KEEPING THE TIN FISH: MORE CITIZEN INPUT ON TIN FISH CONTRACT
The following letters are a string of e-mails regarding the Tin Fish lease that were exchanged between long time ECCO resident Al McMurchie and a couple of Park Board commissioners. The e-mails are being posted here with Mr. McMurchie’s permission.
In the original letter dated Sun., March 18, 2012 at 8:13 PM, Al McMurchie wrote to Commissioner Anita Tabb:
“My wife and I reside one block from the Tin Fish Restaurant. In our travels this Saturday, we were distressed to learn that there is a negotiating problem between the operators of the restaurant and what appears to be certain segments of the Park Board and/or Park Board staff.
Generations of my family have had a long-term relationship with this neighborhood. My grandparents lived and are buried here, my father graduated from West High School, and my daughters grew up here. We love the dynamics of our community. We are quiet by nature, choosing to enjoy living here without political involvement. We’re not complainers and we trust in government officials to do their best and we respect, and even have sympathy for, the challenges that confront them. There however comes a point when we need to express our concern.
Based on what we heard from neighbors, other citizens, and commissioners present, this development is distressing to us from a variety of perspectives:
1. The professional conduct of at least one Commissioner. Reported to us by a fellow citizen, a confrontational, even bullying, tone was observed and commented on by observers during a previous meeting. This is extremely disappointing. For any of you that have bullied, that is not why you were elected.
2. There appears to be a question of park staff’s ability to organize and facilitate an effective agreement on your behalf.
3. All independent operators that have taken distressed and poorly functioning assets of the City and turned them into strong community assets need to be respected and rewarded in good faith for taking that action and assuming that risk. The Tin Fish operators have certainly demonstrated that commitment. As a result the community now has a strong centerpiece for this portion of our park system. Remember that previously those same assets languished for decades.
4. After reading the contract in question on your website there is a fundamental question of fairness for this operator and other operators. Rent seems to have been accelerated at an inordinate rate and is inconsistent with commercial options. Even recognizing the value of the location, the rent amount and other obligations would be viewed by fair-minded people as unreasonable.
5. Loss of this operator and this recreational asset represents risk to the City. Loss of the financial energy this asset represents to the taxpayer appears to have been pushed to the brink. Further, based on your treatment of this operator, replacement with a qualified operator would, at best, be problematic.
6. We view the Tin Fish Restaurant, its operators, and its employees as a tremendous community asset. Legitimate jobs have been created for young people in a positive environment and involving them in an entrepreneurial effort. It is evident whenever we visit this restaurant that this is the case. This benefit is an intangible but nevertheless deserves your close consideration.
We realize that often times in a position such as yours the overriding mission of the organization, the reason you exist in the first place, can get lost due to the details and stresses that you face on an on-going basis. However your mission, as most of your constituents would view it, would be to create positive recreational amenities that contribute to the community. This you have done for the most part and the Park Board has a grand history we are all proud of.
However, the conversations and information we heard this past Saturday lead us to wonder whether or not good faith and professionalism by the public’s representatives have been a part of this particular process. It would be extremely disappointing to us if this were not the case. Not withstanding the other reasons listed, for this reason alone we encourage you to come to a fair and equitable solution to this issue as soon as possible.
We would expect, as a professional courtesy on your part and in your fiduciary role as a public servant, a response to our concerns.
Al and Kelley McMurchie”
Commissioner Tabb responded on Sun., March 18, 2012 at 9:11 PM:
“Dear Mr. McMurchie,
Thanks for your input. I was one of the two votes in the Admin and Finance Committee against the proposed increase to 20% (from 17%) for the Tin Fish contract. The Tin Fish owners were willing to sign the contract at 17% and I was in favor of that proposed contract. The Tin Fish is asking to pay a lower rent than their original contract and the Park Board is trying hard to find a rate in which the majority of the commissioners feel comfortable supporting a new arrangement.
My reason for being willing to sacrifice a small percentage of revenue (17% vs 20%) is that I believe the Park Board has an obligation to provide amenities in its system. We are not tasked with generating revenue but with providing a park experience that can be enjoyed by all. Given that the Tin Fish tries to provide a healthy menu with pricing that is financially accessible to a vast number of park users, I believe they are serving that purpose. They have been good partners and good stewards of our park. The surrounding neighborhoods see them as a good and welcome neighbor.
Of course, other commissioners have differing points of view so you should probably reach out other commissioner, too. It takes 5 of 9 votes to approve the contract. Due to open meeting laws, we are not allowed to have private discussions about Park Board business so I am not aware of the concerns of all our commissioners.
Because we are a public body, the Park Board cannot discuss issues before us in private. So we discuss and try to come to resolution in public. The “sausage-making” can be eye-opening. And in defense of staff, they try to understand “the will of the board” before they negotiate. But we (the board) doesn’t always make it clear what the majority wants. I get frustrated when, at times, my fellow commissioners don’t see things as I do- especially when I find things so obvious. That’s the messy part of democracy that we live with.
I am hopeful that the Park Board and Tin Fish will come to a resolution that works for everyone. I believe that we will.
Al McMurchie then wrote on Mon., March 19, 2012 at 5:38 PM:
“Dear Commissioner Tabb,
Thank you for getting back to us so quickly.
We appreciate your approach and your support of this amenity for our neighborhood. Since they arrived the change in dynamic for our neighborhood, and specifically that area around the building, has been tremendous. We believe that the restaurant’s presence has been a positive, both tangible and intangible, in many regards. As property owners, we would hate to see it all unravel at this point.
We are glad we can count on your positive vote as our representative.
Thank you for your support and your service to our neighborhood.
Al and Kelley McMurchie”
Also, on March 19, 2012 at 9:33 AM, Commissioner Bob Fine wrote:
“Al and Kelley,
The Park Board is not trying to get rid of Tin Fish. The item passed in committee changes their commission paid to an of average 15%. The capital is 5%. That is less than the contract they had to date. They elected not to take up their option not to renew. The want to pay less.
The rest of the story is not being told.
We are reducing their capital requirements. But they also want their commission they pay to the park board reduced.
Do you think the park board should reduce what they pay when they make in the range of $300,000 plus for less than 6 months?
As an elected official, do you think it is responsible to reduce by so much, when they are doing so extremely well, and we would have to make immediate cuts to our programming budget?
Al McMurchie responded on Mon., March 19, 2012 at 2:09 PM:
Thank you for getting back to us so quickly.
We are glad you are not trying to get rid of the Tin Fish. Since they arrived the change in dynamic for our neighborhood, and specifically that area around the building, has been tremendous. We believe that the restaurant’s presence has been a positive, both tangible and intangible, in many regards.
You have been the one that has responded in terms of the numbers and that is helpful. For our further perspective, could you give us an idea of some of the other numbers regarding this issue. We assume that you could only share what is public information.
Could you please provide us with the past couple of years of gross revenue, the rent amount paid to the City from that revenue, and the previous capital (improvement?) percentage.
That would be very helpful for our full understanding.
On March 19, 2012 at 4:31 PM Commissioner Fine answered:
Briefly their revenue last year was 1.1 million. They paid the park board about 164,000. Their previous contract which did not change all of the years they have been there, which they elected not to take up the option under identical terms was a graduated percentage that reaches 17% plus they were expected to pay 10% into capital. The capital was reduced by half in committee.”
Al McMurchie wrote back to Commissioner Fine on Tue., March 20, 2012 at 1:02 PM:
Thank you for providing this information as it helps to clarify the situation.
I’m afraid your estimation of their income is high. With $1.1 million in sales, your perception of them making $300,000 would be very difficult to accomplish. Restaurants are among the most difficult businesses to run. Restaurants operate with low margins and require intense managerial ability to succeed.
To help you be fair with this operator, and other operators, the following financial model should help you understand the realities:
1. Cost of Sales…………….385,000…….35%
3. Other Expenses………….165,000…….15%
Total Operating Expense..1,045,000…….95%
Net Income / Margin…………55,000…….5%
1. Cost of Sales. The typical percentage of purchases of food and beverage products for resale on an operation this size would be a fairly fixed 35 percent of sales.
2. All personnel costs including hourly wages, payroll taxes and costs, supervisory staff, and owner’s salaries need to be in the range of 35 percent of sales. Hourly staff to cover 2,500 hours with 12 employees required at $10 per hour and an additional 15% assumed for payroll costs would equal $345,000. Adjusting this number down by 15% to account for bad weather days brings us to an adjusted staff cost of $293,000. This would leave around $92,000 available for the two owner’s salaries, $46,000 per owner.
3. Other Expenses. Items here would include accounting/legal, advertising/promotion, bank/credit card charges, insurance, licenses, repairs/maintenance, supplies, uniforms, utilities, etc. The percentage here is typically in the range of 15 percent.
4. Rent is the final piece of the expense structure in the range of 5 to 10 percent. This would be a reasonable estimation of the financial dynamics of this restaurant operation.
Combining the owner’s salaries with the net income would provide them with a total pre-tax income of $147,000, 73,500 apiece. This does not seem unreasonable in light of the advancement they have made to the park system due to their daily attentiveness. In addition, even when factoring for the location, the Park Board is getting a rent amount that is well above what would be a target figure for any experienced operator.
It is also important to recognize that this business effort contains no balance sheet energy for the operator. This is not an appreciating asset that they can one day sell. Their equity position, other than the Tin Fish name and its good will, would be virtually zero.
Overall it appears that the Park Board has a had a very good deal under the current arrangement.
Lastly, as a landlord myself, I really don’t understand the method, and resulting confusion, surrounding the issue of capital improvements. We collect a fair rent and then strategically invest a proportionate percentage of that rent into improving the physical property.
I hope this helps as you go forward on the negotiations for this and other comparable City amenities. I have copied your fellow Commissioners in order to aid in their understanding as well.
Commissioner Fine asked on Tues., March 20, 2012 at 1:51 PM:
“Al, Where are you getting the numbers from. Why is their a 50,000 contribution by the company to their 401k?”
Al McMurchie answered on Wed., 21, 2012 at 9:25 AM:
Sorry I haven’t gotten back to you quicker. I know the clock is ticking to some extent.
I have been involved in the general management of country clubs, public golf courses, and restaurants for many years. The percentages are basic metrics utilized to analyze food and beverage operations. While there can be slight variances to the actual performance of each expense category, the model they represent should be considered a good working framework for your understanding.
In terms of the 401K, they are probably able to max-out the contribution level as a result of low personal spending for half of every year. However, I’m not sure I see how placing the status of their 401K into the public realm is a good faith move on your part. That makes me uncomfortable even knowing. The numbers I have provided are accurate enough for your negotiating purposes.
The bottom line is that this has been a win-win relationship for the community and the operators. I see nothing wrong with that and in fact I like it. You are to be congratulated for helping to create that positive change years ago. I encourage you to continue that approach and renew that win-win situation.
I hope that adequately answers your questions. If you should have any other questions, feel free to let me know.
Once again I have copied your fellow commissioners in order to help keep them informed. I will be most interested to see the outcome of this process.
Al McMurchie wrote again to Commissioner Tabb on Thurs., March 22, 2012 at 8:14 PM:
“Subject: Tin Fish Resolution
In attending the meeting yesterday evening, I wanted to follow-up my previous e-mails by commending you on resolving the Tin Fish contract in a positive manner. While I realize that you were unable to attend, we know that you contributed and were supportive throughout the process.
Based on the interest shown by the public and the press, the presence of quality food and beverage services in our parks has certainly elevated the park experience for people. Also, as our representative, it is apparent that you understand that our neighborhood experience would not be the same without the Tin Fish as an informal gathering point. We are very happy with the outcome.
I am sure there will be challenges going forward, but I encourage you to continue to improve all similar assets throughout the park system.
Commissioner Tabb responded on Mon., March 26, 2012 at 1:48 AM:
Thanks so much for your interest and carefully considered input. It was very helpful and I really appreciate all of the communication provided by the community to all of the commissioners. You cannot underestimate the impression that those letters had on the board. I am going to meet with Sheff and Athena tomorrow to make sure everything is on track for their opening.
You wrote such a compelling letter earlier. Am wondering if I can share it? Arlene Fried, who follows park issues and has a website ( https://mplsparkwatch.org/ ) and would like to post some of the thoughtful input received. I will follow your wishes….
Again, thanks for your kind words and confidence in me!
The string of e-mails concluded with Al McMurchie’s reply on Mon., March 26, 2012 at 12:02 PM:
Thanks for your response.
You are welcome to share the e-mails as you wish. If we are going to have a transparent and participatory government at this very local level, I don’t see how it hurts.
All of this seems to illustrate what a great added amenity these heightened food and beverage services have become for our centerpiece parks. I would encourage the board to think more in terms of future opportunities on an aggregate basis across the park system rather than the existing one by one approach. The existing approach seemed to slip in to controversy very easily. Once that happens, the public is forced to take sides and no one really wins in that dynamic.
One last point. It might be helpful to view this issue through the lens of Opportunity Cost. In other words, are there more positive ways to capitalize on these facilities in terms of public relations, vendor relations, and investment in facility re-development. The cost of not doing so over time would represent a negative Opportunity Cost.
Thanks again and best of luck,