December 5, 2006 > Sink or swim
Sink or swim
We have now reached “crunch time” for Fremont’s Family Water Play Facility. Parks and Recreation Director Annabell Holland is asking for an additional $3.8 million from a fund created for Rancho Higuera Historical Park (another failed promise?). The extra expense of creating the water facility is understandable in light of recent and continuing escalation of building material costs. However, after the concrete and steel are set, the ongoing cost of the facility (i.e. operations) will become an important component of the city’s budget. Since water parks present significant attendance, health, safety and staffing issues as well as the added uncertainty of weather for an outdoor venue, costs and therefore cash flow can be extremely variable.
Throughout the push for a Fremont water play facility, assurances have been made that not only will this attraction immediately create an adequate cash flow for its own maintenance, but an excess of revenue over expenditures providing a surplus. Hopefully, the council has looked at this project carefully, and examined not only what is written, but items that have been left for future consideration and conjecture. While The Sports Management Group consultants have provided a colorful booklet, close examination reveals questionable assumptions that can have a major impact on the bottom line. For instance, entrance into this competitive market place is noted as a draw by consumers within a 20 minute driving radius. Competition includes Great America’s Boomerang Bay and Shadow Cliff’s new California Splash, opening in 2007, in Pleasanton. The market analysis does not consider the Newark Silliman Center as a competitor because, “of the very different experiences each facility provides.” I am not so sure about that.
Competition from Raging Waters in San Jose is disregarded, apparently because it lies 24 minutes (MapQuest) from the proposed Fremont water park. It may be a new concept to the folks who created this report, but as time extends to reach Fremont for “secondary” users who live outside the city limits, it may become shorter and therefore more inviting to visit an alternative park. The argument that much of the non-Fremont target market – in some cases a 4:1 ratio of users to Fremont residents - resides within a 20 minute radius loses some impact when considering the effect of competition. Entry fees and passes for these facilities may be comparable and in the case of California Splash at Shadow Cliffs, touted in the report as “a new and exciting waterpark experience,” less expensive.
The financial analysis of the report illustrates “Low,” “Average” and “High” income and expense scenarios, painting a rosy picture even with inclusion of a Capital Reserve Fund (although no Administrative Charge). Using the “Low” income/ high expense chart shows an annual income of $24,000 which falls close to a hypothetical break even point. The Sports Management Group prefers to cite the “potential to realize annual net revenue at the ‘average’ scenario of $366,000.” In its conclusions, the report notes that the water play facility should continue to renew by adding attractions every three to five years. To me, this indicates that a Capital Reserve Fund is not only desirable, but a necessity.
Financial success, according to the proposal, is dependent upon “creating, funding and executing a highly effective marketing program.” In order to do this, the budget contains a line item for $40,000 to $45,000 and the inclusion of a marketing staff position at $66,500 to $90,400. Looking at the appendices of “Probable Operating Expenditures,” I failed to find this employee cost as a line item. Maybe we should simply bring back a Fremont “golden oldie” of shopping bags that state “Swim Fremont” using some whiteout and marking pens on leftover bags from the “Shop Fremont” marketing triumph. The report also notes that maintenance vehicle expense, building and maintenance renewal (depreciation fund) and fees for armored vehicle collection of receipts is not included. This leads to speculation of what else has been neglected from the hypothetical budget.
On top of all these considerations for councilmembers, the agenda also asks for approval of a Public Art Project for the water play facility. This may be putting the cart before the horse. Although I applaud the use of public art to beautify the city, it is somewhat presumptuous to approve art for a project that continues to be plagued by serious questions. Construction has consistently been deferred due to changes in costs and shortfalls sending staff scrambling for additional funding sources. This should give pause to those who project rosy financial rewards from its construction.
Berkeley-based The Sports Management Group will probably not refund their consultancy fees if they are overly optimistic; the burden is with the taxpayer. Is the City of Fremont prepared to subsidize the water play facility with a large contingency fund –downtown funds can be designated – in case rosy projections lose some of their luster? If so, we the public can have some confidence in realistic expectations, not a path to an economic development disappointment.