02/27/2006 Council Packet - Laserfiche WebLink

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• • • FEB. 17. 2006 5:18PM EHLERS & ASSOCS. Na 3947 P. 4 Sources of Revenue Exhibit D shows the NSCF projections for the first year of operations and a stabilized income projection in 2011 compared to the 2004/05 Super Rink actual performance. The second four sheets are projected to produce $700,000 less in net revenue than the Super Rink, primarily because ice rentals hour expected to be less. The first Super Rink was built with sand floors. The second four rinks are anticipated to be used for non ice recreation and events in the spring and summer. The reason that MASC/NSCF is asking for a lower number of hours from the cities is that a wider variety of ice users is expected and because dry floor recreation in the summer is also expected to be a revenue generator, though at a lower rate. Exhibit E has a schedule with the first year estimates for ice and for dry floor rentals. Analysis The commitments for ice time are very fluid at this time. Commitments for ice time of 1,340 hours for two of the ice sheets will be the only long-term guarantees by the time of bond closing. The Herb Brooks Foundation has indicated that it will provide up -front cash for a portion of the four sheet facility and construct its own training center adjacent b the new four sheets. MASC/NSCF have demonstrated a long list of potential user groups, many of which will be relocating from Columbia arena. Fundraising for these efforts are not complete. The County's actual security, however, rests more on trust in the experience of MASC/NSCF in operating similar facilities than any guarantees from user groups at this time. If the financing could wait for six months to a Year, the actual list of user groups. the amount of ice time versus dry floor uses and a more detailed operating cost schedule would be available. MASC/NSCF have decided the benefits of a lower construction contract and current low interest rates outweigh the risks associated with a fluid list of users. The County and HRA also should weigh those factors. The potential viability of the second four sheets is bolstered by the fact that fixed costs should be less. Debt service on the second four sheets will be $125,000 to $135,000 less than the original Super Rink. One can assume that economies of scale will result in lower operating costs for both facilities due to sharing of staff. We have reviewed the revenue and expense projections for the project and find them to be reasonable, given the NSCF past history of efficient operation of a wide variety of recreational facilities. A topic of concern at this time is the adequacy of replacement reserves for this facility and for the original Super Rink. We would recommend that each five years the MASC and NSCF be required to submit a report to the HRA detailing the need for capital improvements for the next 10 years following the report and a plan for funding the necessary improvements. We recommend these actions for both facilities. Bond Rating We expect that Moody's Investor's Service will rate the Bands at an "A2" level. Rating agencies typically reduce the rating on lease revenue bonds by one or two notches from a general obligation bond rating. The Bonds will likely be two notches below because they are funding a recreational facility rather than a more "essential" facility such as a building which houses the county courts or administration, Debt Limit Bond counsel has indicated that the Bonds will count against the county's total debt limit. Currently, the county has over 5390,000,000 in remaining debt limit. Page 3