Parks board OKs muni loan for Mac Center

Monday, August 14, 2017 - 18:11

Financial problems persist at the Harry J. McDonald Center, which will need a municipal loan to continue summer operations.

Without a cash infusion, facility manager Reid McDonald said the center might not be able to pay its employees.

“I’m not sure if we’ll make our next payroll,” McDonald told the Chugiak-Eagle River Parks Board of Supervisors at its July 10 meeting.

McDonald said municipal funding seemed to be the only short-term option for shoring up the center’s finances.

“We are scrambling at this point – there’s not much more I can do.”

A popular Eagle River multipurpose recreation center owned by the Municipality of Anchorage and managed by the nonprofit Fire Lake Arena Management, Inc., “the Mac” has faced financial difficulties for months. In 2016, a municipal audit revealed accounting and management errors dating back to at least 2013. By June of this year, management had yet to complete an audit of its own, according to park officials. As of July 10, the numbers were still in flux, and park supervisors spent nearly two hours struggling to get a handle on the center’s uncertain financial future.

“Everything’s up in the air at this point,” said Eagle River park supervisor Brian Fay.

In a follow-up interview after this story was originally published online, FLAMI board president Pat McCormick said the center’s recent review uncovered no problems and that the municipality simply needed a bit more information.

“Our financials are clean,” he said Tuesday, July 18.

Park supervisors on Monday approved a park capital fund loan of up to $60,000.

“Fundamentally, we subsidize all kinds of sports in this community,” said park supervisor Lexi Hill. “There’s no ideological reason – given what we spend on ski trail grooming – to give no money to the Mac.”

The exact amount of the loan and the terms of repayment are to be determined by the municipality’s contract administrator, according to the parks board.

Some park supervisors questioned how the loan would be repaid – the Mac Center incurred a deficit in 2016 and saw lower-than-anticipated net profits in the beginning of 2017, according to municipal records. But after detailed discussion, they agreed the municipal money was necessary to continue financing center operations – including two loans McDonald secured with Mac Center assets.

Fay called those loans “a huge concern.”

“I asked specifically about that months ago,” Fay told park supervisors and center management.

Fay said the issue is a significant one.

“One of the things that we specifically addressed when we were talking about the contract is that any encumbrance of $10,000 needs a cosignature and approval from the muni, and that’s been missing on all of these things.”

“I don’t know what to say there,” McDonald said. “If that was an issue, why didn’t the audit tell me that was an issue? I don’t know what to tell you, really. I have no further comment on that, I guess.”

The 2016 municipal audit detailed multiple issues with center bookkeeping and management, ranging from unauthorized purchases to withheld profits. In February 2017, the municipality’s internal audit department issued a memorandum listing the various corrective actions since the 2016 audit was released. At the time, local lawmakers, parks officials and center management praised the center’s progress, and the auditor said all issues were correctable.

As of mid-July, however, issues lingered. The Mac Center’s own auditor had yet to deliver complete, current financial information from previous fiscal years, according to park officials. Numbers kept changing, they said.

At the July 10 meeting, park supervisors questioned McDonald and McCormick at length about the issues. Many specific financial questions went unanswered.

“It’s complicated,” McDonald told park supervisors midway through the Monday evening meeting.

“I understand it’s complicated, but…” said Fay.

“It’s complex enough, because of the thing’s that’s happened, to where the auditor needs to speak to it, not us,” McCormick said.

“Then you should have had the auditor here tonight,” Fay said.

McDonald, son of the Mac Center’s late namesake, has managed the facility for 20 years, and FLAMI – formed specifically for overseeing the facility — has held the municipal contract since 1984.

When the Mac — which includes an ice rink and indoor turf — ran into a deficit in 2016, it triggered an Anchorage Assembly review of the management contract. Presented with a new center marketing plan, revamped budget and reassurances from McDonald and McCormick, assembly members approved a renewed contract in February. The renewed contract came with an additional $50,000 to cover costs.

At the time, McDonald said he hoped to boost center revenues with new offerings like an adult hockey league, more youth skating classes and soccer, and other activities on the center’s non-regulation-size turf field. While the adult hockey league was generating community buzz and new ice rentals, McDonald told park supervisors, the turf field wasn’t generating as much revenue as hoped for.

McDonald said the Mac Center’s largest and “most responsible” user group continues to be the Mustang Hockey Association, which recently suffered financial problems of its own: In June, the league’s former treasurer was arrested on felony theft charges after allegedly stealing $180,000 from the nonprofit organization.

McDonald said last year was a bit of a down year for MHA ice rentals.

“We’re hoping that they’ll have a little rebound season after a lackluster performance last year,” McDonald told park supervisors.

The Mac Center operates in cycles, with more users in the winter and fall months and fewer in the summer, according to management. Last winter, McDonald said, rink rentals were at an “all-time low,” but by the summer, he said he was feeling positive about the future.

“We’re in a good spot and looking forward to the fall,” he said to local park supervisors at their July meeting.

Except for the cash flow issue. Because the center makes more money in the winter than in summer — and because as a nonprofit it must return any profits it makes to the municipality during good years — there have always been issues with cash flow, McCormick said Tuesday. He’s hopeful the latest influx of funding will help shore up the center’s finances for the long run.

“The city has developed a mechanism to deal with our cash flow where we will not have to go to the bank anymore,” he said.

The municipal loan was a last resort, McDonald said during the board meeting.

“I don’t know where else to go,” McDonald told supervisors.

Fay called the municipal loan “a pathway to self-sufficiency.” Park supervisors said they would consider further such loans as necessary, and reevaluate the center’s financial future at the end of the year.

Fay expressed hope the center can turn things around.

“It’s not, I believe, a foregone conclusion that this has to continue in the pattern that it’s currently in.”

CORRECTION: A previous version of this story omitted the first name and title of Pat McCormick.

Contact Star reporter Kirsten Swann at kirsten.swann@alaskastar.com.

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