McDermont X profits in first year on their own
By Paul Myers @PaulM_SGN
LINDSAY – Last year served as a make or break 12 months for McDermont operations. Untethered to the City for the first time, formerly the McDermont Field House and now McDermont X, proved that there is a chance for them to make it.
Still for many in town, the city block sized building is a totem to all the money the City sunk into a facility that should have been privatized in the first place.
It has been almost 18 months since McDermont Venture Inc. (MVI), a private company founded by the former McDermont management team, was created to take over operations at the sports and recreation center. The burden was a weight off the City’s shoulders, and placed squarely in the hands of Clint Ashcraft, Deici Avila and Alfredo Velasco. And in their first year striking out on their own they managed to do something McDermont never did: make profit.
According to Ashcraft the newly titled McDermont X facility managed to cut costs, draw in business and eek out a $32,000 profit in their first year with $1.2 million in gross revenue. Ashcraft said that over 2018 memberships were up 15-20 percent and school groups participating in their rec programs were on the rise.
When the City was running operations the cost per employee inevitably rises because of public benefits and a different set of rules that private employees do not require. Ashcraft says part of their profit generation strategy was to reap the benefits of having private employees instead of public ones.
“One point two million was great but when [McDermont] started [10 years ago] we were bringing in $2.3 million. But the problem was it was spending $3-4 million,” Ashcraft said. “In those days it was fresh and people were driving from everywhere to check it out and it was a great thing and a great boost and now that we have our expenses under control we’re hoping to get back to that.”
Ashcraft said that he is proud that after the first year the company is still standing. Throughout 2019 he hopes to improve on the things they already offer.
“We’re moving forward with some projects we want to do and pull them off financially like the zipline and an area for toddlers,” Ashcraft said.
Early on, Ashcraft who has an autistic child of his own, was working on gathering a grant from Tulare County First Five that will help him create an area for autistic children. The hope is for children to expand on their learning capabilities at a young age through tactile learning and other techniques that are geared toward autistic children.
While McDermont X showed in 2018 that the recreation company could stand on its own two feet as a private company, it still proved to be costly for the City.
When Lindsay let go of McDermont operations, they ensured they would still be gathering an annual income from McDermont X. Per their contract, McDermont X will pay the City 50% of their net profit until they reach $100,000. The City’s share of the profit last year, $16,000, is supposed to help pay off the facility. Lindsay still owes approximately $2 million to bonds that helped build it.
Per MVI’s contract when McDermont X breaks the $100,000 mark, the 50% that is paid toward the City will actually be a payment toward purchasing the building. A move that could not happen fast enough for Lindsay brass.
Last week, in light of The Sun-Gazette’s report that the City had taken millions from utility funds to help fund McDermont when the behemoth rec facility was still operated by the City, residents flocked to council chambers for answers and admonishment. At the Feb. 26 Lindsay City Council meeting councilwoman Yolanda Flores raised the question how much the City had spent on the McDermont facility in 2018 versus how much they made.
City manager Bill Zigler said the City has spent approximately $30,000 in maintenance, to which Flores pointed out that the City had actually lost money overall. The exchange occurred amongst the broader discussion of the pros and cons of the Lindsay Chamber of Commerce continuing to run the Friday Night Market.
According to Ashcraft, there is plenty to consider when it comes to maintaining the 172,000 squarefoot facility.
“There hasn’t been enough money to keep it maintained. There has to be a balance between reinvesting, marketing and finding those things to keep people coming back because that downward spiral in revenue just can’t continue,” Ashcraft said.
He added that they are attempting to fix a broken down air-conditioning unit, and there is a need to complete projects like reinstalling gutters and roof renovations.