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PICTOU - The Pictou County Wellness Centre's first year has county council seeing red.
Municipality of Pictou County CAO Brian Cullen told county councillors Tuesday during a finance committee meeting that the 2012-2013 unaudited fiscal outlook for the new facility shows a shortfall of about $445,500.
The operating deficit for the centre is projected to be just over $300,000 while the board operations, which relate to debt financing charges, come in at around $600,000. However, the Pictou County Wellness Building Authority is predicting the actual shortfall will be $445,000.
Cullen said the deed transfer tax can cover up to $250,000 of this deficit, meaning the wellness centre will still end its current fiscal year with a deficit of a little more than $197,000.
''This must be picked up by the municipal units," said Cullen, adding this includes every municipal unit, but the Town of Westville since it didn't agree to become a member of the Pictou County Wellness Centre Building Authority.
The Pictou County Wellness Centre is owned by the five municipalities which agreed to put a deed transfer tax in place to help cover its operating costs. This means that one per cent of every real estate sale in these municipal unit goes to the authority to pay for the wellness centre as well as upgrades to the Aberdeen Hospital.
The entire building cost $38.2 million to construct with millions of dollars contributed from all three levels of government. Construction began in July 2010 and it opened in November 2012. Its features include a twin pad arena with two NHL-size ice surfaces, a six-lane, 25-metre pool and a warm water pool and regulation size gymnasium. The Pictou County YMCA moved into the wellness centre this past fall.
Based on a funding formula, the Municipality of Pictou County has to pay 25.4 per cent of this $197,000 shortfall, so its bill will come in around $50,000 for this year. He added this could increase by an additional $10,000 since some payables have yet to come in.
Costs for other municipal units range from $8,000 to more than $60,000.
Cullen said when the municipal authorities were first presented with the proposal by a group called Citizens for a Healthy Pictou County Society to take on the wellness centre, it estimated that the centre would accumulate a $230,000 deficit that would be covered by the deed transfer tax.
However, he said, this proposal was based on a 90 per cent capacity model for the centre, but the building is currently only being used to 42 per cent of its capacity. Cullen said the wellness centre gets the majority of its revenue from ice rentals and as of now that number is much lower than projected.
"The authority is looking at other expenses like power consumption and other ways to get in line with what we anticipated," he said. "The utility costs are higher than we anticipated."
As county councillors were struggling to grasp these numbers, Cullen said things don't look much better for the 2013-2014 fiscal year. The wellness centre is projecting revenues of $782,000, but its expenses are predicted to be about $1.4 million for an operating deficit of about $651,000.
There is also the possibility that an additional $75,000 in capital costs could be tacked onto this bill for maintenance work for a total deficit of more than $720,000.
With the deed transfer tax covering up to $250,000 of this deficit, the Municipality of Pictou County could be on the hook for about $120,000 in 2013-2014.
"If this is bad this year and so is next year or in five years, do we go bankrupt?" asked Coun. Chester Dewar.
Coun. Randy Palmer said the county and four other municipal units agreed to cover the wellness centre's deficit and it must abide by the agreement.
"We own it," he said. "If it goes bankrupt. We all go bankrupt."
Cullen said the operating costs of the facility are not expected to fluctuate much in the future so the goal is to increase revenue for the centre.
"We are stealing from Peter so we can steal from Paul," said Coun. David Parker. "I am very concerned with these numbers. I look at Pictou and Trenton and they are barely scraping by now. Those are serious numbers that frighten me."
Council asked where the business plan went wrong and questioned how Pictou County could continue to accommodate all of its ice surfaces.
"The business plan contemplated there would be six ice surfaces in the county. We currently have eight," said Cullen.
Coun. Robert Parker questioned whether the authority's decision to keep its ice rentals low or on par with other arena's in the county was hurting its revenue, but Cullen said increasing the amount of ice rental would just drive people to other rinks.
"Rentals are low, but the authority is in a catch 22," Cullen said. "Raise them (the rates) you lose people and it will have a negative effect."
Although he doesn't support such a move Robert Parker asked if the authority considered raising the deed transfer tax to 1.5 per cent as a way to raise its revenue. Cullen responded by saying " the deed transfer tax is performing the way it is suppose to".
"It's the business model that is not," added Robert Parker.
County Warden Ron Ballie, who is the chair for the authority, said the most important thing council can do is keep a close eye on the centre's expenses.
"This is the worst case scenario and we can't tell you how much the best case scenario is," he said. "We only own one facility in the county and that is the wellness centre. We have to keep a thumb down on the expenses. "
New Glasgow Mayor Barrie MacMillan said although the town doesn't exactly know what its contribution to the 2012-2013 deficit will be because the figures have yet to be audited, the town has budgeted to cover its expected contribution to the deficit. New Glasgow is responsible for 35.5 per cent of the deficit, the highest percentage of any municipality. MacMillan said he's not completely surprised that the Wellness Centre has a deficit.
"We knew that there was going to be an operational deficit especially in year number one, where we had a lot of startup costs and commissioning costs that certainly wouldn't be included in another year," he said.
New Glasgow's Chief Administrative Officer Lisa MacDonald said the town accounted for the deficit in its budget, which council approved at its meeting Tuesday.
The audited fiscal statements for the Pictou County Wellness Centre are expected by the end of June.