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HomeMy WebLinkAbout09.10.12 Work Session Minutes City Council Workshop Minutes September 10,2012 Mayor Larson called the workshop to order at 6:31 p.m. Present: Larson,Bartholomay, Donnelly, Fogarty,May Also Present: Ice For Tigers group—Darren Simon, Cal Huntley, Brian McGregor, Mitch Snobeck, Rob Junker David McKnight, City Administrator;Randy Distad, Parks and Recreation Director;Cynthia Muller, Executive Assistant MOTION by Fogarty, second by May to approve the agenda. APIF,MOTION CARRIED. The purpose of the workshop was to hear a presentation from Ice for Tigers on building a second sheet of ice next to the Schmitz-Maki Arena. Mr.Junker stated the goal of the presentation is their hope to unite all the programs together in a way to ask the City to help them build a second sheet of ice. They are not affiliated with Farmington Youth Hockey, and are an independent group. None of them stand to gain anything from this arrangement. They are parents doing this for their kids. They are also focused on seeing Farmington grow. Farmington has a rich tradition when it comes to skating. This new sheet of ice will open up new opportunities for Farmington for economic development and growth that allows us to host tournaments. They have been working on uniting all the groups that have an interest in this, including City staff,the school, and Youth Hockey Association to make this a guaranteed top line revenue earning arena. Their focus is to build a second sheet of ice in a very fiscally responsible manner. They are not looking for dollars, but are looking at huge private rates that will augment this. They do not want to start to build until they know how this will generate revenue as opposed to losing money. They also want to be respectful of Farmington's natural resources and bring this back to the community in terms of builders and allowing them to be part of this. Challenges today include the amount of drive time to other cities, a single sheet of ice only offers 62%rink efficiency which is operating dollars that go into the rink to generate a profit. Because the ice resurfacer sits idle for a period of time on a single sheet, it is amortized across the cost of operations. Parents spend a lot of time driving away from Farmington. A second sheet would bring people to Farmington. There are parents who have decided this sport is not worth the amount of time and have pulled their kids out. Ice for Tigers started meeting in December 2011 and broke the project down into three phases. The inception phase to make sure it was the right thing to build, as there were concerns about the soil and the Vermilion River. In the elaboration phase they studied other arenas to learn what makes good rinks great and what makes bad rinks fail. The execution phase is to start working toward a radical build so they know exactly how much this project will cost and to work towards a fund raising pyramid that allows them to extract the revenue necessary to start the project. A Joint Powers Agreement would be developed to detail how the arrangement will work between all parties involved. Some agreements include the upfront capital expenditures and assigning 11 Council Workshop Minutes September 10,2012 Page 2 those costs to individual parties. They will make sure they have the demand before building. In the agreement every party will have to state the number of hours of ice they will be purchasing which will establish a clear top line revenue for the arena that can be counted on from season to season. You need to have good operations and equipment to make sure the ice is always there, including summer ice. We should not over build which makes the increase in supply less than the demand. Even with the second sheet of ice,there will be excess demand going out of the City. We need to use reputable builders and have the best ice around. Consider the structure for the duration of the build, incent like a business, and get everyone to the table. On the really bad side is don't mis-build the structure. We are putting something up that is meant to stay up and continue on that focus. Don't leave the arena in the lurch and have a solid revenue plan upfront and also plan for reinvestment to make sure the upkeep is maintained. Construction concerns were discussed. A dehumidification system in the current arena was considered,but it cannot be sealed properly, which means summer ice is not a viable option in the current arena. They used that knowledge to have the current arena available in the summer without ice so other dry land events can be held. The second sheet would be for practice and would be maintained during the summer. It is cheaper to seal the building from humidity when building it, rather than after. There are currently two compressors and with a second sheet they would need three compressors. The builder they have been working with is the 292 Design Group. They have built 28 rinks in the last three years and are based in Minnesota. The three goals given to the builder was to make sure it is cost effective, environmentally responsible, and utilize energy reclamation systems. The plans for the second sheet were presented to the Council. The ice resurfacer would be moved to the back of the arena and it will be a shared service between the two rinks. In the corner is a melting pit as opposed to dumping the snow near the river or having any runoff. It would drain into the sanitary sewer. They would remove the current team rooms and build new varsity locker rooms of high quality. There would be seating for 300 in the bleachers. They met with the Learn-to-Skate program to meet their needs. Other arenas are allowing kids to have birthday parties on the ice with an hour of ice time and then using the community room. The second floor in the current arena would become storage. The concession stand would be on the main floor. They spoke with the Farmington Business Association to provide advertising and information for brochures. Two sheets will allow Farmington to host tournaments. Tournaments provide a great economic opportunity. Right now they have to do advance registration and collect the money upfront to get into the tournaments. It is a missed opportunity to not be able to host a tournament in the south metro. Having tournaments away from home is a great stress on families because of travel time and late hours. Tournaments here would create a demand for a hotel. We can save on energy costs, but they are not budgeted. Having inside doorways to the ice will change the way we manage the arena between the different areas. The bid they have today includes construction of everything. They need to determine how much of the cost they can reclaim. Regarding parking,the current lot has 55 spaces, and the middle school has 403 spaces. If the school lot were used,there would have to be a crosswalk with a flashing yellow light. There is an interested party who is participating in the joint powers agreement who might be able to help out with the parking. The fund raising plans were presented as a triangle with individual cells for sponsors and various naming rights. They have not had to sell anything and with interested people contributing they 12 Council Workshop Minutes September 10,2012 Page 3 have commitments for$360,141. With a sound fund raising pyramid, as well as a clear plan in mind,this can be done. There are also dasherboard programs,tape for Tigers, and puck wall sponsors which is called the half million dollar wall. Revenue projects are responsible and guaranteed. The FYHA ice purchased in 2011-2012 season is 758.25 hours. There are 513 hours of demand outside of the current arena. These are based upon current ice projections. For the second sheet, revenues are projected at$408,245 and expenses are projected at $406,949. This is no summer ice, no tournaments, no additional ice outside of FYHA included in the budget. The figure skating club wants more ice time, and the school has guaranteed practice time and wants more ice time. One of the questions asked of each group participating in the Joint Powers Agreement will be exactly how many hours of ice are you actually contributing to the rink. There is much more demand outside of these numbers, but they wanted to be conservative. There will be concrete numbers with the Joint Powers Agreement. Lakeville is also renting ice time from Faribault because of their demand. They would rather rent from Farmington. The Parks and Recreation Commission asked if there would be additional full time staff to manage the second sheet. There would be part time staff added. In the Joint Powers Agreement the revenue numbers would be concrete and the parties responsible would understand their requirements, and long term capital responsibility. Every seated party including the City, school, FYHA, learn-to-skate, Ice for Tigers,would meet with specific focus on cost of capital, upfront capital,the period for payback,the structure of the build, any specific intake requirements that deviate from the plan. The school would like to have $800,000 worth of locker rooms, but they need to help pay for that. The Joint Powers Agreement will include who is responsible for certain requirements. The outcome of the meeting would be a defined radical build so they know exactly how much this will cost, so we have long term capital responsibility, as well as a joint incentivized agreement to see the successful outcome of the arena. It will make sure that people who can purchase ice are guaranteed those ice hours, making sure people who have the leverage to control this are upfront and signing up as well. They need to come up with something that goes beyond the build, from the construction phase to the payback phase to the ongoing phase. Ice for Tigers is focused on raising the upfront capital necessary to start construction. At the same time,the biggest things that affect that equation are cost of capital. Ice for Tigers cannot get a loan, so they need to determine their amount of capital,what is total build cost,the association capital pulled in from other things, as well as City support. The City support comes in a lot of different ways, from helping them get the message out to all citizens,to making sure we are putting this together in a way that all costs are understood and the demands can be met,then turning this over as we go from construction phase, to payback phase,to ongoing phase of making sure we repay any capital debt as well as any loans, and focus on responsibility is the Joint Powers Agreement. Because they are stating the operating expenses and capital expenses in the Joint Powers Agreement,there is a legal entity associated with that payback. This group will be responsible for repaying dollars committed over time. The goal is to focus on rink profitability,the co-op marketing opportunities and longer term to create a revenue structure for a re-investment in programs and continued execution of those programs. Ice for Tigers has spent a lot of time understanding the problems and the risks and the outcome. They have identified 145 people they would like to get together to sell them the idea and obtain funding. They cannot do that unless they know they have the ability to do these things 13 Council Workshop Minutes September 10,2012 Page 4 contingent upon Council approval. They currently have anonymous donors offering large sums of money. They are asking where this will be built. Ice for Tigers is seeking approval to build next to the current arena contingent upon a Joint Powers Agreement being ratified by all parties. Councilmember Bartholomay liked their conservative approach. It will be important to have consistent communication between all parties. Mr. Snobeck noted the superintendent has committed to the Joint Powers Agreement. Parks and Recreation Director Distad asked if they have met with the School Board. Mr.Junker stated they met with the superintendent and the school board chair. Councilmember Fogarty asked if they wanted a representative from the Council or staff. The group wants someone from the Council. The school is seating the director of fmance, a school board member and the athletic director. Councilmember May felt it was a very good presentation, but as a banker she was confused. They were asking for approval, but there are no fmancials. Mr. Junker stated it will be between $2.5 million and $4.7 million depending upon amenities. That will be balanced against the funding. They have not presented a number because they want it to be justifiable. They are not asking to help build,they are asking for the ability to start building. Mayor Larson stated on Monday they will be asking to use the land and naming rights. Mr.Junker added and to be part of the Joint Powers Agreement so they can work on the numbers. Councilmember May asked if this will involve public fmancing or asking for pledges over a number of years. There will be two types of pledges, one for the capital upfront and the other an ongoing contribution. Their target is to build in year one and take loans over the following five year period and repay the loans in the remaining four years. Councilmember May asked about the current agreement with the hockey association to assist with repaying the$1 million loan for renovations. They would need to meet with the hockey association. Councilmember May would like feedback from the Park and Rec Commission and staff. Councilmember Donnelly stated they plan to have the money before construction so do you plan to have the money raised by then or plan to pay it back. Mr. Junker stated the finances have yet to be decided in terms of what they could get for loans and they may have to raise it all upfront which would take longer. Mr.Junker felt it is not their responsibility to come forth with a structure that is forced upon everyone else. That should come from the Joint Powers Agreement. Councilmember May stated if you are looking at going to the public for$4 million, should it be a referendum item as the sportsplex was and the community opted to not do it. Mr.Junker stated they will be doing substantial fundraising on their own, and when they get to that point,they will have to determine the right approach. Mayor Larson noted this is the first group that has come to Council wanting to give back to the community. He was very encouraged by the presentation. For the Parks and Recreation Commission,the parks and trails have been the main focus. The Ice for Tigers members stated the goal is to be profitable. You cannot break even with one sheet, but you can with two sheets. The Commission felt we need to really evaluate when using public funding, what the community really wants. A portion of the community wants hockey and skating. They asked if there has been a conversation with arena staff on what is feasible for staff because two sheets of ice is a lot of work. Mayor Larson clarified the community that would be 14 Council Workshop Minutes September 10,2012 Page 5 benefiting also includes the businesses and not just the hockey community. The Commission felt the group did their homework and will continue to look at this with an open mind. The Commission clarified what the group is looking for on September 17, 2012, is permission for the property and the naming rights and the joint powers agreement. The Park and Recreation Commission needs to get their heads around the net increase and expense. Ice for Tigers clarified it is just to start the process. Mayor Larson stated it is contingent on the Joint Powers Agreement being worked out. Councilmember Donnelly noted the Joint Powers Agreement has to come back to the Council and School Board for approval. Saying yes now is to move the project forward. Without the Joint Powers Agreement, it is over. The land was discussed and it was noted an environmental review would be done. City Administrator McKnight noted we could sell 12 prime time ice hours per day, but with the new sheet there could only be one group. Mr. Junker stated staff looked at the available ice, and the hours available for certain age groups,and the school wants to move practices to the morning which opens up two more prime time ice hours. Parks and Recreation Director Distad noted the budget is very conservative. They have looked at expenses from other rinks, and this would not be a separate facility; we will have one facility with two sheets of ice. Councilmember May asked if the pledges are binding. Mr. Junker stated they have only asked for commitments. Some of them have asked where this will be built. They will make them as binding as possible when moving to the next phase. With the commitment to capital to build, without the dollars in the bank we cannot start. Councilmember Donnelly asked about the status of meeting with joint powers members. Mr. Junker stated the school board has agreed to seat people,the meeting with FYHA is on Wednesday, and the Council is the following Monday. The FBA is not part of the joint powers group. Staff recommended two Park and Rec Commission members be on the joint powers group. MOTION by Fogarty, second by Bartholomay to adjourn at 8:08 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 15