Tag: Pool

Post 2071: AI review of Vienna Town Council 12/16/2024 Work Session, Part I.

 

Below is NotebookLM’s report on the first 43+ minutes of last night’s Town Council Work Session.  Town posted the video promptly.

The audio of that meeting is all that NoteboolLM knows about this particular issue.  I think.

PSSST:  Then how did it get the architect’s name spelled correctly?  OK, so the AI knows a little more than it’s letting on.  The only thing I fed it, for this session, was the 43 minutes of audio.

One is never quite sure whether an AI is pulling one’s leg or not.  But, this was free, and I think I know more, after reading this, than I did before.

 

NotebookLM analysis of Vienna Town Council Work Session 12/16/2024, first portion, regarding a proposed pool/gym facility at “The Annex”.

This audio recording documents a December 2024 Vienna town council work session focused on preparing for a January 2025 session concerning a potential aquatic and fitness center. Council members submitted questions for consultants and staff regarding projected costs, revenue models, and community needs. A vote was taken to determine which questions would be prioritized for the upcoming session. Concerns were raised about funding mechanisms and the impact on local businesses and residents, including the possibility of a referendum. The session concluded with a decision to proceed with the investigation, despite some dissent.

 

NOTE that the text below is also AI-generated, but seems to have come in a form that won’t let me edit it.  (So I can’t turn the text to a different color to set it apart as AI output.)

 

Briefing Document: Town Council Work Session 12-16-2024

Subject: Aquatic and Fitness Center Annex Proposal – Information Gathering and Decision-Making Process

Date: December 16, 2024

Attendees:

  • Town Council Members: Roy, Sandra Allen, Howard, Ray, Chuck, Jessica Raminsky (represented by Mayor)
  • Mayor
  • Town Manager
  • Director of Parks and Recreation, Leslie Herman

Purpose: To identify key questions and information requirements for the Town Council to consider before making a decision on the proposed Aquatic and Fitness Center Annex on January 27th, 2025.

Background:

The Town Council is considering a proposal for an Aquatic and Fitness Center Annex. This proposal includes a significant capital investment and ongoing operating costs. A consultant, Kimmel Bogrett, has provided initial analysis, and Town Staff has conducted independent research.

Key Themes and Concerns:

  • Financial Viability and Revenue Generation: Council members expressed significant concern about the financial sustainability of the project. They requested detailed analysis of projected operating costs, potential revenue streams, and the likelihood of achieving projected membership numbers. Several members requested comparisons with similar facilities in other jurisdictions, including Fairfax County rec centers and the Herndon Community Center.

Council Member Roy: “Is it one in five [households] and for them [Kimmel Bogrett] to explain that… I want names of localities so we can call them up and find out how things are going.”

Council Member Chuck: “My questions… really relate to how much revenues can we expect to um generate from this facility to offset the pretty substantial operating costs.”

  • Membership Projections and Market Analysis: Doubts were raised about the consultant’s membership projections, particularly in light of competition from nearby Fairfax County facilities. Council members requested further analysis of the market area, considering factors like proximity, household income, and participation rates.

Council Member Chuck: “The estimates provided by the consultants is that… the annex would um attract around 2,000 memberships… the county has 16,660 countywide for nine facilities… So the consultants analysis basically posit It’s a slightly higher membership rate even though the facility is only one-third roughly one-third the size of the average county facility.”

  • Funding Options and Public Input: Council Member Allen strongly advocated for exploring alternative funding options beyond tax increases and for holding a public referendum on the project. This suggestion did not receive majority support from the Council.

Council Member Sandra Allen: “I have an issue with the funding… I want to make sure our residents have the decision the ultimate decision… and I want to put this in a referendum.”

  • Operational Considerations: Questions were raised about the potential impact of expanding the proposed pool from four to six lanes, the feasibility and profitability of various programs and services, and the potential demand for pool rentals.

Mayor: “So, we’ve talked about there’s a lot of ways to raise revenue… What is that balance? And what are the different types of um ways to raise revenue?”

Action Items and Next Steps:

  1. Compile Consolidated List of Questions: Town staff will compile a comprehensive list of questions raised by council members, ensuring clarity and avoiding redundancies.
  2. Submit Questions to Consultant and Staff: The consolidated question list will be submitted to Kimmel Bogrett and Town Staff by December 17, 2024.
  3. Deadline for Responses: Kimmel Bogrett and Town Staff will provide written responses to all questions by January 8th or 9th, 2025.
  4. Optional Two-on-Two Meetings: Between January 9th and January 20th, individual council members can schedule meetings with Kimmel Bogrett and Town Staff to clarify responses and seek further explanation.
  5. Work Session Presentation and Discussion: Kimmel Bogrett and Town Staff will present their findings and address council member questions at the Town Council Work Session on January 21st, 2025.
  6. Town Council Decision: The Town Council will make a final decision on the Aquatic and Fitness Center Annex proposal on January 27th, 2025.

Conclusion:

The Town Council is committed to a thorough and transparent decision-making process for the Aquatic and Fitness Center Annex proposal. Gathering detailed information on financial viability, market demand, and operational considerations is crucial to ensure a fiscally responsible and community-oriented outcome.

Post #2069: Last night’s Town Council meeting.

 

Town Council did not vote on raising the meals tax last night.

They’ll revisit in January.

I have only bits and pieces of observations to report.

Observation 1:  If they’d have voted, the meals tax increase would have lost.

Virginia law is reasonably clear about what it takes for a Town to impose a tax.  Virginia Code § 15.2-1427(g):  “ In towns, no tax shall be imposed except by a two-thirds vote of the council members.” 

Which means, with the seven-member Town Council, in the Town of Vienna, it takes five “aye” votes from Town Council members to impose a tax.

As noted in the picture above, there were only six Town Council members present last night.  And based on their remarks, it’s a fair guess that at least two of them would not have voted for the meals tax increase at this time.

Leaving just four potential “yes” votes.  Insufficient for imposing a tax.

If it had come to a vote last night, it would almost surely have failed.

In any case, there was no vote.

Observation 2:  An anecdote about the Town trying to renege on its promise to sunset the meals tax increase, the last time.

As it turns out, this five-votes-are-needed for tax increases mattered quite a bit the last time the Town increased the meals tax.

You may recall that the Town temporarily increased the meals tax by one cent, to pay for the land that is now the Town Green. As with the current proposal, that included a sunset clause.  I recall it being on-order-of seven years.

But when it actually came time to sunset that meals tax increase the last time, the then-Mayor and Town Council balked.  They attempted to renege on that sunset promise.  And in fact, the motion to go back on their word, and make the increase permanent, got four yes votes, and three no votes.

Which meant that the Town Attorney had to inform the then-Mayor that the motion had failed.  Because, as it was a motion to impose a tax, it needed five yes votes to pass.

Back to the present, while this may seem like legal trivia, the law is written this way for a reason.  And given that it’s the same Town, and I think the same Town Attorney, I sure don’t see any wiggle room here.  If they want to impose an additional cent of tax, it should require five “yes” votes.  Not four.

Observation 3:  If you don’t want people to think this pool thing is wired  …

… then start by removing the disinformation from the Town website.

Above is the finance portion of Town’s public-facing write-up of the proposed pool/gym, accessible at:

https://www.viennava.gov/engagement-central/annex-reimagined

I leave to the reader to count the number of times that the Town mentions the $1000/year family membership fee, or the ongoing operating losses to be covered by property or other taxes.

Zero.  Neither of those is mentioned.

And that’s in case you didn’t get the same incorrect message from the Town’s mass mailing postcard.  Which also made it seem as if one cent on the meals tax for ten years would pay for everything.

The description of the financing, above, is both misleading and materially incorrect.  It gives the impression that the pool will be free, when in fact, it will cost as much to use as the Fairfax Rec Centers, and will come with an ongoing property tax burden to boot.

Town staff know this.  Town Council knows it.  The Mayor knows it.

And yet, the Town’s official description of the proposal goes out of its way to give the impression that the entire source of funding is a penny on the meals tax.  And yet, never quite crosses that line into saying something potentially actionable.

It merely omits any mention of unpleasant things such as user fees and property taxes.

With this kind of stuff — disinformation?  propaganda?  — with a description that makes it seem like this pool is free, why would any sane person think that the Town is interested in an even-handed discussion and decision?

Anyway, the Mayor seemed peeved that on-line chit-chat assumes this is a done deal.

All I have to say in response is, look at the what’s posted on the Town of Vienna website, and come to any other conclusion.  If you don’t want it to look like it’s wired, then start by not putting propaganda in our mailboxes or on the website.

I realize the Mayor has no direct control over the running of the website.   But, in theory at least, you’re all part of the Town of Vienna government.

Town Staff may have tipped their hand as to strategy moving forward.

Source:  TOV Granicus page, .pdf  The consulting firm who worked up the numbers for what it’ll cost Vienna to run this building (Ballard King) was, in fact, the chosen partner of the architectural firm that wants to sell Vienna the building in the first place (Kimmel Bogrette, KB above).  We, as the buyer, are literally looking at the seller’s estimate for what it’ll cost us to run our building, once we buy it.

The Town Manager went way out of his way to disparage the estimates that Town Staff had just provided, for operating losses for the proposed facility.  He described them as some sort of extreme worst-case scenario.  It was, as far as I could tell, a completely gratuitous comment.  Didn’t need to be made.  It just came out of nowhere. And, it contradicts what the staff writeup actually said, listing 35% to 50% cost recovery as the norm, making a mere 50% loss the best you could hope for, not the worst.

This in some sense matches the verbiage of the Town Staff’s materials (see prior post), but in that reading I attributed their use of “conservative”, to describe their loss estimate, as being due to the “extra revenue sources” not included (in CAPS in slide above).   But all extra-ordinary revenues aside, unless I misread that 35%-50% line, 50% cost recovery is about as good as it gets, in this industry, for a facility like the proposed one.

The other shoe to drop in this area is that they’re going to invite the consultants to present their operating cost numbers, in January.  Again, inviting somebody to show you the seller’s estimate of what it’ll cost to run the building they’re trying to sell you.

I don’t really understand why a buyer would ask the seller for any estimate of this sort.  It’s the seller’s number.  We’re the buyers.

But, on top of that, once the seller has given you a set of numbers that were so rosy as to be useless, you’d think you’d be done with it.  You’d say, OK, we were told about what we should have expected the seller to tell us.

Instead … we’re asking them back? Giving them another bite at the apple?

Edit 12/11/2024:

Why? 

It’s not clear to me.

On the one hand, they may have Ballard*King present a full-throated defense of their 15% operating loss projection. 

I’m going to hazard that this would be inadvisable, if for no other reason than that projected 85% cost recovery (15% operating loss) is well outside the range listed by Town Staff as some sort of industry norm of 35% to 50% cost recovery.  Red arrow in graphic just above.  (Part of materials posted for the 12/9/2024 Town Council meeting.  See Post #2067).

Then my thought becomes, good heavens.  Town Staff cannot be asking Town Council to see important new material regarding likely operating losses, and then vote the tax up or down in the same session.  Are they?

That also seems inadvisable, for the hurry. Although, it does convey the  “decisions just wander around until they stop” vibe that Vienna puts out.  So why not, I guess, have a presentation of new information from the seller’s side, and then have Town Council vote on the tax, immediately, all in one session.

Funny anecdote.  I had a boss like that once.  He worked with a big committee of industry hotshots.  They, in turn, needed to settle on proposed changes to Medicare’s payment policies.  My boss’s job, was, in part, to shepherd them to a decision.  There was a lot of discussion around the table.  Likening “the decision” to a ball, if the ball stopped rolling at some point my boss didn’t particularly like, he’d kick that ball back into play with some sort of pointed question.  And when the ball stopped where he wanted it, he remained silent.   

I could see this as a face-saving, peace-keeping maneuver, prior to a vote.  If the consultants were willing to repeat what they said already, in their written materials, which is that they assumed Vienna would be the only “REC-Center-like” facility in the market area.  And work from there.   Toward market conditions as stated by 2014 Town Council member Polychrones.  I think the consultants might reasonably suggest that our actual, observed operating losses might be more than they projected.  How much more, they can wing it if they want to, but I’d say that would require additional work to answer.  It’s out-of-scope.

Done with grace, that would serve to provide “white coat” cover to those who wish to ignore the operating cost issue.  You’d be free to interpret that as the experts saying they had it spot-on, and they might consider tweaking their estimate in response to local market conditions.  But no more than that.  So it’s pocket change.

That would also provide an out for those who have focused on Kelleher quantified, and other “benchmarks”, or just feel it isn’t worth it, to burden the restaurant industry in the first place, let alone the operating cost burden.  Those folks can say, fine, the Vienna facility would have one-third the size, but two-thirds the operating cost, of a typical Fairfax County REC Center.  We’re going to pay for that, forever.  That, so that some people won’t have to drive as far to use a gym/pool.  That suggests poor value, e.g., if there’s money to spare, I’d rather lower the water bills first.

Then have Town Council bat it back and forth one last time, and vote.  As previously noted, I’m pretty sure this takes five yes votes to pass, as it is the imposition of a tax.

As an afterthought, I hope we have all gotten our minds around a study that we paid for, using the (presumed respected) firm hand-picked by the seller.  As the buyer in this transaction, it’s that last phrase that should trigger your sense of caveat emptor.   If it does not, you are presumably part of their target audience.  But as someone who made a living consulting, I can tell you, that definitely triggers mine.  I doubt that the architectural firm for this proposed facility has a habit of shooting itself in the foot.

Still turning a blind eye to 2014.

I still haven’t heard either Kelleher or Polychrones mentioned in any Town Council discussion.

Both of those ex-Town Council members are still around, though neither lives in Vienna any more.

In any case, I think at least a couple of Town Council members get it.  That Kelleher was right about economies-of-scale, that Polychrones was right about the stiff competition for this type of facility, from the three local Fairfax County REC Centers.

But officially, as far as the current deliberations go, the rationales for the operating costs concerns that contributed to the 2014 “no” vote — those have simply gone down the memory hole.

Conclusion

So here’s my prediction.

The consultant’s original rosy scenario for operating costs was too rosy.  It was obviously wrong, when benchmarked against data for this area.  In hindsight, that was a strategic mistake.

So, Town Staff is going to have the same consultants come back and present … just guessing here … a somewhat less rosy scenario.  Edit:  Or maybe a YMMV from the consultants, as a way to reconcile all this.

Which Town Council members who wish to do so may then accept as being adequate for use in sweeping the operating loss issue — the ongoing taxpayer subsidy — under the rug.  Edit:  And, in fairness, if done well, will also provide support to those who, for a variety of reasons, expect to see less demand and higher operating losses than the original operating loss projections suggested.

There is also a work session prior to that.  I don’t even want to think about that, as my best guess is, that’ll be where Town staff will soften up Town Council members who resist accepting the seller’s new numbers.

And if five Town Council members vote “yes”, at the end of January, then it’s a go on the meals tax, and for the Vienna pool/gym.

Post #2068: Vienna Pool economics, simplified.

 

The baseline economic scenario

Near as I can tell, the following statements are true:

A small-scale facility such as the one proposed by Vienna will cost about twice as much to operate, per square foot, as the nearby Fairfax REC Centers.

If Vienna merely manages to attract as much revenue as Fairfax does, per square foot of facility, then Vienna taxpayers will cover 50% of the operating costs of the proposed Vienna pool/gym facility.  (User fees such as annual memberships will cover the other half.)

This is the scenario — 50% operating losses — now being shown Town Council, on this round of discussion.

With the staff proviso that there may well be enough un-conventional revenue sources to cover the operating losses without using Vienna tax dollars.  (Which I read as not specifics, but as a plea not to shut the door on having a pool, until Town Staff have had time to look into those alternative revenue sources, and see if anything pans out.)

That all seems squared away now, in my opinion.  I think that’s a realistic view.

Plus the cost of the land.  And the cost of building the facility.  Both of those capital costs, paid for or to be paid for, by the meals tax.

Which is the proximate issue, for this evening’s Town Council meeting.

Well, so what.

So it costs money.  Even tax money.  So what else is new.  Parks cost tax money.  Why not here too?

Turns out, this is a rock best left unturned.

Let me start with a walk on the light side.  Only after you look at the Fairfax County Park Authority as a whole do you really appreciate how rational their system is.

Fairfax doesn’t subsidize the operating costs of the REC Centers.  That’s not where indoor swimming falls, in their spectrum of subsidy level for recreational activities.  On their subsidy-meter, indoor swimming falls at “pays its own way”.  Covers operating cost:

  • Golf courses cover operating cost, plus.
  • REC Centers cover operating cost.
  • Events held in the parks cover operating cost, minus.
  • Parks (just parks, not “attractions”), are free.  They cover none of their costs.

After you absorb that — they chose to make REC Centers cover their own operating costs (or had to, as a political bargain), then it eventually dawns on you that this is why Fairfax has just a handful (9) of gigantic REC Centers.  Their best shot at making them self-supporting was by building them big, in the presence of significant economies-of-scale.

Like it or not, REC Centers constitute part of an orderly and coherent enterprise.  They have a planned level of subsidy that fits into an overall scheme of recreational activity, from golf to a walk in the park.  And the REC Centers appear to have been built at an efficient scale.

Overall, across all its enterprises, the FCPA covers about two-thirds of operating costs with user revenues in one form or the other.  For comparison, the corresponding calculation for Vienna Parks and Rec is less than one-third, based on the 2025 Town of Vienna budget, page 101 for the revenue number.)

Then you look at Vienna, and it’s just slap-dash. 

Vienna’s subsidy level for this type of recreation isn’t chosen with forethought.  It’s going to be whatever the shortfall is, said shortfall likely owing to the inefficient scale of the facility.  So it’s 50-percent-ish, not because that reflects some purposefully decision by Vienna that indoor swimming deserves this level of subsidy, but because it’s what we gotta do, financially, to have one these pool/gym things right here in Town.

It’s literally the residual — the afterthought, just like the chosen scale of operation.  The Town happened to pick up this particular piece of land, and now because this one-third-scale facility is what fits on that land, you get the resulting high average costs, and because our user fees are effectively capped by what Fairfax charges, that’s why we end up with a 50% subsidy.

Even then, Vienna is wealthy enough, that you could just kind of laugh this off in a “what a first-world problem” kind of way.

But if most of what this does is merely cannibalize membership from the nearby Fairfax REC Centers, all we’re doing is raising everybody’s costs.  You’ve pulled people out of an efficiently-sized facility and enticed them to come to yours.  Presumably, in order to have somewhat shorter average travel times for those switching to the Vienna facility.  And you’ve enticed them to do that by subsidizing your fees, so you appear no more expensive than the further-away REC Centers.

And second, it’s not as if this is an environmentally benign thing to build.  My guess, from some projection of the electric bill, it’ll use enough electricity to power 75 homes or so.  Between 1 and 2 percent of all the homes in Vienna.

And finally, don’t forget the opportunity cost.  What is the point, exactly, of passing a Parks and Rec master plan, like, eh, a couple of months after locking up all your capital, for the foreseeable future, in this pool/gym thing.  Is that so you can talk about all the changes you’d like to make, to optimize Vienna parks, but now no longer can?

This ready-fire-aim decision-making is so weirdly a part of the Town of Vienna vibe that we who live here perceive nothing unusual in it.  But it’s not until you study the Fairfax County Park Authority that you realize just how well they have their act together.  And how little does the Town of Vienna have its act together.

And that’s what did it for me.

You know how deep our thinking goes?   It goes as deep as “citizens of Vienna have long wanted a pool”.  And that we, could, in fact, have one.  It won’t bankrupt the Town.

In the end, it boils down to dumping a whole lot of money into providing services locally, that are already provided nearby.  Not cheaper, or better, or really even, different.  Just closer.  More Vienna-centric.

I’m not seeing the value in that.

But I’ve been using the Fairfax County REC Centers for years.

Vienna pool?  Build it, don’t build it, I don’t much care.  It’s not going to affect me one way or the other.

Post #2066: Vienna pool capital reserve

 

I was asked a question regarding “capital reserves” for a pool.  That’s the $100K item circled above.

Is that enough, set aside, for future repairs and replacement of the long-lived, big-ticket items, as they wear out? Things like the roof, the HVAC system, carpeting, parking lot pavement, and the equipment.

Turns out, that’s a surprisingly hard question to answer.

But my answer is, yeah, probably.  Or, at least, I can’t possibly know enough to say otherwise. Continue reading Post #2066: Vienna pool capital reserve

Post 2065: Vienna Pool, 25% non-resident upcharge.

 

For me, this whole Vienna pool/gym thing has been like opening a big box of chocolates.  Every day, there’s a different and unexpected treat.

Today its the “25% upcharge for non-residents”.

Sometimes, you bite into one of those fancy chocolates, and it’s not at all what you expected.

Of course non-residents must pay more.  That’s a no-brainer, right?

On the one hand, it seems like a simple matter of fairness.  Let’s suppose that  Vienna taxpayers have to kick in (say) 20% of the operating costs of this facility year after year.  So that the fees charged to Vienna users only cover (say) 80% of costs.

Well, then, if you don’t pay Vienna property taxes, then it’s only fair that you ought to make up for that by paying (20%/80% =) 25% more for a membership.

Obviously, we must ask non-residents to pay the full, un-subsidized price.  Because they aren’t paying Town of Vienna taxes.

That’s the rationale for a 25% up-charge.  It’s so that everybody pays the same, for using the facility.

It’s obvious, right?  This homey little “fairness” story has a lot of common-sense appeal.  I mean, surely you would not ask Vienna residents to subsidize the swimming of non-Vienna residents?  That has to be nuts, right?

Sorry, that particular bon-bon is full of baloney.

First point:  What does the average Vienna pool member actually pay, in total, including tax subsidy?  What’s the true “ticket price” that you charge them?

Assume for a moment that the following is true:

  • A family membership to this pool costs $1000 to a Vienna resident.
  • 10% of Vienna families buy memberships.
  • The cost of running the pool works out to be $1250 per member.
  • Vienna taxpayers are making up the $250 operating loss out of property tax revenues.

Under these assumptions, how much does the average Vienna resident who purchases a membership actually pay, including both the purchase price, and the tax subsidy?

  1. $1000
  2. $1250
  3. $1025

The answer is c, $1025.

If everybody in Vienna pays for the pool, but  only one-in-ten uses the pool, then the average pool user’s share of the tax subsidy is one-tenth of the total.

If you focus narrowly on the ticket price — that the total price of a membership, to a non-Vienna resident, must match the total amount paid by the average Vienna pool member, including what that member paid in tax subsidy — then the fair price for non-residents is $1025.

That’s because Vienna-resident pool users themselves are subsidized by all Vienna taxpayers.

There is a counter argument that, somehow, taxes are all a wash.  So that even if you don’t join the pool, maybe your pool joiners don’t have their leaves vacuumed up, or use the ball fields, or something.   So there is some sort of a fuzzy, we’re-all-in-this-together, it-all-averages-out argument for including the total value of all taxpayer contributions, when figuring the “fair” non-resident upcharge.

If the goal is merely one of pricing — that everybody who uses it pays the same total price — then the right non-resident price in this case is a 2.5% up-charge.  Not a 25% up-charge.

Point 2:  financial leverage.  What’s your “fair non-resident upcharge” if operating losses are, say, 50%.

Well, it’s 100%.  Based on the same naive reasoning that gives you the plausible-sounding 25% upcharge.  If the taxpayer subsidy covers half the costs, then the un-subsidized membership price would be doubled.  The “fair” membership fee, for those outside the Town of Vienna, would be $2000/year for a family. 

So, $1000/year for a Vienna family.  And $2000 a year for a non-resident family membership.

Does anything strike you as impractical about that?

As in, how many non-resident memberships would you expect to sell, given that there are three Fairfax REC Centers nearby, and those only cost $1000/year for a family membership?

Point 3:  Marginal cost is probably close to zero.

If you have (say) 30 people swimming in your municipal pool, and you add one more, how much does that increase your costs?

If you said, probably close to zero, then I’d say you’re all-the-way right.

And so, until such time as the facility gets “congested” (in economics-speak) — so crowded that it’s hard to find a parking place, or there’s no room to swim laps, or you have to wait to use your favored weight or cardio machines — having more people use the facility literally costs nothing.  Or very close to it.

Translation:  Additional users are pure profit.  Until such time as the facility gets congested from over-use.

Now how do you feel about that hefty up-charge?  In particular, how smart does it look to charge so much that you totally discourage membership purchases from outside the Town of Vienna?

Point 4:  Keep your eye on the doughnut, not on the hole.

The taxpayer subsidy is literally the hole in this facility’s revenues.  And by focusing on that hole, you are missing the doughnut entirely.

The doughnut here is the total revenues for the pool.  (Less costs, which by assumption are more or less independent of the volume of users.)

The question you need to ask is: “What non-resident upcharge policy results in the least expenditure by Vienna taxpayers”. 

Which, if total costs really don’t vary significant with the number of users, amounts to, what non-resident upcharge policy results in the highest facility revenue?  Again, consistent with the facility not being congested, that is, so crowded that it becomes unpleasant to use.

In short, the “fair upcharge” viewpoint is a poor way to look at this because it only focuses on costs.  It ignores revenue (the doughnut).  A high upcharge may, in fact, shrink the doughnut, and leave you with an even bigger hole to fill.

Point 5:  The break-even “price elasticity of demand” is something like 1.0.

Formally, price elasticity of demand in this case is defined as the percentage reduction in non-Vienna memberships sold, divided by the percentage upcharge.

If a 10% upcharge results in a loss of 10% of your out-of-town membership (relative to the number you’d get with no non-resident upcharge), you’d take in roughly the same revenues with or without the upcharge.   That is, price x quantity = revenue, so 110% x 90% = 99%.

Doing the math, if a 25% upcharge loses you more than 20% of your out-of-Town memberships, then imposing that upcharge is a case of shooting yourself in the foot.  Because 125% x 80% = 100%. Any loss greater than 20% results in less total revenue, and so results in a bigger required taxpayer subsidy for the facility.  (Assuming that marginal cost is zero, and that the facility does not get congested.)

For example, suppose that imposing a 25% upcharge chases away half of your potential out-of-town memberships.  In that case, your revenues from out-of-Town members fall by more than a third.  (That is, 125% x 50% = 62.5%.)  If costs don’t change, then Vienna taxpayers have to make up for those lost revenues.

Conclusion

First, if you insist on charging a “fair’ price to non-residents — that is, the price absent any Vienna taxpayer subsidy — you’re going to get some sticker shock if operating losses are as high as I have projected them to be.  You’ll end up trying to charge $2000/family for non-residents.  And I’m guessing you’ll end up collecting next-to-nothing.

In that extreme case, it’s fairly easy to see that charging the “fair” price could easily mean shooting yourself (the Vienna taxpayer) in the foot.  All the revenues that you don’t collect, from those outside of Vienna, translate into higher annual operating losses that must be covered by the TOV taxpayers.

But more generally, simple pricing rules-of-thumb may not result in the lowest Vienna taxpayer subsidy.  That’s true for the upcharge decision.  That’s also true for the decision on what to charge Vienna residents in the first place.  I’ve been working under the assumption that we’ll charge what Fairfax charges.  I’m pretty sure we can’t charge a lot more than that, and still have much business.  But there’s no guarantee that charging at the Fairfax County rate is going to minimize operating losses for the facility.  That would depend on Vienna residents’ price elasticity of demand for this facility.

Finally, we should face up to the possibility that, politically, we may have no choice but to shoot ourselves in the foot.  Even if we knew that a “fair” upcharge would end up costing the taxpayers money, I would not want to be the person to explain why we’re letting non-Vienna residents join the pool for the same membership fee as residents.

Worse, if you had some sort of value-based price discrimination in mind (i.e. pick what pockets you can), if travel time is the big dis-utility for regular gym use, you’d charge TOV residents more than you’d charge those from further away.  Try explaining that one, to a grumbling crowd of taxpayers.

Best guess, the upcharge is going to be some plausible-sounding round number.  And nobody’s going to give a second thought to guessing what the impact of that will be, on Vienna taxpayers.

Post 2063: Vienna’s “Annex” survey, analysis of verbatim survey responses.

 

This is my analysis of the open-ended question 7, shown above, on the spring 2024 Town of Vienna survey regarding the future of “The Annex”.  That’s the name Town staff gave to the former Faith Baptist Church on Center Street, and then to the three-acre property on which that now-razed church once sat.

The short answers are that:

  • About 25 percent of survey respondents mentioned “pool” in that response.
  • Support for an indoor pool was about twice that for an outdoor pool.
  • Respondents were highly concentrated in the area closest to “The Annex”.
  • Respondents who asked for “indoor pool” were even more highly concentrated in the area closest to “The Annex”.

My main goal was to use these survey responses to judge likely revenues from the proposed Vienna pool/gym.  A rough cut of the resulting finances for the Vienna proposal, based on that, suggests annual operating losses around $1.4M.

I’ll be as transparent as I can about the methods I used to arrive at that last conclusion, in the final section below.  But it boils down to using the survey responses to guesstimate the number of Vienna families that might pay $1000/year for membership in this facility.

Part 1:  Survey responses and response rate by distance from “The Annex”.

For background, see the Town’s contractor’s analysis posted for the 9/30/2024 Vienna Town Council work session (link to .pdf.).   The survey was the last of three Town-run exercises to gauge public sentiment regarding uses of the former Faith Baptist Church property.

The survey was open for the month of April 2024.  The survey contractor’s final report was released just a few days ago, in response to a FOIA request.  The final version contains 1209 responses, of which 932 provided some answer to the free-form Question 7 shown at the top of the post.

I converted the multi-hundred-page table of responses, from the .pdf appendix of that report, to an Excel (.xlsx) file, which you may access directly by clicking the image below, which will take you to the spreadsheet on Google Documents.

The Town got 1209 usable survey responses, of which 61% were from individuals who self-reported as Town of Vienna residents (below):

I’d guess that the actual proportion of respondents who were Town residents was modestly higher, because many of those who left the “Town resident” question blank reported living in ZIP code 22180 or being within a short distance of “The Annex”.

As with any survey data, you have to keep in mind that people leave some answers blank, and the rest is self-reported data, and so may be subject to error (e.g., for whether or not you live within a mile of “The Annex”).  In most of the remaining tables below, I simplify the table by omitting a separately line for “missing” or “blank” or “unknown”.

The Town received some criticism for including non-residents in the survey, but there’s no one obviously right choice regarding that.  On the one hand, those outside the Town boundary don’t pay Town taxes.  On the other hand, they are potential paying customers for the proposed facility.   It was entirely reasonable to include those individuals if the goal was to identify the paying customers for an eventual pool/gym facility on the site of “The Annex”.

The Town asked respondents to indicate how far they live from the site of “The Annex”.  Fully 97% of respondents answer that question, so (accepting their responses as accurate), that provides a very good geographic “handle” on the responding population.

Bullseye shortcut for per-capita estimates.  Those distances – 1/4 mile, 1/2 mile, and 1 mile — were self-reported on the Town’s survey.  I use those to provide approximate per-capita estimates, based on the assumption that population density is reasonably uniform across the bullseye segments.  That is, I can substitute simple geometry (the areas of those concentric circles) as a reasonable proxy for relative size of the populations living in each area.

The response rate — fraction of Town population that responded to the survey — was vastly higher in the “inner bullseye” above, the area within a quarter-mile of the side of “The Annex”.  If you accept my “bullseye” approximation to the size of the population in each slice of the “bullseye” above, then for the three segments that have a boundary (>1 mile has no external boundary), you find that the survey response rate from those living 1/2 to 1 mile from the site is only 20% of the survey response rate from those living within 1/4 mile of the site.

You have to take that with a small grain of salt, as this is based on survey respondents’ self-reported distance, and it’s not even clear what, exactly, they based their response on.  (By car?  Straight-line?)  But the difference in response rate is so large that the potential error in the self-reported distance measure doesn’t negate this finding. 

One-mile ring as proxy for “Town of Vienna”.  Finally, below, I end up using the one-mile radius around the site of the proposed Town pool/gym as a rough-but-convenient approximation for “Town of Vienna.  That distance corresponds roughly — but only roughly to the Town boundary.  It omits the areas south of Tapawingo, and north of Westwood Country Club.  It extends slightly beyond the Town boundary to the west.  But that’s the point at which the bulk of the survey responses transition from self-reported Town of Vienna residents, to mostly non-residents:

When get to Part 3, the financial analysis, I’ll show the other reasons I have for ignoring the responses from beyond one mile, and simply inflating the remaining responses up to match the 5,400 families in the Town of Vienna.

Part 2:  Analysis of survey question 7 to split “pool” into indoor and outdoor.

Click the picture below to go to Google Sheets spreadsheet that allows you to count question 7 responses that contain the specific word or phrase of interest to you.

My first task is to find all the responses to question 7 that said “pool”, and split them into those who wanted “indoor pool” versus those who wanted “outdoor pool”.  This, because as I have noted throughout these posts, indoor pools are quite different from outdoor pools.  Separately, I need to toss all who said “free pool”, because that’s not an option, and those who said “no pool”.

There was a second open-ended question (question 8 on the survey), but only about 300 people provided any answer to that, and mostly, they repeated what they said in question 7.  It would be a slight — but only slight — refinement to include the information from question 8 to supplement what was said in question 7.

A crude word-search of the responses shows that, of the 28% that said pool, most didn’t specify what kind of pool they wanted.  So that, when I get to the financial analysis section below, I have to pro-rate those non-specific responses into “indoor” and “outdoor”.  That said (see next point), the lines in yellow are a pretty good guide to the fractions that specifically wanted an indoor pool or an outdoor pool (or in some cases, either.)

(Corrected — I swapped indoor and outdoor labels in the original, incorrect version.  There were twice as many responses suggesting indoor pool, as there were suggesting outdoor pool).

 

The upshot is that a) a lot of people said “pool”, and of those who were specific about it, b) indoor pool got about twice as many mentions as outdoor pool.

So I stand corrected, in my previous guess (from the previously published word cloud) that it was more like 50/50, instead of two-thirds/one-third indoor versus outdoor.

Crude word search is useful, but the only way to assign those responses well is to read every response, and provide some judgment as to what the individual was probably asking for.  For example, “exercise pool” is probably synonymous with “indoor pool”.  By contrast, somebody who wanted access to the local private membership pools was clearly interested in an “outdoor pool”.

For the moment, trust my judgment on correctly flagging Question 7 verbatim responses that said “indoor pool” versus those that said “outdoor pool”.  If nothing else, it was a labor-intensive task unlikely to be repeated.  (A.k.a., you’re welcome to do it yourself and see how the results change.)  And my results are contained in the spreadsheet link at the start of this section.

If you allow me to assign them, then you get the following detailed table and graph.

 

The first punchline is that 25% of survey respondents legitimately mentioned pool in their responses, and it wasn’t to ask for a free pool.  But we already knew that “pool” was mentioned frequently, from the word cloud that accompanied the reporting of the survey results by the Town.

And, as the crude word search suggested, of “pool”, where identifiable, indoor beats outdoor 2-to-1.  That, for the minority of answers for which I can infer their preference for one type of pool or the other.

But “can’t tell” beats them both, by a long margin.  Lot of people just said “pool”, or variations thereof.

Memo:  Two interesting indoor versus outdoor sidelights.

There were two interesting sidelights to my split of respondents into clear “indoor” versus “outdoor” pool requests.

First, “outdoor pool” was preferred by respondents of an age suggesting they were likely parents with young kids.  In hindsight, that’s no surprise, but was some validation that I managed to classify the responses correctly.

By contrast, “Indoor pool” was the preference for older adults, which I interpret as an interest in exercise swimming.

I think this provides some justification for what I’ve said throughout this series of posts.  Outdoor pools are for fun.  Indoor pools tend to be for exercise.  And, for sure, the association between age and indoor pool preference matches what I see weekly when I look at the Oakmont REC Center pool.  As of mid-morning weekdays, the pool is typically full of lap-swimming adults, with considerable gray hair evident.

But there was also an extremely strong association between “indoor pool” and nearness to the facility.  By contrast, respondents interested in an outdoor pool were not clustered near the proposed Annex site.

I’m still pondering this result.

In theory, this means I need to adjust the data for non-response bias.  That is, because the respondents were clustered near to the proposed facility, and those respondents had the highest likelihood of wanting an indoor pool, I ought to make some adjustment to make the survey representative of Vienna as a whole.  But — see final section — just by chance, for the market (revenue) analysis below, this ends up being a wash.  The very low likelihood of wanting in indoor pool by those living beyond 1 mile (and so, by most non-Town respondents) just about exactly offsets the strong desire for an indoor pool, for those leaving near the facility.  In other words, roughly speaking, the simple average of the survey responses, as they stand, is a reasonable approximation for my “Town of Vienna” financial analysis below.

So I’m not going to mess around with trying to adjust for survey non-response bias.  And I’m not even sure I should, because I’d bet that willingness to respond to the survey is some proxy for likelihood of using the facility when built.  In other words, the survey, as-is, might be a better representation of likely pool customers, than if I re-weighted it to show what I would have gotten if the survey response rate had been the same across all segments of the “bullseye”.

I can speculate that exercise swimmers presumably swim routinely and so especially value short travel time to a pool.  I can also speculate that the folks living near this facility don’t want the nuisance of an outdoor pool (which is, I assure you, a loud place in the summertime.)  I can speculate that those nearest the facility had higher exposure to the Town’s in-person events, where “indoor pool” was the only pool option offered.  The truth is that I have no clue what the right explanation is.  The observed fact is that people who lived nearest “The Annex” had a much greater likelihood of specifically requesting an indoor pool.

Part 3:  Going from “pool” to estimates of memberships and revenue.

In outline, I’m going to do the following.

  • Pro-rate the responses of “pool” into indoor and outdoor, to arrive at 18% of respondents who are OK with an indoor pool at “The Annex”.
  • Explain why I focus solely on households in the Town of Vienna as the likely customer base for this pool.
  • Take 18% of the 5,400 households in the Town of Vienna, then reduce that for:
    • Non-response bias:  That those who don’t care about “The Annex” (and are unlikely to use it) likely didn’t bother to answer the survey in the first place.
    • Intent-to-purchase bias.  (That only a fraction of those who said they’d like to see a pool will actually buy a $1000/year membership).
    • Admittedly, my estimates for both of those are no more than plausible guesses.
  • Count the resulting families at $1000/year, inflate for memberships as a projected fraction of operating revenues, and see how that compares to the projected operating cost for the facility.

I would not take any results here as a firm estimate of anything.  And yet, I think that they provide a common-sense indication that the Town’s small rec-center-like facility will likely run a large annual operating deficit.

How large?  Best guess, $1.4M, annually.

Details follow.

Part 3.1:  Pro-rate all “pool” responses to get “indoor pool”

Starting from the very large table shown above, I estimate that you could reasonably guess that 18% of all survey respondents were in favor of (or were OK with) an indoor pool on the site of “The Annex”.

Part 3.2:  The unsolvable problem of  “25% upcharge” and other reasons to focus solely on the Town of Vienna.

The Town’s proposal for a small REC-Center-like facility blithely notes that we intend to charge 25% more to non-residents of the Town of Vienna.  In prior posts, I’ve said “you can try”.

Here, I explain in detail why this is a problem for the Town of Vienna pool that has no good answer.  There is, as far as I can tell, no good way to be fair to Vienna taxpayers, and avoid losing the out-of-Town market to the nearby Fairfax County REC Centers.

The first consideration is taxpayer equity.  Put aside that the meals tax is slated to pay for construction.  Vienna taxpayers will be subsidizing a significant part of the operating costs of this facility.  People outside of Vienna aren’t paying the ongoing taxpayer subsidy required to keep this open.

Practically speaking, you must charge non-residents more, simply out of fairness to your own citizens.  (And note that, the higher the level of subsidy required, the more the “up charge” ought to be.)  If you project that around one-fifth of the cost of running this will come directly from TOV taxpayers, then the fair upcharge for non-residents would be (20%/80% = ) 25%.

The second, opposing consideration is the presence of nearby competition from the Fairfax County REC Center system.  The Town is already proposing to charge TOV residents roughly as much as Fairfax County charges for use of any of the three nearby REC Centers.

Practically speaking, you can’t charge non-residents more, beyond the Fairfax County REC Center rate, or your market for non-Town users melts away, beginning with the sizeable fraction of those individuals who actually live closer to a REC Center than to “The Annex”.  Below, I’ve crudely drawn in lines denoting the “halfway between” point.

But in addition, if you note that both the overall survey response rate, and the fraction of respondents asking for indoor pool, both rapidly decline as a function of distance from the facility (before any consideration of an up-charge beyond the Town border), then you realize that any remaining market area beyond the Town of Vienna border probably doesn’t much matter anyway.

There is little in this survey to suggest that people at a distance would be drawn to this proposed indoor pool.  There was rapidly dwindling interest with distance.  Interest at all (survey response), and on top of that, interest in a pool as fraction of responses.

Numerically, of the population living half a mile or more from “The Annex”, a low fraction bothered to respond to the survey at all.  And of those, once you get to a mile or more from the annex, the fraction of respondents who wanted an indoor pool at the annex is lower (than within the one-mile boundary) and plausibly would continue to decline with further distance.

The upshot of all this is that I don’t think I’d make a huge error by concentrating solely on projecting customers for the proposed Vienna pool/gym solely from the 5,400 households in the Town of Vienna proper. 

At this point, you may ask, what about those who said they wanted a gym, not a pool.  Some responses did say “gym” but not “pool”, but those were relatively few, and would not materially affect the conclusions below.

By contrast, the Town’s proposal projects that half the income from this facility will come from persons living outside of the Town.  But they did not acknowledge the presence of the three nearby REC Centers, the dilemma regarding the 25% up-charge, nor were those consultants aware of the rapidly declining survey response rate, and “indoor pool” response percentage, among survey respondents, based on distance from the proposed facility.

In other words, I think the business plan from the Town’s consultants was wildly optimistic in projecting that half the user-fee money would come from non-residents.  By contrast, I may be somewhat pessimistic in ignoring the area outside the town entirely.  But I don’t think I’m materially understating revenues in doing so.

In fairness, note that the response rate decline may not be entirely cleanly measured in the third ring of the bullseye, as that extends a bit beyond the Vienna town boundary.  Not clear if all of those people were systematically surveyed, and was too lazy to check, because for sure, almost all the area of the third ring of the bullseye is, in fact, Town of Vienna land.  So the resulting response rate has to be almost right, if “right” means restricted to the portion of the 3rd ring for which a systematic survey was conducted.

Anyway, let me point to the 25% upcharge, wave my hands, and ignore the possibility of selling a large number of pool memberships outside the Town of Vienna.

A lot of things about the apparent sharp decline in interest in an indoor pool, with distance from the indoor pool, bother me.  Starting with, maybe the self-reported distance measure is way off, and everybody grossly understates their true distance from “The Annex”.  And then, this apparent sharp dropoff of pool demand, with distance, runs completely contrary to my observation that the pool at Oakmont is always well-used by lap swimmers whenever I see it.  So I know that dedicated exercise swimmers are willing to travel quite a ways to get to that pool.  Why, then, such a sharp decline with distance in the Vienna survey data?  Maybe pools surrounded by housing do get a considerable walk-in trade, on top of the widely-scattered regular exercise swimmers.  On the other hand, maybe a lot of the “yes” votes for a pool, from those near “The Annex”, aren’t the sort of serious indoor swimming fans who will buy an annual membership.  Bottom line is that something about this doesn’t quite square up, and I have yet to pin down what it is.  And likely never will.

The contractor’s analysis said to double your Vienna money, to account for business from outside of Town proper.  By contrast, I’m saying zero money from outside of Town.  I think I’m less wrong than they are.  But that’s about as much as I can claim, until such time as the thing is built, the prices are charged, and the patrons do or do not appear from beyond the Town boundary, upcharge dollars in hand.

 

3.3:  Project the financials starting from 18% of 5,400 Town of Vienna households,

If I had to guess, I’d guess a $1.4M annual operating loss.  That’s what I project by assuming that 18% of the entire Town of Vienna population would like to see a pool at “The Annex”, but only half of them actually buy a membership.*  And that revenues from outside the Town are small enough to ignore, as a result of declining interest with increased distance, and the anti-competitive impact of a “25% upcharge” policy when we have three Fairfax REC Centers nearby.

* Where does 50% come from?  Google’s AI tells me that value can occur, when people literally say that they intend to purchase a particular item on a survey.  So that seemed like a conservative (small) reduction to take, here.  Plus, we all trust AI to tell us the truth, right?  The impact of potential non-response bias, by contrast, is just a plausible round number.  There is no empirical basis for it whatsoever, in this case.

Another thing in favor of that middle scenario is that the apparent density of memberships per square foot of pool is plausible.  Under the middle scenario, the 5500-square-foot pool has 483 paid annual memberships.  That’s only modestly higher density of family contracts per square foot than occurs at our nearby private membership pools (as detailed in prior posts on this topic).

 

Conclusion.

I was wrong about demand for an outdoor pool.  The primary demand for a pool at “The Annex” comes from an older population, one that I interpret as being more interested in routine exercise than in “fun for the kids”.  Those people clearly want a year-round pool, and they dominate the “pool” responses to the open-ended survey question 7.

That said, I don’t think this survey provides any comfort at all to those who think that the resulting operating losses will be small.  Certainly not, if we focus on the 5400 households in the Town of Vienna, and make any reasonable projection of likely annual memberships sold within that population.

Further, the survey results show that interest in what the Town is proposing for “The Annex” declines rapidly with distance, and that on top of that, interest in an indoor pool, among survey respondents, also declines rapidly.  Couple that with an almost-certain need to have a big up-charge for non-residents (out of fairness to Vienna taxpayers), and the presence of three nearby Fairfax County REC Centers, and I think it’s hard to justify assuming large amounts of revenue from beyond the Town’s borders.

So, once again, no matter what data source I start from, I still characterize the Town’s decision to build a one-third-scale knock-off of a REC Center as akin to a mom-and-pop retailer deciding to locate next to Walmart.  You’re going to take an economic beating for doing that.  The only uncertainty is how large a beating you’re going to take.

That doesn’t mean you shouldn’t do it.  It just means that as Town Council evaluates the cost-benefit tradeoff for this current proposal, they need to understand that the operating losses — the “forever” taxpayer subsidy needed to keep the doors open — is likely to be a lot more than the few-hundred-thousand that they have been shown.

Addendum:  But wait, didn’t the Town already show us that we wanted an indoor pool?  And pickleball.  Lots of pickleball.

Nope.  It might look that way, from the consultant’s report on all this, but you have to track exactly which graphic came from which exercise that the Town conducted.

From the consultant’s report on potential uses for “The Annex”, cited above:

Source:  Town of Vienna, Kimley-Horn report, posted with the 9/30/2024 Town Council work sesssion.

I I I missed that, the first few times I skimmed that report, and I can only assume that others did as well.  That first Town graphic in this section came from an in-person event, with perhaps 60 persons attending, where “indoor pool” was the only option listed.  And was, also, the first option listed.

Post 2062: Vienna Pool/Gym Proposal: Fairfax REC Centers require no taxpayer subsidy for operating costs.

 

Source:  Oakmont REC Center, posted right next to the elevator.

Let me start with the simple fact, as shown in the picture above.  Fairfax REC Centers are self-supporting.  They require no ongoing taxpayer subsidy.

The proposal for Vienna’s one-third-scale REC Center, by contrast, assumed that operating cost subsidies would be required.  It seemed to imply that this was normal, and that nothing could be done about it.  That, consistent with ignoring the nearby REC Centers.

You may or may not be familiar with one or more of the three Vienna-area REC Centers.  This post has a broader focus than any one REC Center.

Focus 1:  Do you need any more proof of economies of scale?

With the REC Centers, the lack of ongoing tax support is a bedrock principle.  User fees cover operating costs.

But the need for permanent taxpayer subsidy as assumed in the Vienna pool/gym proposal.  This, despite proposed user fees that are roughly the same as what Fairfax charges ($960 annual family membership for Vienna, versus $1050 for Fairfax.)

A moment’s thought will tell you that if the Vienna proposal could have claimed no need to subsidy, it would have.  That would surely have made it an easier “sell” all around.

Why can Fairfax count on the REC Centers to be self-sufficient, but Vienna can’t.  Compare:

  • Vienna’s proposed facility, 25,000 square feet.
  • Lee District REC Center ….. 86,000 square feet (reference).
  • Cub Run REC Center ………, 94,000 square feet (reference).
  • Audrey Moore REC Center, 83,000 square feet (reference).

The smallest REC Center for which I have found size data — Providence — is roughly twice the size of the planned Vienna facility.

As a Vienna resident, you may have been aware that there are three REC Centers nearby (Oakmont, Spring Hill, Providence).  You may have been vaguely aware that these are large facilities.

But you may not have been aware of the full context.  All of the Fairfax County REC Centers are large.  And they pay their own way with user fees.  But Vienna’s proposed facility is small.  And not even the people who’d like to sell us the plans for the building can credibly claim that it’s going to be self-supporting.

Connect the dots between that, and the relative size of the facilities, and 2014 Town Council Member Kelleher’s point regarding the inefficient scale of a Vienna facility.

Focus 2:  A purposeful level of subsidy in the well-planned Fairfax County system

The second big difference between the planned Fairfax County system, and the one-off proposed Vienna facility, is that the lack of operating subsidy for the REC Centers is part of a larger recreational whole.  Fairfax didn’t randomly set out to make the REC Centers self-supporting.  That’s how REC Centers fit into the bigger picture, in Fairfax.

Fairfax REC Centers are just one point on a fairly intuitive “spectrum” of taxpayer subsidies, for a variety of recreational activities.  For Fairfax County-run entities:

  • Golf courses cover operating cost, plus.
  • REC Centers cover operating cost.
  • Events held in the parks cover operating cost, minus.
  • Parks (just parks, not “attractions”), are free.  They cover none of their costs.

At one end of the spectrum, expensive recreation, typically used by the well-off (golf), must pay its own way for both operating and capital expenses.  At the other end, taking a walk in a pleasant un-developed space has no associated user fee.

This purposeful spectrum of taxpayer subsidies in Fairfax is laid out in their recent study on equitable access to recreational activities in Fairfax.Fairfax County recently underwent some self-criticism for being too business-like in terms of limiting subsidies, and making many facilities inaccessible to the poor (I paraphrase, but that’s the common-sense gist of it the 2024 Fairfax equity study).

By contrast to Fairfax’s seemingly-thoughtful planning of subsidy level by type of activity, Vienna’s taxpayer subsidy level for the proposed pool/gym is … whatever it is.  It’s purely the residual of finances of this particular facility, no matter how they work out.

On the one hand, Fairfax County is the 600 pound gorilla in this market, and they have leeway that Vienna does not.  So in that sense, it’s unfair to point out the “randomness” of Vienna’s taxpayer subsidy for it’s (small-scale) rec center.

And yet, the more I look at the entire Fairfax system, they have made an effort to make it sensible, for want of a better term,  So, on the other hand, it’s undeniable that much of the Fairfax system has an innate logic to it, while Vienna’s does not.  Nobody even seems to be asking the question “what is the right, fair, just, or reasonable level of subsidy” so that Vienna can have a public indoor pool.

But on the other hand, “What’s the right subsidy for this proposed facility?” is not even on our radar screen.

Post #2061: Vienna pool/gym: Why we can’t just pre-sell memberships to test demand for this new facility.

 

Regarding the proposed Vienna pool/gym, why not ask people to buy a membership in advance, so we can get an accurate gauge of paying demand for this facility?  It’s not as if that’s a novel idea.

I’ve asked myself that, and I’ve heard others asking the same question.

The short answer is, Vienna can’t, because we’re broke.  Roughly speaking, all the money available for the Vienna capital fund is already spoken for, thanks mainly to the our very large 2020 bond issue.

So, even if we raise taxes now, assuming normal economic times ahead, we’d have to save the revenues for four years, first, just to be able to be able issue that new bond with the assurance that we have enough money around to make the payments on it.

The upshot is that if we wanted to have a “membership drive” to test the waters, before making a final decision on this facility, we’d be selling memberships in a pool that won’t open for another six years.

Judging demand by offering pre-orders is a standard way of doing business.  It would be particularly helpful here, because demand for the facility is the big unknown.    But, practically speaking, we can’t do it, because we’re basically broke, in terms of our capital budget.

Extras for experts:  What happens if we don’t have normal economic times for the next four years?

Source: Some old Town of Vienna budget.  For some reason, the Town has taken all of its archive of budget documents off-line, so I can no longer go back and give an accurate citation as to source.  I first posted this chart in Post #547.  

The year 2008 saw our last significant economic downturn, a consequence of the collapse of the housing bubble, and the near-collapse of the banking system.  (There was a short, sharp recession during COVID, but thanks to the magic of every government in the civilized world showering money on their populations, that was over with in half a year.  Followed, with some lag, by a world-wide burst of inflation.  But no Great Depression.  I count that as a win.  So the short-but-sharp COVID turnaround doesn’t count as a “real” recession, in my book.)

While Vienna property values were stable during the 2008-2010 recession, meals tax revenue was not.  People ate out a lot less.  I guess.  And that resulted in the dip in Vienna’s meals tax revenue, circa 2008, shown above.  Oddly, it took close to a decade for the meals tax revenues to return to their 2008 level.  Why was that revenue number sticky?  No idea.

That meals tax money is how Vienna makes the payments on the bonds we have issued a.k.a. money we have borrowed.

With all the loose talk about mass firings of Federal employees, blanket tariffs on imports, plus the end of any COVID- or infrastucture-related stimulus money, I’d guess that some chance of a 2008-style dip in meals tax revenues will factor into Town Council’s final decision on this issue.  I heard a citizen voice that concern specifically with respect to our being part of the DC-area economy, at the mid-October Town Council hearing.

The upshot is that there’s a cost to maxing out your credit card.  You can’t make a major new purchase in a hurry.  And, all other things equal, I’d think your level of fiscal risk-aversion should increase, going forward.  And our meals tax revenue is known to fall in hard economic times, per 2008 above.  (And, somewhat oddly, stay down.)

This whole Vienna pool thing is a fraught decision.

Post #2058: Vienna rec center proposal. Beyond Econ 101.

 

Why am I still writing about this?

The economics of it are weird enough to be interesting.  (I am an economist. Or, at least, was.)

Plus, I’m retired.

So, the rest of this, I’m doing for fun.  Or what passes for fun, in my life.

First, a moment for catharsis, or how did I get here?

I will briefly express my dismay, then anger, then amazement, then horror at the Town’s decision-making process.  This, by way of understanding my motivation.

Dismay at reading the projection of demand, revenue, and operating losses for the proposed Vienna pool/gym facility.  I benchmarked the key demand and revenue quantities against some seemingly common-sense standards, and I didn’t much like what I saw.  And I liked even less, why I thought I was seeing it.  FWIW.

Anger once I realized that this seemed part of a systematic campaign to make 2014 Town Council members Polychrones and Kelleher уничтожить, that is, made into nothingness, as if they had never existed.  Intentional or not, that’s a big failure in the decision-making process, and failure is failure.  Because, not understanding the likely operating cost implications of Kelleher’s economies-of-scale point, coupled with Polychrones’ local competition point — that’s not acceptable, if you want a good outcome all around.

Amazement when it dawned on me that — this is hard to say — maybe not every person on Town Council was necessarily aware that they, Town Council, were the buyers in this transaction, and that they were looking at the seller’s numbers, for the financial projections.  My wife tells me it’s rude to say that, but hey, I’m just reporting my thought processes.  And the fact that it took me a while to figure that out myself.  But the financials were done by a chosen partner of the folks trying to sell Vienna a couple-million worth of architectural services.

Did I say amazed?  Wrong nuance entirely.  Horrified, when that sank in.

As an interested bystander on the buyer’s side of the table, with some relevant professional experience, I was thinking, wow, for sure, our side of this was thoroughly prepped as to this bedrock aspect of what they’re being shown, right?

But … some of my more difficult times as a consultant arose because I’d just plow ahead, thinking the client and I were on the same page.  When that wasn’t so, and it would have saved a lot of heartache to straighten that out first.  So it’s not a waste of time, particularly given that this is likely a once-in-a-lifetime experience for everybody on my (the buyer’s) side of the table, to make sure everybody understands the basic framework.

Even if that means possibly looking like an ass by stating the obvious.  It comes with the job.

As subtlety is not my strong suit, nor is it effective in a situation like this, I worked to give the issue of operating losses higher visibility, make sure the Polychrones/Kelleher logic of the 2014 decision was understood, and so on.

That’s how I got to this point.

With that out of the way, let’s see if I can step it up to Econ 202.

The story so far, as I tell it.

By starting with 2014 Town Council member Kelleher’s warning on the inefficient scale of a Vienna facility, and layering on a stringent model of competition in this market (thou shalt not price above Fairfax user fees), I came up with sort of Econ 101 synopsis of the situation.  Here:

Taxpayers pay for scale inefficiency.  If a Vienna facility’s average cost per user is twice that of Fairfax’s REC Centers (Kelleher’s warning, quantified), then, all other things equal, taxpayers end up eating that excess cost due to inefficient scale of operation.  Like $1.1M a year, here.  Forever, because it’s baked into the inefficient scale of the facility.

The immediate policy implications.

Unless you still want to rely on the seller’s rosy scenario for projected taxpayer subsidy for this facility, a shift of thinking is in order.

Now, instead of having faith that your staff can run one of these every bit as well as Fairfax County runs the REC Centers,  …

… in order not to take an ongoing financial beating (50% operating losses), you must believe that …

… your staff must make up for the cost-side deficiency of a small-scale building …

… which means that your staff must significantly outdo Fairfax County, in bringing in revenue per square foot of facility.

And in my world, they can’t do that with price increases beyond what Fairfax charges, so …

… they have to do that by bringing in a higher volume of services/number of paying customers, (per facility square foot, relative to Fairfax.)

In other words, assuming Kelleher’s warning is right, and that the numbers as presented are ballpark, to avoid taking an economic beating year after year, you have to assume not just that your staff are as good at this as the Fairfax County staff, you have to assume that they’ve got some aces up their sleeve, and that your staff must outperform Fairfax REC Centers considerably, in terms of volume of paying customers served, per square foot of facility.

Maybe they can.  Maybe they can’t.  I don’t know.

But all of a sudden, once you realize the cost handicap Vienna faces, this is a lot bigger ask.  I’m not saying this hurdle cannot be overcome.  I’m just saying that Town Council needs to be aware of it.

Of luck or skill, either one will do.

On the one hand, there’s luck.  Maybe you could get much higher revenue per square foot merely because you’re lucky enough to be located in a particularly lush part of the surrounding gym-market landscape.

This, I think, is the essence of what the seller’s analysis of the situation was trying to say.  That there’s so much money in Vienna, and it’s looking to be spent on an indoor pool, and it’s going to be spent on your pool, that, no problem, if you merely run your facility with technical competence, your losses will be minimal.  So, despite any up-front handicap of high average costs due to small size, Vienna will come out of it whole, financially, or nearly, because the location of the facility allows you to skim the cream off this particular market location.

So, in my view, the seller’s analysis is at root a luck argument.  We just weren’t directly aware that we had to count on that kind of luck, because Kelleher’s scale economy warning had been buried.

So rephrase the received wisdom on this proposal as:  By being sufficiently lucky in its choice of location, Vienna can offset the innate handicap of high average costs due to inefficient scale, with high customer volumes per square foot of facility.

To which I say, maybe.  Maybe we’re lucky enough that simply our location offsets our cost disadvantage.  Moderately high population density, lot of disposable income, what’s not to like?

But while Vienna is the highest-income community in Virginia (per news report), it’s not like we’re exactly surrounded by slums.

The alternative to luck is skill.  That is, a business plan for the facility that specifically acknowledges the cost handicap, and realistically shows specific actions by Vienna that plausibly will overcome that, to avoid high levels of operating losses for this facility.

To the contrary, on the skill side — the business plan, if you will — I’ve now stumbled across three things that suggest that little thought has been given to ways to maximize revenue in this facility.

The first is dismissing any notion of binding capacity limits for the proposed Vienna pool.  The seller’s proposal explicitly – and kind of weirdly, come to think of it — makes a big deal about those not being binding.  No problem, everybody will fit.  But when you toss around projections of 4000 memberships — which, if they were all family memberships, would be like 12,000 people — for a building with 100 parking places and a pool with a maximum capacity of 130 people or so — eh, I’m just not seeing it.

Visit Vienna Aquatic Club on Memorial Day weekend, and you’ll likely agree with me.  That’s a bigger pool than is proposed for the Vienna facility, with just 450 memberships.  Note the full 100-car parking lot, and the crowded pool, realize that 4000 memberships for a smaller pool is asking a lot.

So, to me, it still looks like the financial proposal for this Vienna pool was tacked onto the physical proposal for the building, at the last minute (which I know to be true in essence, as it was an after-the-fact add-on), and that the apparently discrepancy between the financials and physicals of this overall presentation was never reconciled, merely papered over.

Surely, this facility has some finite capacity in terms of memberships that can be effectively served from a building of this size.  Somebody needs to state what that is and why, and otherwise prove that capacity limits don’t put the kibosh on the notion that we’ve simply lucked into a very rich vein of ready pool money, by having the good sense to put a pool in Vienna, and that’s all we need to know.

Second, “25% up-charge” needs to be, well, explained, at a minimum, as to how Vienna plans to implement charging 25% above the Fairfax annual membership rate (what they prose to charge to Vienna residents, roughly, per the proposal), for (effectively) a small clone of a Fairfax REC Center, in Fairfax’s back yard.  Because I’m not seeing it.

And now, news to me, I stumbled across what appears to be the Town locking out a potential source of pool revenue, with a Vienna pool design that appears ill-suited to accommodate swim teams.  This, when Fairfax thinks enough of swim team revenue for the Reston facility that, in its budget fund 40050 summary, it calls out three different swim-team-related organizations by name.  (Which I interpreted to be, in effect, thanking them for being good, paying partners in this endeavor.)

If nothing else, further progress calls for an eyes-open analysis of the average cost hurdle Kelleher warned about ten years ago, and what, if anything, Vienna is going to do to surmount that.

A Tetris-like exercise to help you see the problem.  The graphic above is the pool schedule at Oakmont REC Center, for some recent random day.  Except for “open swim”, the little colored (non-blue) blocks of time represent customers and revenue, from classes and swim team practices.  So that’s a graphic representation of how well Fairfax is doing now, in terms of “customers per square foot of pool”.  Now try to fit in twice as many of those blocks, in that same space.  That’s more-or-less what you’re asking Vienna to do, to come close to breaking even, in a facility that has twice the operating cost per square foot.  Worse, try it again, but this time expand the  “open swim” area to cover half the pool, as Vienna seems to be selling this as roughly half “fun” pool, have “exercise” pool.  Now try to fit in two copies of all those colored blocks, into half the pool.   That’s the flavor of what Vienna must do, to break even financially, if they really aren’t kidding about this being a half-and-half, fun/exercise pool.  It illustrates the ask you are making, by starting off with high costs due to an inefficient scale of operation.

Or, just have the taxpayers cover the proposed facility’s operating deficit, whatever it may be.

I guess this ended up being business 101, instead of econ 202.

Or maybe Tetris 101.

Free advice for what it’s worth.