07-06-2021 Council Work Session Packet

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WS – Item 4 WORK SESSION STAFF REPORT Work Session Item No. 4 Date: July 6, 2021 To: City Council From: Michael Grochala, Community Development Director Re: Recreation and Aquatic Center Feasibility Study Background The City Council accepted the Recreation and Aquatic Center Feasibility Study, prepared by ISG, on June 28, 2021. The study evaluated three options for continued operation of the facility including: 1) Total City Managed Facility 2) Total Outsource of Management and Operations by outside entity 3) Hybrid Option that include City management with vendors operating specific program areas Both the City Management option and Hybrid options provided the most City control over facility programing and meeting city goals of financially accessible membership. ISG further highlighted the benefits of a Hybrid model in lowering startup costs along with faster membership ramp-up. Financial Considerations The primary concern of operating the facility is the short and long term financial impacts of the facility on property taxes. While the City has had a financial commitment to the facility since its original construction, taking over operational management potentially increases that commitment. As noted in the report, startup costs will result in an operating deficit over the first two years of operation. This deficit is expected to level out in year 3. Accordingly, staff has evaluated some initial considerations to reduce this impact. Staff considers the closure of the Lino Lakes YMCA a negative economic impact of the COVID- 19 public health emergency and thus the City could utilize ARPA Fiscal Recovery Funds for reopening costs. Other current funding available for the Recreation & Community Center includes $679,654 in the Closed Bond Fund (#301). Additional funding could be included in the annual tax levy starting with taxes payable in 2023. In 2006, the City issued G.O. Tax Abatement Bonds (refunded with Series 2016C) to contribute $2,350,000 to the Chain of Lakes YMCA. The bonds mature in 2022 and have a final debt service tax levy of $325,054. In 2023, the City could continue to levy $325,000 annually for operations or capital replacement for the Recreation & Community Center.