Friday, July 27, 2007
Unreasoning reasoning
Does anyone understand why we are building basketball courts at Abbotsford Recreation Centre? This when the debacle with Centennial Pool has clearly highlighted the fact that what the Abbotsford sports and recreation scene really needs is another pool.
I do know the reasoning of the city on the matter – I just cannot understand it.
I suppose I am just to rooted in reality as opposed to the strange dimension existing within the walls of Abbotsford City Hall.
Their “reasoning” goes something like this: pool operations lose money while basketball courts generally make money.
In the real world this “Abbotsford speak” translates to: pool operations have a negative cash flow while basketball courts generally have a positive cash flow.
That is to say you spend more to operate a pool than you collect from user fees (negative cash outflow). Operating costs for courts tend to be much lower and therefore user fees exceed operating costs (positive cash inflow).
That assumes certain levels of court usage to meet projected fee income. Costs can be fairly accurately projected based on operating costs at similar facilities in other cities, although ARC will incur the unusual additional cost of needing a second front desk to control and collect for the new facilities added. Not having access to all the current operating costs of ARC, the cost projection assumptions and calculations and the projected usage and user fees I cannot comment on the city’s calculations.
For the purposes of this commentary it is unnecessary to be able to ascertain the reasonableness of the city’s assumptions and projections. I am willing to assume a positive cash flow from the new facilities in the neighbourhood of their $100,000 per year.
In the real world, outside of Abbotsford City Hall any accountant, anyone with business or common sense can tell you that it is not cash flow from operations that determines whether you are making money or losing money. It is total income minus TOTAL COSTS.
When you ask City Hall why they are building a basketball court instead of the obviously and demonstrably needed new pool facility they say that pools lose money and basketball courts make money and that they will be looking at building the badly needed pool in the future – after securing the “positive cash flow” of the court facilities.
If Abbotsford City Hall wants to determine which recreation facility it will build or what order it will build in based on positive or negative cash flows rather than the basis of what facilities the City most needs, that is their call … but in the real world you do not ignore the costs of the new facility (plant) you are building in determining cash flow and income/operating expenses. Even in the oxygen starved air of Abbotsford City Hall it should have been obvious that if your reason for building a facility is its cash flow you then need to consider the cash flow associated with paying for the facility you are building.
So in order to be able to show a $100,000 a year “profit” from the court facility operations the city, thus the taxpayers, will payout $150,000+ per month or $1,800,000+ a year. Only in Abbotsford City Hall could spending $1,800,000+ to “earn” $100,000 seem rational. In the real world this would not be thought stupid, rather it would be considered totally insane behaviour. Perhaps what we need in accounting for Abbotsford City Hall’s financial practices is a budget item and expense category to record the costs of their lack of logic and any financial sense.
Has Abbotsford City Hall become so habituated to their own smoke and mirror shows, selling taxpayers a mirage, that they themselves no longer see reality but the fantasy world they have constructed?
Never having raised the false promise of profit with the arts and museum building the cost of the building only enters into the equation as a question of are we getting good value for our investment? The important, and still unanswered question, is whether we have a design appropriate for meeting the needs of Abbotsford not when the doors open but a decade, two decades in the future?
They have raised the promise of “profit” for the arena complex. However in light of the reports on the cost of Vancouver’s Convention Centre, another public/ PCL contract, it would not be prudent to make any estimate at this time. But profit anywhere but in the minds (and sales pitch) of City Hall?
I do know the reasoning of the city on the matter – I just cannot understand it.
I suppose I am just to rooted in reality as opposed to the strange dimension existing within the walls of Abbotsford City Hall.
Their “reasoning” goes something like this: pool operations lose money while basketball courts generally make money.
In the real world this “Abbotsford speak” translates to: pool operations have a negative cash flow while basketball courts generally have a positive cash flow.
That is to say you spend more to operate a pool than you collect from user fees (negative cash outflow). Operating costs for courts tend to be much lower and therefore user fees exceed operating costs (positive cash inflow).
That assumes certain levels of court usage to meet projected fee income. Costs can be fairly accurately projected based on operating costs at similar facilities in other cities, although ARC will incur the unusual additional cost of needing a second front desk to control and collect for the new facilities added. Not having access to all the current operating costs of ARC, the cost projection assumptions and calculations and the projected usage and user fees I cannot comment on the city’s calculations.
For the purposes of this commentary it is unnecessary to be able to ascertain the reasonableness of the city’s assumptions and projections. I am willing to assume a positive cash flow from the new facilities in the neighbourhood of their $100,000 per year.
In the real world, outside of Abbotsford City Hall any accountant, anyone with business or common sense can tell you that it is not cash flow from operations that determines whether you are making money or losing money. It is total income minus TOTAL COSTS.
When you ask City Hall why they are building a basketball court instead of the obviously and demonstrably needed new pool facility they say that pools lose money and basketball courts make money and that they will be looking at building the badly needed pool in the future – after securing the “positive cash flow” of the court facilities.
If Abbotsford City Hall wants to determine which recreation facility it will build or what order it will build in based on positive or negative cash flows rather than the basis of what facilities the City most needs, that is their call … but in the real world you do not ignore the costs of the new facility (plant) you are building in determining cash flow and income/operating expenses. Even in the oxygen starved air of Abbotsford City Hall it should have been obvious that if your reason for building a facility is its cash flow you then need to consider the cash flow associated with paying for the facility you are building.
So in order to be able to show a $100,000 a year “profit” from the court facility operations the city, thus the taxpayers, will payout $150,000+ per month or $1,800,000+ a year. Only in Abbotsford City Hall could spending $1,800,000+ to “earn” $100,000 seem rational. In the real world this would not be thought stupid, rather it would be considered totally insane behaviour. Perhaps what we need in accounting for Abbotsford City Hall’s financial practices is a budget item and expense category to record the costs of their lack of logic and any financial sense.
Has Abbotsford City Hall become so habituated to their own smoke and mirror shows, selling taxpayers a mirage, that they themselves no longer see reality but the fantasy world they have constructed?
Never having raised the false promise of profit with the arts and museum building the cost of the building only enters into the equation as a question of are we getting good value for our investment? The important, and still unanswered question, is whether we have a design appropriate for meeting the needs of Abbotsford not when the doors open but a decade, two decades in the future?
They have raised the promise of “profit” for the arena complex. However in light of the reports on the cost of Vancouver’s Convention Centre, another public/ PCL contract, it would not be prudent to make any estimate at this time. But profit anywhere but in the minds (and sales pitch) of City Hall?
# posted by James W Breckenridge : 3:35 PM
