State-owned Honey Creek Resort loses money

Nov 15, 2016 MORAVIA — After two years of making a profit, Iowa’s only state-owned resort lost $348,550 in the year that ended June 30, according to a state audit released Tuesday.

Honey Creek Resort, located in Moravia on the shores of Rathbun Lake, was built in 2008 and boasts a 105-room lodge, 28 cottages, restaurant, indoor water park and 18-hole golf course.

After struggling for years to repay debt on initial construction bonds of about $60 million, the Iowa Legislature voted in 2013 to pay more than $30 million to retire the bonds.

In the year that followed, Honey Creek made a modest profit of $163,930. Fiscal 2015 was even better with revenue exceeding expenses by $325,852.

Honey Creek’s revenue for fiscal 2016 was roughly $5.4 million — down 12 percent from $6.16 million from the previous year. Last year’s expenses, roughly $5.75 million, were also less than fiscal 2015, but not enough to end the year in the black.

The recent audit covers the last 11 months of management by Central Group Companies of St. Cloud, Minnesota. The company, which had managed the resort since 2007, was replaced June 1 by Delaware North Companies Parks & Resorts of Buffalo.

Bruce Trautman, Iowa Department of Natural Resources deputy director, said Honey Creek’s contract with Central Group required the resort to let the company keep revenue from advance reservations and gift cards purchased before the transition to Delaware North. This contributed to the operating loss, he said. The resort finished the fiscal year with a net position (assets minus liabilities) of about $455,000.

DNR officials said in March Delaware North would be required to make $2.51 million in capital investments, including a conference center upgrade, wedding pavilions, outdoor pool and room refreshing. In addition, the firm is to pay the DNR 7 percent of gross monthly receipts to be put into reserves for maintaining and improving the resort, officials said.

“Let’s wait and see what happens when they’ve operated for a full fiscal year,” Trautman said of Delaware North. “We’re very happy with them.”

Delaware North has made staffing changes, repaired some features of the resort and is drafting plans for the outdoor pool, he said.

If the resort’s annual gross receipts exceed $7 million, Delaware North is to pay the state an extra .5 percent, and if gross receipts surpass $8 million, an extra 5 percent is to be paid to the state.

Reported by:  TheGazette.com