There was a weird debate at the Grand Forks City Council budget session yesterday. The question was is the Alerus Center just like any other city department or is it unique? More to the point, should the council scrutinize it as much as any department or much, much more?
Council members Terry Bjerke, Doug Christensen and Mike McNamara think more is necessary, which is not unexpected. In their view, the Alerus Center is different, namely because it loses a lot of money.
Council member Curt Kreun, who chairs the Alerus Center commission as a representative of the council, thinks it should be treated like other enterprise fund departments.
An enterprise fund department is one that gets most of its money from fees for services rendered, as opposed to taxes. In other words, it’s like a city-owned business. There are some small exceptions. For example, the inspections department gets paid fees for inspecting buildings, but is in the general fund. The city buses get most of their money from federal grants and city subsidies, but are in an enterprise fund.
If the Alerus Center is a regular enterprise fund, one would expect, among other things:
- The events center would report its financial health no more than other enterprise funds. It currently is expected to file a cash flow statement every quarter where other enterprise funds don’t until the end of the year. That’s what I think anyway because that’s the only time I see those statements.
- The events center would make its financial data available on demand. It recently discussed getting rid of the ludicrous policy of hiding December financials to prevent the news media from calculating the year-end profitability of the center. Most city departments should have a budget they use internally and, though I’ve never bothered to ask, I don’t think any of them would say "no" as the Alerus Center has. Finance Director Saroj Jerath said if anybody asks about money in an enterprise fund or any other fund for that matter, she just gives out how much cash is in the fund. I haven’t tried that with the Alerus Center yet, but Curt said yesterday that’s how it works with the center.
- The events center would have a contingency line item in case it spends more than it earns. Saroj said this is normal for all departments. In the Alerus Center’s case, it’s the $250,000 the City Council approved earlier this year for use in this year, meaning it’s kind of normal for the events center, too.
Doug and Mac didn’t think that $250,000 should be available as a budget line item next year because it implies the city expects the Alerus Center to lose money. That is, they don’t want to plan to fail. I don’t think they’ve convinced the majority of the council because, as everybody knows, "failing to plan = planning to fail."
However, they and Terry may have a point that the Alerus Center is a unique department requiring unique scrutiny. Doug explained to me later that it’s because the events center’s revenue stream is so unpredictable. It’s not like utilities where revenues are more or less known in advance and there’s a long history from which to draw seasonal patterns.
Also, the Alerus Center is one enterprise fund department that eats up a lot of tax dollars.
I don’t know if I’m reading the numbers right, but the city’s comprehensive annual financial report from 2007 — 2008 isn’t audited yet — says Alerus Center expenses were $9 million and revenues were $3.7 million. A lot of that probably is debt payment and capital improvements paid for with the 3/4-percent sales tax, though I’m not sure why the tax wouldn’t be counted.
In contrast, water works spent $8.6 million and made $8.3 million. It may have relied on reserves in 2007 to keep utility rates stable.
Please note that the Alerus Center is, in legal terms, an enterprise fund exactly like the others. Any additional requirements are the council’s to make, but the council may not make any changes that would violate the state requirements for an enterprise fund.