By Erin Glanville
'Fair' Is The Operative Word In Burgess Pool NegotiationsUploaded: May 13, 2015
Menlo Swim and Sport's (MSS) contract with the city is back before the city council, but this time, the question of who will be running the pool is not at issue. The current lease agreement does not end until May 2016, but at the May 5, 2015 city council meeting, the council unanimously agreed with a Parks and Recreation Commission recommendation that the city negotiate with MSS to extend their lease agreement for city aquatics operations rather than embark on a formal Request for Proposals process.
There are several key contractual issues, however, that are up for discussion.
First up: the amount of rent MSS will be required to pay the city. The 2011 contract had a provision that a lease agreement could be extended after five years but that rent would need to be reassessed to a fair market value (FMV) with "consideration given to":
? gross revenues for the Burgess Pool
? the fixed costs of operating the Burgess Pool
? the profitability of the Burgess Pool operations
? the rental rate for similar facilities, and
? the other terms and conditions of the current lease.
According to the contract provision, the FMV rental rate is to be determined by mutual agreement, or by a neutral third party arbitrator if the city and MSS cannot agree.
MSS (which currently operates the Belle Haven pool year round despite only being contractually required to do so for 10 weeks during the summer) initially paid the city $3,000 a month in rent but their rent has increased over the past four years (pursuant to the US Department of Labor's Consumer Price Index (CPI)) to $3253 /month. A yet to be determined CPI increase will be added in June.
The key factor to determining a FMV rental rate will be the third bullet point: determining profitability and what is a "fair return" to the operator. Staff reports have placed General Fund savings (achieved by not having to operate the pools) since May 2006 between $450,000 -- $500,000. Very little, however is publicly known about what revenue the renovated pools are capable of generating. In fact, it is unclear how profitability for the 2011 contract was calculated and how the various revenue streams for the many programs run through Burgess were calculated. Outsourcing pool operations may still put city finances far ahead when pension costs, etc. are factored in, but having a clear picture of the trade offs is critical to making sound choices.
Given the civic engagement surrounding the 2011 contract and RFP process?including calls for transparency and requests that the financials be reviewed by an independent auditor or a finance committee? opening up that process so that the public has more information on both the revenue and operational costs would be an important next step towards garnering greater public trust towards these types of public/ private partnerships.
Another key point that has already sprung to the forefront: SOLO swim team's access to pool space as part of the new contract. At the May 5th council meeting, dozens of parents and children attended to take to the microphone and ask the city to ensure the team has "fair access at a fair price." According to speakers and head coach Tom McRae, the team has 90 members packed into 8 lanes for an hour and a half Monday - Friday, and their team will drop down to 4 lanes for those 90 members during the summer. (Note: SOLO was offered space at the Belle Haven pool in 2011, but declined that space at the time.) Council members directed staff to work with both parties on a solution as part of the development of a new contract.
SOLO's access seems part of a bigger question of choice that has surfaced this negotiation go-around. SOLO families repeatedly spoke to how important the issue of choice is, and that point has also been underscored in a February 25, 2015 memo to the Parks and Recreation commission from Community Services Manager Derek Schweigart. He wrote: "The business model implied in the lease allows for competition in order to provide the highest quality programs, whether provided by the operator directly, by a rental group or additional contractor, or by both. Competition and choices allow participants options and meets the diverse needs of the community."
In forgoing the RFP process, the city saves time and money and rewards MSS for providing a strong level of service over the last four years. Doing so does, however, skip a step in the public access/ transparency process that can hopefully be made up through vigilant city efforts to be more open with information than last time; specifically, understanding how much revenue the city owned pools are capable of generating. As the city heads into another contract negotiation involving Burgess pool, the one thing that seems clear is that "fairness" is emerging as the operative word.