NILES - The Mayor Ralph. A. Infante Wellness Center opened in February 2009 at the cost of just more than $4 million. The city has seen strong numbers in revenue and membership, city officials say, but a recent change in its financing has them on the hook for more than initially expected.
The center is losing money, and the city is picking up the difference.
The city paid for the 70,675-square-foot building with the sale of a one-year note. Each year, that note would be rebid, Niles Auditor Chuck Nader said.
"We were trying to pay down the note by about $100,000 each year, and by doing this, the (center) was about breaking even every year," Nader said.
The city ran into snag when the economy began to take a downtown around 2010, and Nader said city leaders believed they would need to shift course.
"When (the economy) was more favorable, we were getting interest rates of less than 1 percent," Nader said. "But with the financial market heading the way it was, paying off the note would just get more and more expensive.
"Let's say the (mortgage note) was around $3 million. If interest rates went up to 4 or 5 percent, we'd be paying $150,000 alone in interest each year."
The city's answer was to change the note into a 20-year bond payment at a fixed-interest rate of 2 percent.
Under the one-year notes, Nader said Niles was looking at taking 40 or more years to pay off the center. With the fixed-interest bond, the city now pays a higher figure each year in debt service, but the center will be paid off in 20 years.
In 2011, the city reported a note payoff of $3.34 million and bond proceeds of $3.27 million. That same year, the center reported a profit of $91,293, the last time the center has made a profit for the city.
In 2012, the first year under the bond, the center reported revenue of $294,648 against $468,197 in expenses, a difference of $173,549 that the city was on the hook for paying.
In 2013, the story was much the same, as the city reported a loss of $151,447 on the center.
According to Nader, the city's general fund has picked up the slack for the center, and will continue to do so going forward. In 2013, the city's general fund balance was $12.55 million, with the $151,447 difference on the center's mortgage taking 1.89 percent of that total.
One avenue not available to the city to lessen the load is advertising. According to Scott MacMillan, director of operations at the center, the city will not pay to advertise against private fitness centers.
"It can be hard to run a business within a government," MacMillan said. "It's just the way these arrangements are set up. The finance committee people in Niles make up the budget, and right now we don't have any money in it for advertising."
The problem with spending money on advertising a facility that is already costing the city's bottom line, Niles Mayor Ralph Infante said, is that the benefit may not outweigh the costs.
"We're a nonprofit, and we're not trying to compete with the Planet Fitnesses (of the world)," said Infante, the namesake of the facility as well as advisory board president. "The soccer field and courts are always booked, and we just brought in Silver Sneakers (for senior citizens).
''Could we maybe get some more members (by advertising)? Sure, but we already have a lot of members," he said.
The center may not be alone in shying away from tradition advertising, as similar city-owned facility in the area have little in the budget for advertising as well.
North Olmsted Recreation Center administrative assistant Linda Andrews said that her center takes a grassroots approach to marketing.
"We do a newsletter that we distribute and we have a website, but we don't have money in the budget (for TV, newspaper or radio marketing), Andrews said. "We'll only advertise in the paper for a couple of really special events, or if we get one or two freebies from the paper."
David Cooper, manager of Parks and Recreation for the city of Tallmadge in Summit County, is in charge of operating the city's recreation center. According to Cooper, Tallmadge's facility has a $203,000 operating surplus.
Cooper said he does take a targeted approach to marketing the facility to those in the area.
"Truth be told, the majority of our members actually come from surrounding cities, because there is nothing else like our rec center in the area," Cooper said.
"We don't advertise in big papers like the ones in Akron or Cleveland, but we do advertise in local papers in Tallmadge, Stow and Kent for our programs and other offerings."