Ice arena to remain in city's general fund

By Kevin Elliott

A potential plan to create a city enterprise fund to manage and operate the Birmingham Ice Arena was put on hold Monday, March 22, as the Birmingham City Commission voted unanimously to keep finances for the arena within the city’s general fund.

Capital improvement needs at the ice arena, including more than $3 million in upgrades from a recently approved parks and recreation bond, has resulted in increased interest by the city commission and the public in operations of the ice arena, and how much is being subsidized by property taxes. Currently, the arena’s operations are recorded in the city’s general fund, along with other governmental services. As a result, the operations of the ice arena aren’t readily determinable.

On March 8, the city commission held a workshop to discuss whether ice arena operations should remain in the general fund or move to a separate enterprise fund.

Birmingham City Manager Tom Markus said both he and the city’s financial staff recommended against creating an enterprise fund, as he said the desired accounting can be done without transferring funds out of the general fund.

“In order to move the ice arena operations to an enterprise fund, several things would need to be done,” Markus said. “First, assets and liabilities would need to be identified and recorded. As demonstrated in the workshop, this would likely result in a deficit unrestricted net position. State law does not allow a city to have a negative unrestricted net position, therefore an operating transfer from the general fund would be needed to correct this. Unless revenues are generated sufficient to offset the costs, the transfer of funds from the general fund to the enterprise would need to be done on an annual basis.”

Additionally, Markus said additional allocations would be needed from the general fund, as it is doubtful the arena would be profitable. Rather, he said, most public ice arenas aim to break even, rather than turn a profit.

“In total, establishing an enterprise fund for the ice arena will likely result in more property tax funding to support it than if it were left in the general fund,” Markus said. “In addition, creating and maintaining an enterprise fund would be significantly more administrative time to setup and maintain, however, it would provide the most accurate and detailed information on the operations.”

Commissioners unanimously agreed to forego the creation of an enterprise fund and instead chose to have an annual finance report on operations to the city commission provided by October 31 for the preceding fiscal year.