6.3.A. SR 11-13-2012 l REQUEST FOR ACTION
River
TO ITEM NUMBER
Mayor and City Council 6.3.A
AGENDA SECTION MEETING DATE PREPARED BY
Work Session November 13, 2012 Rich Czech, Ice Arena Manager
ITEM DESCRIPTION REVIEWED By
Ice Arena Renovation Update Michael Hecker,Park and Recreation
Director
REVIEWED BY
Cal Portner,City Administrator
ACTION REQUESTED
Review and discuss the Ice Arena renovation options provided by 292 Architect Group.
BACKGROUND/DISCUSSION
At the August 13,2012,City Council meeting,Council directed staff to put together a Proforma for the
four options of renovating the Arena. Staff met several times to discuss options and has established the
attached pro formas.
When looking at additional revenue sources,we found that extra programing of the building may be a
viable option;however,it did not create the revenue resource that would substantially affect the bottom
line. Naming rights for the building and or ice sheets may be worth looking at,but until we know what
option we will be moving forward with,it's hard to market ourselves to local businesses.
Option one is to follow the current Capital Improvement Plan (CIP) for the Arena. While the CIP
covers some major items, such as the Barn's roof(membrane),the refrigeration system, and the
dehumidification system,it does not take care of all of the Arena's growing needs such as a larger lobby,
the Barn locker room improvements,ventilation safety systems,and ADA issues. Operational costs will
become harder to manage due to the age of the equipment and the timing of needed repairs to the
building. Following the CIP option,renovating the Arena will still require the need for major repairs to
the current structure in 9-12 years.
RJM Total Cost Estimate: $4,812,158
The pros of option one:
• No up-front costs
The cons of option one:
• Potential safety hazards,including ventilation systems
• Poor air quality in locker rooms
• Customers and citizens lose interest and stop utilizing the facility
• City loses value on a significant community investment
• Added expenses when major repairs will need to be made
rill FRED 8r
N:\Public Bodies\City Council\Council RCA\Agenda Packet\11-13-2012\Ice Arena RFA111312.docx blATURE
Option two addresses some repairs up front such as the Barn roof and ceiling,repairs to Olympic Rink
locker rooms and roof,and ventilation for refrigeration and resurfacing rooms in the Barn. This option
still doesn't address major needs of the building and is only a short-term fix.
RJM Total Cost Estimate: $5,118,572
The pros of option two:
• Minimum outlay cost
• Fixes dehumidification in the Barn and helps maintain the structure
• Addresses life safety
The cons of option two:
• Refrigeration issues not addressed, still scheduled later in CIP
• Olympic floor still sand base, cannot be used for dry floor events
• Environmentally harmful refrigeration system still in place
• No operational improvements to facility
• Team dressing rooms for high school are not addressed
• ADA issues not addressed
Option three establishes groundwork for a long-term solution that can be further enhanced in future
years. It gives the Barn a total makeover,including a new roof, ceiling,locker rooms, and HVAC system.
RJM Total Cost Estimate: $8,700,769
The pros of option three:
• State of the art refrigeration system for the Olympic Rink, sized to handle the Barn in the future
• Operationally more efficient;combined resurfacing room
• Concrete floor added to Olympic making it more multi-purposed
• Larger lobby giving the facility a new identity that can handle larger events
• Varsity locker rooms are addressed
• ADA Issues are addressed
The cons of option three:
• Up front expense
• Barn structure still being utilized
Option four removes the Barn completely and rebuilds from the ground up.
RJM Total Cost Estimate: $10,488,846
The pros of option four:
• New common refrigeration system
• Operationally more efficient;combined refrigeration system
• Better seating and sightlines for new rink
N:\Public Bodies\City Council\Council RCA\Agenda Packet\11-13-2012\Ice Arena RFA111312.docx
• More energy efficient facility
• Meeting rooms
The con of option four:
• Cost
It is my professional recommendation,which has been supported by industry-trusted engineers and
designers,that the need to address our refrigeration systems must be a priority. The direct refrigeration
systems we have in each rink were once the most trusted in the business. However, since the Montreal
Protocol production ban on R22 refrigerants,parts are becoming harder to replace and the cost of the
refrigerant has increased over 300%in just five years,up to $12 - $15 per pound. The direct system uses
approximately 6,000 pounds per unit, so even a minor leak can cost thousands of dollars.
ATTACHMENTS
• Pro forma,option one
• Pro forma, option two
• Pro forma, option three
• Pro forma, option four
• Ehlers financing options memo
Action Motion by Second by Vote
Follow Up
N:\Public Bodies\City Council\Council RCA\Agenda Packet\11-13-2012\Ice Arena RFA111312.docx
r'
Ice Arena Financial Forecast
11/08/2012
2011
Budget
Budget
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Actual
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
REVENUES
Ice Rental
493,698
488,000
493,000
495,000
510,250
510,250
522,125
522,125
537,375
537,375
549,250
549,250
564,500
Other revenues
-
-
-
Hockey Programs
35,445
30,000
36,000
36,720
37,454
38,203
38,967
39,746
40,541
41,352
42,179
43,023
43,883
Skating Programs
53,901
65,800
64,500
65,790
67,106
68,448
69,817
71,213
72,637
74,090
75,572
77,083
78,625
Admissions
25,630
22,900
25,500
26,010
26,530
27,061
27,602
28,154
28,717
29,291
29,877
30,475
31,085
Admissions Surchage
7,012
7,300
Sign Rental
18,086
17,500
18.000
18,000
18,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
Dry Floor Events
19,518
17,400
19,500
19,890
20,288
20,694
21,108
21,530
21,961
22,400
22,848
23,305
23,771
Other Dry Floor Events
-
-
-
Vending
11,796
14,000
11,800
12,036
12,277
12,523
12,773
13,028
13,289
13,555
13,826
14,103
14,385
Skate Sharpening
4,223
4,300
4,300
4,386
4,474
4,563
4,654
4,747
4,842
4,939
5,038
5,139
5,242
Building Rent
2,600
2,600
2,600
2,700
2.700
2.700
2,700
2,700
2,800
2,800
2,800
2,800
2,800
Other Building Rent
-
-
Other Mdse Sales/Misc.
2,849
2,900
3,050
3,142
3,236
3,333
3,433
3,536
3,642
3,751
3,864
3,980
4,099
TOTAL
674,758
665,400
685,5501
683,674
702,315
707,775
723,179
726,779
745,804
749,553
765,254
769,158
788,390
EXPENDITURES
Personal Service
265,932
294,450
287,500
293,250
299,115
305,097
311,199
317,423
323,771
330,246
336,851
343,588
350,460
Recreation Programs
34,121
53,750
51 850
53,406
55,008
56,658
58,358
60,109
61,912
63,769
65,682
67,652
69,682
Supplies
47,209
44,200
48,950
50,419
51,932
53,490
55,095
56,748
58,450
60,204
62,010
63,870
65,786
- Utilities
145,824
142,450
149,050
156,503
164,328
172,544
181,171
190,230
199,742
209,729
220,215
231,226
242,787
Other Services & Charges
46,800
41,950
45,350
46,711
48,112
49,555
51,042
52,573
54,150
55,775
57,446
59,171
60,946
TOTAL
539,886
576,800
582,700
600,289
618,495
637,344
656,865
677,083
698,025
719,723
742,206
765,507
789,661
CONCESSIONS
Sales
77,768
69,000
78,000
80,340
82,750
85,233
87,790
90,424
93,137
95,931
98,809
101,773
104,826
Less: Product& Supplies
32,990
24,450
26,900
27,707
28,538
29,394
30,276
31,184
32,120
33,084
34,077
35,099
36,152
Salaries
20,084
22,700
23,100
23,793
24,507
25,242
25,999
26,779
27,582
28,409
29,261
30,139
31,043
Net Profit
24,694
21,850
28,0001
28,840
29,705
30,597
31,515
32,461
33,435
34.438
35.471
36,535
37.631
OPERATING INCOME (LOSS)
159,566
110,450
130,850
112,225
113,525
101,028
97,829
82,157
81,214
64,268
58,519
40,186
36,360
Bond Proceeds
Inflated Dollars (3% -2012 year)
357,300
237,028
2,254,034
519,985
33,851
91,942
1,193,470
11,021
29,917
-
-
Capital Outlay
42,143
20,500
357,300
223,422
2,062,760
462,000
29,200
77,000
970,400
8,700
22,929
-
-
Barn condenser
35,463
Ice edger
6,680
Barn roof membrane
11 3 300
Barn dehumidifer
180.000
Desiccant wheel on Olympic dryer
64,000
Zamboni battery
11,000
Floor scrubber
9,500
Barn dehumidifier
Front entrance doors
12.000
Barn locker rooms heating system
45,000
Electronic air monitor
14.500
Repair Vertical Cracks to Oly Precast
9.500
Freon Detector for Barn's Ice Plant
25.000
Replace rubber matting
2.000
2000 .
2.000
2.000
2000
2000
2000 .
2 000
Barn Structure repairs
50,000
Replace co -ray vac heagngBarn
20,000
Maintenance /storage area
75.000
Expand locker room #5
8.500
Membrane Oly Locker Room Roof
3.840
Olympic roof repair
22.320
Exhaust System for make -up air
30,000
Dasher Boards
140.000
Door Replacement
50,000
Toilet Room Repairs & Upgrades
80.000
Replace HVAC in lobby
15,000
Replace water heaters
7200 .
Paint ceiling of barn
35.000
Replace co -ray vac heating /Oly
30.000
Ventilation unit for lockers 5-8
9,500
Repair Vertical Cracks to Oly Precast
6,700
Replacement of Refrigeration System
1.771,100
758,900
Owner Costs
Ice Resurfacer Replacement
120.000
120.000
Replace Scoreboards
19 5on
Miscellaneous (audio)
25.000
Arch. /Engineering Fees
40.422
160.000
40.000
5,000
10.000
60.000
-
1 429
TRANSFERSIN(OUT)
Capital Outlay - Liquor Fund
-
137,500
General Fund
90,369
-
-
-
-
-
Building Debt
(200,780)
-
-
-
-
-
-
-
-
-
-
-
-
Grant Contribution
-
NET INCOME (LOSS) $
7,012 5
89,950 1
$ (88,950)1
(124,803) $ 2,140,509 $ 418,95
$ 63,978 $
9,785) $ 1,112,256 $
53,247 $
28,602 $
40,186 $
36,360
Cumulative Excess (deficiency)
13,755
103,705
14,755
(110,048)
(2,250,557) (2,669,514)
(2,605,536) (2,615,321)
(3,727,576)
(3,674,329) (3,645,727) (3,605,541) (3,569,181)
11/08/2012
Ice Arena Financial Forecast
REVENUES
Ice Rental
Other revenues
Hockey Programs
Skating Programs
Admissions
Admissions Surchage
Sign Rental
Dry Floor Events
Other Dry Floor Events
Vending
Skate Sharpening
Building Rent
Other Building Rent
Other Mdse Sales/Misc.
TOTAL
EXPENDITURES
Personal Service
Recreation Programs
Supplies
-Utilities
Other Services & Charges
TOTAL
CONCESSIONS
Sales
Less: Product& Supplies
Salaries
Net Profit
OPERATING INCOME (LOSS)
Bond Proceeds
Inflated Dollars (3% - 2012 year)
Capital Outlay
Barn condenser
Ice edger
Zamboni battery
Floor scrubber
Barn dehumidifier
Repair Vertical Cracks to Oly Precast
Replace rubber matting
Membrane Oly Locker Room Roof
Roof repairs - Olympic
Dasher Boards
Door Replacement
Toilet Room Repairs & Upgrades
Replace water heaters
Replace co-ray vac heafing/Oly
Ventilation unit for lockers 5 -8
Repair Vertical Cracks to Oly Precast
Replacement of Refrigeration System
Construction Expenditures
Construction
Owner Costs
Ice Resurfacer Replacement
Scoreboards
Miscellaneous (audio)
Arch. /Engineering Fees
TRANSFERSIN(OUT)
Capital Outlay - Liquor Fund
General Fund
Building Debt
Grant Contribution
NET INCOME (LOSS)
Cumulative Excess (deficiency)
11/08/2012
COQn a
2011
Budget
Budget
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Actual
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
493,698
488,000
493,000
34,622
945,469
8,700
21,500 - -
35.463
495,000 510,250 510,250 522,125 522,125 537,375 537,375 549,250 549,250
564,500
36,720
37,454
38,203
38,967
39,746
40,541
41,352
42,179
43,023
43,883
35,445 30,000
36,000
53,901
65,800
64,500
65,790
67,106
68,448
69,817
71,213
72,637
74,090
75,572
77,083
78,625
25,630
22,900
25,500
26,010
26,530
27,061
27,602
28,154
28,717
29,291
29,877
30,475
31,085
7,012
9.500
7,300
2.000
18,086
17,500
18,000
18,000
18,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
19,518
17,400
19,500
19,890
20,288
20,694
21,108
21,530
21,961
22,400
22,848
23,305
23,771
11,796
14,000
11,800
12,036
12,277
12,523
12,773
13,028
13,289
13,555
13,826
14,103
14,385
4,223
4,300
4,300
4,386
4,474
4,563
4,654
4,747
4,842
4,939
5,038
5,139
5,242
2,600
2,600
2,600
2,700
2,700
2,700
2,700
2,700
2,800
2,800
2,800
2,800
2,800
2,8
a7A 750. 49
2,900
f.IXS dnn
3,050
0.0.7 S5n
3,142
RR1 R'A
3,236
7M 115
3,333
7n7 775
3,433
771 17e
3,536
77a 77e
3,642
7- And
3,751
- -
3,864
7- -A
3,980
70.e 150.
4,099
70.0. ten
265,932 294,450 1 287,500 1 293,250 299,115 305,097 311,199 317,423 323,771 330,246 336,851 343,588 350,460
34,121 53,750 51,850 53,406 55,008 56,658 58,358 60,109 61,912 63,769 65,682 67,652 69,682
47,209 44,200 48,950 50,419 51,932 53,490 55,095 56,748 58,450 60,204 62,010 63,870 65,786
145,824 142,450 149,050 156,503 164,328 172,544 181,171 190,230 199,742 209,729 220,215 231,226 242,787
46.800 41.950 45.350 46.711 48112 49.555 51.042 52.573 54.150 55.775 57.448 59.171 60.946
77,768 69,0001 78,0001 80,340 82,750 85,233 87,790 90,424 93,137 95,931 98,809 101,773 104,826
32,990 24,450 26,900 27,707 28,538 29,394 30,276 31,184 32,120 33,084 34,077 35,099 36,152
20.084 22.700 23.100 23.793 24.507 25.242 25.999 26.779 27.582 28.409 29.261 30.139 31.043
159,566
110,450
130,850
112,225
113,525
101,028
97,829
82,157
81,214
64,268
58,519 40,186 36,360
1,586,523
2,072,122
436,673
10,665
41,340
1,162,808
11,021
28,053 - -
42,143
20,500
-
1,495,450
1,896,285
387,978
9,200
34,622
945,469
8,700
21,500 - -
35.463
6,680
11,000
9,500
9.500
2.000
2.000
2.000
2.000
2.000
2.000
2.000
2.000
380
22.320
140.000
25.000
80.000
7,200
30.000
9.500
6.700
1.771.100
758.900
1,372.414
120.000 120.000
19.500
25.000
86.536 97.025 20.978 - 2.622 55.069 - -
90,369 - - - - -
(200.780) - - - - - - - - -
13,755 103,705 1 234,555 (1,239,743) (3,198,340) (3,533,984) (3,446,821) (3,406,004) (4,487,598) (4,434,351) (4,403,884) (4,363,698) (4,327,338)
Ice Arena Financial Forecast
REVENUES
Ice Rental
Other revenues
Hockey Programs
Skating Programs
Admissions
Admissions Surchage
Sign Rental
Dry Floor Events
Other Dry Floor Events
Vending
Skate Sharpening
Building Rent
Other Building Rent
Other Mdse SaleslMisc.
TOTAL
EXPENDITURES
Personal Service
Recreation Programs
Supplies
- U80ties
Other Services 8 Charges
TOTAL
CONCESSIONS
Sales
Less: Product& Supplies
Salaries
Net Profit
OPERATING INCOME (LOSS)
Bond Proceeds
Inflated Dollars (3% - 2012 year)
Capital Outlay
Barn condenser
Ice edger
Zamboni battery
Floor scrubber
Barn dehumidifier
Repair Vertical Cracks to Oly Precast
Door Replacement
Repair Vertical Cracks to Oly Precast
Replacement of Refrigeration System
Construction Expenditures
Construction
Owner Costs
Ice Resurfacer Replacement
Scoreboards
Miscellaneous (audio)
Arch. /Engineering Fees
TRANSFERSIN(OUT)
Capital Outlay - Liquor Fund
General Fund
Building Debt (20yr 2.67% TIC)
Grant Contribution
NET INCOME (LOSS)
Cumulative Excess (deficiency)
11/0812012
2011
Budget
Budget
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Forecast
Actual
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
493,698
488,000
493,000
6,680
495,000 510,250 510,250 522,125 522,125 537,375 537,375 549,250 549,250
564,500
36,720
37,454
38,203
38,967
39,746
40,541
41,352
42,179
43,023
43,883
35,445 30,000
36,000
53,901
65,800
64,500
65,790
67,106
68,448
69,817
71,213
72,637
74,090
75,572
77,083
78,625
25,630
22,900
25,500
26,010
26,530
27,061
27,602
28,154
28,717
29,291
29,877
30,475
31,085
7,012
7,300
18,086
17,500
18,000
18,000
18,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
19,518
17,400
19,500
19,890
20,288
20,694
21,108
21,530
21,961
22,400
22,848
23,305
23,771
11,796
14,000
11,800
12,036
12,277
12,523
12,773
13,028
13,289
13,555
13,826
14,103
14,385
4,223
4,300
4,300
4,386
4,474
4,563
4,654
4,747
4,842
4,939
5,038
5,139
5,242
2,600
2,600
2,600
2,700
2,700
2,700
2,700
2,700
2,800
2,800
2,800
2,800
2,800
265,932 294,4501 287,5001 293,250 299,115 305,097 311,199 317,423 323,771 330,246 336,851 343,588 350,460
34,121 53,750 1 51,8501 53,406 55,008 56,658 58,358 60,109 61,912 63,769 65,682 67,652 69,682
47,209 44,2001 48,9501 50,419 51,932 53,490 55,095 56,748 58,450 60,204 62,010 63,870 65,786
145,824 142,450 149,050 156,503 164,328 172,544 181,171 190,230 199,742 209,729 220,215 231,226 242,787
46.800 41.950 45.350 46.711 48.112 49.555 51.042 52.573 54.150 55.775 57.448 59.171 60.946
77,768 69,0001 78,0001 80,340 82,750 85,233 87,790 90,424 93,137 95,931 98,809 101,773 104,826
32,990 24,450 26,900 27,707 28,538 29,394 30,276 31,184 32,120 33,084 34,077 35,099 36,152
20.084 22.700 23.100 23.793 24.507 25.242 25.999 26.779 27.582 28.409 29.261 30.139 31.043
159,566
110,450
130,850
112,225
113,525 101,028 97,829 82,157
81,214 64,268
58,519 40,186 36,360
7,673.639
-
8,177,565
- 151,944 - -
147,585 1,060,919
25,443 - -
42,143
20,600
-
7,708,139
- 135,000 - -
120,000 837,499
19,500 - -
35,463
6,680
11,000
9.500
15.000
7,673.639
120.000
25.000
6,700
758,900
120.000
19.500
71,899
90,369
(200,780) - - - (189,470) (440,210) (536,765) (532,544) (532,830) (532,233) (535,929) (533,764) (531,306)
13,755 103,705 1 234,555 (157,146) (233,091) (724,216) (1,163,152) (1,613,539) (2,212,740) (3,741,624) (4,244,477) (4,738,055) (5,233,001)
Ice Arena Financial Forecast
REVENUES
Ice Rental
Other revenues
Hockey Programs
Skating Programs
Admissions
Admissions Surchage
Sign Rental
Dry Floor Events
Other Dry Floor Events
Vending
Skate Sharpening
Building Rent
Other Building Rent
Other Mdse Sales(Misc.
TOTAL
EXPENDITURES
Personal Service
Recreation Programs
Supplies
- Utilities
Other Services 8 Charges
TOTAL
CONCESSIONS
Sales
Less: Product B Supplies
Salaries
Net Profit
OPERATING INCOME (LOSS)
Bond Proceeds
Inflated Dollars (3% - 2012 year)
Capital Outlay
Barn condenser
Ice edger
Zamboni battery
Floor scrubber
Barn dehumidifier
Construction Expenditures
Construction
Owner Costs
Ice Resudacer Replacement
Scoreboards
Miscellaneous (audio)
Arch. /Engineering Fees
TRANSFERSIN(OUT)
Capital Outlay - Liquor Fund
General Fund
Building Debt (20yr 3.22% TIC)
Grant Contribution
NET INCOME (LOSS)
Cumulative Excess (deficiency)
11/08/2012
2011 Budget ) Budget ) Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
493,698
488,000
493,000
495,000
510,250
510,250
522,125
522,125
537,375
537,375
549,250
549,250
564,500
35,445
30,000
36,000
36,720
37,454
38,203
38,967
39,746
40,541
41,352
42,179
43,023
43,883
53,901
65,800
64,500
65,790
67,106
68,448
69,817
71,213
72,637
74,090
75,572
77,083
78,625
25,630
22,900
25,500
26,010
26,530
27,061
27,602
28,154
28,717
29,291
29,877
30,475
31,085
7,012
7,300
18,086
17,500
18,000
18,000
18,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
19,518
17,400
19,500
19,890
20,288
20,694
21,108
21,530
21,961
22,400
22,848
23,305
23,771
11,796
14,000
11,800
12,036
12,277
12,523
12,773
13,028
13,289
13,555
13,826
14,103
14,385
4,223
4,300
4,300
4,386
4,474
4,563
4,654
4,747
4,842
4,939
5,038
5,139
5,242
2,600
2,600
2,600
2,700
2,700
2,700
2,700
2,700
2,800
2,800
2,800
2,800
2,800
2,849
2,900
3,050
3,142
3,236
3,333
3,433
3,536
3,642
3,751
3,864
3,980
4,099
674.758
665.400
685.550
683.674
702.315
707.775
723.179
726.779
745.804
749.553
765.254
769.158
788.390
265,932 294,4501 287,5001 293,250 299,115 305,097 311,199 317,423 323,771 330,246 336,851 343,588 350,460
34.121 53,750 51,850 53,406 55,008 56,658 58,358 60,109 61,912 63,769 65,682 67,652 69,682
47,209 44,200 48,950 50,419 51,932 53,490 55,095 56,748 58,450 60,204 62,010 63,870 65,786
145,824 142,450 149,050 156,503 164,328 172,544 181,171 190,230 199,742 209,729 220,215 231,226 242,787
77,768 69,0001 78,0001 80,340 82,750 85,233 87,790 90,424 93,137 95,931 98,809 101,773 104,826
32,990 24,450 26,900 27,707 28,538 29,394 30,276 31,184 32,120 33,084 34,077 35,099 36,152
159,566 110,450 130,850 112,225 113,525 101,028 97,829 82,157 81,214 64,268 58,519 40,186 36,360
10,488.846
- 11,154,139 - 135,061 - - 147,585 - 25,443 - -
42,143 20,500 10,513,846 - 120,000 - - 120,000 - 19,500 - -
35.463
6,680
11,000
10 488.846
120.000
25.000
120 000
liliflilriZi
90,369
(200,780) - - - (320,072) (612,308) (770,097) ( 768, 454) ( 770, 887) ( 766, 750) (766,619) (765,269) (767,839)
13,755 103,705 1 234,555 1 (318,513) (525,060) (1,171,401) (1,843,669) (2,529,966) (3,367,224) (4,069,706) (4,803,249) (5,528,332) (6,259,811)
To: Tim Simon, City of Elk River
From: Mark Ruff, Ehlers
Date: August 16, 2012
Subject: Financing Options for Proposed Ice Arena
The ability to undertake projects, issue bonds and levy taxes is governed by state law.
Recreational facilities have more limited options than City infrastructure projects. Generally,
cities have funded recreation facilities either through a general obligation (G.O.) bond pursuant
to a referendum, through an annual appropriation lease revenue bond, or through a G.O. tax
abatement bond. These three options are outlined in more detail below.
A portion of the costs of the ice arena may be eligible for funding through G.O. Equipment
Certificates (must be repaid within 10 years). We can pursue these options further if you have
detail on the type and amount of costs associated with the project.
Issuance of General Obligation Bonds pursuant to an Election as Outlined in Minnesota
Statutes, Chapter 475. If the City determines to proceed generally under Chapter 475, an
election is required to be held on the issuance of bonds.
® The longest part of the election process is the allowance of a forty- nine -day
notification to the County Auditor.
® The required ballot language assumes that the entire debt service is paid from
ad valorem taxes on all taxable property within the City.
® If the City chooses, a portion of the bonds could be paid from other sources
and the City -wide ad valorem tax levy could be reduced on an annual basis.
® Property taxes are levied on the basis of tax capacity. Previously, property
taxes were levied on the basis of market value.
VWV1 /\i e "fler<,..Ir1C; coiY1
EHLERS
Minnesota phone 661 -697 -8500 3060 Centre Pointe Drive
LEADERS IN PUBLIC FINANCE Offices also in Wisconsin and Illinois fax 651- 697 -8655 Roseville, MN 55113 -1122
toll froo 800 -552 -1171
® The bonds are subject to net debt, with few exceptions. Below is a calculation
of the City's current Net Debt Limit based upon pay 2012 values and debt.
Net Debt Limit
Assessor's Taxable Market Value 1,792,595,800
Multiply by 3% 0.03
Statutory Debt Limit 53,777,874
Less: Debt Paid Solely from Taxes 23,615,000
Unused Debt Limit 30,162,874
2. EDA lease arrangement under Minnesota Statutes Section 465.71. If the City determines
to proceed under Section 465.71, an election is not required. The City's Economic
Development Authority could provide financing through a direct lease arrangement and
could issue lease - revenue bonds to the competitive market. In any event, the lease is not
a general obligation or indebtedness of the City but a special obligation payable solely
from lease payments annually appropriated by the City. This means that the City has the
ability to annually levy for lease payments while reserving the right to annually terminate
the lease, without penalty.
We have discussed this option for the City for the public works facility. Interest rates for
an ice arena are expected to be much higher than a public works facility because
recreational facilities are not considered to be "essential" by bond buyers. Because of
this provision allowing the City to terminate and the lack of essentiality, the City could
see interest rates at least 1.00% to 1.50% above a general obligation bond rate. If the
City determines to proceed under the lease revenue method, the following points should
be noted:
® Leases less than $1,000,000 are not subject to net debt limit.
A public hearing may be required for approval.
® A debt service reserve and a trustee may be required for the financing,
depending upon market conditions.
® While the City could legally walk away from a lease, the City's bond rating
would decrease significantly in the event of a non - appropriation.
3. G.O. Tax Abatement under Minnesota Statutes Chapter 469
What is Tax Abatement?
Tax abatement is the ability for an individual taxing entity to capture and use all or a portion of
the local property tax revenues within a defined geographic area to assist with a public
improvement or a new development or retain a business. Property owners do not need to give
permission to abate taxes nor does it change the amount of taxes to be collected. It allows each
major taxing jurisdiction to choose to contribute its share of the taxes and limit abatement in any
manner it determines appropriate. In practice, it is a rebate rather than an exemption from paying
taxes. It is governed by Minnesota Statutes 469.1812- 469.1815.
Tax abatement can be used to finance pubic infrastructure like the recreational facilities,
regardless if the benefited development or infrastructure is on or adjacent to the parcel for which
the tax is being abated. However, it is often confusing to taxpayers when tax abatement is
utilized because the tool leaves the impression that certain parcels will pay more taxes than
others. In reality, the taxpayer in an abatement area pays taxes on the abated property in the same
manner it would if the taxes were not being abated.
The city has flexibility in how it chooses to abate /redirect the taxes and can abate /redirect a
specific percent or the taxes or dollar amount, which may include taxes from new development
or existing taxes. If more than one taxing entity participates in the abatement, the length of the
abatement is not required to be the same for each entity. There are no qualified cost
requirements for tax abatement.
What is the process for establishing tax abatement?
After identifying the details of the abatement, including the amount, term and the parcels for
abatement, a public hearing with at least a 10 day published notice must be held by each entity
granting the abatement. The entity granting the abatement is then required to adopt a resolution
approving the abatement. The adopting resolution must include the following: (1) Term of the
abatement; (2) Statement of public benefit expected to result from the abatement; (3) Required
findings; and (4) Schedule of repayment of deferred taxes (if applicable). This process must be
completed by each entity granting the abatement.
What findings must the approving entity make prior to approving tax abatement?
The entity granting the abatement must make a finding that the abatement benefits to the political
subdivision at least equal the costs of the proposed agreement, and that the abatement is in the
public interest for at least one of the following reasons:
• Increase or preserve tax base
• Provide employment opportunities
• Provide or help acquire or construct public facilities
• Redevelop or renew blighted areas
• Provide access to services for residents
• Provide public infrastructure
• Phase in a property tax increase, in specific circumstances
• Stabilize the tax base
What is the term of abatement?
If all three taxing entities (city, county and school district) participate in tax abatement the
maximum term is 15 years. However, if only one or two of the entities participate, the term is a
maximum of 20 years. The term of the abatement must be included in the adopting resolution. If
the resolution is silent to the term, the maximum term is 8 years.
What is the maximum amount that can be abated?
In any one year, the TOTAL amount a political subdivision may abate may not exceed the
greater of 10 percent of the entity's net tax capacity or $200,000. In addition, taxes on a parcel
may not be abated while the parcel is located in a tax increment district. The City's net tax
capacity is approximately $21.592 million, so its maximum total abatement capacity is
$2,159,000. Tax abatement bonds do not count against the City's debt limit.
How do abatements affect tax levies?
Abatements are special tax levies. The amount of the abatement must be added to the total levy
for the current year. The abatement amount must be included in the proposed levy for Truth in
Taxation as well as the certified levy.
Who has used tax abatement bonds for recreation purposes?
Buffalo I City of I MN T
Taxable Temporary General Obligation Tax Abatement Bonds, '
', 3,000,000.00 _Golf course
Series 2004D
_..... .
......
It is our understanding that the City of Savage and City of Woodbury are contemplating tax
abatement for recreation facilities.
Small issuers, in this context defined as an issuer of less than $10,000,000 of debt per calendar
year, enjoy slightly lower interest rates by making the bonds "bank qualified" or BQ. BQ bonds
in today's market trade about .15% to .25% lower than non -BQ bonds.
The IRS does allow a component unit of a local government to benefit from BQ status.
Therefore, if the EDA issued $9,000,000 in bonds for a project and the City issued $20,000,000
in bonds in the calendar year, the ERA's debt could still be BQ. However, the ERA's debt does
count against the City's BQ limit. Therefore, if the EDA issued $9,000,000 in debt, all of its debt
could be BQ. However, if the City issued $8,000,000 in debt in the same calendar year, the City
would not have any of its debt BQ because the EDA's debt would also count against the City's
debt.
If a community is working on a joint project, it is sometimes possible to share BQ status among
two different cities or a city and a county.
BQ status is a slight benefit to a project, but a .15% interest rate shift can occur through market
forces in less than a week. Therefore, we recommend to communities that they borrow when
they need funds rather than trying to "play" the market.
Please contact us with further questions or comments.