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1998-03 CSC (3)RICHFIELD COMMUNITY SERVICES ADVISORY COMMISSION Thursday, March 12, 1998 Special Meeting Present: D. Buzicky, C. Krohn, R. Dietl, R. Jabs, T. Loweth, B. McGlinn, C. Sharkey, M. Scaglia, D. Schaefer, N. Stiller; Council Members K. Stokes, S. Rosenberg; Staff S. Devich, A. Payne Absent: A. Auchstetter, T. Erlander, J. Sloss The meeting was called to order by Chair Loweth at 7:02 p.m. in the Conference Center of the Water Plant. Mr. Easterwood, from the hockey group, did an overview and explained what steps have been taken to get to where they are now. The need for the second sheet of ice has been covered and presented to the City Council. The Council referred the hockey group to the Community Services Commission for a recommendation as to the need and possibility of a second sheet of ice. The Commission recommended a feasibility report be completed and asked the group to bring this back to them for a recommendation. The hockey group has completed this report and is at this special meeting for approval. Jabs attended meetings conducted by the hockey group and was thanked for his time and efforts as liaison from the Commission. The hockey group defined the need that they feel is steeper than before and identified the market and who would use the ice. In a survey conducted by the hockey group, all other communities said they would rent ice from Richfield except Prior Lake. The main reason they propose to build this facility is because it would provide a service to the community and it would be an additional amenity. The school and the hockey association will need 409 additional hours this fall. Ice is also needed for other ice related sports including broomball and synchronized skating. Easterwood distributed a report prepared by Steve Quam of the hockey group on Veterans Park. This report describes some history of the park, that it was build with landfill from highway construction. He also showed a picture of the plan from 1970 when the arena was originally constructed where the second ice sheet was in the plans. He explained it is consistent with the DNR for compatible use and complies with what was originally intended for the park. Easterwood added, Richfield is the only suburb with only one arena. The only other area with one sheet is south Minneapolis. Easterwood feels the arena is the most used park in Richfield with the exception of the pool and is a park facility not an enterprise. It would provide economic benefits to the community with games and tournaments that Community Services Commission Meeting March 12, 1998 Page 2 bring new people to the area. He has an optimistic view that if marketed properly it can be revenue producing. He said he and members of the hockey group would be willing to take non-prime time ice to free up time to tap the market for others to use. Easterwood mentioned other communities with two and three sheets of ice and explained who typically used them. The Commission asked about the populations of these communities and indicated most are more affluent than Richfield. The Commission added, teams coming in from other areas, stayed in hotels in Bloomington and the biggest draw card was the Mall Of America. Very little money was spent in Richfield and the impact of youth tournaments is minimal at best. Another Commission concern is, with all the ice sheets being built in neighboring cities, why would Richfield ice be more attractive than that of one of these cities. Potential revenues have been worked up by Al Payne, Ice Arena Manager. He distributed a report he compiled by visiting six surrounding arenas, talking to managers and looking at schedules over the past two years. The report shows from November through February demand is a high, but is not high the rest of the year. Then Payne spoke with user groups the ice group contacted. Showcase Hockey, that runs a spring league, explained their trends and ice requirements. He also spoke with the south Minneapolis youth groups including Roosevelt, South, Washburn and others. With the information he gathered, he compiled a probable schedule. Many people looking for ice but most want the same time and ice can only be rented once. This is included in the report, breaking into seasons and explains what new ice would mean to Richfield. This report included closing for 13 weeks because they do not know what to expect for spring and summer ice. Listed is Team Minnesota who would buy ice for a big tournament the end of July, practice before the tournament and some spring ice. The report explains what a typical week looks like with a second sheet. It has not been determined yet what the cost would be to rent this ice. Payne included another full time maintenance person in this report. He compiled information and gave to Mark Ruff from Ehlers and Associates. The Commission asked how there can be profit if the present rink is being subsidized $50,000 per year. Payne explained utilities remain and staff costs are already there because he is only adding another full time person. Items like computers, insurance and other factors remain the same and will not go up because of the second ice sheet. Community Services Commission Meeting March 12, 1998 Page 3 Devich explained. if you completely discounted the debt service you could operate the arena at a break even or profit because of the increase of ice hours. There is no debt service on the Richfield first sheet. Any arena with a debt service is in deficit. A question from the Commission was asked about how marketing would be done to sell time. Payne replied the Team Minnesota team has committed to buy ice if there was a second sheet of ice. They currently use four rinks with teams from across the world and play eight straight days from 8 a.m. to 10 p.m. and the week prior to the event it is the same for practice. They use Edina, Rosemount, Burnsville and Eden Prairie. They would leave Eden Prairie because of ice problems. Marketing would still need to be done to attract adult groups. Two questions raised by the Commission are who will do the marketing and what will a second sheet of ice do for the Richfield kids including Richfield High School, the Academy of Holy Angels and Youth Hockey. Payne answered, with one sheet they are now accommodating two high schools including two girls teams and two proposed junior varsity teams and a youth organization that would like to increase their numbers. The high school teams play games nearly every Tuesday and Thursday night eliminating these nights for youth hockey. With open skating on Wednesday nights, the only night for youth is Monday night. He states one sheet of ice will not accommodate two high schools and a youth organization. The Commission raised a concern about the arena renting ice as the hockey group says will happen. Also, if other arenas are constructed in the area, why would people rent from Richfield. Payne does not have a concern about renting ice time during the peak months but rather when the high school’s seasons have commenced and the youth hockey league has ended. It will come down to who rents ice at the lowest price. The Commission asked, if with the addition of a second sheet, will the High School expect to buy more ice time. The Richfield High School liaison indicated they presently pay $36,000 per year and would not pay more. Payne answered the high school definitely would purchase more time with the addition of the girls junior varsity team. Holy Angels would also rent because of the additions of their teams. Easterwood said the cost of renting ice is determined by the City and whatever they choose to charge, the teams will pay that rate. Holy Angels has also told Easterwood they would leave Edina for practices and rent Richfield ice. The two items not included in Payne’s report are how concessions will be run and advertising expenses. Concessions revenues presently going back to the arena. Erickson distributed his report and explained he was originally hired to do a feasibility report to determine the cost and functionality of the second sheet of ice. They Community Services Commission Meeting March 12, 1998 Page 4 developed the program in his report working with City staff and the ice group. It is an addition of 28 to 35 square feet to satisfy what the facility should accommodate. There were five potential locations where soil borings were taken. The best location is to the east located for a common entry for both ice sheets with the offices centrally located not to interfere with the view of Hat Trick Hockey. This would insure control of the entrance. Pictures in the book he gave the Commission indicate exact locations. This plan shows an alternate for locker rooms for the high school teams. Erickson said the parking would only be affected slightly and would have a turn around drop off area. This design would be a plus for dropping and picking up children. Payne said with the history of the lot, parking would be adequate. Easterwood reminded the Commission there is an additional parking area near the picnic shelter. The concept Erickson presented relates more to Hat Trick Hockey without the expensive roof the original arena has. It is a permanent concrete structure (not a dome) and completely up to code. They have been asked to look at a bubble or steel structure but these would require an ordinance change. If a dome is up for six months an ordinance change would not be necessary. Erickson explained his report regarding preliminary cost estimates. Categories are site work costs and building. The report includes costs in changing offices and lobby to accommodate the new entrance. Soft costs include architectural fees testing, furnishing and equipment (new zamboni) and ice and concession equipment. The Commission asked about bleachers on one side of the new sheet. Payne explained this would be used for a practice rink and seating would be adequate. A contingency plan is also included. Items desirable are four full locker rooms for the high school with showers and locker rooms. The design is set up for future plans. Meeting rooms are desirable. Remodeling lobby and offices would become more efficient and improve control situation. Closed deck bleachers would be an improvement. Ammonia indirect system is an upgrade from what is presently being used. Entry plaza and additional parking for 50 cars is indicated. Steve Devich distributed a financial handout that was done by Mark Ruff of Ehlers and Associates, City financial planners. Ehlers does bond work for the City and has knowledge in tax increment financing. Ruff has done work with other ice arena facilities and has experience in this area. He was asked what is available for financing and put together several options that are outlined in the booklet. Community Services Commission Meeting March 12, 1998 Page 5 The first is a GO bond. This is the best financing for someone who wants to buy bonds from a municipality because they have the full faith and obligation of the tax base behind them. A referendum is required for this type of bond. The second option is a GO tax increment bond. If 20% of the project were funded by tax increment financing there could be tax increment bonds. The third option is Lease Revenue Bonds. This situation is where city does not do bonds, the Housing and Redevelopment Authority (HRA) could do the bonds and lease the facility back to the City. Payments would be go back to the HRA. Residents would say this is a way to get around the referendum. The fourth option is gross revenue recreation bonds and the most likely to be used. Devich read the description. Revenues from this ice sheet go to paying off debt service of this bond even before paying off operating expenses. If revenues fall short, the City has to make up difference in the debt service and in operating. The City would not have any flexibility to levy any more taxes to pay the deficit. To make up difference of any debt service or operating losses, the City would have to take money otherwise used to fund increases in other departments to pay deficit or back up revenue from this facility with another City revenue. Liquor profits could be used for this. Sources of funding through bonding such as a tax exempt bond could be considered. If construction costs of $2.7 million are being considered, the City should look at a $3.3 million bond issue. Capitalized interest may not be great depending upon when the facility is open. The City will need to pay the debt service from the beginning of taking revenues. Costs of issuance is $55,000. Debt service reserve is required, that would be around $11,500. These costs are considered conservative. Devich explained three sets of figures. The high usage calculations were done by Publicorp based on assumptions this would be on a 20 year amortization. Based on Payne’s calculations of ice rental and if the arena wouldn’t lose any time from the other sheet. Also based on the cost to rent ice of $120 for prime time and $95 on non prime time. Debt service would fall short $59,000 of making the annual debt service. Moderate usage as determined by Publicorp used Payne’s estimate less 400 hours of ice rental. It is hard to project what revenues will be but Devich feels the moderate figures are very conservative. This is based on figures from other ice arenas. If moderate usage figures are used, the number $107,000 would be the shortage to make the debt service payment. For comparison the one sheet figures and project out shows loss $52,000 in 1998, $62,000 in 1999 and $71,000 in 2000. This shows a 4% increase in operating costs. Community Services Commission Meeting March 12, 1998 Page 6 With the single sheet of ice the City is losing money and will continue to lose money. Other considerations for revenues would be improving concessions and marketing. Commission asked possibilities of financing the deficit and how is this is decision made. Devich replied the City Council makes that decision. Devich added, if the deficit were $175,000 the debt service must be paid or the City would default on the bonds. Commission asked if the City is already at it’s levy limits. Devich answered it is close and the City would need to go to special revenues for this. The deficit in the year 2000 would be 30% or 40% of what is normally available for special revenues in the CIP. The Commission expressed concerns about how the City can also afford a new Golf Course, Maintenance Facility, Community Center or other projects the City needs. Devich said, seeing these figures come in and the work done by Erickson, if the project were scaled down or eliminating lockerrooms, building a metal building or using a bubble if the second sheet were to be primarily used for practice it could mean moving the building to the north to utilize the existing refrigeration. Commission said if the bubble could be removed, there could be some way to come up with a surface for roller bladding. This way it could be utilized year round. The Commission said what this comes down to is primarily utilization and need of ice time for practice for Richfield youth. Another option suggested is to dome Donaldson. Payne said this has been looked into but it is felt the weather is too difficult to predict and with another year like 1997, there would be no ice at all. Devich explained there will be a public hearing on March 23 and the plans for this project are to scheduled to begin in 1998. The City would have to amend by resolution the 1998 Capital Improvement Budget. If City goes ahead quickly, it won’t be in for the next hockey season. The critical time frame for action should be to initiate plans and specs the end of March. The Commission asked for an accurate list of numbers of children involved in hockey programs broken down for 1997 for both high schools and youth hockey in age levels. Payne will provide this at the next meeting. Jabs recommended the hockey group look at other alternatives since so much time and work has gone into their proposal. Jabs agrees with numbers but urged the Commission to look at what the community survey indicated regarding their feeling of being a second or third ring suburb. He feels the Commission owes it to the community to look at what can be done for the children and the entire community. He also asked Community Services Commission Meeting March 12, 1998 Page 7 the Commission and the hockey group to keep open mind and determine what is best for Richfield and the children. The hockey group feels the children are important and need be the first consideration. The Commission agrees, the children are important but the sport is very expensive and for that reason it is not a choice for many. The hockey group is working toward scholarships and loaning hockey equipment to children who cannot afford it. The Commission indicated they would like to see a month of public input in the way of open houses, since there are no time constraints. If built this year or next year, questions remain on how it is this going to be financed and four or five other projects need to be addressed. The Commission feels to push this issue seems inappropriate and they would like to have more solid information and have time to study what has been presented. Regarding the location of the maintenance facility, staff has asked for two members of the Commission to be represented on this team. Jabs and McGlinn will be on this task force with Krohn as an alternate. Motion by Sharkey to adjourn the meeting. Second by Jabs. Motion carried.