Council Corner: Repeating the Mistake on the Lake
Over a decade ago, Columbia Association decided to start a new day spa, Haven on the Lake. At its June 12, 2014, meeting, the Board was presented with financial projections for the facility and deliberated on whether the spa should include an indoor pool. CA projected that Haven was expected to yield more than half a million dollars each year, and in the “pessimistic” case it would break even. In reality, Haven wound up losing between $1 million and $2 million each year it was in operation before it was permanently shuttered during the COVID-19 pandemic. The right question was not whether Haven should have a pool, but rather if it should have been built in the first place.
CA’s proposal to spend $13.3 million on office space and to build out and run a daycare center risks repeating some of the same financial mistakes from Haven on the Lake. In slides from the July Board meetings, available online at columbiaassociation.org/blog, CA predicts that a daycare center will break even in its second year and run a modest operating profit each year thereafter. The problem is that these rosy predictions do not align with CA’s assumptions for the learning center.
CA assumes that the daycare capacity will be 180 children each paying $325 to $510 per week based on age and will require 48 staff to run. This results in a maximum revenue of approximately $3.4 million per year, yet the staffing alone could cost around $3.8 million based on CA’s $80K average cost to employ a full-time staff member. While $80K may sound high, CA will need to provide a competitive compensation package including benefits to attract directors and licensed professionals. Like Haven, the daycare could be facing a structural deficit—before accounting for other expenses such as insurance, utilities, supplies and playground equipment.
The other possibility is that CA acquires the adjacent building without adding a daycare center. Unfortunately, the finances are no better in this scenario. The annual rent from the adjacent building is only about $500K per year, since it has few tenants. However, the expenses are estimated to be around $700K so this case, too, would result in annual losses. Based on this it appears that the daycare proposal is CA’s justification to purchase an unnecessary liability.
The correct question is where could CA invest the $13.3 million that would provide a greater benefit to the community? Reston recently renovated two of its pools for about a third of this cost. Perhaps instead of buying unneeded office space, CA could use this capital to renovate six outdoor pools. This is just one possibility as there are plenty of CA facilities that need significant upgrades. CA should focus on improving fundamental community amenities and services before exploring new business ventures outside its expertise.
Eric Greenberg is the River Hill Representative to Columbia Council.
Email: riverhill@villageofriverhill.org.
Disclaimer: This column reflects the views of Eric Greenberg only and not those of the Columbia Council or the River Hill Board of Directors.
