BLYTHEWOOD – During an intense five-hour workshop last Friday, Blythewood Town Council discussed ways to ‘stop the bleeding’ of the Doko Manor, which, all worried aloud, could possibly become too expensive to operate in the not too distant future. A question that popped up again and again was “How long can the Town continue to subsidize the Manor?”
The other big concern was whether to go forward with construction of the Doko restaurant in light of both real and feared financial risks. Councilman Tom Utroska asked, “In a worst case scenario, if the restaurant owner defaulted in the second year and the Town had to pick up the payment for the next eight years, would we (the Town) have enough disposable income to make those payments?”
Mayor J. Michael Ross answered, only half joking, “That depends on how much we’re still losing on the Manor.”
The Manor’s Financial Bind
In October, the Town’s CPA, Kem Smith, reported that the Manor was operating at a deficit of $106,000 ($52,000 in furnishings and $54,000 in operating costs) after the first six months of operation (March to October 2013.) Last month, Smith reported operating losses of almost $23,000 during the first half of fiscal year 2014 (July – December 2013.) She said that the improved picture of the losses resulted from spreading some pre-paid expenses over the 12-month fiscal year. Since Smith’s report did not separate the losses by month during the first half of fiscal year 2014, The Voice has not been able to determine how much of that $23,000 loss was in addition to the $106,000. As of press time, Town Hall has not responded to requests for the information.
Councilman Bob Massa said that since the $52,000 for Manor furnishings was paid out of the general fund, it can’t be paid back with more general fund money. He said if the Town sets up a payment schedule to pay off the $52,000 from another source, such as Hospitality Tax revenue, it will take four and a half years of $1,000 per month payments.
Ross told Council, “The December numbers for the Manor were only down $597. I really think the previous $6,000 (per month loses) are what got us to this.”
Massa told Council that the breakeven point on operating cost for the Manor is about $6,600 a month. “Were putting in about $4,000 a month,” Massa said.
Councilman Bob Mangone had criticism for the former Events and Conference Center (Manor) Director, Martha Jones, for not providing financial projections to Council for the Manor’s losses when requested. “We asked three times for the projections,” Mangone said.
“We may have needed to have a person with more experience and who could look at the numbers,” Ross conceded, “but those numbers were never shared with (her.)”
“With all due respect for Ms. Jones’ competency,” Mangone said, “it doesn’t take a Master’s degree in finance to add up how many events you had, how much was charged and how much the total came out to be.”
“And she did that very well,” Ross countered.
“She never even gave us a first quarter projection,” Mangone said.
“Well,” Ross said, “she isn’t here anymore.” (Jones resigned effective Jan. 29, 2013 to go to work for Richland School District 2).
“But we asked for it three different times,” Mangone said. “And all we ever got was telling us how well we did in December. But how many events do we have scheduled in January, February and March? How much are we charging for them? There. You’ve got the number. It’s not rocket science.” Utroska and Massa agreed.
Jones told Council in October that she had not had access to the monthly financial reports on The Manor. Asked about that, Smith told The Voice she sent the reports every month to the Town Hall. When asked by The Voice whether she had ever asked anyone for those reports, Jones did not answer.
“We were again promised by Ms. Jones that she would have (the projections) to us before this meeting. But still we don’t have them,” Mangone said.
Another sticking point had to do with the Town’s policy of paying the expenses of groups who ‘rented’ the Manor for free. Utroska said he didn’t think the Town should be paying the expenses for such things as air conditioning, heating and the laundering of tablecloths and napkins for groups that are allowed free use of the Manor.
“But this is our Community Center,” Ross said. “I don’t know who ever thought we could break even here. Give it a chance. We’ve raised the fees about 25 percent on the weekends.”
“I think as soon as we said we were going to rent it,” Mangone added, “then it lost the concept of a Community Center. It’s a venue that the community uses.”
Mangone said he didn’t think The Manor would ever break even, “because the 25 percent increase is not going to come close to covering the expenses. We’re going to have to decide how much we are willing to subsidize The Manor.”
“We are not going to break even,” Massa agreed. “We need a minimum charge for use of the building and we (are now paying) for some of the Director’s salary with Hospitality Tax money.”
He told the group that because the budget was more than 5 percent off because of the losses, the law required them to revise it. Ross suggested Massa work with Smith and Meggs to bring some suggestions for that revision to another workshop scheduled for Council on Monday, Feb. 17.
The Manor Punch List
Another item for discussion was the Manor’s ‘punch list’ – items that the contractor is obligated to finish, repair or touch-up by March 12. Utroska, who has assumed oversight of such items from his predecessor on Council, Paul Moscati, said the list includes 16 interior and exterior items ranging from interior doors that need replacing and corrections to the paving to missing ceiling tiles and chipped paint on the pergola. While there is no additional expense for the punch list repairs, Utroska also listed the following necessary items that will be an additional cost to the Town:
A security system for the Manor.
A maintenance reserve account for ongoing wear and tear or for carpet/HVAC replacement.
Final top layer of paving on roads and parking areas.
To set up a reserve or enterprise fund for the Manor, Massa, a CPA, suggested the Town consider setting aside money from the Hospitality Fund, which is a fund derived from a tax collected by the Town’s restaurants, to be used to attract tourists to the town.
“By law we can take $25,000 of this money from the general fund for tourism related items,” Massa said. “We would have to pass a resolution, but then it could be used for the park as well as the Manor.”
Massa told The Voice that the Town’s $2 million reserve fund could not be tapped for the enterprise fund.
Earlier in the meeting, Town Attorney/interim Administrator Jim Meggs said that Larry Sharpe’s last $500,000 payment for the Community Center had been received by the Town and was available for a reserve (maintenance/replacement) fund for the Manor.
But an overall budget recap of the Park and Manor that was presented to Council by former Councilman Moscati on Sept. 16, 2013, and which appeared on the front page of the Sept. 20, 2013 issue of The Voice, showed the entire $1.5 million from the sale of the Community Center property (to Larry Sharpe) is no longer available. According to Moscati, that entire revenue has already been spent and accounted for in the construction of the Manor and park.
Doko Restaurant Status
Mangone reported on his research into the Town’s $900,000 loan from Santee Cooper to build the proposed Doko restaurant. He said the terms of the loan are 2 percent interest the first five years, with payments at $18,000 per year. For years six-10, the loan floats and the interest rate is whatever the one-year treasury bill rate is for that year. Mangone said the contract is between Santee Cooper and the Blythewood Facilities Corporation (BFC), a non-profit corporation created by the town government, that was signed by State Rep. Joe McEachern, the BFC president.
“Those loan payments over a 10-year period,” Mangone said, “will be roughly $220,000 short of the $900,000. But the plan is to rent the restaurant to Jonathan Bazinet, and it’s fair to say that if Mr. Bazinet’s restaurant produces the revenue that he thinks it will, then the Town would bring in between $400,000 and $500,000 just from the 2 percent Hospitality Tax that would be generated from Bazinet’s revenue.
Mangone said it is his understanding from reading the loan contract and a letter former Town Administrator John Perry sent Santee Cooper asking for the loan, that the Town is the guarantor of the loan and that if the restaurant fails, the Town is on the hook to make the payments. Meggs disagreed, saying the Town is not on the hook and is not the guarantor of the loan.
“It is very clear,” Meggs said, “that we (the Town) have the opportunity to non-appropriate (not pay) and the BFC is on the hook, not the Town.”
But both agreed that if the loan is defaulted, Santee Cooper could take over ownership of the restaurant and the land it sits on and the Town’s bond rating would go through the floor.
The Council members said they had little understanding of the BFC and requested that the Town’s bond attorney, Ray Jones of Parker Poe Consulting Firm, and the Town’s CPA explain the functions and financials of the BFC at the Feb. 17 meeting.
Meggs explained that, “The BFC is designed to do one thing – avoid the bonded debt limitation of the Constitution. The lynch pin of all this is the non-appropriation option that the Town has every year, which keeps it out of the full faith and credit and general obligation of the town.”
Meggs added later in the meeting, “the BFC is a way (the Town) got around certain regulations and restrictions.”
While Council expressed their faith in Bazinet’s ability to be successful in the restaurant, “Our decision (on whether to build the restaurant) should not be based on whether Mr. Bazinet will be successful,” said Mangone. “The Town’s responsibility is ‘how can we protect ourselves in a worst case scenario.”
At the end of the workshop, Council voted to go in to executive session to further discuss their proposed contract with Bazinet. No vote was taken following the executive session. Council will hold another meeting at 7 p.m. on Monday, Feb. 17 at the Manor.
