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09/06/1994 - City Council SpecialAGENDA SPECIAL CITY COUNCIL MEETING Tuesday September 6, 1994 5:00 p.m. Eagan Municipal Center Lunchroom I. ROLL CALL & ADOPTION OF AGENDA II. REVIEW PLANS & SPECIFICATIONS /CIVIC ARENA PROJECT REVIEW RESULTS OF REVENUE VERIFICATION FOR THE EAGAN CIVIC ARENA CAMPAIGN III. OTHER BUSINESS IV. ADJOURNMENT city of eagan TO: HONORABLE MAYOR & CITY COUNCILMEMBERS FROM: CITY ADMINISTRATOR HEDGES DATE: SEPTEMBER 2, 1994 SUBJECT: SPECIAL CITY COUNCIL MEETING /TUESDAY, SEPTEMBER 6, 1994 A Special City Council meeting is scheduled for Tuesday, September 6, 1994 at 5:00 p.m. for the purpose of meeting with the City's architect, ACC, and representatives of the Civic Arena Fundraising Committee to review plans and specifications and a revenue verification for the civic arena project. Attached on pages .2 through / is a memo that includes information about the status of plans and specifications and the verification of contributions, etc. that were coordinated by the Civic Arena Fundraising Committee. OTHER BUSINESS There are no items for Other Business scheduled for the work session. /S/ Thomas L. Hedges City Administrator MEMO TO: HONORABLE MAYOR & CITY COUNCILMEMBERS CITY ADMINISTRATOR HEDGES SEPTEMBER 1, 1994 CIVIC ARENA PLANS & SPECIFICATIONS CIVIC ARENA FUNDRAISING VERIFICATION Civic Arena Plans & Specifications FROM: DATE: SUBJECT: MEMO city of eagan Following the August 16 Special City Council workshops, the City Administrator was directed to coordinate two (2) meetings regarding the civic arena project. A meeting was held on Tuesday, August 30, at 4:30 p.m. with Mayor Egan; City Councilmember Hunter; Director of Parks & Recreation Vraa; Mary Pontrelli, President of the Eagan Hockey Association; Paul Dahlberg, architect from ACC; and the City Administrator to review design and development plans for the Eagan civic arena project. The architect presented a variety of alternatives for discussion and explanation, allowing the Committee to consider a project budget at $1.9 million for the civic arena building. There are several public policy questions that will need to be addressed relative to final plans and specifications for the proposed civic arena building. In order to meet the project budget, there are a number of revisions being proposed for City Council consideration that may be speced as alternates at the time the project is bid in January. Alternatives to reduce project costs range from a sand floor that would eliminate any hard surface activities absent an ice surface to removal of concessions that reduces revenues and restricts the use of the facility for special events, i.e. tournaments. The architect is confident the project can be built within a budget of $1.9 million; however, the Committee realizes that the scope of the project will change due to the number of modifications required to meet budget. Attached and referenced as pages 6 through R' is a handout provided to each member of the Committee that reviews items reduced/ eliminated at the schematic design phase and explains the various revisions that are possible for the project and the impact for future operations, such as: 1) lack of heat may reduce the number of participants in open general skating; 2) no bleachers or a major reduction in the number of seating may place some additional restrictions on the use of the facility; and 3) a delay in concessions will impact anticipated revenue for operations. The Committee, consisting of Mayor Egan and City Councilmember Hunter, suggested that three (3) basic conditions be given public policy consideration by the City Council. Those include: 1) the project be revised in order to stay within a base bid estimate of $1.9 million; 2) certain enhancements to the building project be bid as alternates; and 3) the design and initial construction allow for certain improvements to be added at a later date, possibly after the civic arena is in use. The Committee is of the opinion that decisions can be made at the time bidding occurs, that will allow the City Council to further consider the overall project scope. In other words, if the City should receive favorable bids, certain alternates may be included that will enhance operations, thus providing greater public use and revenues. The Director of Parks & Recreation has repared a civic arena operational budget which is enclosed on pages ? through for City Council review. This budget takes into consideration revenues from concessions, open skating, dry floor operations, high school practice and games and other operating uses that may or may not be collected dependent upon a final design and project scope once bids are received and awarded in early 1995. Civic Arena Fundraising Verification At the direction of the City Council, the City Administrator and Director of Finance have undertaken the project of verifying the pledges and the financial position of the Eagan civic arena campaign. A meeting was held on August 30, 1994, with Brad Schmidt to again review the information as it was previously presented to the City Council. Cash /Pledges Under the direction of the Director of Finance, Assistant Finance Director Tom Pepper reviewed bank accounts to verify current cash positions and called a representative sampling of pledgers to verify their commitments. It should be noted that from an auditing perspective, the signed pledges make a valid receivable; to confirm commitments would not be necessary. Tom Pepper confirmed with the bank the current cash balances of the fundraising committee's accounts. Balances are within $200 of those reported on the spreadsheet. He also confirmed with the bank the current EHA cash balances appear sufficient to support their $80,000 pledge in 1994 and most of their $40,000 pledge for 1995. The total amount of cash pledged was $303,250. It was assumed that a certain corporate pledge of $50,000 was good. He also assumed another pledge of $7,500 was still good as the letter of confirmation from the donor was written in August 1994. As mentioned above, the EHA pledge appears good based on cash balances. Of the remaining $125,750 in pledges, several larger ones were selected totaling $105,000 and Tom Pepper attempted to confirm the commitments by phone. Of the $105,000, he was able to verify $80,000 but was unable to reach the appropriate parties to verify the remaining $25,000. In all his inquiries, he found nothing that would cast doubt on either the amount or timing of receipt of the pledges. 3 Other /In -Kind When the Coca -Cola representative was reached, he said they have pledged $10,000 in cash, including $5,000 toward a scoreboard with conditions and an estimated $12,500 through a cost sharing arrangement on concession sales of pop and juice. The fundraising group has interpreted the $5,000 scoreboard contribution to be in addition to the other $10,000. With CocaCola's interpretation, pledges are overstated by $5,000. The $12,500 appears to be the largest unknown because it relies somewhat on the final building design which will greatly influence the type and amount of concession sales. Because this is a five year contribution, it would need to be looked at similar to an out year pledge in that it would repay money borrowed to complete construction or be used to pay construction bills at the very end of the project. The Aagard Environmental Services' "in- kind" contribution of a roll -off container should reduce construction costs by $4,140. The contribution of refuse hauling after completion does not raise funds for construction but reduces operational costs. That $1,416 contribution would need to be looked at similar to an out year pledge in that it would repay money borrowed to complete construction or be used to pay construction bills at the very end of the project. The Lexington Standard contribution of parking lot Tight poles will require a transfer of funds between the site budget and the building budget but appears to be collectible. Finally, the "sweat equity" number comes directly from the worksheet prepared by ACC. This number will change if the scope of the project changes and certain items are removed from the project to get the overall cost down. It will be important that these estimates are not double counted. That is, they should reduce the bid so special care needs to be taken so the budget and actual numbers contain the same items. Reduced Bid It is in the area of reduced bid savings where the potential for philosophical differences is rather great. The fundraising group has taken the approach that any savings reduce the required community match of $600,000 by a corresponding amount. As a result, they are using the budget versus actual difference for design services by ACC of $34,000 as a part of their fundraising efforts. They are also using a range of a $75,000 to $150,000, reduced bid savings from a building contractor. The letters confirming this both seem to side -step the bidding issue which I believe has been subsequently addressed verbally. Opus offers a $75,000 discount on a design and construct price of $1,940,000. The Mike Gresser letter appears to be contingent on E.C.I Building Contractors being the general contractor which would then generate a savings of $75,000 to $150,000. It is important to recognize that this savings will be realized only if it is reflected in final bids. The savings only generate real money if the final bid is less than the budget for the project as defined. 1/ Summary Although portions of the challenge, eg. "reduced bids," require additional policy consideration by the City Council, it seems that the campaign has been successful and the $600,000 has been raised. The dollar amounts listed in cash and pledges appear to be sound and nothing has been discovered which would lead us to question the collectibility. The dollar amounts programmed for collection after 1995 total $11,333 and would need to be replaced with other funds to pay for construction. This will require some minor cash flow adjustments which the City can accommodate at little cost. The "in kind" contributions become somewhat more speculative in that they depend on factors, such as final design, which are not yet completed. Again, the $10,708 programmed for collection in years after 1995 will require special attention. The "reduced bids" portion of the fundraising cannot be verified in total until actual bids are received in early 1995. Including the savings of $34,000 in the architect's bid is a policy consideration for the City Council. With cash, pledges, in -kind and a $5,000 reduction from the CocaCola pledge, the total is $528,347. If either Opus or E.C.I. bid the project and donate profit, an additional savings will be realized, proposed at a value of $112,000, which is the average ofo $75,000 and $150,000, for a total contribution of $606,347, if the $34,000 were disallowed. The City Council, by action at the August 16 meeting, has accepted the community campaign effort in raising the $600,000 match. In addition, the December 31, 1994 time restriction is no longer in effect by that same direction. The revenue verification is solid and has been reviewed by the Finance Committee Chairperson, City Councilmember Hunter. The only policy decision before the City Council is: 1) Is the $34,000 an allowable expense? The final actions before the City Council are as follows: 1) Acknowledge the civic arena fundraising. 2) Authorize plans and specifications with direction relative to a base bid and alternates. 3) Direct that if the bids exceed the budget (based on the civic arena campaign and City contribution), the City Council will determine how the project will be financed at the time bids are received. 4) Authorize the Fundraising Committee to collect the 1994 pledges during September /October. City Administrator Attachments TLH /vmd Ice Arena Reductions The following items were reduced with the initial schematic design produced in May of 1993. • Sound System: There is no public address system for announcing or for music for public skating, hockey games or figure skating. • Upper Level: The upper level was stripped of the bathroom and the concession facilities. Plumbing and electrical stubs will be provided. • Elevator: Plans provide only for the space for a future elevator shaft and space for mechanical equipment. • Heating of the arena: There is no space heating of the arena; there will be infrared heaters over the bleacher section. • Office /concessions: There are no provisions for providing of concessions, counters and equipment. Nor are there any furnishings in the offices. This will obviously impact revenue production if no concessions other than vending. • Subfloor Heating: The grid for subfloor heating will be provided but the heat exchange equipment necessary to make it operable will be left out. This means that continued, long -term operation of the facility for ice will not be permitted because of the probability of incurring frost heaves (permafrost accumulation because of extended operations). • Interior Painting: Arena portion reduced. • Floor Material: Minor reduction of the area to receive skate tile. Review of possible additional reductions: The following are possible reductions to the scope of the building and the resulting impact of those reductions. • Hockey dasher boards: Reduce amount of 'glass' and replace with acrylic panels and eliminate liner panel in boards. Acrylic is cheaper, but scratches easily, gets dirty and becomes hard to see through. This also results in increased maintenance which takes a considerable amount of time. Eventually, replacement of acrylic panels will be required. Liner panel reduces noise and improves cleanliness, reducing operational cost. 6 • Reduce seating/reduce building width by three feet. These two are in combination. By reducing building width, seating is reduced from 9 rows to 7 rows. Will now provide for approximately 525 permanent seats and 125 'standing room' for a total of 650. In addition, this option will allow for temporary seats to be brought in providing for an additional 50 to 100 seats. Reduction of the building width by 3 feet will also reduce the lobby by 3 feet in width, or approximately 60 square feet. • Five hundred + seats still meet the earlier program requirements. The reduction in seating is the most singular expensive reduction within the building. However, skate changing area within the lobby is already at a minimum size for public skating but will still get reduced by an additional 60 square feet. • Youth locker roorn/team locker room. Eliminate one youth locker room: increase size of team room. The building currently has six youth /team locker rooms. This proposal would eliminate a youth locker room while slightly increasing the size of the adjacent team room. This reduction will save approximately 336 square feet of space and flooring material. An additional team room can still be added in the future. • Roof system. Change out the Behlen roof for a long span steel joist roof. The current roof and ceiling system provide for a metal ceiling in the arena. This continuous ceiling does not require long term maintenance painting. The joist roof exposes all the steel framework while lowering the distance between the ice and the underside of the exposed joists. The exposed joists have a propensity to collect moisture in high humidity situations. This can result in rusting and in moisture droplets forming on the ice. Painting the steel surface can help to reduce the potential for rust but long term maintenance will require the painting of the ceiling and underside of joist surfaces. The system also creates a larger volume of air -which is the worst enemy of the dehumidification and ice system. It may be less attractive than the Behlen roof system. • Bathroom. Replace tile with burnished block. Bathrooms currently have tile on floors and walls. The walls could be substituted with the sealed block. This block is cheaper but still requires additional maintenance in the long run. Appearance is also an issue. • Concrete floor vs sand floor. Current proposal provides for a concrete slab for the ice surface. This could be replaced with a sancl floor. Sand floors eliminate the possibility for use of the facility for other dry floor events and is more costly to operate and maintain in the long run. The quality of the ice surface is diminished, in the opinion of some, and more costly to operate. • Eliminate team bathrooms and showers. Two of the team rooms have shower stall and bathroom. These could be entirely eliminated or reduced to simply stubbing in the plumbing fixtures. Teams rarely use the shower rooms in current facilities but there are always occasions when out -of -town teams, and adult teams may require or find it necessary to utilize. • Reduce rink size to substandard size. Currently, the ice sheet is 100 x 200 size facility. Reduction would mean reducing the size by 15' resulting in reducing the front of the building; probably eliminating a youth locker room. This would create a substandard size rink but would be compatible with many older style rinks currently in existence. This option does not provide, however, an opportunity to expand the rink at a future date and also precludes marketing opportunities with a larger sheet of ice, i.e. increased numbers for public skating, hockey, figure skating. • Eliminate infrared heaters over bleachers. The infrared heaters over the bleachers could be eliminated with no heat in the building. The heaters will add some comfort for spectators, but is this worth the cost. Heaters can always be added later. n6larena E r MEMO _ city of eagan DATE: JULY 29, 1994 TO: TOM HEDGES, CITY ADMINISTRATOR FROM: KEN VRAA, DIRECTOR OF PARKS & RECREATION SUBJECT: PROJECTED CIVIC ARENA OPERATIONAL BUDGET You had asked that I provide you with a projected budget for the Civic Arena for the first full year's operation. Attached is that budget projection. Again, I would like to emphatically point out that this is a projected arena budget. What is difficult about a first year's operation is that we have not built up the clientele that will eventually be there two or three years down the road. Ice rental in prime time will go relatively easy. I think we can be assured that the local association will want to buy all of those times. It is not the prime time that makes an arena budget, it is the sale of the non - prime time and off hours that make a budget balance. The 6:00 in the mornings and the 11:00 at nights take time to build a clientele on a continuing basis. And then there is the Learn to Skate school. I have no doubt in my mind that in three or four years we can expect three, four and maybe even five hundred as Burnsville now has in their program. We have projected a much lower number for the first year because, again, it takes time to build your clients. Finally, we really don't know much about an operational schedule. I have simply projected these revenues based on the expectation that we will be in operation from approximately the last week in September through the end of March. How many hours are devoted to public skating, the Learn to Skate school, possible figure skating, programs, mid- afternoon skating as well as a definitive rate schedule; all are still projections. To assemble these projections, I have utilized the cost figures of both Apple Valley and Centennial ice arenas. Apple Valley Arena's expenses are considerably higher than we have projected here for the Eagan Civic Arena. The Apple Valley facility is used significantly for non -ice activities by the high school for pre and post ice which obviously raises their expense for heat, lights and labor. Centennial is in operation with a summer program, consequently, their expenses are also somewhat higher. I have tried to discount some of that for this projected arena budget. A word of caution: this is the first full year's operation and it is not intended to reflect the operations for the first several months of the ice arena, that being the Fall/Winter of 1995. Clearly, arena expenses will be higher during this time period as with preparation for the opening of this facility with the hiring of staff, i.e. arena manager, in advance of the actual opening. Consequently, the facility will be incurring labor cost without any revenues being generated. Because ice arenas run so close to the break even point at any one time, these Page -2- early expenses need to be understood that they will not likely be caught up until after the first year or two years of operation. For that reason, I would like to suggest that the City investigate the feasibility of showing the arena function as an "enterprise" function rather than an annualized budget. This would be no different than any commercial business which opens and does not expect to turn a profit in the first year of operation. Start up expenses, staffing, equipping and putting an organizational structure in place takes time to recover. I believe that this would certainly be the case with this facility and an enterprise function would allow the Council and community to take a broader perspective on how and when the balancing of income and expenses should take place. And, finally, it appears that this facility is well on the road to contstruction. Therefore, would like to ensure that the City have on board by July 1, 1995 the operations manager for this facility. Again, this assumes a late September or early October opening of the arena facility to the public. This is a somewhat compressed time frame for an arena manager to begin the ice scheduling and, therefore, it will be incumbent upon the City administration to develop some early policies and make solicitations outside the community for ice sales until such time as the arena manager can make decisions on a schedule. I hope this budget is the beginning point for discussion with the Council so that we can massage this into a "final" projected operational budget. I would like to also take this opportunity to again state that nowhere in the budgeting has the City reflected the equipment and capital needs to get this building operational. There is a site budget and there is a building budget, but there is no equipment budget. While I have not yet done an itemized breakdown of the items the facility will need, it is clear that a cost projection of between $100,000 and $125,000 for this equipment should be made. This will include the Zamboni, office equipment, cleaning supplies, ice maintenance items, goal cages and other miscellaneous items. This figure should be projected into the arena budget in the near future either in the operations or in the construction /site development. I believe the preceding provides sufficient information to begin discussions. If there is additional information you would like me to provide, I will do my best to research and find that for you. KV/Ik BUDGET/ARENA.MMO /0 Projected Arena Operations Expense First Full Year Operations 4410 Salaries $ 63,773 4411 Accumulated Leave 4112 Over Time 2,000 4131 Temporary/Seasonal 36,000 4140 Accumulated Ret. 12,103 4150 Accumulated Ins. 11.813 Sub Total $125,689 4210 Office Supplies $ 300 4211 Printing 400 4220 Operational Supplies 9,600 4223 Building Cleaning Supplies 4,200 4224 Clothing 600 4231 Mobil Equipment Repair Parts 2,000 4235 Fuel 1,100 4240 Small Tools 500 4244 Chemicals 1.250 Sub Total $19,900 4331 Telephone $ 1,800 4350 Printing/Binding 1,500 4360 Insurance 8,000 4371 Electricity 30,000 4376 Natural Gas 14,000 4381 Equipment Repair 3,000 4410 Miscellaneous (Blade Sharpening) 2,500 4411 Conf /Schools 600 4412 Local Meeting 100 4454 Waste Removal 1.200 TOTAL: Sub Total $63.300* $208,889 * (1) Does not include concessions operations. (2) Does not include capital equipment or small equipment items necessary to operation facility, i.e. resuifacer, cleaning equipment, office equipment, ice maintenance. (3) Does not include wading pool operational expense. Income: Projected Arena Revenues First Full Year Operations Ice Rental $140,000 H.S. Practice /Games 18,000 Learn to Skate 18,000 Open Skating 10,000 Skate Sharpening 4,000 Vending Concession 4,000 Dry Floor 5.000 Sub Total $199,000 Wading Pool Transfer (Labor Chargeback) $3,600 TOTAL $202,600 /.v