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Home My WebLink About1999-09-08 CC Packet Joint Meeting . . . i1lwater '~ ~ THE BIRTHPLACE OF MINNESOTA AGENDA FOR JOINT MEETING OF MAHTOMEDI AND STILLWATER ,,-tA~ AT t!.e-t.v.~ l1ru~_. CJ STILLWATER CITY HALL '1 'I - ~ 0 7:00 P.M., WEDNESDAY, SEPTEMBER 8,1999 1. CALL TO ORDER AND WELCOME BY STILL WATER MAYOR, JAY KIMBLE. 2. RESPONSE BY MAHTOMEDI MAYOR, YALE NORWICK. 3. OVERVIEW OF PROPOSED SECOND ICE ARENA (NILE KRIESEL). A. MASTER PLAN OF MARKET PLACE FACILITIES. B. OPTIONS A AND BAND ESTIMATED COST OF OPTIONS A AND B. C. RECOMMENDED OPTION B. 4. OVERVIEW OF PROCESS TO BUILD SECOND SHEET OF ICE (JON HOHENSTEIN). A. FACILITY PROGRAM AND A V AILABILITY OF ICE TIME B FINANCIAL REVIEW AND PROCESS C. KEY ISSUES 5. PROFORMA (SPRINGSTED, INC). 6. DIRECTION TO STAFF FROM RESPECTIVE COUNCILS. 7. ADJOURNMENT. CITY HAll 216 NORTH FOURTH STillWATER, MINNESOTA 55082 PHONE 651-430-8800 . . . MEMORANDUM TO Mayor and CouncIl FR CIty Coordmator RE Proposed constructIon of second Ice sheet WIth Mahtomedt DA September 3, 1999 DIscussIon You should have receIved a separate packet for the JOInt meetmg scheduled for 7 00 PM, Wednesday, September 9, 1999 (StIllwater CIty Hall), WIth the CIty ofMahtomedt The packet contaIns a finanCIal proforma entItled "PresentatIon on a Proposed StIllwater/Mahtomedl Expanded Ice FacIlIty" The proforma IS based pnmarIly on the follOWIng assumptIons 1 The cost of the facIlItIes IS estImated to be $3 2 mIllIon dollars 2 Bondmg costs would be about $3 4 mIllIon dollars 3 Term of bonds would be 20 years 4 Mahtomedl would contrIbute $700,000 up front (thereby reducmg the debt serVIce costs) 5 Mahtomedt would guarantee purchase of, and StIllwater would guarantee sale of, 825 hours of Ice tIme per year for a penod of 15 years (note tIns has never been made completely clear but I belIeve that IS the time penod) 6 LIly Lake Arena would contInue to operate and the constructIon costs mclude renovatIon of LIly Lake ($259,000) 7 DepreCIatIon of $75,000 per year 8 Rental rates would Increase by $5 every three years and other revenues (I e, speCIal events, conceSSIOns, advertIsIng and soccer) would mcrease by 2% annually 9 Personnel expenses would mcrease by 4% annually and other expenses by 2% annually The cost of current operatIons and the cost of bwldIng and operatIng a second sheet of Ice, based on the assumptIons lIsted above, are compared as shown on the graphs that accompany the PresentatIon report AccordIng to Graph I (wluch IS based on StIllwater's actual expenence dunng the past season and partIally on the second season and IS the graph that I am the most comfortable WIth), It appears that the addttIonal cost (deficIt) to operate a second sheet of Ice would average about $ 67,000 a year for the penod shown on the graph (Note the first year, 2000/2001, Includes a reserve for capItalIzed mterest so the net debt serVIce payment IS very low and not mdtcatIve of the debt servIce for subsequent years Therefore the focus should be on the penod begInmng 2001/2002) . . . The graph only goes out to 2008/2009 so we don't know what the results of operatIon would be but I tlunk we can assume that the relatIonshIp would remam the same for enswng years ObVIously, after 20 years the debt servIce payments would cease and I would estImate that the net mcome (after depreCIatIon of $75,000) would be about $140,000 to $150,000 Some key Issues need to be resolved If the two cItIes are to go forward WIth thIS project I belIeve the key Issues are 1 How WIll the addItIonal defiCIt be paId for? Although, the CIty WIll have a second sheet of Ice that WIll be relatIvely debt free and WIll generate net mcome after the debt servIce IS paId (I e, In 20 years), and even though two sheets of Ice can be operated more economIcally than one sheet of Ice, the defiCIt WIll stIll mcrease by about $60,000 to $70,000 per year WIth the new debt servIce 2 What IS the tIme penod that Mahtomedl would be allowed to use he facIlItIes (or lIkeWIse how many years should Mahtomedl be requrred to guarantee the rental of Ice tIme)? 15 years? 20 years? 3 $700,000 has been dIscussed as Mahtomedl's share of the constructIon costs Is tlus an appropnate share gIven the cost of the facllItes (I e, bond Issue = $34 mIllIon) RepresentatIves from Sprmgsted, Inc WIll be at the meetmg Wednesday to present the proforma and to answer any questIons you mIght have Jon Hohenstem, CIty Adnnmstrator for Mahtomedl, and I WIll also try to gIve you addItIonal mformatIon/explanatlOns at the meetmg In the meantIme please feel free to call me If you have any questIons about the enclosed matenal ?f..uC( . . . ~ I Z/9,7 Presentation on a Proposed Stillwater/Mahtomedi Expanded Ice Facility Ice Sheet Projections Discussion Points Final Review ~ Springsted . . . Purpose . Develop financial projections for adding a new Ice sheet to the Stillwater Rec Center . Use a range of operating assumptions to create a "window" inside which actual operations could be expected to occur . Estimate the financial Impact of an expanded Ice facIlity with and without Mahtomedl participation uSing Information gather from the Stillwater, Mahtomedi and comparable faclltles operated by Woodbury, Brooklyn Park, Mlnnetonka and New Hope. Examine Three General Options A Continue present operations - One Ice sheet at the Rec Center and operation of Lily Lake, participant: Stillwater B. BUild new sheet With Mahtomedi - Two Ice sheets at the Rae Center and operation of Lily Lake, participants: Stillwater and Mahtomedl C. BUild new sheet Without Mahtomedl and close Lily Lake - Two Ice sheets at the Rec Center only, participant. Stillwater Critical Business Points . RENTAL HOURS A. Current Oceratlons: Rec Center Lily Lake Total Total Revenue Generated $411,680 B. New Sheet w/Mahtomedl Rae Center 3909 Lily Lake 1200 Total 5109 hours Total Revenue Generated $591,000 (estimate) Comparable average: 3,973 hours for two-sheet facIlities Note: Reduced Case - What happens With a 10-12% rental reduction Rec Center 3420 lily Lake 1080 Total 4500 hours Total Revenue Generated $510,000 (estimate) 2714 1004 3714 hours C. New Sheet/Close Lllv Lake: Rec Center 3714 hour Total Revenue Generated $429,393 Issue. Probability of actual use of three Ice sheets . . . Cities of Mahtomedl and Stillwater, Minnesota September 1, 1999 · HOURLY RATES $135 - Rec Center pnme time $120 - Lily Lake pnme time $110 - 80th arenas, non-pnme time Assume Inflator of $5 00 every three years Issue Supply and demand will govern hourly rates reflecting changing market and demographics Expenditures · Pnmary Determinant - Level of Staffing · Stillwater Recreation Center plus Lily Lake -Staff does Ice and soccer dome · Average Comparable - 9.75 Full-time eqUivalents (FTE) (Two of the four comparable faCIlities share staff with other City facIlities, such as a field house or a community center.) · Stlllwater/Mahtomedl estimate - 4 8 FTEs · Net Income (loss) including depreCiation, replacement expenses and debt service Comparable Facilities 1998 ($122,933) Projections with 2001/02 comparable facility (18t full year of expenses operation 2008109 Option A $186,281 ) $312,381 Option 8 $293,314) $417,469 Option C $(394,999) $503,569 Projections with actual Stillwater Expenses Option A $ 61,009) $147,532 Option 8 $135,415) $209,685 Option C $237,100) $295,785 Projected Net Impact of ($ 67,865) ($111,672) Dome Issue: Spnngsted beheves lower staffing over time Will lead to lower revenues. IncreaSing operating revenues will depend upon Increasing non-pnme time programmmg. Page 2 . . . Cities of Mahtomedl and Stillwater, Minnesota September 1, 1999 Debt Financing · $3,360,000 G 0 Bonds, Issued by Stillwater · Term - 20 years · Structure: level Debt Service · Interest Rates 522% average coupon · Funding source options tax levy net Income, If It occurs tax Increment, If an excess occurs In TIF Dlstnct #3 Graphs · Three graphs have been developed to Illustrate each option, keeping vanous assumptions about rates and operating expenses constant Stillwater City Staff estimates of recent actual expenence of the soccer dome are consistently added to all options · The difference between current operations (A) and bUilding a new Ice sheet with Mahtomedl (B) ranges from a net loss of ($74,406) to ($107,033) In 2001/02 and a net loss of ($62,154) to ($105,089) In 2008/09 · The difference between current operations (A) and bUilding a new Ice sheet without Mahtomedl and closing lily lake (C) ranges from a net loss of ($176,091) and ($208,718) In 2001/02 and a net loss of ($148,254) to ($191,189) In 2008/09 G \WORK\WP7\SHARONlICESHEET DOC Page 3 . ($100,000) ($200,000) ($300,000) ($400,000) ($500,000) ($600,000) ($700,000) . . Rate Increase Every 3 Years Stillwater Expenses $0 1999/2000 2000/2001 2001/2002 2oo~2003 200~2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 Seasonal Years -Current Operations (A) /1 Sheet at Each FaCility (Stillwater Only) ~Wlth Upfront Mahtomedl Contnbutlon (B) /2 Sheets at Rec Center and 1 at Lily Lake (Stillwater and Mahtomedl) ~Bulld 2nd Sheet, Close Lily Lake (C) /2 Sheets at Rae Center (Stillwater Only) Prepared By Spnngsted Incorporated Graph 1 9/1/99 . ($100,000) ($200,000) ($300,000) ($400,000) ($500,000) ($600,000) ($700,000) . . Rate Increase Every 3 Years Comparable Facilities Expenses $0 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 200812009 Seasonal Years -Current Operations (A) /1 Sheet at Each FaCIlity (Stillwater Only) -+-Wlth Upfront Mahtomedl Contnbutlon (B) /2 Sheets at Rae Center and 1 at Lily Lake (Stillwater and Mahtomedl) --.PBulld 2nd Sheet, Close Lily Lake (C) / 2 Sheets at Rae Center (Stillwater Only) Prepared By Spnngsted Incorporated Graph 2 9/1/99 . ($100,000) ($200,000) ($300,000) ($400,000) ($500,000) ($600,000) ($700,000) . . No Rate Increases Stillwater Expenses $0 1999/2000 2000/2001 2001/2002 2oo~2003 2003/2004 2~005 2005/2006 2006/2007 2007/2006 2008/2009 Seasonal Years -Current Operations (A) /1 Sheet at Each FaCIlity (Stillwater Only) ...-Wlth Upfront Mahtomedl Contnbutlon (B) / 2 Sheets at Rec Center and 1 at Lily Lake (Stillwater and Mahtomedl) .....Bulld 2nd Sheet, Close Lily Lake (C) /2 Sheets at Rec Center (Stillwater Only) Prepared By Spnngsted Incorporated Graph 3 9/1/99