08/20/2013 - City Council Finance CommitteeFINANCE COMMITTEE MEETING
TUESDAY, AUGUST 20, 2013
4:00 P.M.
CONFERENCE ROOMS 2A & B
AGENDA
I. AGENDA ADOPTION
II. CASCADE BAY FINANCIAL POSITION
III. CIVIC ARENA FINANCIAL POSITION
IV. OTHER BUSINESS
V. ADJOURNMENT
Agenda Memo
August 20, 2013 Finance Committee Meeting
II. CASCADE BAY FINANCIAL POSITION
ACTION TO BE CONSIDERED:
• Provide direction on funding for Cascade Bay's shortage of cash reserved for scheduled
capital renewal/replacement items, and for upcoming capital needs not on the
renewal /replacement schedule.
BACKGROUND:
• Initial funding
o Cascade Bay was built in 1998 at a cost of $7.1 million. The Community
Investment Fund (CIF) contributed $4.1 million and the balance was financed
internally. $1.1 million of the original $3 million interfund debt was paid back; $1.9
million was forgiven ($1 million forgiven in 2006, $.9 million forgiven in 2011):
CIF contribution $ 4,140,000
CIF note - unamortized 1,000,000
CIF note - amortized 800,000
Housing Fund note - amortized 1,200,000
Total Cascade Bay project cost $ 7,140,000
note forgiven in full 2006
unpaid balance of $365,000forgiven 2011
unpaid balance of $545,000 forgiven 2011
• Operations history
o Attendance has dropped significantly from the levels of Cascade Bay's early years.
Contributing factors include changing demographics within Eagan and perhaps the
newness factor wearing off:
Cascade Bay Attendance
180,000
170,000
160,000 Original financial
feasibilitythreshold Newfeasibility
150,000 threshold
140,000
130,000
120,000
110,000
100, 000
90,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Agenda Memo
August 20, 2013 Finance Committee Meeting
o Now that the internal loans have been forgiven, Cascade Bay can likely cover its
operating costs over the long haul despite the sustained drop in attendance.
• In a good - weather season (e.g., 2012), Cascade Bay can clear about
$100,000 after expenses and capital set - asides.
• In a poor- weather season (e.g., 2009), Cascade Bay can fall more than
$100,000 short of covering expenses and capital set - asides.
• Historically, we've had more fair -to -good weather seasons than poor weather
seasons, so it appears reasonable to expect that Cascade Bay could maintain
its financial position going forward.
• Current status of capital renewal and replacement (R &R) funding
o Scheduled R &R items:
• Each year, the balanced budget calls for about $70,000 to be set aside for
replacement of much of Cascade Bay's capital equipment.
• A replacement schedule is maintained, detailing the annual set -aside for each
piece, which is simply the estimated replacement value divided by the
number of years of the equipment's useful life.
• When items on the schedule are replaced, they are paid for with that set -
aside cash, and those items are kept on the schedule for the next time they
need to be replaced.
• Historically, cash over and above operating expenses went first to pay off
internal debt, and then to fund the R &R account. When revenues were not
sufficient to cover both, the R &R account was shorted.
• Furthermore, replacement costs on the R &R schedule have not been updated
on a regular basis; instead, it was originally hoped that interest income on the
R &R set -aside would cover inflationary increases. However, because of a
combination of (a) not fully funding the account, and (b) essentially zero
interest income over the past several years, the R &R balance is significantly
below actual replacement costs for the items on the schedule.
• A very rough estimate of additional costs to reflect true replacement costs is
$400,000. Staff will do additional research to try to put a finer point on
actual replacement costs in time for the Council's review of the operating
budget in October.
• So the R &R account is currently estimated to be short as follows:
Balance that s/b in the R &R based on set - aside _ $ 735,000
Estimate of add_ I_cost on existing item_ s 400,000
Balance that is in the R &R account (380,000)
Shortage $ 755,000
Agenda Memo
August 20, 2013 Finance Committee Meeting
o Unscheduled capital/R &R items:
■ In the 2013 Budget, the following items, which were not included on the
original list of scheduled replacement items, were identified as upcoming
capital needs:
Restore lazy river slide (repaint) 20,000
Water heater - changing /bathhouse 15,000
Replace Shower Tower 13,000
Update /replace camera system 9,700
Replace door /hatch /flanges /hardware in mech bldg 5,000
Cabling for better IT access in admissions bldg 5,000
Replace pool vacuum 3,000
Update electrical in mini -golf area 1,500
Total $ 72,200
SUMMARY
• With the elimination of internal debt service payments, it is reasonable to expect that
Cascade Bay income over the next several years will cover operating expenses as long as
normal attendance does not drop significantly more than it already has. Though operating
margins will probably be slim overall, it appears no operating subsidy will be necessary into
the foreseeable future.
• With respect to capital funding, sources will need to be identified for the following:
Shortage from inability to fund R &R account as planned $ 355,000
Additional estimated shortage based on replacement value 400,000
Other capital needs not included in R &R schedule 72,200
Total $ 827,200
ATTACHMENTS:
• Renewal and replacement schedule is attached on page � ` � 0
Agenda Memo
August 20, 2013 Finance Committee Meeting
III. CIVIC ARENA FINANCIAL POSITION
ACTION TO BE CONSIDERED:
• Provide direction on remedying the Civic Arena's deficit cash position and lack of cash
reserves for scheduled facility renewal/replacement items.
BACKGROUND:
Operations history
o The Arena opened with one sheet of ice in 1995.
o A second sheet added in 1998 with an associated bonded debt of $1.57 million.
o In 2010, two significant projects — geothermal energy and floor improvements
were completed simultaneously, the outstanding bonds were paid off, and internal
debt (due to the Public Utilities Fund) of $2.55 million was incurred. The savings
from reduced energy costs were expected to be more than enough to cover the
higher annual debt service payments.
o Over the past several years, the Civic Arena has seen its operating cash balances
decline:
o Like Cascade Bay, the Civic Arena has an R &R account that it has been unable to
add sufficient funds to for planned needs. Since 2009, the R &R account has been
used to cover operating cash deficits. In 2012, the Civic Arena used up the
remainder of its R &R account to cover operations and, at the end of the year, the
Civic Arena fund had a deficit cash balance of about ($55,000).
J
Agenda Memo
August 20, 2013 Finance Committee Meeting
• Current status of capital renewal and replacement (R &R) funding
o Scheduled R &R items:
Each year, the balanced budget calls for about $60,000 to be set aside for
replacement of capital equipment.
The Arena's replacement schedule and set -aside calculation is similar in
nature to Cascade Bay's.
The Arena's R &R account balance at the end of 2012, if fully fund, should
have been $400,000. Because all of it has been used to cover operations
costs, the current balance is zero.
o Unscheduled capital/R &R items:
• Roof replacements were not included in the original R &R schedule.
• Recently, inspections of the roofs have been completed and it is
recommended that the roof over the west rink be replaced in 2014 and the
roof over the east rink be replaced in 2015:
Roof - West rink (2014) $ 200,000
Roof - East rink (2015) 150,000
$ 350,000
SUMMARY:
• Based on recent history, it appears operating revenues over the long term are insufficient to
cover all expenses, including internal debt service and the R &R set - aside. In the seven
years since 2005, operating cash has declined at an average of almost $100,000 per year.
Note that operating cash was used to complete some capital additions, including the
mezzanine.
• Sources need to be identified to fund the following:
Shortage from not funding the R &R account as planned $ 400,000
Deficit operating cash balance 55,000
Other capital (roofs) not included in R &R schedule 350,000
$ 805,000
We likely have an additional shortage based on replacement value as with Cascade Bay;
however, we do not have an estimate of that amount at this time.
ATTACHMENTS:
• Renewal and replacement schedule is attached on page 1 `— j_c� .
(P
Agenda Memo
August 20, 2013 Finance Committee Meeting
OVERALL SUMMARY — CASCADE BAY AND CIVIC ARENA
Summarizing the cash needs for both Cascade Bay and the Civic Arena, we have:
Cascade Bay
Shortage from not funding the R &R account as planned $ 355,000
Additional estimated shortage based on replacement value 400,000
Other capital needs not included in R &R schedule 72,200
Subtotal 827,200
Civic Arena
Shortage from not funding the R &R account as planned $ 400,000
Deficit operating cash balance 55,000
Other capital (roofs) not included in R &R schedule 350,000
Subtotal 805,000
Total need $ 1,632,200
OPTIONS:
1. Fund the entire Cascade Bay and Civic Arena cash needs at this time from some other
fund. (Total funding would be $1,632,200.) The General Fund balance would be a
candidate. As discussed at the August 13 budget meeting, the General Fund balance,
currently at 46.5% of the 2014 proposed budget, is above the Council's target range of 40-
45%.
Utilizing this amount of Reduces fund
fund balance ... balance to ...
$ 463,000 45%
1,211,000 42.5%
1,632,200 41.1%
1,959,000 40%
(Or, put another way, each $300,000 utilization of fund balance reduces it by exactly 1 %.)
Other capital funds (e.g., Equipment Revolving Fund, Facilities R &R Fund) could be used,
but neither appears to be overfunded and able to absorb these amounts, based on the 5 -year
CIP.
V1
Agenda Memo
August 20, 2013 Finance Committee Meeting
2. Fund the Entire Cascade Bay needs, but only the immediate operating cash and roof
replacement needs for the Civic Arena at this time. (Total funding would be
$1,232,200.) Then, replenish the Civic Arena's R &R account over time with operating
revenues by funding R &R before paying back the internal debt to the Public Utilities
Fund.
In the short term, while the R &R account is being replenished, it's likely little, if any, will
be available for debt service. In the end, under this scenario, we might have to consider
forgiving a portion possibly all —of the $2,256,000 remaining debt. Annual debt service
is about $182,000 (roughly $100,000 principal, $82,000 interest). It does not appear in the
long term that revenues will be sufficient to cover all three of (1) operating expenses, (2)
R &R account funding, and (3) internal debt service. There should be sufficient revenues to
cover (1) and (2), and hopefully at least the interest portion of (3) each year.
Another variation to this option would be to make the interfund debt interest -free. That
would likely ensure there would be some principal reduction each year once the R &R fund
is replenished.
3. Fund the entire Cascade Bay and Civic Arena cash needs at this time from some other
fund. (Total funding would be $1,632,200.) Then, annually fund the R &R account in
full first, before paying back the internal debt, as in Option 2.
Making the interfund debt interest -free would be a variation on this option as well. This
would result in a more substantial payback to the Public Utilities Fund than Option 2, at the
expense of the General Fund balance.
HAGene Files \City Council \Council Committees \Finance\2013 \8 -20 -13 \Cascade Bay R &R 7- 15 -13 -cm
Cascade Bay R &R 7- 15 -13 -cm
Cascade Bay
Renewal And Replacement Schedule
updated 8 -14 -13
Useful
Life
Estimated
Replacement
Cost
Origial
Purchase
Replaced
Annual
Yearto
Replace
Item
Ice Machine
11
$ 3,239
1999
#3
$ 294
2010
Perfect Fry #1
7
4,260
2000
2004 -new
$ 609
2011
#2
10
4,150
2000
2010 1
$ 415
2010
#31
101
4,150
2001
1
$ 415
2011
Turnstiles #1
20
11,500
1999
HVAC system (admin)
2019
#2
20
1999
$ 700
$ 575
#3
20
2,222
2002
$ 111
2022
8/15/2013
HVAC system (admin)
20
14,000
1999
$ 700
2019
Sand Play Area
Mermaid Fountain
7
20,166
1999
2005 -new
$ 2,881
2013
Waterfall Waterplay
7
1999
Kompan Sand Table
81
1999
Guard Chairs
$900 #1
10
1999
Removed
from R/R in
2008
$ -
2010
$900 #2
10
1999
$
2010
1,360 #3
10
2001
$
2011
1,360 #4
10
1
2001
$
2011
Air Conditioning (conc.)
20
20,000
2000
$ 1,000
2020
Roofing (3 buildings)
20
6,000
1999
$ 300
2019
Shed
20
2,500
2002
$ 125
2022
Funbrellas
#1
10
41000
1999
2008 - New
Lightning
damag covered 'by
insurance
$2257 x 11
$ 400
2018
#2
10
4,000
1999
$ 400
2018
#3
10
4,000
1999
$ 400
2018
#4
10
4,000
1999
$ 400
2018
#5
10
4,000
1999
$ 400
2018
#6
10
4,000
1999
$ 400
2018
#7
10
4,000
1999
$ 400
2018
#8
10
4,000
1999
$ 400
2018
#9
10
4,000
1999
$ 400
2018
#10
10
4,000
1999
$ 400
2018
#11
10
4,000
1999
$ 400
2018
#12 (Birthday Party Area)
10
2,304
2001
$ 230
2011
Sun Port
10
4,275
2002
$ 428
2012
Walk in Refrigerator
20
6,993
1999
$ 350
2019
Walk in Freezer
20
4,017
1999
$ 201
2019
2 door freezer
12
2,604
1999
$ 217
2011
2 door refrigerator
121
2,029
1999
$ 169
2011
Refrigerator Display
12
3,809
1999
$ 317
2011
Sandwich /nacho display $1020
7
1999
Removed
from R/R in
2008
$ -
2006
Mobile Heated Cabinet
11
3,307
1999
1 $ 301
2010
Undercounter heated cabinet
10
2,498
1999
$ 250
2010
Cash Registers
#1
1999
#2
1999
#3
1999
#4
1999
Dynamtion Monitor(airtester)
101
1,760
1999
$ 176
2009
HVAC Equipment
20
4,000
1999
$ 200
2019
Gas Hot Water Heater
20
4,000
1999
$ 200
2019
Video Security System
10
9,625
2002
$ 963
2012
Suitmates (2) $2.500
5
1999
Removed
from R/R in
2008
$ -
2004
PA System
11
5,000
1999
$ 455
2010
Water Flume/Wood $ Steel
20
73,848
1999
$ 3,692
2019
8/15/2013
HAGene Files \City Council \Council Committees \Finance\2013 \8 -20 -13 \Cascade Bay R &R 7- 15- 13 -crT
Cascade Bay R &R 7- 15 -13 -cm
Cascade Bay
Renewal And Replacement Schedule
updated 8 -14 -13 Estimated
Useful Replacement Origial Year to
Item Life Cost Purchase Replaced Annual Replace
Water Flume /Fiberglass
11
145,000
1999
2010 new
Captain's Ship slide
15
196,000
$ 13,067
2025
Water Flume /Install
201
80,000
1999
$ 4,000
2019
Ship Slide
15
20,800
1999
$ 1,387
2014
Starburst
15
20,500
1999
$ 1,367
2014
Tumblebuckets
15
8,000
1999
$ 533
2014
Deck Chairs
Econo (50) $66.00
11
3,300
1999
$ 300
2010
Lounge (200) $156.75
ill
31,350
1999
$ 2,850
2010
Econo (40) $66.00
10
2,640
2001
$ 264
2011
Lounge (10) $156.75
10
1,568
2001
$ 157
2011
Econo (50) $66.00
10
31300
2002
$ 330
2012
Lounge (40) $160.00
10
6,400
2004
$ 640
2014
Concession Patio Furniture
Ladderback Chair (150) $99.23
15
14,885
1999
$ 992
2014
31" Cafe Table (28) $153.08
15
4,286
1999
$ 286
2014
31 "Bar height table (12)$163.79
15
11966
1999
$ 131
2014
46'x85' oval dining table (2)$553.08
15
11106
1999
$ 74
2014
Turbines
#1
15
15,000
1999
$ 1,000
2014
#2
15
15,000
1999
$ 1,000
2014
#3
15
15,000
1999
$ 1,000
2014
#4
15
15,000
1999
$ 1,000
2014
#5
15
15,000
1 1999
$ 1,000
2014
#6
15
15,000
1999
000
2014
Boilers
#1
20
17,500
1999
875
P$875
2019
#2
20
17,500
1999
875
2019
#3
20
17,500
1999
2019
#4
20
17,500
1999
$ 875
2019
Pumps
#1
15
7,200
1999
2007 -LR
$ 480
2022
#2
15
4,223
1999
2010 -LR
$ 282
2025
#3
15
5,000
1999
$ 333
2019
#4
15
5,000
1999
$ 333
2019
Filters
#1
20
25,000
1999
$ 1,250
2019
#2
20
25,000
1999
$ 1,250
2019
Pulsar Chemical Equipment
81
8,000
2002
$ 1,000
2010
Room Heaters
20
3,800
1999
$ 190
2019
Stranco Controllers
#1
15
3,000
1999
$ 200
2014
#2
15
3,000
1999
$ 200
2014
Irrigation Control System
15
20,000
1999
$ 1,333
2014
LMI Pumps
$1,200 #1
5
1999
Removed
from R/R in
2008
$ -
2004
#2
5
1999
$
2004
#3
5
1999
$
2004
#4
5
1999
$
2004
#5
5
1999
$
2004
#6
5
1999
$
2004
Flooring
20
20,000
2002
$ 1,000
2022
Phone System
8
21,000
2001
$ 2,625
2008
Walkie Talkies
6
6,000
2004
$ 1,000
2010
Walk Behind Lawn Mower
8
3,000
2004
$ 375
2012
Grill
5
2,500
2004
2010
$ 500
2015
mini golf carpet
8
10,000
1 2006
$ 1,250
2014
Total
$ 1,139,080
$ 69,451
8/15/2013
Items to be replaced
with mechanical rm
reconstruction
$22,000 to clean & reF
IU
H: \Gene Files \City Council \Council Committees \Finance\2013 \8 -20 -13 \Civic Arena R &R 8- 14 -13 -cm 8/15/2013
Civic Arena R &R 8- 14 -13 -cm
Civic Arena
Renewal And Replacement Schedule
updated 6-4-2011, my
Useful
Life
Estimated
Replacement
Cost
Origial
Purchase
Replaced
Annual
Current
Annual
Year to
Replace
Item
WEST ARENA
Water heater--cencessien
28
500
1895
201-0
$ 25
20 -15
Water heater - concession
15
15001
2010
$ 100
$ 100
2025
Resurface
45
�5,n99
1995
201-1
$- -5,099
2414)
Resurfacer
15
115,000
2011
$ 7,667
$ 7,667
2026
ResUrfa6eF Batteries
5
5.00
1495
2403
$- 1 -,000
2090
5
5,000
2403
2507
$- --1-,000
2508
Resurfacer Batteries
5
9,000
2007
$ 1,800
$ 1,800
2012
gaftetyQ4-g-
51
2,59
1095
2408
2400
Battery Charger
15
5,000
2008
$ 333 1
$ 333
2023
Dehumidifier
20
50,000
1995
$ 2,500
$ 2,500
2015
Compressor - #1
15
7,50509
4895
2404
$__ 75g
2405
Compressor - #1
25
:own inn
2004
$ 525
2024
Compressor- #2
20
7,50 n
1985
2045
Compressor - #3
24
�w50 n
1895
$75
2845
Compressor - #4
29
-7,599
4995
$ 375
2015
Cooling Tower
20
50,000
1995
$ 1,100
$ 2,500
2015
Room Fumaces /blowers - office
20
1,000
1995
$ 50
$ 50
2015
Room Fumaces /blowers - concessions
20
1,000
1995
$ 50
$ 50
2015
Room fumances /blowers - lockerooms
20
1,000
1995
$ 50
$ 50
2015
Concession Equipment
r reg7AF 44
44
' n M
49855
2002
O� O
]MC
2QN
Freeezer -1
11
3,000
2002
$ 273
2013
Freezer -2
18
3,000
1995
$ 167
$ 167
2013
refrigerator
18
3,000
1995
$ 167
$ 167
2013
Ice Machine
10
2,500
2010
$ 250
$ 250
2020
Hot food equipment
18
7,000
1995
$ 389
$ 389
2013
Counter /structure replacement
20
10,000
1995
$ 500
$ 500
2015
Equipment
Skate Sharpener
18
7,000
1995
$ 389
$ 389
2013
ReRIA' SkaleS
6
5,245
2002
2908
$--475
2499
Rental Skates
5
5,200
2008
$ 1,040
2013
office equipment -desks
15
10,000
2004
$ 667
$ 667
2019
Building
Rubber matting -west
20
30,000
2012
$ 1,500
$ 1,500
2032
Equipment Washer
12
50,000
2005
$ 4,167
$ 4,167
2017
Industrial washer /dryer
15
10,000
2005
$ 667
$ 667
2020
Vending machines
15
10,000
2005
$ 667
$ 667
2020
Water softeners
15
5,000
2011
$ 333
$ 333
2026
TV's system
8
10,000
2010
$ 1,250
$ 1,250
2018
Sound stytem
15
20,000
2011
$ 1,333
$ 1,333
2026
theater lights
12
25,000
2011
$ 2,083
$ 2,083
2023
Mezzanine flooring
7
10,000
2008
$ 1,429
$ 1,429
2015
Mezzanine tables
10
12,000
2009
$ 1,200
$ 1,200
2019
Mezzanine chairs
10
10,000
2009
$ 1,000
$ 1,000
2019
(originals -old ECC banquet chairs)
Mezzanine AV equipment
71
5,000
2009
$ 714
$ 714
2016
Infrared healers
20
20,000
2000
$ 1,000
$ 1,000
2020
Ice Edger
10
7,500
2010
$ 750
$ 750
2020
Scoreboard -large
Scoreboard- small
20
7,000
1995
$ 350
$ 350
2015
20
3,500
1996
$ 175
$ 175
2016
l\
Removed as part of
geo project
start in 2013
H: \Gene Files \City Council \Council Committees \Finance\2013 \8 -20 -13 \Civic Arena R &R 8- 14 -13 -cm 8/15/2013
Civic Arena R &R 8- 14 -13 -cm
Civic Arena
Renewal And Replacement Schedule
updated 64-2011, my
Useful
Life
Estimated
Replacement
Cost
Origial
Purchase
Replaced
Annual
Current
Annual
Yearto
Replace
Item
EAST ARENA
Water Heaters- 150 gallon
15
2,300
1998
$ 153
$ 153
2013
Water heater - 100 gallon
15
2,000
1998
$ 133
$ 133
2013
Water heater- 100 gallon
15
2,000
1998
$ 133
$ 133
2013
Resurfacer
15
110,000
1998
$ 7,333
$ 7,333
2013
5
7,5M
2004
2907
$--599
2908
Resufacer Batteries
5
9,000
2007
$ 1,800
$ 1,800
2012
Battery Charger
15
3,500
2008
$ 233
$ 233
2023
GG-P a --fra)
49
-- 6008
4888
$- 3,(i89
2088
Go- presser-A2-
49
7, WQ
new 2047
$-799
49
40
7,500
4908
S-1758
2908
Geeling-Tewer
445
- 16,OW
4888
$ --44*7
2413
Dehumidifier
20
42,000
1998
$ 2,100
$ 2,100
2018
Room Fumace /blower 1- east storage
20
12,800
1998
$ 640
$ 640
2018
Room Fumance /blower 2- east storage
20
12,800
1998
$ 640
$ 640
2018
Room Fumance /blower- community room
20
12,800
1998
$ 640
$ 640
2018
Room Fumances /blower- boiler room
20
12,800
1998
$ 640
$ 640
2018
Sernpr G-P-94
49
New 2947
$ -700
49
Building
Bleachers
30
20,000
2000
$ 667
$ 667
2030
Sound System
15
10,000
2009
$ 667
$ 667
2024
Community Room furniture
10
7,000
1998
$ 700
$ 700
2008
Scoreboard -large
20
7,000
1998
$ 350
$ 350
2018
Scoreboard -small
20
3,500
1999
$ 175
$ 175
2019
Rubber matting - east
20
30,000
1998
$ 1,500
$ 1,500
2018
water softners
15
10.000
1998
$ 667
$ 667
2013
cleaning equipment
Ki- Vac
6
3,000
2007
$ 500
$ 500
2013
Single Disc floor scrubber
5
2,500
2004
$ 500
$ 500
2012
walk behind floor scrubber
41
8,000
2010
S 2.000
$ 2,000
2014
TOTAL
$ 59,580
$ 59,580
Removed as part of
geo project
Removed -geo proj
