Pay to play: recreation spending a burden for some small towns

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Pay to play: recreation spending a burden for some small towns

Canton’s Colonial Theater (above) is in near-pristine condition but operates at a $110,000 yearly loss. File photo

Among the various spending categories in many municipal budgets — general government, public safety and the like — one can usually find some amount devoted to recreation.

From parks to pools and everything in between, governments have traditionally provided facilities and programming of varying extent designed to deliver these services to citizens at low or no cost.

The cost to governments, however, and the question of whether or not any government should ever compete with a private business are both valid concerns in North Carolina, where small towns struggle to maintain fiscal responsibility as the General Assembly strips them of other revenue sources.

While the impact of legacy recreation programs continues to be felt, especially in one small Western North Carolina town, the question remains — how much should governments pay to play?

Compare and contrast

The Haywood County municipalities of Clyde and Maggie Valley are similar in that they have small populations and a small tax base. Accordingly, their yearly general fund expenditures are on the order of $1.1 million and $2.6 million, respectively. Property tax rates in both are 45 cents per $100 in assessed value.

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Clyde spends about $12,000 on recreation; Maggie Valley, about $23,000. In Clyde, that’s just over 1 percent of all general fund spending, and in Maggie, it’s just over eight-tenths of a percent.

Maggie Valley does, however, own and operate the Maggie Valley Festival Grounds, though it’s not included in the town’s recreation budget. The town has budgeted $155,000 for festival ground expenses in 2018-19 with expected revenues to be $27,000.

For the most part, Maggie Valley and Clyde don’t own or operate any substantial bricks-and-mortar facilities; expenditures are largely based around cutting grass in parklands and cleaning up picnic shelters.

That’s not the case in Canton, where the operation and maintenance of four major properties account for around 12 percent of all general fund expenditures.

“It’s just not sustainable,” said Canton Mayor Zeb Smathers. “And it’s not just recreation. We have to see what other ways we can increase revenue and decrease costs. We can’t keep going back to fund balance in large amounts every year. We all know how that will play itself out over time.”

Canton’s proposed budget for FY 2018-19 shows projected general fund expenditures of $6.18 million, including a staggering $631,458 appropriation to its recreation fund.

Although the budget again holds property taxes steady at 58 cents per $100 — where they’ve been since 2007 — they’re still the highest among towns in Haywood County.

Keeping them there are the Canton Armory, the Colonial Theater, the Champion Credit Union Aquatic Center and the International Paper Sports Complex — all town-owned or leased and hemorrhaging money.

The IP Sports complex consists of three unlighted ball fields, indoor batting cages, a concession stand and a walking trail. It’s not technically owned by the town, but rather leased from IP. This year, it will cost $130,409 to operate and maintain, but shows projected revenue of just $2,500.

The new $2 million Champion Credit Union Aquatic Center — a sentimental project for many in Western North Carolina who didn’t want to see the town’s leaky 70 year-old public pool filled in — will cost the town $161,000 this year. That doesn’t include a long-term $72,000 yearly loan payment. Revenues are projected at $30,000, but could vary widely because the operation is in its first year.

The “Jewel of Canton” — the downtown Colonial Theater — has been the subject of much discussion over the past few years, with various camps advocating alternately for preservation or for utilization. Smathers called a special work session March 13 to determine the highest and best use for the building, a question, which has not yet found an answer. This year, the Colonial will require $123,828 in expenditures against a projected $13,000 in revenue.

The Armory is a 4,000 square-foot building with a seating capacity of 300. Although it’s currently in need of a $60,000 roof, it’s still used for musical performances, political events and weddings that should bring in about $16,000 this year, according to the budget. Not including the new roof, it will cost the town $124,462 over the next 12 months.

All told, projected revenues from these facilities total $61,500, with expenses of $539,699.

There are some other minor revenue sources associated with the town’s recreation fund, including grants, and there are also other minor expenses that bring the total projected recreation expenditures of the Town of Canton for FY 2018-19 to $755,108 against revenues of $123,650.

That’s a $630,000 loss, of which almost $480,000 comes directly from those four facilities.

cantongraph

Making dollars, making sense

Property tax revenues are, in most municipalities, the largest single source of yearly revenue, and that’s no different in Canton. The town’s $472 million valuation at a tax rate of 58 cents per $100 yields $2.7 million, which after delinquent collections nets $2.6 million.

Under these conditions, each cent of property tax represents about $47,000. If the town were to raise the property tax rate to 59 cents, it would realize that amount in new revenue. Conversely, if the town were to lower the rate to 57 cents, it would need to strike that amount in expenses.

Within the scale of Canton’s overall budget, the four town-owned recreational facilities account for a substantial chunk of the current 58-cent rate.

The Aquatic Center’s $161,000 subsidy alone accounts for approximately 3.4 cents of property tax, not including the $72,000 loan payment. The IP Sports Complex’s $130,000 subsidy runs a close second at 2.7 cents, followed closely by the Colonial and the Armory, both at 2.6 cents. In total, that’s about 11.4 cents of Canton’s 58-cent property tax rate devoted to the operation of four separate money-losing businesses.

Recent political leadership can’t truly be blamed for the state of affairs in Canton; Smathers has, like several of his predecessors, inherited the cumbersome facilities — a remnant of a dying era when governments operated far more subsidized services than they do today.

Less than a century ago, many towns operated a so-called “poor house” or “poor farms” to serve a particular community need, funded by taxes. Almshouses — homeless shelters, in essence — were similar in that many of the New England states operated them by levying taxes. Several historic pest houses also remain across the United States, although no longer operated by governments.

Soup kitchens and even cemeteries could also be found on a town’s books on through the 1950s, but as markets expanded and both public- and private-sector entrepreneurs rushed in to fill the need, most towns have gotten out of the business of being in business except for core utilities like sewer, water and, in Waynesville’s case, electricity.

Recreation spending yet persists, but as Canton competes with other Haywood jurisdictions for economic development opportunities, it’s getting harder and harder for companies to ignore the property tax rate, even with incentives that mitigate its impact for a few years.

In Canton, at least some of that persistence — namely in the case of the Aquatic Center, but to a certain extent with the Colonial as well — is due to the sentimentality.

“Overall, people need a sense of place,” said Canton Alderwoman Kristina Smith. “While I believe that the pride of Papertown isn’t isolated to one Town of Canton facility, I do believe that our dynamic and historic facilities like the Colonial are special. The facilities like the Colonial are more than an identity, they are our history, and our future. While services, entertainment and desires change, we hold onto these facilities because we know that they have morphed over the years and still can be positioned to serve Canton in a larger sense once again.”

The political and public will to refurbish the pool, for example, was strong despite the project’s cost and the long-term obligations that came with it, and the desire to see a vibrant Colonial is an integral part of a rapidly-redeveloping downtown.

“On principle, people need diverse and accessible recreation,” Smith said. “Providing services like recreation results in great quality of life, which is critical for citizens and also fosters economic growth. If we focus on sustainability of the recreation budget, economic development and high quality of life, I don’t believe we can go wrong. I see investing in recreation as an investment in people — our families, seniors, and the future citizens of Canton.”

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