When we ran our story “White Elephant” last week, we didn’t realize to what extent the problems with the City Centre really was. In fact, the entire article was based upon a few phone calls, the city budget report. In a nut shell: It’s worse than we thought.
To correct the article, we are really not losing $600,000 per year , but $630,000, and it looks like it is getting worse.
The information was found after we reviewed the city contract with the management company that runs the City Centre, PFM, as well as the financial statement for 1999.
According to the contract, the city was supposed to receive 40% of any excess revenues (profits) for 1998 and 45% in 1999. In fact,the financial statements show that they received only 35% in 1998 and 40% in 1999. The ‘short change’ is $18,000 in 1998 and $20,315 in 1999. That’s only what we found carefully studying the documents over a long period of time, 15 minutes! Michael Levensen, City Manager, says that we are wrong with this figuring as the amount that was received in the current fiscal year really represents the previous years earnings. Confused yet? In other words, PFM does not give the city their ‘cut’ until the following year.
What’s even more incredible is that according to the terms of the agreement the City gives PFM $595,000 per year to subsidies the Centre. This amount is considered part of the revenue source and is calculated in the revenue sharing formula. That means PFM is receiving extra money from false profit. . When we spoke to Kevin Barett, Manager for PFM, he indicated revenue for the City Centre is $1,160,838, and failed to mention it included the $595,000 subsidy. In fact the revenue from real business was only $480,000 +/- with expenses in excess of $800,000!
PFM’s has a fabulous deal: They get $80K per year as a management fee, and an additional $200K in profit sharing, even though there really is no profit. All they have to do is maintain the status quo and they make a lot of money. The public is being mislead by this revenue sharing business. In fact if you remove the city contribution of $565,000, the management company would not be entitled to more than the $80,000 that they get to manage the place.
This was a badly negotiated contract. Not only does it give a bonus to the management company by operating the business at a deficit, but there is no way out of the this hole given the current structure.
So who’s running the show? Just a quick review showed errors in the accounting of the funds from the City Centre. The statements do not reflect actual expenses on the centre such as the carrying of the bond that was used to build the centre. We are not even sure if the expenses include electricity, water, insurance etc. as PFM has not been required to present as detailed a statement as any other business would require. We also discovered errors in the agreements that the city signed.
It is possible that we are missing something concerning all the facts and figures. Perhaps the City Commissioners do not know what’s going on either. One thing is certain: A complete audit of the contract and financial records of the City Centre is in order, and the City should show us all what are real lcost is in operating the centre. After all, we must find out who’s really running the show.
Take a look at the information for yourself:
Notes, page 7 of the Financial Statement
Letter from the Budget Officer to the City Clerk concerning our request.
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