Letters to the Editor
Letter to the Editor | What PenMet said about the Community Rec Center, then and now
PenMet recently presented its financial update on the Community Recreation Center (“CRC”). Three PenMet staff members did an excellent job. I applaud them.
The CRC is an incredible facility. The staff has been doing a great job getting the CRC operational and the growth in usage has been impressive. The staff puts on great programs and maintains PenMet’s facilities in the best conditions possible given their resources.
The problem I had with the financial presentation is that it didn’t match up to what PenMet was saying about the CRC back in 2020 when they did their proforma budget and they were selling their bonds to help finance the project. What PenMet is saying now is NOT what they were saying six years ago.
This information speaks for itself.
Profitability
SLIDE 33
This slide discusses the 2020 predicted and 2025 actual profitability of the CRC. Let’s compare PenMet’s 2026 statements to the statements it made back in 2020.
Does the 2026 statement come close to matching what PenMet said in 2020? The feasibility study did NOT say the CRC would operate at a deficit “…for the first several years.” PenMet said the CRC would
operate at a deficit “…for the first couple of years.” I understand that estimates and proformas are best guesses at the time, but my concern here is not that the estimate in 2020 was incorrect. My concern is that PenMet’s 2026 statement of what it said in 2020 is not even close to being accurate. Creditability is a critical factor for an entity supported by taxpayer dollars. Creditability is seriously lacking in Slide 33. It also concerns me that, the 41% cost overrun notwithstanding, I was told PenMet never updated its 2020 proforma!
Benchmarks
SLIDE 34
This slide describes what “…most park districts…” do when analyzing the performance of recreation facilities and mentions a “…common benchmark” for debt service as a percentage of operating expenses. I filed a public record request for support for these statements, but PenMet was unable to provide me with any support.
Here’s what PenMet said about what is done by “…most park districts…”:
“Most park districts don’t include debt service in the financial evaluation of recreation facilities.” I have two problems with this statement. First, PenMet can provide no source for this statement. Second, even if it’s true, I think it’s critical (especially given the huge 41% cost overrun) that PenMet at least include the $800,000 in annual debt service when discussing CRC’s financial performance.
If, as PenMet now says, the CRC will operate at a loss without even considering this huge debt service amount, doesn’t that put tremendous pressure on PenMet’s main source of income: Our property taxes? The CRC is now never expected to cover its own costs. About 85% of PenMet’s income comes from our taxes and the CRC’s debt service is about 10% of our property taxes. That’s $800,000 that will not go to fund PenMet’s programs or operating expenses. Is there another levy lid lift in the near future?
Here’s what PenMet said about the “…common benchmark…”:
- “A common benchmark is 15-20% of operating expenses is debt service.”
- “PenMet Parks’ budgeted debt service is 10% of operating expenses in 2026…which is lower than the average benchmark.”
I have issues with both of these bullet points.
First, as I stated earlier, PenMet has no source supporting the first statement. Where did they get that benchmark? I reached out to the National Recreation And Park Association (“NRPA”) which compiles financial date for parks nationwide. I asked them if the 15%-20% benchmark mentioned by PenMet comes from their database. Here’s what the NRPA said:
“I am currently not finding any data we collect that explicitly features debt service outside of it potentially being a part of an agency’s capital expense…”
More importantly, the NRPA added this comment with respect to debt service that supports operating expense, etc.: “This is six percent of the operating budget (median for all types of park and recreation agencies and 4% for Special Park Districts).” They don’t establish standards. They just compile reports on the data they receive.
PenMet is a special park district. It appears that the NRPA’s database shows 4% of operating expenses as being the median debt service percentage. If so, PenMet appears to be extremely highly leveraged. Again, will we see a levy lid lift in the near future?
Craig McLaughlin
Fox Island