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III.1. Depot Update; Lenz CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Ari Lenz, Assistant City Manager Date: March 14, 2023 Subject: Depot Update _____________________________________________________________________ PURPOSE To provide Council and the Community an update on the changes at the Depot and to summarize the next steps. INFORMATION In 2022, the Depot Coffee House ended the year with a deficit of approximately $81,000, making the fund balance at a total deficit of negative $216,000. The current agreements in place for the Depot have no plan for how to address a deficit budget or balance. As the fiscal authority for the Depot, the City of Hopkins has been carrying that negative balance. Due to the on-going deficit challenge, the City has had multiple conversations with the partners over the past years and there has been minor contribution adjustments but no commitment to additional funding to meet the Depot’s deficit need. In January, the partners agreed to a revise hours at the Depot to reduce coffee operation hours during the winter months and adjust to longer hours in the summer months. However, in February, the Depot Program Manager submitted their resignation. The partners agreed with the deficit existing and no plans to resolve the outstanding balance or sufficient revenue to continue current operations, it was not fiscally responsible to move forward with rehiring at this time. Instead the partners agreed to taking this opportunity to suspend coffee operations, but continue to support youth programming and re-evaluate the program, goals and the financial situation. Coffee operations are suspended at the Depot Coffee House effective April 2, 2023. At its heart, the Depot’s primary mission has always been to provide a safe, chemical- free environment for students and youth in the community. It has been a space for youth focused programming and leadership develop ment. The City and our partners have committed to continue funding the Depot Youth Board activities while we spend the coming months working together to find the best way to maintain youth programmin g and leadership development and opportunities to continue serving the Depot’s mission. Background Administration The Depot has been in existence since 1997. Its Mission is “To provide a place of community and learning in which student involvement and youth development are encouraged in a chemically-free environment.” The Depot’s partners are Three Rivers Park District, Hopkins School District, City of Minnetonka and City of Hopkins. The Depot had a positive fund balance of $8,495 at the end of 2012. The fund balance remained relatively stable through 2017, ending the year with a deficit of $31,288. The Depot struggled financially in 2018 and eliminated a full-time coffee operations manager position as of 1/1/2019. All duties were combined with the Program Manager. The Depot’s Partner contributions were also increased in 2019 to provide additional support. 2019 began an arduous period for the Depot’s operations. In July, Metro Transit took over the Depot’s parking lot for construction of the Green Line Extension light rail project. A temporary parking lot was created, but it remains difficult to access the Depot. Excelsior Boulevard has been closed numerous times due to construction. Bike trail users are frequent customers at the Depot, but related trail closures have kept them away. Despite, all these challenges the Depot increased its fund balance by $1,957 in 2019. In 2020, the Depot experienced negative impacts from the COVID-19 Pandemic. The coffee operation were temporarily closed due to State orders. When reopened it was at limited capacity. The facility chose to operate a take-out only model. (The age of the building and physical location have always prevented a drive through). The depot decreased its fund balance by $28,099 in 2020. Issues stemming from both the Green Line Extension and the COVID -19 Pandemic continued in 2021. City Council approved a 2021 Budget with a $15,000 decrease in fund balance. Actual results decreased fund balance by $44,234. The following chart shows 10 years of operating data: 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Revenues 280,360 340,161 360,305 376,538 386,073 336,467 335,257 308,019 203,963 183,488 Total Expenditures 286,178 358,750 374,632 362,829 383,657 359,459 368,507 306,062 232,062 227,722 Increase (Decrease)(5,818) (18,589) (14,327) 13,709 2,416 (22,992) (33,250) 1,957 (28,099) (44,234) Ending Fund Balance 8,495 (10,094) (24,421) (10,712) (8,296) (31,288) (64,538) (62,581) (90,680) (134,914) Again, the Depot had an operating deficit of approximately $81,000 in 2022. The ending fund balance is negative $216,000 (unaudited). In 2023 the following contributions were committed by the partners, they have reaffirmed their commitment for this year during this transition period. The City also set aside $35,000 in ARPA funds for the deficit and was hoping for a match before committing those funds. No match has been made to date. Hopkins School District - $50,000 City of Minnetonka - $28,000 City of Hopkins - $28,000 (additionally is responsible currently for administration costs and financials including the deficit balance). Three Rivers Park District - $19,500 (additionally responsible for capital costs associated with the building, building is owned by Hennepin Rail Authority and leased through Three Rivers) 2023 Total Contributions: $125,500 FUTURE ACTION Staff will be combining some of our planned efforts related to the Youth Workforce program with the Depot program this Spring/Summer as we work on meeting with partners or potential partners, gathering information and making a recommendation that is both fiscally responsible and meets the goals to support youth leadership development and programming. Three Rivers has agreed to allow us to continue to use the building as the City of Hopkins sees fit. The City will be at least temporarily maintaining the building until we determine next steps. The Youth Board will be included in this process. We currently are accepting public feedback online via a surve y form, the feedback will help shape the future program. https://www.hopkinsmn.com/FormCenter/The-DepotFreight-Room-25/Depot-Feedback-Form- 234.