Opinion: Diamond Peak’s financials just don’t add up
March 4, 2015
In the Feb. 18 IVGID GM's Corner article, "Diamond Peak's business model is strong," Mr. PInkerton tells us "the financials provided for Diamond Peak are a very fair reflection of our cost and revenue structure."
I'm not sure why he used the word "structure," but if it's construed to mean the financials are a fair reflection of Diamond Peak's actual costs and revenues, then I completely disagree.
Members of the Diamond Peak Master Plan Steering Committee were told by staff that Diamond Peak's financials do not include any central services costs.
Among those costs not allocated are Human Resources, Accounting and IT. We were told that Diamond Peak's cost allocation for HR and Accounting would be about $250,000 to $300,000. Central IT was another large ticket item not allocated.
How can we possibly consider these financials to be meaningful if we don't include these major costs? These are significant expenses of any business and certainly included in the expenses of the other ski areas to which Diamond Peak so favorably compares itself.
At the Oct. 7, 2013, board meeting where trustees were supposed to give direction for budget planning for 2014-15, three of our current trustees expressed the desire that Diamond Peak break even, or make a profit without subsidies (with both capital and debt service included).
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But we certainly cannot make that determination unless major central expenses are properly allocated. Thus far, we have not seen evidence that any of the venues generate a profit.
To the contrary, if we include a conservative estimate of just three of 13 potential central services (see page 168 of the current IVGID budget) in the expenses on the cash flow analysis staff provided to the Committee, and take out the Rec Fee subsidies, I think we will see a completely different picture.
I have asked Mr. Pinkerton to include the HR and Accounting cost allocations as well as a fair allocation of central IT costs for Diamond Peak and come back with a revised cash flow analysis. The next Steering Committee meeting will be Monday, March 9.
Our General Fund Budget is more than $4 million annually. Only about a million dollars of that is attributed to HR and Accounting. That still leaves $3 million of operating expenses that aren't allocated.
We don't provide general governmental services like counties, cities or towns. The District only has the power of recreation and certain utilities, so everything paid for in the general fund should be considered as an expense of those enterprises/programs.
If it is not, then IVGID is spending on things for which it has no authority. What would be a fair percentage of those costs for Diamond Peak?
Mr. Pinkerton indicates that because IVGID is government, these costs may be higher than those for private business. I'm sure there are (private) industry statistics that could give us a reasonable estimate of HR, Accounting and IT costs (maybe even specific to ski areas) and other central services, so we could get a more apples to apples comparison, but completely eliminating these expenses is certainly not a "fair reflection."
These statistics might also be valuable information in assessing whether or not these services could be provided at lower cost by outsourcing.
And let's not forget, IVGID doesn't pay income taxes or property taxes, so any differences in total operating expenses because we are government will pale in comparison to the tax burdens private operators face.
Our total expenses should be significantly lower than private for-profit businesses.
The IVGID Board has the responsibility to make informed decisions regarding Diamond Peak's future. A more accurate picture of Diamond Peak's financials is critical.
If our current "financial structure" does not provide that, then maybe that structure needs to change.
Judith Miller is an Incline Village resident and a member of the Diamond Peak Master Plan Steering Committee.