CPA: Doko Manor Must Stop the Bleeding
BLYTHEWOOD – After the grand opening of Doko Manor two weeks ago to rave reviews from Mayor J. Michael Ross and the Town Council, the Town’s CPA, Kem Smith, presented the sobering news to Council Monday evening that the Manor is not breaking even and is, in fact, operating at a fairly large deficit.
When asked at a park committee meeting last week for an update on the Manor’s rental revenue, Town Administrator John Perry told committee members that he did not have the demographics and metrics to answer questions about the Manor at that time.
However, Smith told the Board that, during the six months since it has opened, the Town has spent $106,000 on the Manor from the General Fund – $52,000 for furnishings and another $54,000 for operations.
“We’re going to have to stop the bleeding,” she said. “We’re averaging about $3,036 per month in rentals, which is only about half of our fixed monthly costs of between $7,500 and $8,000.”
Asked by Councilman Ed Garrison if the monthly rental incomes are increasing, Smith answered, “Not really.” She listed the monthly rental revenues as: $2,600 in June; $3,100 in July; $6,300 in August and $3,400 in September.
Smith said that she and Perry need to determine where the break-even point is for the operation of the Manor.
“The fixed costs are about as low as we can get them,” she said. “We’re only paying for utilities and a percentage of the Manor’s employees and about $500 a month for some basic supplies. There’s nowhere else to cut expenses.”
Plus, Smith told the Board that the fixed rates are down to the bare bones and do not include any kind of sinking fund that she feels is essential for big repairs down the road in five to 10 years.
“I think we’re going to have to look at increasing rental fees,” she said.
Asked by Ross if she thought the Manor should already be at a break-even point, Smith said she had two comments.
“One, as I listened at a recent Council meeting about how ‘we’ve got it booked until March 2014,’ that was disturbing because I knew what the numbers looked like,” Smith said. “Just having it booked on weekends and a couple of days a week is not what we need to be looking at. We need to be looking at the numbers.
“Second,” Smith said, “You are $54,000 in the hole. How much more money do you have? Can you borrow money? Have you saved $150,000 so you can weather the loss until you can make a profit? This is a business that has to have funding,” she emphasized. “So are you going to continue to fund it with the General Fund no matter what the losses? How long are you going to fund it like that? It’s time for you to start asking the hard questions, like ‘When are we going to run out of money?’ ‘Will we be able to get a loan?’”
Garrison suggested the Town spend the money for a marketing strategy and a marketing program to follow up. Perry said the Town hired Big Eyed Bird marketing firm recently to create branding for the Town and the Manor.
“This has been a learning experience,” Smith told Council, “but we don’t want too much more time to go by without seeing what we’re learning here. We’ve got to increase the number of rentals and the rates.”
