Even before the Twin Cities Marathon cancellation generated a still-unsettled financial fracas, the nonprofit behind it knew it needed to shift its business model to survive.
Operating costs had significantly increased the past few years for Twin Cities in Motion (TCM), outpacing revenue coming in from fees and contributions and threatening the organization's ability to produce races that attract thousands of people and pump millions of dollars into the state's economy.
This year, costs to prepare the canceled Twin Cities Marathon and TC 10 Mile were up 25%, or roughly $500,000, when compared to 2019, said Dean Orton, TCM president. Extra security and medical staff, along with a combination of other services that cost more amid inflation, played a role in the additional expenses, he said.
Now TCM is facing even more potential payouts. TCM canceled its Oct. 1 races just hours before the starting gun after officials learned temperatures could become too dangerous for participants, marking the first marathon cancellation due to weather. TCM said Thursday it was still working through the cancellation process with its insurer and will need more time to figure out what refunds or credit it can offer the approximately 8,000 marathoners and 12,000 10-milers. Registration costs for marathon runners ranged from $129 and $220, marathon officials said.
That's in addition to paying the at least 100 vendors that provided barricades, tents, water, safety support and more, Orton said. But the cancellation also prevented many vendors from providing services, so TCM is "working through the details" to determine if it needs to uphold any obligation to pay those vendors as well, he said.
If the insurance claim doesn't fully cover all the costs associated with the cancellation, TCM would have to look into how it would finance the remaining, Orton said.
Revenue beyond registration
Registration fees have long been the major source of revenue for St. Paul based-TCM, income tax documents show. In 2019, registration accounted for 70% of TCM's $4.9 million in revenue that year.
It has been a slow climb from pandemic-created problems for the nonprofit, which forced the cancellation of the marathon in 2020 and half-capacity settings in 2021 to allow for social distancing. TCM's revenue in 2020 and 2021 was down 47% and 20%, respectively, when compared with 2019, documents show. Net income in 2021 was $320,526, a far jump from being $261,073 in the red in 2020.
Diversifying the revenue stream is paramount to replenishing resources needed to keep programming ongoing, said Orton, who set a goal of TCM reaching a record 50,000 runners served by 2024. To achieve that, the nonprofit is adding paid membership programs, youth-centric activities and more year-round services that grant money can fund while also actively seeking additional community and corporate partners to take the pressure off registration fees, Orton said.
Earlier this year, TCM merged its offices with three other running-related nonprofits to shift into a hybrid-work model with more employees opting to work from home. Sharing conference rooms and common spaces has allowed the organization to lower its overhead costs, he said.
Ensuring the nonprofit can produce the marathon, one of the largest annual sporting events in Minnesota, is valuable to the state's economy, Orton said. An economic study from Meet Minneapolis, the tourism agency of the city of Minneapolis, showed the 2015 marathon brought in $34 million in sales for retailers, restaurants, transportation operators and hotels as well as an additional $1.6 million in local tax revenue and $2.4 million in state tax revenue.
Orton is confident that number significantly increased in 2022, the first full-scale version of marathon since 2019.
Cancellation cost
TCM will be able to navigate setbacks from the cancellation in the short term, Orton said. But not all of the registered runners can say the same.
Florida resident Daniel Guenechea spent nearly $2,400 for his trip to Minneapolis to run in the Twin Cities Marathon. The costs included airfare for himself and his wife, hotel stay, food, transportation and the $178 race fee.
While he said he would return to visit Minneapolis, Guenechea said he wouldn't participate in another TCM event. The cancellation, he said, soured his relationship with the organization.
"I'm not going to do another $2,000 or $2,500 in expenses because of the way they canceled it," he said. "If they would have said a week before, 'Hey, this looks problematic. We're not going to cancel, and here are some options if you are not able to run.' Let people decide based on their fitness."
The refund, at this point, is inconsequential for Guenechea, who doesn't feel like he wasted money on the trip since he ended up running the course anyway. He's an amateur runner and wasn't expecting to take home prize money for a top finish, entering just to improve his personal best time and for the overall enjoyment of running.
Blair Aakre and his wife, who are from Minnesota and now live in Colorado, also flew into the Twin Cities for the races. Beyond their $200 entry fee, they paid about $200 each for airfare and another $250 for a hotel, plus the cost of a rental car, which all "really did add up," Aakre said.
"We decided to make the most of it and just do the 10-mile run and then kind of go from there," Aakre said, adding they had already checked out of their hotel by the time the official cancellation email came around 5:30 a.m. that Sunday. "It was really disappointing to not be able to run the race."
Aakre runs in at least two marathons each year, which requires months of training and travel preparations in advance. He's yet to decide whether he will return for the Twin Cities Marathon in 2024 to recoup any possible credits.
"We'll just have to see," Aakre said.
