An Update on the HFFA Transition

It’s been just over a month now since a new company began managing Huntersville Family Fitness & Aquatics (“HFFA”). The Swim Club Management Group (“SCMG”) based in Huntersville was awarded the HFFA management contract by the town board this summer after the prior management group had managed the facility since 2002. I wanted to see how the transition was going so I reached out to SCMG CEO Brian Sheehan to get his thoughts.

Eric


– What are some of the immediate changes SCM has implemented at HFFA over the past month?

We have made a number of changes, many of which members will begin to fully enjoy over the next 30-60 days. For example, we immediately closed down the outdated Café and signed an agreement with Summit Coffee to have them renovate and operate the Café and kitchen. We see an opportunity with this arrangement to increase our member service by offering a more diverse, healthy menu to our members. The arrangement should also be a boast to overall profitability. We have also signed agreements to purchase new fitness equipment. Members will soon see new equipment and repurposed spaces that will allow for bootcamp style classes and other specialized group exercise classes. 

We are also working with an outside firm to perform a membership survey at no additional cost to members or the taxpayers. We will receive their presentation on the results later this week and we expect to implement additional changes based on membership feedback. 

– How have HFFA members reacted to some of these immediate changes?

The response has been terrific. Some of the changes have been small. For example, we added complimentary fruit infused water at the entrance, dedicated a room to cycle/spin classes and created a classroom more conducive for the yoga classes. These changes cost very little but have made for a much better member experience. 

– Do you have any social media or marketing plans to attract new members to HFFA?

Yes, we identified this as an opportunity for improvement early on. We have enhanced our presence on social media and plan to do a better job of engaging our members through social media moving forward. In addition, we signed an agreement recently to have the HFFA website redesigned. The current website is outdated and unengaging. I believe the last time they updated the Current Events Section was 2015. Our members can expect a more functional and dynamic website within a few weeks.

– What are some of the short-term goals SCMG is focusing on at HFFA?

Our immediate focus has been on improving the members experience. We believe the best way to attract new members is to offer our current members a great experience. We have also put a heavy emphasis over the past 30 days on cleaning up a few risk management issues. Part of having a positive member experience is keeping our members and their children safe. This is a responsibility we take very serious and we are moving quickly to make certain all areas of the facility are operating at industry best-practice. 

– How do you see HFFA benefiting from or complementing the town’s new rec center still under construction across the street on Verhoeff?

We have quickly established a great working relationship with Parks & Recreation and we are excited to create synergies with their new space. They have offered all HFFA members free access to the facility which provides a great value proposition for our members. 

– Can you briefly explain how HFFA is funded – including how taxpayers contribute.

HFFA is funded, in part, by Tourism (Hotel/Motel) Taxes, along with other revenue sources like membership fees. Our goal is to reduce the reliance on taxpayer funds at HFFA. 

Within our first week we identified that there were numerous members with past due balances. In fact, the total dollar amount was in excess of $12,000. Our team worked diligently on this matter and within our first 30 days we have collected over $10,000 in past due fees. In most cases the issue was simply a member that had obtained a new credit card and forgot to update us. Making all those phone calls was certainly not the most fun job in the building during the first 30 days, but it was necessary to properly operate the business. We understand the fiduciary responsibility we have to the taxpayers to be good stewards of their money and the people of Huntersville can expect us to operate accordingly.   

– What message do you have for those who were opposed to the decision to make a change in management at HFFA?

Whether you advocated for a change in management or opposed a change in management, we welcome you as a member at HFFA.  I have lived here most of my life and I know the people of Huntersville are fair and open-minded. I hope everyone will take the time to stop into the facility over the next 60 days and see the positive changes we’re making. 

HFFA Transition Costs – Severance Pay

The town board voted well over a month ago on July 11 to change management companies at HFFA. As a consequence of that decision, pursuant to section 8.(c) of the current management contract between the town and the current management company, Health & Sports Works, if the contract is terminated without cause the town is required to pay a termination fee equal to 6 mos. base management fees AND 8 WEEKS SEVERANCE FOR DEPARTMENT HEADS. Interestingly, this line about severance was only added to the current contract that the prior board rushed through less than a month before the 2015 elections – approved 4-2  by Commissioners Julian, McAulay, Neely, and Bales (yes, the same Melinda Bales running for re-election this year).

In all three prior management contracts in 2002, 2006, and 2011, the termination language limited the town’s exposure to 6 mos. base management fees – of course, if the town had taken the reasonable position that the contract was being terminated for cause, taxpayers wouldn’t have had to pay any additional monies to terminate the contract. Why the town would ever agree to such unfavorable terms is a topic for another post.

Would you expect current employees at HFFA to receive “severance pay” if they maintain employment under the new management company? Dictionary.com tells me that severance pay is paid because of a lack of work. So if the new management company decides to hire employees of HSW and keep them employed in their same or similar positions, how will they be without work? Doesn’t make sense to me, but that’s the position HSW is taking according to emails sent to the town. Seems to me the town never intended to pay “severance” to people who maintain consistent work. Too bad the current contract doesn’t have a definitions section so any disagreements over terms could be easily resolved. Good thing the town has top notch legal counsel advising them on how to resolve disputes over easily understood terms like severance.

So, how much are taxpayers in Huntersville going to have to pay the current management company to stop managing HFFA? At present, the demand for severance appears to be $95,287.29 related to nine, YES NINE, department heads. Just to put that in context, the town only has six department heads, eight if you include the town attorney and town manager. Don’t bother trying to find information about each department at the HFFA website, it’s not there. Will the current town board and current town manager just agree to whatever amount HSW  demands in severance without negotiating? I guess we’ll just have to wait and see.

Eric

Huntersville Board agenda – June 5, 2017

UPDATE: Not surprisingly the budget passed 5-1 with little discussion and with Commissioner Phillips being the lone vote in opposition. And as I wrote below, Huntersville appears to have taken a page out of the Nancy Pelosi school of governing since they voted on a budget on June 5 that had not been presented to the public beforehand.


There is a town board meeting tonight at 6:30pm – no pre-meeting is scheduled. You can view the agenda or download the full agenda packet here. You can watch a live stream of tonight’s meeting at the town’s Ustream page here. I can’t cover every agenda item – especially for tonight’s overly packed 297 page agenda – so I always encourage residents to review these agendas and discuss any items of interest with the mayor or a board member because even a single motivated resident can make a difference on how the votes turn out on some of these.

I’m not even going to try to address any of the other issues on tonight’s agenda because the most important item is adoption of the budget (and because I haven’t had time to sufficiently review the 297 page agenda packet that wasn’t even made available to the public until sometime mid-day last Thursday). The budget doesn’t have to be voted on until the end of June – why not just defer a budget vote until the June 19 meeting given how many other items are already up for discussion tonight so that the budget can receive the full attention of the board?

A few other random thoughts on the proposed FY 17/18 budget.

First, why is there no revised budget in the agenda packet? The town board and staff held a budget work session two weeks ago on May 22 and discussed changes to the interim town manager’s proposed budget. Does staff plan to just hand a hard copy of any revisions to the proposed budget to the board at the dais immediately before the meeting starts tonight? If so, why not make the same copy available online to the public prior to tonight’s meeting? I guess the board has to pass the budget before the public is allowed to know what’s in it…

Local government continues to grow unabated despite the election of a new, “fiscally conservative” town board in 2015. Total budget expenditures (including HFFA and Electricities funds) of $47.3 million in FY 12/13, $48.8 million in FY 13/14, $53 million in FY 14/15, $55.7 million in FY 15/16, $57.9 million in FY 16/17, and now just over $61 million recommended this year. If the board does vote on the budget tonight, I look forward to the mayor explaining to Huntersville taxpayers they have to wait just one more year for that reduction in the tax rate he pledged to work on this year…

$17.9 million estimated in last year’s budget for property tax revenues. The town has collected $18,245,815 YTD according to the proposed budget. What is the surplus revenue being used for?

Gotta love paying a $20 vehicle tax to the town every year to help do your part to generate another $1.6 million or so in revenue because paying taxes when you bought your vehicle and having to pay the DMV and the county ever year based on an inflated value of your vehicle isn’t bad enough.

Huntersville’s portion of county ABC revenues remains a paltry $95K. Davidson doesn’t even have an ABC store and yet they receive the same portion of ABC proceeds. What are the state legislators who represent the town doing to bring about a more equitable distribution of ABC revenues in Mecklenburg County?

Every single town department’s budget is up over last year’s adopted budget figures except Governing Body (costs associated with the mayor and town board) which is only down a mere $6,500.

Did you know your tax dollars are used to subsidize memberships for elected officials and town staff to HFFA? See that line item for “Other Contri(Fitness)” in every department’s budget except Legal, that is where the town budgets for a supplement for HFFA memberships. According to the town’s finance director, the town supplements employees and elected officials at the same rate, which is $312 per year. She explained it is considered a supplement because the employee/elected official is also required to contribute $120 per year for their individual membership. Elected officials currently taking advantage of a subsidized membership to HFFA are: Mayor Aneralla and Commissioners Bales, Boone, Guignard and Kidwell.   

Even with all that help from taxpayers, HFFA joining fees AND membership fees are down again this year and it’s highly unlikely the facility will make up the gap in projected figures in the next three months going into summer. But hey, let’s continue to subsidize exercise in Huntersville because economic development, right?

Over $3.4 million budgeted for the Huntersville Fire Dept., Inc. and yet they don’t have to itemize their budget like every other department. That doesn’t seem very transparent. It’s interesting that the proposed budget only uses the term “volunteer” but not “paid” or “salaried” when referring to the Huntersville Fire Dept., Inc. since it is made up of both volunteer and paid firefighters.

HPD is asking for approx. $1 million more than their adopted budget last year, although the interim town manager is only recommending a mere half a million budget increase. And yet, as of March 13, 2017, HPD is sitting on $347,807.19 in equitable sharing funds received from both the DOJ and Treasury Department. When asked about these funds at the May 22 budget work session Chief Spruill said (paraphrasing) they were saving these funds for a big ticket item. HPD already purchased an armored vehicle without using these equitable sharing funds, what other big ticket item is HPD saving up for? Why are these funds not being used to offset some of the police budget this year? Can these funds be used to help stop the seemingly unending string of vehicle break-ins in Huntersville? Maybe the board’s public safety liaison, Commissioner Boone, can help answer these questions.

And in case you missed it, my thoughts on the Legal Dept. budget are here.

I’m already close to a thousand words so Parks and Rec gets off easy this time.

Eric

Journalism 102: How to Journalism contd.

Here is my obligatory response to the Lake Norman Tax the Citizen “talkers.” If you’re one of the many, many, many local residents who doesn’t actually read the Citizen despite it being delivered free to your house every week and so don’t know what I’m responding to, you can click here. It doesn’t show up in the online version, but the print edition ran a “photo” of yours truly alongside the Talk of the Towns column. Touche, talkers, touche.

Is it just me, or is the whole referring to yourself as “talkers” gimmick so you can avoid signing your name to an opinion piece slightly absurd? Do these “talkers” actually think by hiding behind unsigned editorials readers don’t know that the news staff is contributing to the opinion section of the paper? I know the Citizen can’t afford to hire separate editorial staff like the WSJ or Charlotte Observer, but drop the pretense with the unsigned editorials. One has to wonder if they walk around the newsroom referring to each other as “talkers?”

And is it just me, or is it slightly hypocritical for a paper that disparages social media and users of social media at every opportunity to waste ink responding to something written by “a local blogger?” Maybe my criticism just hit a little too close to the mark. Or, maybe the “only experienced, professional, legitimate news outlet in the Lake Norman region” is upset that some “local blogger” has any influence at all on local politics when we all know “real news” print journalism outlets are the only proper source of influence on local politics. It’s almost as if the Citizen longs for the days when its stated agenda will again manifest itself behind the dais at Huntersville Town Hall like it did before this current board was elected.

I’m not going to delve into the economics of the Rapids agreement not because it’s boring, but because the talkers have already demonstrated their inability to grasp basic economic concepts in the past. See the talkers demonstrate their inability to understand scarcity here and then see the talkers throw a tantrum here when I point out their inability to understand scarcity and their desire for greater state control of the economy. If you want to know how I can consider “an organization paying the town a half-million dollars over 10 years for prioritized field use” to not automatically be a good deal for Huntersville taxpayers, you can start by reading the introduction and first essay of Bastiat’s collection of essays entitled What Is Seen and What Is Not Seen.

Instead of merely speculating, I attempted to verify the talkers’ claim that it was the volume of phone calls and e-mails the electeds likely received in the two weeks between votes that changed their minds [about the Rapids renewal agreement] by asking the three commissioners who changed their votes (Boone, Guignard and Phillips) how many emails/calls they actually received. Commissioner Boone said he believes he received a total of five emails – 4 in support of renewal, 1 against renewal, and that support for renewal came mostly from face to face contact with individuals. Commissioner Guignard said he received two emails – both in support of renewal, and had one conversation on the issue. Commissioner Phillips said he received a total of three emails – 2 in support, 1 against. Phillips didn’t remember any phone calls, but did have face to face conversations with individuals who had a vested interest in renewal of the agreement; however, he added none of these face to face conversations were with actual parents of soccer players. So, the three originally dissenting commissioners received approximately ten total emails between them – 8 in support, 2 against, and a handful of in-person conversations (not including two long-winded blog posts opposing the renewal agreement as presented…). Not exactly a flood of opinion either way.

Finally, a suggestion for the talkers from this humble local blogger to help restore their credibility amongst the social media class: some in-depth, investigative reporting. It’s been two weeks now since the talkers column suggesting they needed more time to ask questions about the allegations that the former Huntersville mayor and town manager benefited from a no-cost membership to Northstone Country Club. Might the talkers be putting the final touches on a thorough investigative piece about Northstone for this week’s issue? One other potential topic for a great investigative piece – when is the last year HFFA made a profit and how much money has this facility cost Huntersville taxpayers since opening? A good complimentary story could investigate how much Duke Energy could have contributed to the town in taxes related to the McGuire Nuclear plant but for a prior town board and prior mayor agreeing in or around July 2000 to give up millions in future tax contributions in exchange for expedited payments to help get HFFA built. For reference, Duke paid roughly $9.8 million in taxes to the county in 2016 related to the McGuire plant. Assuming Huntersville would be getting around a third of what the county receives, just think of all the good politicians in town could be doing with those few million in extra taxes every year!

Eric

Taxpayers still keeping HFFA afloat

This column originally appeared in the Jan. 21, 2016 edition of the Herald Weekly. You can find my second HFFA column here. The column below is relevant once again because HSW (formally known as Health Works, Inc.), the management company in charge of the HFFA, is requesting $25,000 in bonus money per their contract with the town. The agenda for the upcoming board meeting on Tuesday night has the bonus money budget amendment request listed as Item K. under Other Business.

Interestingly, HSW is still using weighted metrics as outlined in their 2011 contract, not the weighted metrics outlined in their 2015 contract (attached below).  So upon further review it appears HSW is using the 2011 metrics because the 2015 contract was not effective until July 1, 2016. I assumed incorrectly the 2015 contract was effective immediately upon execution in October 2015, hence why it was rushed through by the prior board, but that’s clearly not the case.

Let’s hope this current board takes a more inquisitive approach to the self-serving metrics review document submitted by HSW in support of their bonus request than did the board in 2015.

Eric


The Huntersville Family Fitness & Aquatics facility located on Verhoeff Drive is partially funded by taxpayers. This may be common knowledge to longtime Huntersville residents, but many newer residents are likely unaware that tax dollars are used to support HFFA. You definitely wouldn’t know it based on the HFFA website, except for the small Huntersville town logo on the home page.

For those Huntersville residents who were living here in the late ’90s when the HFFA was originally proposed and voted on, don’t worry; this column will not rehash the contentious debate over whether funding a gym is a proper function of town government – mainly because it isn’t. But, since taxpayers are still funding this facility after more than a decade in existence, it is reasonable to question whether their tax dollars are being spent properly.

HFFA proponents like to point out that it has gone from an entity that was in need of funds from the General Fund to operate, to operating solely on hotel/motel/prepared food taxes. Politicians like these “good” taxes because it means avoiding taxing residents directly to fund their favored projects (unless you’re a Huntersville resident who chooses to patronize a Huntersville restaurant). While it’s true that general fund money is not currently used to keep the doors open at HFFA, it is used for any bonus paid to the management company, like the $50,000 approved in 2015. But this misses the larger point: What are the opportunity costs of using limited taxpayer funds to run a gym?

A few more facts most Huntersville residents without a passing familiarity on submitting records requests may not be aware of. The HFFA is managed by a company named Health & Sports Works. This company has managed the HFFA almost exclusively except for a short period immediately after it opened. The initial management contract in 2002 between Huntersville and HSW provided for a management fee of $30,000 for the first year, $40,000 for the second year, and a fee of $50,000 during each subsequent year.

The renegotiated contract in 2006 saw management fees significantly increased to $153,750 annually, along with a potential bonus payment of up to $50,000. In 2011, Huntersville renegotiated with HSW and agreed to an annual management fee of $158,362.50 (a strangely specific amount…) with the potential of a $50,000 bonus. Finally, two weeks before the recent election and eight months before the contract was set to expire on June 30, 2016, the prior town board voted 4-2 to approve a renegotiated contract with HSW at $183,564 annually. [See most recent 2015 HSW contract below]

HSW 2015

Going from $30,000 annually to $183,564 annually in little more than a decade sounds like a massive cost increase, but surely it’s because this is the market rate for managing a facility like HFFA, right? A reasonable question, but not one that was answered prior to the vote on Oct. 19, 2015, approving the renegotiated management contract, which was not even made available for public inspection at the town’s website until the morning of the vote.

The town manager made the decision not to put out the management contract for competitive bid, a decision that was fully supported by town board members Melinda Bales, Jeff Neely, Ron Julian and Sarah McAulay. State law does not mandate this type of contract be put out for competitive bid, but decision makers have no basis for comparison and are not ensuring tax dollars be spent in the most efficient manner possible without a bidding process. When the town can find time to request bids on landscape contracts costing between $46,000 and $65,000 annually (which was scheduled to be voted on at Tuesday night’s town board meeting), it is beyond implausible the HFFA management contract shouldn’t have been put out for bid.

The current HFFA management contract requires the town to pay a fee equal to six months of management fees if terminated prior to July 1, 2019. This gives the current town board at least three years to request a competitive bid be prepared to determine if HSW is indeed the only qualified company to manage the HFFA. Let’s hope that’s enough time.

On limited government and the HFFA

This column was supposed to have appeared in the Feb. 18, 2016 print edition of the Herald Weekly. It never appeared in print, however, it did end up online and can still be found at the Herald’s website. The Herald editor informed me she had received some questions about my initial HFFA column in January 2016 so I provided all source documentation and never heard anything further until she informed me after I submitted the second column on HFFA below that she was going to have to put the column on hold. I subsequently learned HFFA had decided to pull their advertising dollars from the Herald – to this day they continue their ad boycott of the Herald, but do continue to advertise in the other local weekly paper.

It’s usually frowned up for entities funded by taxpayer dollars – like the HFFA – to engage in viewpoint discrimination. Apparently the First Amendment isn’t high on the list of concerns of the Huntersville Town Board since the HFFA is still being funded by tax dollars.

Eric


Frederic Bastiat famously defined government as the great fiction through which everybody endeavors to live at the expense of everybody else. By this he simply meant that it is within our nature to seek the greatest amount of pleasure while expending the least amount of effort. Man can satisfy his endless wants and desires in one of two ways: by ceaseless labor and the application of his faculties to natural resources; or by seizing and consuming the products of the labors of other. This fatal tendency of man, to satisfy wants and desires with the least possible effort, is the origin of plunder, which is why Bastiat explains legislators should ensure the law maintains justice by protecting property and punishing plunder.

You’re probably asking, what does any of this have to do with the Huntersville Family Fitness and Aquatics center? The HFFA is just one example in Huntersville of the law being perverted by allowing taxpayer funding (i.e., the products of the labors of others) to be used to support, in my opinion, an improper function of town government. Many readers will disagree with this position and the idea of any limits on town government other than what a majority of the Town Board can agree to.

But, it is budget season in Huntersville and the proper function of town government is something that needs to be debated by our elected leaders when deciding how to allocate the scarce revenues available for the large number of potential beneficiaries. If less money went to HFFA, more money could be allocated for Rural Hill for example. Reasonable people can disagree over whether Rural Hill should receive any taxpayer funding, but based on current statutes they (along with Latta Planation, the Hugh Torance House & Store, Visit Lake Norman, etc.) are eligible to receive funding from the same pool of money used to fund HFFA. [See pg. 106 for funding levels here.]

Ideas and elections matter, even on a local level. The current Town Board was elected, in part, because voters disagreed with the prior board’s overall philosophy on governing, which could be summarized by a motto similar to the Panther’s this season – “Keep Spending.” While the makeup of the Town Board has changed, the same special interests remain and are intent on maintaining the status quo.

HFFA proponents will be heard to proclaim, but how will the citizens of Huntersville stay healthy if taxpayer dollars aren’t used to keep the HFFA open? And what about all of the “economic development” Huntersville benefits from by the HFFA hosting events?

To which I would respond, how do the citizens of Huntersville keep from starving without the town using taxpayer dollars to operate a grocery store? How did any Huntersville resident do sit-ups, push-ups, pull-ups, run or swim before the HFFA was built?

If we are to accept the premise that the HFFA should continue to be subsidized by taxpayer funding because it is the centerpiece for health in Huntersville and the surrounding communities and because of the alleged economic benefits, should it follow that all other sources of competition be eliminated to maximize these health and economic benefits? Should the Town Board close all other gyms and pools to increase membership at HFFA? When the non-taxpayer subsidized Fitness Center at Birkdale was forced to close due to financial reasons, many former members joined the HFFA. Think of the increased revenues at HFFA if all the gyms in Huntersville were closed and their members all joined the HFFA!

There remains approximately $1,022,940 [See pg. 68 of the audit here.] to be paid on the mortgage for the HFFA through the year 2020 before taxpayer dollars will no longer be necessary for debt service. The question for current Town Board members is what happens after 2020? Will taxpayer funding continue to be used for the current facility, or will HFFA finally be expected to become profitable?

These and other questions will persist as long as the law is used to take property from one person and give it to another and any attempts to censor such questions should be discouraged.