Bemidji Regional Event Center

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Bemidji Regional Event Center
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Our goalis to answer this question

• What project can we reasonably afford to
  construct and operate?
• To do this, we will look at
• Resources
• Investment of funds
• Operational considerations

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Resources

• There are two classifications of resources
• Known
• Anticipated

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Known Resources

• State bonding money secured in 2006 for design
  and development - 3.0 million
• 30-year extension of our local option sales tax -
  42.0 million
• Reduced from 44.0 million due to anticipated in
  increase interest rates
• Assumes a 3 annual increase in sales tax
  collections
• State bonding money approved in 2008 - 20.0
  million

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Known Resources

• City Utility Funds - 1.1 million
• 800,000 for handling off-site runoff
• 300,000 for sewer extension through the property
• Total known resources 66.1 million

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Anticipated Resources

• Land Sales - 13.5 million
• Based on the midpoint of a range provided by
  Ramsland Vigen
• DNR Trail acquisition - 4.1 million
• Commercial land sales - 8.3 million
• Residential land sales - 1.1 million
• TIF Bonds - 6.4 million
• Our bond consultants have given us a range of
  potential TIF resources from 2.1 million to 6.6
  million
• Private Grant - 2.0 million
• Donor remains anonymous at this point

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Anticipated Resources

• DEED Cleanup Grant - 1.2 million
• This is equal to 75 of our cost
• Hotel Partner - 1.5 million
• This has yet to be negotiated and is a minimum
• Additional funds could leverage enhanced
  facilities
• Total Anticipated Resources 24.6 million

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Total Resources

• Known 66.1 million
• Anticipated 24.6 million
• Total Resources 90.7 million

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Investment of Funds

• Land - 13.0 million
• Event Center Building - 46.5 million
• Furniture/Fixtures/Equipment - 3.4 million
• Architect Engineering fees - 8.1 million
• Site Corrections - 1.0 million
• Site improvements - 7.9 million

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Investment of Funds

• Capitalized Interest - 5.3 million
• Contingencies - 5.5 million
• Total Investment - 90.7 million

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Construction Summary

• Resources are sufficient to cover known expenses,
  provided
• Land sales and construction meet the projected
  12-year build out
• Private grant is secured
• A hotel partner agrees to the minimum
  contribution
• It is also possible that land sales will exceed
  the average projection and additional funds may
  be obtained from our hotel partner.

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Operations

• The Event Center is not likely to break even or
  make money.
• Conventions, Sports Leisure estimates a net
  operating deficit of somewhere between 323,000
  and 667,000 annually.
• Their base case scenario reflects a 436,000
  deficit, which includes a Capital Reserve Expense
  of 200,000.

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Operations

• Although CSL estimates represent a stabilized
  year of operations (by the 5th year), shortfalls
  occurring during the first 5 years could be
  covered by reducing the capital reserve
  contribution in those years.
• CSL claims that actual operations have never been
  worse than their projections. Therefore, we can
  anticipate smaller deficits.

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Operations

• Possible sources to cover operating deficits
  without raising property taxes include
• Sale of naming rights. CSL estimates this at
  75,000 to 150,000 annually
• Charge for parking during events
• Increase ticket surcharges
• Dedicate savings from the creation of an airport
  authority to the center. Currently 180,000.
• Dedicate a portion of the 150,000 savings from
  reorganization of the wastewater treatment
  facility.

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Operations

• Possible sources to cover operating deficits
  without raising property taxes include
• Reassess the need to continue City Arena
  operations. This facility loses over 100,000
  annually plus ongoing capital needs
• Develop the old fairgrounds site, with the
  county, and split lease revenues
• Find additional opportunities for advertising
  revenues, i.e. scoreboard, sponsorships, etc.
• Lease any unused office space

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Operations

• Possible sources to cover operating deficits
  without raising property taxes include
• Increase the current hospitality tax to cover
  promotional costs included in the budget
• Pursue corporate pledges In November of 2006 we
  received annual pledges totaling 65,000 per year
  for 5 years

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Operations Summary

• Cities are not for profit businesses. We spend
  money to build and maintain roads, utilities,
  parks, airports, arenas, and city buildings. We
  should expect to operate this facility at a
  deficit. How much that should be is a policy
  decision. The millions of dollars this facility
  will generate in the community, as well as the
  hundreds of jobs created, must be considered in
  determining such a number.

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Next Steps

• Approve moving ahead with the design development
  phase of the project
• Approve using city reserves to cash flow expenses
  while awaiting reimbursement from state bonding
  funds