BANGOR, Maine — Eastern Maine Development Corp. has improved its financial picture, but its ownership of Norumbega Hall, the downtown Bangor building the organization purchased in 2005, continues to act as a lead weight on the organization’s finances, according to a recent audit of the organization’s books.
EMDC is a private, nonprofit economic development organization based in Bangor that provides business support and workforce development services in Penobscot, Piscataquis and Hancock counties, as well as a portion of Waldo County.
The organization’s financial audit was completed in September, eight months late, and revealed that as of Sept. 30, 2012, it had an operating deficit of more than $600,000.
The audit was for EMDC’s fiscal year that ended Sept, 30, 2012, so the numbers are already a year old, but it’s the most recent, comprehensive and accurate picture of the organization available.
While a deficit of $600,000 is a substantial number, it’s less than the $1 million the organization lost the year before.
It’s also not the whole picture, according to Michael Aube, who took over as EMDC’s CEO in early 2009.
In his nearly five years on the job, Aube has sought to cut costs, streamline existing programs and identify new revenue streams. As a result, the organization’s operating budget has decreased from $7.2 million a few years ago to $3.8 million this year, Aube told the Bangor Daily News on Thursday.
While layoffs have happened in the past, EMDC’s employee total has leveled off around 47 full-time individuals, Aube said.
The recently completed audit would have revealed an organization operating in the black if it had not been for a “one-time hit” related to Norumbega Hall that sent the organization’s operating revenue plunging into the red.
EMDC purchased the building in 2005 for $2.1 million, according to Aube, a decision some in the organization have come to regret. “We’d love to tee up a Mulligan on that one,” Tom Lizotte, chairman of EMDC’s board, told the BDN last December in an interview.
In October 2012, the organization put the building on the market for $1.1 million, which triggered what’s known as an “impairment loss” to the company’s bottom line of $624,474.
Without that hit, the organization’s audit and tax return show that it would have turned a $1 million loss the year before into an operating surplus of $19,000.
“We’ve righted the ship in terms of control and management of operational costs,” Aube said. “What we don’t control, unfortunately, is the real estate values in this market.”
Aube said the write-down of the value of the building — again, a “one-time hit” — doesn’t look good on paper, but it had to happen.
“We had to take that hit. If we had not put the building up for sale, the value would have stayed where it was and that would not have appeared as a balance-sheet hit,” Aube said. “So from an operational standpoint, where really the effort is to raise revenue and be cautious with cost, we ended up on the plus side with that. That was our goal.”
A few potential buyers showed interest, but EMDC eventually took the building off the market. While it’s admittedly too much building right now for the organization’s needs, Aube is confident they can make ownership work. Though, if the right buyer came along, he’d certainly be interested in discussing a sale, he said.
In an effort to defray some of the overhead costs, EMDC recently launched a co-working space in the building marketed toward entrepreneurs who want office space and the networking that goes with it.
With no “impairment cost” hampering progress, Aube said the organization completed its most recent fiscal year, which ended on Sept. 30, 2013, in the black. He expects an audit to be complete in March 2014.
“I know we ended the year in a positive place,” Aube said. “Now, where that positive place is — whether it’s $20,000 or $200,000 — we don’t have a sense of that yet.”
Lizotte said Thursday the organization is in a “much, much better” position than it was a few years ago, when the board was considering all options, including a worse-case scenario of bankruptcy.
“The financial recovery plan instituted in 2011 is bearing fruit,” Lizotte said.
Looking forward, he sees much to be hopeful about.
For one, EMDC has found success in small business lending. EMDC provided $3 million in capital to small businesses through its lending programs and partnerships with the U.S. Small Business Administration. That’s a two-fold increase over past years, Aube said. More loans means more servicing fees, which is new revenue for the organization.
More loans also suggest an increase in business activity and an improving economy, which can’t be overlooked when considering EMDC’s recovery, Lizotte said.
“We’re a nonprofit economic development [organization],” Lizotte said. “Our performance is largely a reflection of the larger economy we serve. When everyone is going through a downturn in a recession, that shows up on our balance sheet, as well.”
Not reflected in this most recent audit is the departure and shedding of some programs, which reduces expenses, but also reduces revenue and means overhead costs need to be spread among fewer programs.
The organization shed the Greater Bangor Convention and Visitors Bureau, while the Bangor Area Comprehensive Transportation System split off from EMDC, its parent organization for the past 25 years, on April 1, 2013.
EMDC is also no longer administrator for Workforce Investment Act funds that flow into northern and eastern Maine for workforce development programs, though it’s still the service provider in the region. Northern Maine Development Commission is now administering the funds. The contract to provide those services is currently up for grabs, and there are other organizations competing with EMDC for the right to provide those services.
EMDC submitted its application last Friday, and Aube seemed confident EMDC will retain the contract. If it didn’t, the loss of those funds would be devastating for the organization.
The organization has made improvements, its fiscal foundation is now sturdier and employee morale is up, but there’s still more to do, Lizotte said.
“Now we have got to do a better job getting out to the communities we serve and touting the services we provide,” he said. “I think we have a positive story to sell out there. As the economy improves in eastern Maine we want to be a helpful partner for businesses in the area.”