demographics can only justify under optimistic scenarios.

        I do think the Y is getting a good deal here, because I feel this center will draw from far and wide outside Sammamish, since all communities east that, to get to a pool, would normally have to drive to education hill in Redmond or downtown Issaquah will go to this facility. I really hope Sammamish negotiates a profit sharing agreement if revenue targets are exceeded!

      • Vincent Cucinelli says:

        Sean for some reason this wouldn’t allow to reply under your comment so I put it here.

        At the end of the day city council will do what they please and I get that and the land the city is getting at a fairly good deal I’ll give you that. Part of my issues here is yes were voting on the potential idea of the project. This has been polled for many years and the consensus is yes some want it but many hare hesitant due to cost.

        A lot of what your talking about is speculation.. I sat in a meeting and heard from a city council member that there will be ways for the city and Y to part ways if its not profitable, you can probably view the video on the citizens for Sammamish website. Yes I agree with you, if they were smart there would be contingencies in place and maybe there will be and maybe there won’t be, no one can really say.

        You mentioned a special deal for citizens on swim programs for residents, both members and not.. Curious where you found this because all that’s been published that I’ve seen or heard about at meetings is a discount on the initiation fee (Which they extended to Snoqualmie residents at that facility as well as gave a 28% reduction in monthly dues). Now I could be wrong and missed something so if you could help me out with that I would appreciate it..

        I still contend that for the opportunity that the Y is getting a $5 million risk is little. Why did the Y choose to build in Newcastle vs Sammamish? The investment of the close to $20 million it would have cost them was too risky but to only turn a quarter of that around with no debt on the building, I’m pretty sure any business owner in their right mind would take that.

        Yes the Y doesn’t have a profit motive (hence them being a non-profit) but they need to build funds for other projects which is why their branching out into more high income areas, it makes sense to go where the money is…

        I guess in the end my argument here is I really feel like this whole thing is a backroom deal that is only being put up for an “advisory” vote because it got brought to public attention.. The technical vote is for a community center but its really do you want a city funded community center ran by the Y and other non-profits, or not. Instead were being asked to vote on a half dealt project. It should have been either yes or no to a community center without being in the mist of contract negotiations, or a full blown plan (This is what the community will get, this is what it will cost, etc), we don’t have that…all we have is speculation and this could be how it ends up. This whole advisory vote to see if there’s interest in a center is a smoke screen, they’ve touted there’s interested so why another vote if that’s what their trying to figure out, or is this just a way to appease those opposed to help the city officials save face?

    • Sean Smith says:

      @Vincent, RE: “Many aspects of the operations…”
      I here you about the trouble replying where you want to. I’m putting my reply to your Oct 31st post (a level below) here.

      Yes, I agree with you completely. So much of this deal is speculation, the only points to focus on are: whether we go forward; do we go with the Y as a partner; do we put it at the commons vs. the Y go develop their own land; do we do it now or wait.

      On the fact sheet there is a comment about Sammamish citizens getting a break:
      http://www.ci.sammamish.wa.us/files/document/9997.pdf
      “Pending the result of negotiations, Sammamish residents may also be eligible for discounts on swimming lesson, summer cap and other specific, facility-based programs”.

      And in the July 16th regular meeting minutes:
      http://www.ci.sammamish.wa.us/files/minutes/9855.pdf
      “Motion: Councilmember Vance moved to approve the resolution authorizing submission of a proposition to King County elections for an advisory vote on the development of a multi-purpose community center to be placed on the November 6, 2012 ballot….Furthermore, submittal of this resolution is conditioned on the City Manager executing an MOU with the YMCA that includes provisions for discounted facility-based program fees for Sammamish residents…Motion carried 6-1 with Councilmember Whitten dissenting.”

      To your point Vincent about branching out to where the money is, the Y did a calculation and felt that since Sammamish is affluent, the Y could offer up to 5 million. See my other post for a reference to the video on this.

      I can’t fault the council for wanting to step carefully and wanting to be really sure there is community support for the major aspects (Y partnership, capital spend of this magnitude). People say they want stuff, but when the numbers come out people change their mind. The council is taking care and asking: Hey this is what is possible, but it’s a really big number. Should be keep going on this? I respect that.

  3. officefinder says:

    Excellent decision to vote no.

  4. Cyrus Oskoui says:

    YMCA came into existence with the intention. They do good work and they are good addition to low income communities. However, the new Y has become purely a business. No politician dares to question their financial statesments. They have no mortgage to pay, no rent , no property tax and they are exempt from collecting sales tax. Instead they pay very high salaries and benefits to their top managements. I dare the Y to publish their payroll.

    If providers of every service becomes tax exempt from taxes, we the consumers and the public will have to pay more taxes to compensate for the lost tax revenues.

    With or without the city sponsored health club or the YMCA, ten percent of general public joins and exercises at a health club. They ones that have the Columbia Clubs, the Y or the Gold Gym etc, are paying for their membership. Once the tax paying providers cease to exist, everybody in the community has to pay for the same ten percent who will join the Y.

    • Sean Smith says:

      From Guidestar:
      http://www.guidestar.org/organizations/91-0482710/ymca-greater-seattle.aspx,
      2010 IRS Form 990, page 32
      (You must register for free to gain access)

      The top 6 directors, in 2010 (latest year available), made the following base salaries: $274,324; $186,537; $168,753; $157,453; $144,640; $100,192

      The first number jumps out at me, but the rest do not. That is the going rate in my opinion, maybe a bit on the high side for an organization with over 3000 employees:
      http://www.payscale.com/research/US/Job=Executive_Director,_Non-Profit_Organization/Salary#by_Company_Size

      Only renters in Sammamish that pay for a private gym will cause a reduction of tax revenue to the city. As Don Gerend pointed out, the approximate 2% increase in property values will make up some or all of the short fall from the tax revenue coming from the property tax paying customers of for-profit gyms. I don’t think we can get to the bottom of that unless the private operators share their revenue figures, but I suspect the taxes resulting from increased property values will more than make up for any direct tax revenue shortfalls.

      • Vincent Cucinelli says:

        2% property value increase.. For most homeowners in this area that’s a drop in the bucket compared to where their to even break even on their properties..

  5. Sean Smith says:

    Here is the video that talks about financial aspects:
    http://www.ci.sammamish.wa.us/tools/VideoPlayer.aspx?eventID=2331

    And here are some points from that video:

    The Y started at offering 3 and Ben and the city “squeezed them” to get 5 million (@2:58).

    A perfect YMCA is about 40k households and you typically capture between 5 and 7%…Coal Creek is about 11% (@2:19:55) [Curley asking if this thing works:] “It’s not as robust as I would have hoped that it would have been” (@2:20:34) Sammamish has about 30k households they consider target customers (@2:20:40), and if they get a 10% capture, “that’s about 3k “units”, and “as we like to say, it’s thin, but we think this is a very viable, doable project” (@2:20:40 – 2:21:15) “we think this branch would be strong” (@2:22). “We know that this is going to be a viable project” (@2:22:30)

    [IMPORTANT!] Sammamish can afford to pay more, so it should (I’m paraphrasing here, but given their wider priorities, 5 million was their number for a more affluent community, @2:27 – To your point Vincent about branching out to where the money is)

    Just did a project in Snoqualmie where the city put up all the capital, and the Y is the operating partner (@2:28:30). The Y did a small capital campaign for this project, for equipment, etc.

  6. Pingback: Whitten to voters: you’re stupid, drop dead « Sammamish Comment

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