08/02/2010 - City Council Finance Committee (2)AbL-
City of Eap Memo
.TO: MAYOR MAGUIRE AND COUNCILMEMBER BAKKEN
FROM: CITY ADMINISTRATOR HEDGES
DATE: JULY 30, 2010
SUBJECT: FINANCE COMMITTEE MEETING /AUGUST 2,5:00 P.M to 5:45 P.M..
As a reminder, a Finance Committee meeting has been scheduled for Monday, August
2, at 5:00 p.m. in Conference Rooms 2 A & B.
The purpose of the meeting is to seek direction and a recommendation to the City
Council on an Eagan Hockey Association proposal to build training space within the
Eagan Civic Arena. The proposal which has previously been shared in very general
terms with the Council would essentially provide for a build out of training space located
on the east side of the ice in the West Arena. The space became available when the
ice sheet was downsized.
An item has been placed on the City Council's Administrative agenda for the August 2
Regular Meeting for consideration of the proposal and next steps by the full Council.
The proposed agenda for the Finance Committee Meeting is attached; however, the
discussion material will be presented at the meeting.
Directors Seydell Johnson and VanOverbeke, and Superintendent of Operations Mesko
and Campus Facilities Manager Vaughan will be at the meeting to answer Finance
Committee questions regarding the proposal.
/s/Thomas L. Hedges
City Administrator
cc: Director of Parks and Recreation Seydell Johnson
Director of Administrative Services VanOverbeke
Assistant to the City Administrator Miller
Superintendent of Operations Mesko
Campus Facilities Manager Vaughan
AGENDA
FINANCE COMMITTEE MEETING
MONDAY, AUGUST 2, 2010
5 P.M.
CONFERENCE ROOMS 2A&B
I. AGENDA ADOPTION
II. PROPOSED MODIFICATIONS TO CIVIC ARENA RINK SPACE
III. OTHER BUSINESS
IV. ADJOURNMENT
Summary Information Sheet
Finance Committee Meeting
August 2, 2010
1. Location Sketch/Layout
2. Eagan Hockey Proposal (EHA)
a. City builds out the space to be available for EHA use and hourly rent for non -ice
training, etc.
b. EHA pays the City $50,000 per year for ten years for:
i. Construction funding
ii. Hours of use (number, time periods, etc. of hours has not been discussed)
3. Factors for Consideration
a. The City's preliminary cost estimate for the build out is $550,993. The EHA expectation
is that the City will front this money to pay for the construction and be repaid by the
EHA. This is the process that was used for the last capital contribution made by the
EHA. All payments were made on time and there were no problems with the
arrangement. In that case the EHA was not given an allocation of hours and instead
was an hourly renter of ice time.
b. The EHA would like to have training space for the upcoming skating season (November
1) either at this location or at another site that they would acquire/lease.
c. The present value of 10 years of $50,000 payments is considerably less than the
estimated construction cost. Also, at that level of contribution no dollars could be
directed to hourly rentals. (See other worksheet)
d. There are essentially three possible ways and then numerous combinations to leverage
or stretch the EHA contribution as follows:
i. Use a longer time frame than 10 years, meaning the total EHA contribution is
greater than $500,000 and the commitment is extended.
ii. Use a lower discount rate on the payment stream. This would essentially be a
subsidy resulting from the opportunity cost of using City dollars in this manner.
This rate used alone cannot be low enough to take care of the current estimated
gap.
iii. Use an upfront contribution from the City to lower the capital costs being financed
by the EHA.
iv. Some combination of the above.
e. The City's Community Investment Fund would be a source to finance the project and/or
to make a capital contribution if the City Council desires to proceed after all EHA dollars
have been maximized. The Civic Arena does not currently have the necessary funds
available to pay for this project.
f. A bid process is probably necessary to determine more firm cost estimates.
g. Although it is not expected to amount to much, the City has not determined operational
costs, if any, resulting from building out this space.
h. Again not quantified, but it is expected that there is some benefit to having the non -ice
training taking place in the City's facility.
i. The EHA dollars are projected to come from gambling proceeds and there may be
some uncertainty about the long-term viability of that revenue source.
4. Public Policy Considerations
a. Should the City seek bids on this potential project?
b. Should negotiations proceed with EHA representatives to address the financing gap
assuming it remains after the project is bid?
Administrative Agenda/ August 2, 2010 Meeting
CITY ADMINISTRATOR
Item 1. Consider a recommendation from the Finance Committee regarding proposed
modifications to Civic Arena rink space. As directed by the City Council at the Special Meeting
held on July 27, the Finance Committee is meeting at 5:00 p.m. on August 2 to develop a
recommendation to the City Council on an Eagan Hockey Association proposal to build training space
within the Eagan Civic Arena. The proposal which has previously been shared in general terms with
the Council would essentially provide for a build out of training space located on the east side of the
ice in the West Arena. The space became available when the ice sheet was downsized.
The Finance Committee will present its findings and recommendations for official Council action at
the meeting.
August 2, 2010 Finance Committee Meeting
After discussing the EHA proposal, the Finance Committee determined that it is appropriate for the
City to pursue the potential project to build out training space in the West Arena.
The Finance Committee is recommending the following action for consideration by the City Council:
1. Staff be authorized to solicit bids on the potential project.
2. Staff undertake more detailed discussions with EHA representatives to assist in refining the
proposal to develop additional information regarding a financing package.
3. Staff be directed to develop revenue modeling and to work out a business plan for rental of this
space.
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MEETING NOTES
FINANCE COMMITTEE MEETING
MONDAY, AUGUST 2, 2010
5:00 P.M.
CONFERENCE ROOMS 2 A & B
Committee members present: Mayor Maguire and Couriq,,,member Bakken.
City staff present: City Administrator Hedges, Directo(,'#."Administrative Services
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VanOverbeke, Parks and Recreation Director Seyd§ll4Jt%h son, Superintendent of
Operations Mesko and Campus Facilities Manages Waugh t
The meeting was called to order.
The agenda was approved as
FI
City Administrator Hedges provRd
discussions with the City Council;
Hockey Asso,,q at[.n (EHA). The K
building ,fi n '[Wfra r� g space - n
has be�cbie available%,,,
e to theimprovements and iceet reply
Superintendent of Operations Me
location, nature, and potenti_opE
space per the current:proposal
ENDA A
RINK SPACE
J backgroutd information regarding previous
nd the current status of the proposal from the Eagan
oposal in general provides for EHA financing for
khe east side of the ice in the West Arena. The space
ownsizmg of the ice sheet with the recent geothermal
ement.
ko reviewed photos and sketches and discussed the
rational impacts of the construction and use of the
Director of Administrativ,e Services VanOverbeke covered the current estimated cost of
the project, the potential repayment stream from the EHA and some potential methods
to address a gap, if the results from a more formal bid do not completely eliminate it.
The Committee discussed the pros and cons of proceeding with this type of project at
the arena including a discussion of the number of hours that might be used by the ENA
and what other potential users might be in the market for this type of space. General
questions about the long-term demographics of the EHA and current reserves resulting
from gambling operations and the long-term prospects of that revenue source were
raised. Further discussion included the need for increased revenue modeling, a more
refined business plan, and additional discussion with representatives of the EHA. The
Committee desires that bidding include an enclosed catwalk to maintain the integrity of
all spaces and uses of the arena.
The Finance Committee concluded that it is appropriate for the City to pursue the
potential project to build out training space in the West Arena and recommended the
following action for consideration by the City Council:
1. Staff be authorized to solicit bids on the potential project.
2. Staff undertake more detailed discussions wifihI A representatives to assist in
�5� 'i b{°
refining the proposal to develop additional inforrfation regarding a financing
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package. � µ
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3. Staff be directed to develop revenueling and totrk out a business plan
for rental of this space. as�K.
There was no other business.
The Committee adiodrned at
III. OTHER E
44
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IV. AIJJOU
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