Minnesota’s Economic News — W/E 10/15/21
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The budget crunch facing local governments due to the economic impact of COVID-19 may not be all bad if it leads cities to get out of businesses they probably had no business being in in the first place. Take the fitness center operated as part of by the city of South St. Paul’s community center in a former school building, finally on the chopping block after years of steadily declining results, according to the Pioneer Press.
City and school officials say the idea, which came up as they prepared for the July 6 reopening of the center amid the coronavirus pandemic, is being driven by several factors: declining membership and revenue; increased competition in the fitness marketplace; and added budget pressures caused by the pandemic.
“Obviously, the coronavirus impact has been huge to all gyms, fitness areas,” said Joel Hanson, city administrator. “But even before that there were challenges from decreasing enrollments. And so this is kind of an evaluation of: Is this feasible to operate for the long term? Is it sustainable?”
The intense competition between big brand workout centers continues to drive down prices and make it difficult to impossible for the suburb’s parks and recreation department to keep pace with the industry’s innovations.
“When LA Fitness opened up, we saw a little bit of an impact, but their membership prices were pretty close to ours,” said Chris Esser, South St. Paul’s parks and recreation director. “When Planet Fitness opened up, that was a game-changer just because they offer very deeply-discounted membership prices compared to what we have.”
The market pressure has forced the Central Square Community Center board of directors to put a hold on increasing membership pricing the past five years, Esser said. Even with that, along with adopting several fitness reimbursement and senior fitness program incentives, memberships continue to decline.
At the same time, expenses mount each year, increasing the need for a taxpayer subsidy to stay open, even though the city has a sweetheart deal when it comes to utilities.
…the city does not pay rent or contribute to utility costs — a situation that has allowed Central Square to operate in the black the past 15 years, Esser said.
“But if we had been paying rent, if we had to pay for utilities,” he said, “our membership fees would be more than they are and I think we would have had this conversation long before now.”
No final decisions have been made on the fitness center’s future yet. But it seems likely that closing the fitness center would leave residents plenty of private sector options to get in shape while leaving their city government more fiscally fit.