Trenton Redux

Economics are a bummer

I love Trenton and my home in Mill Hill. I'd also like a beach house on Block Island, and a villa in Tuscany. Unfortunately, I can't afford those things. Economics are a bummer.

Proponents of the Artworks status quo seem blissfully unconcerned about economics. Nowhere in the debate on the other side does there seem to be much recognition that the taxpayers of Trenton are making a major investment in the facility, and have the right to demand a fair return.

How big is the subsidy? Expenses include:

• Utilities. Have averaged $3,900 a month for the past 3 years. However, utility rates have increased substantially in the last year (we’ve been lucky it’s been a mild winter, so far). The commercial rate for natural gas in December was almost 2x what it was a year ago. Prices have fallen back a little bit, but who knows for how long? So, going forward, it's a very good bet it's going to be a lot more than $3,900/month. We've estimated $6,000/month, which we think is a fair guess.
  

• Repairs. When something blows out (building was outfitted nearly 20 years ago) the city pays. Figure $500/ month
  

• Miscellaneous – e.g. sewer, water, insurance (the city self-insures, but has to pay an administrative fee to a 3rd party), routine maintenance, figure another $1,000/month

So direct expenses will probably run about $7,500/month, or $90,000/year. Not counting, of course, the major capital repairs which the building needs.

But let’s not forget the city’s loss of revenue from the site. When the city originally leased the building to ArtWorks for $1/year, Mill Hill was a transitional neighborhood. There was no economic value to speak of, so no loss to the city. With the success of Mill Hill, this is a very valuable property. Figure 8 units x $250K value x 4% = $80,000/year in lost tax revenues.

So, altogether it's costing the city roughly $170,000 per year to maintain the status quo.

Now, $170,000 is just a number. It’s a lot for a car. It’s a little for a good house (my dream house in Block Island would cost a lot more). What gives it meaning is the value received for the money spent.

Trish Fagan, director of the ArtWorks program for MCCC, was quoted in the Trenton Times as saying that 150 students attend the college's program. The “Spring” term covers the period from January through May. That's 150 days or 41% of a year. During that period, the City of Trenton subsidized ArtWorks to the tune of $69,863.

If there were 150 students during that period, the subsidy was $467 per student. Is that good value?

I doubt many Trenton taxpayers would think so. These are overwhelmingly non-credit courses (21 of 24 courses in the Spring term). The students themselves are paying about $25 per session plus materials fees.

Why do the operations cost so much per student? It's not a mystery: the facility is grossly underutilized. This is, after all, an 8,800 square foot facility. You'd figure it would support at least 9 classrooms. Figure the spring term is 19 weeks and could theoretically be used 60 hours/week. This availability translates to a total capacity of 10,260 classroom-hours.

Yet the entire spring schedule for MCCC in artworks, every session of every course, amounted to 867 classroom-hours.

When your costs are fixed, it's hard to be cost-effective with 8% utilization. Economics are a bummer.

posted by Michael @ 3:34 PM