A storm ahead.
FLORENCE - The city has only three more annual payments to go before the loan it took out to build the Florence Events Center is paid off. There a problem, though: The city lacks the money to make the final two payments and is stumped on how to get the cash.
The center has not been profitable since the recession started, and it has lost business to the nearby Three Rivers Casino, which did not exist when the city planned the events center.
When the center was completed in 1996, Lane County government, which levies and collects a countywide hotel room tax, signed an intergovernmental contract with the city, agreeing to pay off the 20-year construction bond on the center, which was expected to boost coastal tourism revenues by attracting visitors to conferences, meetings and other events there.
"It's not an arrangement you see every day," said the city's new finance director, Erin Reynolds, who discovered the problem when she was familiarizing herself with the ins and outs of city budgets. Florence budgets five years out, more than the state requires, and when she was hired the city was in the throes of that budgeting process.
The problem stems from when the city made what would seem to be a sensible financial decision: In 2004 it refinanced the $1.48 million principle that was still owed on the original construction loan, saving $346,000 in interest for the life of the loan. But the refinancing also extended the length of the loan by two years.
"I noticed that the (intergovernmental agreement) ended June 30, 2014," Reynolds said. "I thought, 'Hmm, I think our debt ends in 2016.' "
"That should have been something that should have been identified," she said. "For whatever reason the dots weren't connected. I just found that disconnect. ... It wasn't the most clear at first. I thought, 'No way did they miss this.' "
But they did, and now the question is how to pay the rest of the debt.
The county will make only one more payment for the events center loan, but the city has three more annual payments to make to pay off the remaining $454,560, including anticipated interest.
The city will receive $182,000 from the county, which will cover loan repayment through the summer of 2014. After that, the city is on its own.
Reynolds said it's too late to renegotiate with the county, which has its own well- documented severe financial problems. So the City Council has directed City Manager Jacque Betz to form an exploratory committee to figure out the best route forward. The 11-member committee has its first meeting on May 6.
"It's not about me making decision. It's about me facilitating a process," Betz said, noting that she is due to report back to the council on the issue in September. "I try to be open and I try to engage the community."
When the community voted in 1993 on whether to build the events center, the project was approved by a narrow margin of only 71 votes. The ballot measure explicitly excluded property taxes as a means to pay for the center, which Betz said is no longer realistic given the new challenges.
The demographics in the area have changed since that ballot measure, Betz said, and she doesn't rule out levying a new property tax, but any option involving the public's money would be voter-approved.
In addition to the problem of paying off the construction loan, the events center is facing an annual $98,000 shortfall in its operating budget starting in 2015, Betz said, assuming that ticket sales and other revenue streams stay at recession era levels.
The City Council increased the city's hotel room tax by one percentage point in 2008. The two recipients of city room tax revenue are the events center, at approximately $200,000 per year, and the Chamber of Commerce, at about $50,000. The city's room tax is separate from the county's.
Recession retarded development
One of the premises of having an events center is to attract conferences and other large gatherings of people who spend money in the greater community.
Betz said that if Florence had been able to land a large hotel or other development that collects room taxes, that would have been all the events center needed to have a sustainable budget. The original plans for the center assumed that some revenue-generating facility would be built in the future. But the recession scared off potential investors and nothing has been built.
It costs about $49,000 per month to run the events center, and aside from room taxes, the money comes from rental fees, ticket sales and donations, said the center's director, Kevin Rhodes.
Rhodes, who is on the committee with Betz to find sustainable solutions, has worked at the center since three months after it opened, and he remembers the doubt in the community about its future when it was being built.
"Many believed it was just going to sit vacant, but it stays incredibly busy and it's widely used," he said. "Until you actually get one in your community, you don't realize what a benefit it is."
Annual events include a home and garden show, the Winter Folk Festival, the flower show of the Rhododendron Festival and performances by the Eugene Ballet and Eugene Symphony.
Rhodes said the center's peak was in 2006, when it was the venue for 461 events. Last year there were 373.
"Ticket sales are down 20 percent from when we were peaking," Rhodes said. "These types of facilities always need to be subsidized. They rarely are self-funded."
Cooperation with the casino?
Rhodes said the center has three full-time employees, plus contract workers and about 60 volunteers who raise funds and donate about 6,000 hours per year.
The cadre of active volunteers, many of whom are retirees, are a boon to the facility, but Rhodes sees having a professional-quality theater as beneficial to local school children as well. They can do more with their own productions and learn more about theater. In that sense, the facility is more than a mere business and its value cannot be calculated in dollars and cents, he said.
"Over the years, you see the important role it plays in our community," Rhodes said. "It's really a wonderful venue."
One of the factors putting a crimp on the Florence Events Center revenue is the nearby Three Rivers Casino, which has a hotel and events facility.
Betz said her intention is to have meetings with officials at the casino, possibly mediated by someone with Gov. John Kitzhaber's office, to see if there is any way the two entities can work together.
"Sitting down and enhancing our relationships with the tribes is how I'd like to put it," Betz said, noting that joint marketing efforts is one possible way the city could work with the casino for everyone's benefit.
Betz outlined ideas for finding sustainable funding in her article in the April edition of the "Focus on Florence" newsletter.
She is open to hearing solutions from those it would affect. In the article, her stated possibilities are to ask the citizens to use city general fund money, to put a five-year local option levy on the ballot, to create a special taxing district, to privatize the center or to ask the governor for help. "You always hope that financial assistance is there, but everyone is struggling right now so you really have to get creative," Betz said. "If the economy turned around, then this problem could fix itself."
Even though it was a costly error in miscalculating the final date of the debt service, everyone involved said they are happy to have discovered the issue early enough to come up with a plan.
Privatizing the events center is low on the list of probabilities, and closing it down seems out of the question.
A community attraction
"I'm glad we found this (error). This is our chance to get it right," said Betz, who has worked for the city for 14 years and been manager for about a year. "It's a very time consuming effort that I am engaging on."
Cal Applebee, executive director of the Florence Area Chamber of Commerce, said the events center is very important to the city, and he knows many seniors who have chosen to relocate to Florence in the past decade, at least in part because of it.
"I don't think anyone would even envision that it would not continue to function and be available," Applebee said. "The city is going to find a revenue stream one way or another to keep it going."
He said that at this point, he has not heard much discussion about this issue, which only came to light recently, with more people learning of it through the newsletter.
"As time goes on there will be a lot more awareness in the community," he said. "I think most people in the community recognize the importance and the value in that. We've also got a lot invested in it. It would be a terrible resource to just shut down and let it go. I don't see that happening at all."