Volunteer Ty Collins, 21, of Redmond, handles a dog in January at the Redmond Humane Society. The society brought in about 2,500 animals last year.

The Redmond Humane Society opened its event center in 2007, hoping that it would take the place of its failed thrift store. It would be a community center that people would pay to rent for weddings or other functions. The public also could bring their dogs to the U-wash, a self-service grooming station, for a bath.

But faced with a financial crisis, the current board of directors recently shut down operations at the center after its disappointing performance.

The shelter has operated precariously on the edge of financial collapse. With heavy debt, frequent operating deficits and staff turmoil, it has been bailed out by Deschutes County. Now, the Humane Society — its members, board and former employees — is trying to dig out of the hole.

In the last two months, the shelter’s longtime director resigned, more than half of its staff members have quit or were laid off, and there is still about $1 million in debt it can’t afford. And twice in the last eight months, the shelter has made public pleas for money to stay open.

“I’m heartsick,” said Jamie Kanski, the former executive director. “It’s not the shelter’s fault. It’s because of outside factors. To see it all crumble in three weeks, it’s heartbreaking.”

The shelter currently owes about $360,000 on a mortgage used to build the event center and about $500,000 on the mortgage for its current shelter building, and faces $10,000 each month in mortgage payments on the two facilities. Faced with that burden, the shelter also failed to develop a reliable source of outside income like a thrift store, said board President Dale Gilbert.

After an early July Deschutes County Commission meeting, county and city leaders vowed to help keep the shelter open through the summer. Since then, the offer of help has extended to a possible county loan worth more than $800,000 that would repay much of the shelter’s debt.

The trust

The Humane Society’s problems may date back to November 1989, when it was named as a beneficiary of a trust worth millions of dollars. The trust took effect when Alice Teater passed away in 2003, and the shelter received its first payment in 2005.

When the trust was left to the humane societies in Bend and Redmond, Teater required that the money go to them only as long as they operated as animal shelters. If, for example, Redmond’s shelter shut down, the money would likely all go to the Humane Society of Central Oregon in Bend.

The trust is made up of two main assets: an 11-acre plot of bare land and Green Pastures mobile home park, which has a few dozen lots. The southwest Redmond properties are adjacent.

The property is for sale, and when a buyer is found, the Redmond and Central Oregon societies will split the proceeds. The societies also are paid about $30,000 each from the rent proceeds from Green Pastures.

There has been an offer on the property for about $195,000 per acre, Gilbert said during a Deschutes County Commission meeting.

The Redmond shelter grew fourfold when it moved to its new facility in January 2005, and the promise of the land sale has lingered in the expansion’s background as a way the shelter could pay off its debt.

The shelter has struggled since that expansion, Gilbert said. With more animals, more property, more employees and more debt, the Humane Society has often found itself in a financial hole at the end of fiscal years.

“There have been a tremendous amount of growing pains,” Gilbert said.

The shelter

In 1999, Deschutes County donated 5 acres of land on which the society could build a new shelter when the society had to move from its site near the Redmond Airport. The society paid $1 a year in rent until the Federal Aviation Administration ruled that land around the airport must be rented at market rates, or about $20,000 a year, Kanski said.

The original plan for the new shelter called for a $550,000 building, but within a year — and after review by professional architects — the cost of the building rose to about $1 million.

“It was a conservative plan,” Kanski said. “It was pretty basic functionally.”

But the shelter never raised enough money to pay for the building.

Kanski helped lead a capital campaign for the building. She said the Humane Society had raised about $500,000, but after the Sept. 11 terrorist attacks, donations ended. Construction on the shelter was stop and go.

The shelter leadership knew about the trust beginning in 1989. But shelter construction stalled after money ran dry around 2001. With Teater’s 2003 death, the promise of the trust seemed to become a reality. The shelter leadership began to operate as if the money was around the corner, but the bulk of the trust’s value was — and still is — tied up in land.

“News of the Teater Estate allows plans to proceed to build shelter,” Kanski wrote in a handwritten timeline she provided.

Eventually, the society raised about $50,000 more and took out a mortgage of more than $500,000, enough to cover the construction.

Proceeds from the trust’s land sale would cover that mortgage, Kanski said. But without the land sale, the shelter hasn’t been able to keep up with payments and cover operations.

Even if the money eventually comes through and the debt goes away, Gilbert said the Humane Society has operated too much on the financial edge. The shelter, for example, has invested just $5,605 in fundraising since July 2001, according to tax documents. No money has been invested directly in fundraising since July 2004.

“It’s kind of a Band-Aid approach,” Gilbert said. “(Trust money) takes and clears off the debt, but then there’s still an issue of consistent funds to support it.”

As early as 2002, the shelter was operating in the red. During the 2002-03 fiscal year, for example, the shelter spent about $50,000 more than it brought in from donations and other program revenues, according to its tax forms.

That has been a typical pattern in the last few years, said Gilbert.

The shelter began the 2004-05 fiscal year with $270 in cash, according to its tax forms. By the end of the year, it had nearly $400,000 — much of that from the $320,000 sale of its thrift store building on Sixth Street in Redmond.

“’05, ’06, ’07 have all been negative, severely negative,” Gilbert said. “This issue has been going on for a period of time.”

Event center

For the five fiscal years beginning with 2002-03, the shelter finished three of the years in debt, according to tax documents.

The new shelter opened in January 2005. By July 2006, the shelter board of directors was considering building the event center. The idea was to make up for income the society no longer had because it had closed its thrift store, Kanski said.

Thrift stores are often critical for nonprofits like the shelters, but Kanski said their store wasn’t making money, possibly because of increased competition from stores run by other nonprofits. The Humane Society of Central Oregon’s thrift store in Bend, for example, keeps the shelter’s doors open, Executive Director Pat Roden said. Last year, she said, the store’s revenues were more than $530,000, money that covered about 35 percent of the Bend-based shelter’s operations.

The event center was able to cover only about 3 percent of the Redmond shelter’s budget, according to Kanski.

The event center had multiple sources of income. People could clean their dogs for between $12 and $18 in the U-wash. There also was an on-site groomer with professional credentials, according to the shelter’s Web site.

The center also was available for meetings, weddings and dog training sessions, according to the site.

The roughly $15,000 of income during the year the event center was open was a disappointment, said Darlene Daly, who was the Humane Society’s treasurer during the period. The idea had been to use the income from the event center to cover some operating costs at the shelter.

“We thought it would bring in more income,” Daly said. “With the grooming station, the U-wash, we just thought it’d provide more income.”

Today

After Kanski’s acrimonious resignation, the board of directors continued making program and staff cuts. Kanski’s son, Josh Capehart, was the animal welfare officer, a job that was eliminated at the end of June. The Redmond shelter had around 17 full-time employees at some points over the last few years.

As of Friday evening, there were just seven, according to Gilbert.

To justify the tighter operations, Gilbert pointed to the shelter in Bend.

The Bend shelter brings in about 4,000 stray animals each year and has an overall staff equivalent to 17 full-time employees. Redmond, with a similar-sized staff, brought in about 2,500 animals last year, Gilbert said.

Gilbert said the board is now making difficult decisions based on business principles, something past boards — including ones he served on — did not do.

Kanski argues that she and her staff had the shelter on the verge of a sustainable model.

She had made some difficult moves to help the shelter stay open, Kanski said. For example, last winter, she cut staff hours by up to 30 percent. With operating expenses lower and income higher, she said the shelter was on solid ground.

Kanski said that by raising adoption fees and requiring people to pay when they gave up their own pets — something it used to accept promissory notes for — the shelter was averaging about $1,600 in income each day in June.

She argues that would have been more than enough money to operate the shelter.

Over a year, that would have meant revenues of nearly $500,000. According to tax documents from the last five years, the programs never directly brought in more than $214,371.

But Gilbert argues that the cuts had to go deeper. The Humane Society needed to be cut down to its core business, he said. That involved closing the animal rescue and welfare operations, shutting the event center and making more staff cuts, which have continued through last week.

He argued that the cuts are necessary for the shelter to make it through the current crisis.

“We have the business acumen to make the right decision,” Gilbert said. “The rest (of the boards) have been animal lovers. You know, animal lovers aren’t a bad thing. But this needs to be run as a business, not run as a love for animals. You run it as a business, and animals will be taken care of. Run it as animal lovers, and it will fail.”