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HomeMy WebLinkAbout1998-04-01 PACKET 13.B.REQUEST C1F CITY C(7UiVCIL ACTiOP! C�UfdCIL AGEfVDA tNEETIRlG ITEM # DATE 4/1/9� PREPAF2�D BY Public Works John Fredrickson ORIGINATit�G DEPAFtT(�EtJT STAFF AUTHOR �.�..*..�....�..«���..�....�����.�4*..��....�... � � � � Provide staff direction regarding planned improvements to the Cottage Grove 9ce Arena. BUDGET IMPLICATION $ $ BUDGETED AMOUNT ACTUAL AMOUNT FUNDING SOURCE SUPPORTING DOCUMENTS � MEMO/LETTER: John Fredrickson, 3i25/98 ❑ RESOLUl"ION: ❑ ORDINAIVCE: ❑ ENGINEERiNG RECOMMENDATION: ❑ LEGAL RECOMMENDATBON: � OTHER: Financiai projections by Dean Muiso ADMINISTRATORS COMMENTS The enclosed proposai is to spend $202,000. $125,000 needs to be spent to provide the necessary maintenance. The balance can be delayed to the 1999 budget. I reviewed Nlinnesota Statutes 462.358 subd. 2b with Corrine Thompson. She is comfortabie that the Park Trust Fund can be used to provide for this expenditure. Finally, the Arena Nlanager wili be providing revenue recommendatiort�� prg�de or th long te�r�m capital campaign ' ' � -��� ,- � �� � �i4y Administrator Date rtseaasase cou�c�L,acr�o� �r,��E�: ❑ �pP�ovED ❑ ��NS�� ❑ or�E�a • ' � � TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: JOHN FREDRICKSON SUBJECT: ICE ARENAIMPROVEMENTS DATE: MARCH 25, 1998 ISSUE Several months ago, the City Counci� was made aware of the fact that the City was experiencing the loss of freon from the refrigeration system which services the studio rink. Staff presented the Council with six (6) options to address the issue. Options ranged from shutting down the studio rink to expanding the arena to accommodate a full size sheet. The Council directed staff to research costs for the foilowing scenarios: (1) Instailation of a sand surface ice rink directly over the existing concrete rink floor. (2} increase the size of the studio rink from 65' x 120' to 77' x 124' (3) removal of the existing studio rink and replacing it with a full size 85' x 200' rink. (This option would require the City to expand the size of the existing buiiding by approximately 12,000 square feet). Staff was also directed to prepare a financial analysis of ice Arena operations to evaluate whether or not the Ice Arena would generate sufficient revenues under option 3 to repay principal and interest on debt issued to expand the studio rink. On Wednesday, March 18 the City Councii met with Staff and representatives af the Cottage Grove Hockey Association to review and discuss the findings of the financial report. Tne Council also reviewed an analysis prepared by the Hockey Association tnat highiighted projected growth if an additionai full size rink was constructed. Discussion In reviewing the financiai report, tne Council was made aware of the fact that operating expenditures (excluding capitai expenditures) have exceeded operating revenues in all but o�e of the last five years. This situation is not uncommon for ice Arena's. It was noted in the report that the Cities of Hastings, Appte Valley and West St. Paul require subsidies from other funding sources to offset operating deficits. We also learned that operating expenditures have decreased $15,125 or 4.26% from 1992 to 1997. As a resuft, the operating cost per hour of rink use for both the main rink and the studio rink, has decreased by $7.06 from $117.97 in 1993 to $110.91 in 1997. However, total hours rented on both the main rink and the studio rink has decreased by 125 hours from 1993 ta 1997. This reduction in hours is primarily attributed to the increase in the number of ice arenas built in the area. A number of communities that purchased ice in Cottage Grove in the past now have ice arena's in their own communities. The Cottage Grove Athletic Association have also purchased ice elsewt�ere in an effort to access a full size sheet for practices and scrimmages. With the recent construction of 5 full size sheets in the immediate area and with plans for the construction of additional rinks in the Cities of Woodbury and Mahtomedi, it would appear likely that Cottage Grove will have to rely almost exclusively on local user groups to financially support our facility. A case in point is the fact that the 1998 adopted budget is based on a decreased demand for ice time in the amount of 68 hours. The engineering firm of Bonestroo and Associates were directed to prepare preliminary cost estimates for the three (3) options and the findings were as foilows: Option A- instaliation of new piping and sand surface directly over the existing concrete rink floor. Tempered glass shieiding Upgrade refrigerant system Design and Engineering Repairs to northeast corner of main rink ADA modifications Replacement of doors and door frames Total $85, 000 $23, 000 $30, 000 $25, 000 $ 9,000 $15,000 $15,000 $202,000 Option B- Increase the size of the studio rink from 65' x 120' to 77' x 124'. Tempered giass shielding Upgrade refrigerant system Design and Engineering " Repairs to northeast corner of main rink * ADA modifications ' Replacement of doors and door frames Totai Option C- Expansion of facility to accommodate a second full size sheet Installation of elevator Design and Engineering * Repairs to northeast corner of main rink "` ADA modifications * Repiacement of doors and door frames Total $120,500 $ 25,000 $120,000 $ 25,Q00 $ 9,000 $ 15,000 $ 15,000 $329,000 $1,370,000 $ 70,000 $ 150,000 $ 9,000 $ 15,Od0 $ 15,000 $1,629,000 ° Represents Other Facility Maintenance Needs That Should be Addressed. What are the financiai implications? To finance the construction of a fuil sheet, Recreation Revenue Bonds, EDA Revenue Bonds or General Obligation Bonds would have to be sold. In order to sell Revenue Bonds, the City must be able to demonstrate to the lenders that revenues will be sufficient to repay debt principal and interest. The debt service to fi�ance a 20 year bond is estimated at approximately $170,000 to $170,000 per year. In reviewing revenue projections, it appears likely that if a second full sheet was constructed, revenues would not be sufficient to pay operating expenditures and debt service. Based on this information, the City is not in a position to sell Revenue Bonds for this expansion without significantly lowering the initial loan amount. With respect to the sale of General Obligation Bonds, it would seem unlikely that there would be enough community support to support this endeavor at this time. Staff Recommendation Staff is Staff recommends that the City Council endorse Option A at a estimated cost of $202,000. Improvements wouid inciude: • Reconstruction of the existing rink • Instailation of protective giass around rink • Repairs to the eMerior of the building . ADA modifications to the bathrooms and new drinking fountains • Replacement of exterior doors and door frames • Mechanical room upgrades and replacement of one compressor. Staff wouid recommend that the improvements be funded through an interFund loan with a five (5) year payback. In an effort to satisfy this loan debt, staff will look for ways to reduce expenditures and increase operating revenues. One obvious option is to increase the hourly rate we current charge on our large rink. Based on information included in a 1997 Minnesota Ice Arena Managers Association survey, it shows that our hourly rentai fee on our large rink is on 4he low end compared to other metropolitan communities. Woodbury currently charges $125.00, Eagan charges $130.00, Lakeville charges $130.00, Hastings charges $105.50, and South St. Paul charges $120.00 per hour. Cottage Grove's rate for the 1997-1998 season was $115.00. With regard to future expansion, Staff would suggest that an Ice Arena Capitol Improvements Fund be established. Funds generated through private donations, increased user fees, general fund contributions, future gambling proceeds, contributions from the golf course enterprise fund and the Park Trust Fund are ail potential revenue sources for this improvement fund. This issue is being placed on the April 1, 1998 City Council agenda for consideration and direction. /�� �y D�,'�"' n'�so c REVISED PR -- - A TWO SHEET FACILITY First, I would p� ea�s This s ng donetn man ymo e a ound the meteo e I would also anytime of the y ortuni to negotiate prices with late hours to filI the suggest ihat the Arena Manager be given the opp tY un-rented hours on the City's behaif. Ali the foilowing scenarios are providing for revmedt and proposed operating expenditures for each year, pius a$200,000.00 debt service pay reserve for future capital expenditures. in all scenarios I have included CGHA's long term annual up front cash commitment of �22,500.00 per year. For this proposai (best case) i have used the CGHA's written proposal presented to the City Council and tne hours they say they woU � fo dabi g hart for a o fai�riy safe in proJecting with my projections on the "supp ail the other hours used by patrons. However, any hours over the CGHA's past expenenced commitment of 1,100 ro ections f om 1998, I uP w th �3P622 total ho �rs n r i il go year�by ice season, pius my p j year with CGHA"s proposed commitment from 1999-2000 season through 2002-2003 season. e foilowing information is to provide the houriy rate needed to be charged each year to break even. This means that EVERY hour has to be charged the fuii rate. I feei we couid potentially price ourseives out of the market if we agree to go ahead with a second fuii sheet of ice at this time. Realistically there needs to be more up front money to pay down the totai cost of the project. If the bond debt is less, than the ice time per hour becomes less and should be more affordable to the users. If the user groups can't afford the hourly cost they wiil either buy less ice or go somewhere eise that is cheaper. For each year I have inciuded a more detailed expenditure budget on the foilowmg pages. 1999-2040 Season - $137.00 per hr x 3, 622 hr =$496 Z'I 4.00 - High School practice. Precision lines, Figure Skating School. Adutts, TCM, CGH $ g4, 822.00 -" Other sources" Admissions, Vending, Pro Shop, Misc., Concession Stand, Captai� Practice, $SJO ,2rJ�.�� Leagues, High School Games and CGAA's bng term commitrnent Revenues = $590,250.00 S � � , 3a� Expenses = 3590 250.00 ProfiULoss = $ 0.00 Cost per hour excluding the $200,000.00 for debt service =$107.74 2000-20U1 Season - $136.00 per h� x 3,798 hr =$516,528.00 - ice rentals � 93 472.00 -"other Sources" - Same as above $610, 000.00 Revenues = $610,000.00 Expenses = $609 400.00 Profit = $ 600.00 Cost per hour =$107.79 2001-2002 Season- �,132.00 per hr x 3,994 hr =$527,208.00 - ice rentals S 88 065.00 -"Other Sources" - same as above $615,273.G0 Revenues = $615,273.00 Expe�ses = $614 OQ0.00 Profit = $ 1,273.00 Cost per hour-$103.66 2002-2003 Season- $130.00 per hr x 4,212 hr =$547,560.00 - $ 91 595.00 - $639,155.00 Revenues = $639,155.Od Expenses = � 26,450.00 Profit = $ 12,705.00 Cost per hour =$101.25 This first scenario is the best for the City and supposedly wiii meet the CGHA growing need. 1 do fear that this is far fetched simply do to the past level of commitment to ice time, people dropping from hockey dunng the 1997-88 season do to the high costs, no fundraising is done by the association currently, and no excess money to fal( back on in their general fund. Ali this leads me to believe that this scenano is not highly likely in the near future. ice rentals "Other Sources" - increases in some fees The next scenario provides for a lack of commitment from the CGHA. We wili use 1,600 hours of ice for them each year through the 2002-2003 season. Once again, I have ailowed for $200,000.00 for debt service. I� ali cases I will be using 3,622 hours of ice rental and the figures trom above for the "other sources" of revenues with minor adjustments for each year due to the change of the hourly ice time price. 1999-2000 Season - $137.00 per hour - Revenues Expenses Profit _ $59d,250.00 =�590 250.00 _ $ 0.00 Cost per hour = $107.74 20U0-2001 Season - $142.00 per hour - Cast per hour = $113.03 2001-2002 Season- $143.50 per hour - Revenues Expenses Profit Revenues Expenses Profit _ $610,106.00 _ $609 400.00 _ $ 706.00 _ $615,659.00 _ �614 000:00 _ $ 1,659.00 Cost per hour = $114.30 2002-2003 Season - �146.50 perhour- Revenues = $627,245.00 Expenses = $626 450.00 Profit = � 795.00 Cost per hour = $117.74 This scenario is more achievabie by the CGHA, but I still have my reservations about the hour n �cr ase n houriy ate Aam not certa�n they other ser group could and or would commit to their "normal" ice time ho�rs of the past. The third scenario is saying that the CGHA daesn't meet their projections, but do increase by 50 hours per year. This scenario starts the CGHA out with onfy 1500 hours in 1999-20Q0 season and goes up to 1,650 hours in the 2002-2003 season. Once again, I have inGuded the $200,000.00 for debt service after ali operating expenses have been paid. 1999-2000 Season- $142.00 per hour - Revenues Expenses Profit _ $596,146.00 _ $590 250.00 _ $ 5,896.00 Cost per nour = $110.80 2000-2001 Season- $144.00 per hour - Revenues Expenses Profit _ $610,9�d.00 _ $609 400.Q0 _ $ 1, 5'70.00 Cost per hour = $114.61 2001-2002 Season- $143.50 per hour - Revenues Expenses Profit _ $615,659.00 _ $614 000.00 _ $ 1,659.00 Cost per hour = $114.30 2002-2003 Season- $145.00 per hour - Reve�ues Expenses Profit _ $628,550.00 _ $626 450.00 = $ 2,100.00 Cost per hour = $116.14 With this scenario I feel much more comfortable with the hour commitment on the part of the CGHA, but the hourty rate will probabiy scare aii users off. In conclusion, at the p�esent time I wouid suggest the foilowing scenario: A. Keep progressing towards a full size sheet of ice. B. The CGHA start a fundraising campaign to include the likes of, "Buy a Brick", `Corporate Sponsors", Candy Bar sales, Simeks sales, Light Bulb saies, Concession Stand revenues go directiy into buiiding fund, Hockey Fest goes directiy into building fund, Using current �egistration fee structure- inciude $15.00 per person to go directly into building fund. They can then designate how many doilars per year for "x" years they need to generate to reach their goai of "x" amount of doAars to commit up front to help offset the initial costs o4 a new ice sheet. If they wish they couid add a commitment over the long term aiso for "X' number of dollars. The CGHA is working towards these avenues cureentiy, but have not had time to get any thing started with this short notice of how to come up with all this money and still keep hockey affordabie. I would like to see the CGHA renting a total of 1400 to 1600 hours in Cottage Grove and surrounding rinks for at least a coupie of years to see that there is a real need. C. The City put "x" amount of doliars into a buiVding fund for "�' number of years to help offset the up front costs. D. The City go ahead immediately and spend approximately $150,000.00 to redo the studio rink. This would not be a waste of money simpiy because we wouid get the use out of it, we couid keep the Figure Skating Schooi off the one big sheet we have, the CGHA couid continue to run their Mite and Termite program and nat make their introductory program travel out of town. This would also keep the CGHA's costs down some while they are trying to raise money for a new ice sheet. Then in 3 to 10 years a new fuil size rink can be put in wlth the money raised. l have revised the operating budget and have come up with the foilowing figures. 3°1a to each operating budget for each year. In the year 2007 the budget sees a projected retirement: 1999 - if new rink wouid open in October af 1999 $198,400.00 - wages $191,833.00 - commodities, contractuai $200.000.00 - debt service, capital improvement $590,250.00 2000 - $204,400.00 $197,577.00 $ 7,423.00 - $200 000.00 $609,400.00 i have also added decrease due to a This is an adjustment for a fult season of two sheets of ice. 2001 - 2002 - 2Q03 - 2Q04 - 2005 - $210, 500.00 $203, 500.00 $200 000.00 $614,000.00 $216,800.00 $209,650.00 $200 000.00 $626,450.00 $223,300.00 $215,900.00 $200 000.00 $639,200.00 $230,000.00 $222,400.d0 �00 000.00 $652,4d0.00 $236,900.00 $229, 000.00 $200 000.00 $665,900.00 2006 - $230,130.00 - adjusted 4or half year of wages $ 12,600.00 - retirement buyout-annual feave pay in June-July time 4rame. $235,930.00 $200 000.00 $678,660.00 2007 - $230,730.00 $243,010.00 $200,000.00 $673,740.00 Continuation of projected budgets: 2008 - $237,650.00 5250,300.00 �200 000.00 $687,950.00 2010 - $252,�25.0a $265,545.00 $200 000.00 $717,670.00 $267,480.40 $281,720.00 $ 7,540.00 - retirement payment $200 000.00 $756,740.00 2012 - 2014 - $258,300.00 $298, 880.00 $ 50 000.00 - Continue Capitai Improvement Fund $607,180.00 $274,030.00 $317, 090:00 $ 50 000.00 $641,120.00 2016 - 2018 - r� � $268,060.00 $336,400.00 $ 50 000.00 $654,460.00 $284,380.00 $356,895.00 $ 50,000.00 $ 10 420.00 - retirement payment $701,695.Od 2009 - 2011 - $244,781.00 $257,809.00 �200 000.00 $702,580.00 $259,690.00 $273,510.00 $200 Q00.00 $733,200.00 2Q13 - $250,780.00 $290,170.00 $200 000.00 $740,950.00 2U15 - $266,050.00 $307,850.00 $ 50 000.00 $623,900.00 2017 - 2019 - 2021 - $282,250.00 $326,600.00 $ 50,000.00 $ 7 200.00 $666,050.00 $276,100.00 $346,500.00 $ 50 000.00 $672,600.00 $251,400.00 $367,600.00 $ 50 000.00 $669,000.00 �\._.,....