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HomeMy WebLinkAboutItem 4City of Lakeville Finance Department Memorandum To: Mayor and Council Justin Miller, City Administrator From: Shayne Ratcliff, Lakeville Arenas Manager Jerilyn Erickson, Finance Director Date: March 25, 2019 Subject: Lakeville Arenas Recap The purpose of this report is to provide the Council with an update on the Lakeville Arenas organization including current operations and future planning needs. Background The Lakeville Arenas is a Joint Powers Organization between the City of Lakeville and ISD 194. The Arenas organization is responsible for overseeing all aspects of the Lakeville Ames and Lakeville Hasse Arenas including day-to-day operations, repairs and long-term capital improvement planning. Details In 2018, the Arenas saw a continued growth in Learn To Skate participants, dry floor events and community public skating. The newly approved Facility Use Policy, signed in March 2019, will help to maximize historically “non-desirable” hours to be reserved through the ice draft process resulting in increased revenues beginning in 2020. Renewed Partnerships The Arenas recently finalized long term partnerships with both the Lakeville Hockey Association and the Heritage Figure Skating Club to provide dedicated ice time to both organizations in exchange for an annual contribution to be used for arena improvements. These agreements will generate $80,000 annually and will focus on items such as expanded parking, off-ice training areas and expanded seating. Capital Improvement Needs Originally constructed in 1994, the major mechanical equipment including ice plant, ice floors, dasher boards and dehumidification systems at Ames Arena have reached their useful life expectancy. A federal mandate to eliminate the use of R-22 Freon refrigerant beginning in 2020 has resulted in significant increases to maintain the current ice plant system and concern over long-term availability of resources. In addition to the ice plant operation, the ice floor on Ames #1 has several glycol leaks and requires additional attention to ensure ice conditions are safe and playable. The long-term Capital Improvement Plan has scheduled the replacement of the ice making systems and other major mechanicals through a multiyear project in 2020/2021. In an effort to maximize arena operations through energy efficient equipment, the Arenas consulted with APEX Efficiency Solutions in 2018 to perform a Directed Engineering Study regarding the ice plant and equipment replacement project. The results of this study have identified several ways to improve building efficiency through upgraded lighting, building management controls and building envelope improvements to reduce annual operating expenses by over $100K annually once the project is complete. Copies of the APEX proforma and cashflow are attached. Staff still need to review the assumptions built into the proforma. A copy of the 2019 budget/capital reserve fund projections is also attached. The fund balance projections show a deficit after accounting for required debt payments. Further discussion will be needed regarding other funding sources to fund these capital improvements. Council Direction Staff is providing this material to inform the city council of upcoming capital needs as well as funding scenarios. It should be noted that the attached projections reflect the issuance of debt, which would need to be provided through general obligation or bond referendum, or lease purchase financing. Attachments: APEX Proforma and Cashflow 2019 Budget – Capital Reserve Fund Projections Facility Solutions  Efficiency Solutions  Arena Solutions Location Cost Guaranteed Utility Savings One Time Operational Savings Annual O&M Savings Potential Incentives Net Cost Simple Payback Ames Arena $98,117 $4,650 $0 $980 $7,554 $90,563 16.1 Rink 1 - Option A $63,610 -$120 $0 $0 $0 $63,610 -530.1 Ames Arena $61,956 $3,940 $0 $0 $0 $61,956 15.7 Ames Arena $4,930,828 $18,000 $0 $7,000 $0 $4,930,828 197.2 Ames Arena $14,370 $1,200 $0 $90 $0 $14,370 11.1 Ames Rink 2 $71,387 $3,620 $0 $0 $0 $71,387 19.7 Ames Arena $6,285 $640 $0 $0 $0 $6,285 9.8 Ames Arena $508,285 $0 $0 $0 $10,500 $497,785 N/A Ames Arena $251,625 $0 $0 $0 $0 $251,625 N/A Ames Arena $539,231 $0 $0 $0 $0 $539,231 N/A Ames Arena $414,714 $0 $0 $0 $0 $414,714 N/A ARR Option $0 $28,512 $0 $0 $0 $0 0.0 $6,960,409 $60,442 $0 $8,070 $18,054 $6,942,355 101.3 Hasse Arena $3,460 $270 $0 $0 $0 $3,460 12.8 Hasse Arena $16,277 $1,200 $0 $0 $0 $16,277 13.6 Hasse Arena $125,578 $8,000 $0 $1,685 $10,750 $114,828 11.9 Hasse Arena $179,869 $7,170 $0 $0 $800 $179,069 25.0 Hasse Arena $73,869 $3,620 $0 $1,000 $0 $73,869 16.0 Hasse Arena $46,942 $1,680 $0 $0 $0 $46,942 27.9 ARR Option $0 $6,500 $0 $0 $0 $0 0.0 $445,994 $28,440 $0 $2,685 $11,550 $434,444 14.0 Ice Arena Projects $100,000 $0 $0 $0 $0 $100,000 N/A $39,680 $0 $0 $0 $0 $39,680 N/A $7,546,083 $88,882 $0 $10,755 $29,604 $7,516,480 75.4Totals - Ice Arenas Only Hasse Ice Arena - Improvements New Ammonia System, Building 2020, New Floor in 2021 Contingency - Funds for additional scope to be determined later by the owner HVAC Controls - Adding Controls on the existing Dehumidification unit and Locker Room Units Low-E Ceiling - Install a new Low-E ceiling DES Lighting Upgrade - Replace existing lighting with LED retrofit technology. Replacement of 2nd DHU - Replacing second unit with gas heat Lighting Upgrade - Replace existing lighting with LED retrofit technology. (TUBES) BRR Replacement - Replace existing BRR unit with new gas fired Dehumid unit Dasher Boards - Two rinks of Dasher Boards Refrigeration Controls - Adding controls to the existing R-22 System for energy efficiency Low-E Ceiling - Install a new Low-E ceiling on Rink 2 Building HVAV Controls - Install a new BAS system for the existing roof top units Solar Gardens - Xcel Solar Gardens - Xcel Building Envelope Improvements - seal envelope wall/ceiling, doors and windows. Work Description Ames Ice Arena - Improvements Window Film - Install new window film on the exterior windows Other Ames Improvements - Sub Total Building Envelope Improvements - seal envelope wall/ceiling, doors and windows. Boiler Plant - Install new boiler plant for heating both rinks and provide heat for the Snow Melt Pit Water Savings - Provide new water savings flushing and sinks for low flow systems Lighting Upgrade - Replace existing lighting with LED retrofit technology. (TUBES) Private and Confidential 2/28/2019 1 of 1 Facility Solutions  Efficiency Solutions  Arena Solutions February 28, 2019 Guaranteed Cost 7,546,083$ Incentives & Grants 29,604$ Client Contribution 5,650,000$ Project Net Cost 1,866,480$ Annual Utility Savings 53,870$ Annual O&M Savings 10,755$ Annual Solar Savings 35,012$ Cashflow Period 20 years Cumulative Cash Position 115,248$ Finance Amount 1,866,480$ Finance Term (years)20 years Finance Interest Rate (%)3.25% Payments/yr 4 Year 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 Period 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Escalation Rate Annual Utility Savings 3.2%55,594$ 57,373$ 59,209$ 61,103$ 63,059$ 65,077$ 67,159$ 69,308$ 71,526$ 73,815$ 76,177$ 78,615$ 81,130$ 83,726$ 86,406$ 89,171$ 92,024$ 94,969$ 98,008$ 101,144$ O&M Savings 1.0%10,862$ 10,971$ 11,081$ 11,192$ 11,303$ 11,416$ 11,531$ 11,646$ 11,762$ 11,880$ 11,999$ 12,119$ 12,240$ 12,362$ 12,486$ 12,611$ 12,737$ 12,864$ 12,993$ 13,123$ Solar Garden Savings 28,512$ 29,791$ 31,133$ 32,542$ 34,018$ 35,565$ 37,185$ 38,879$ 40,651$ 42,502$ 44,436$ 46,455$ 48,562$ 50,759$ 53,050$ 55,437$ 57,923$ 60,512$ 63,207$ 66,011$ Total Annual Savings 94,968$ 98,135$ 101,423$ 104,837$ 108,381$ 112,058$ 115,874$ 119,833$ 123,939$ 128,197$ 132,612$ 137,189$ 141,932$ 146,848$ 151,942$ 157,219$ 162,685$ 168,346$ 174,208$ 180,278$ Financing Payment (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ (127,283)$ Principal (112,527)$ (113,088)$ (113,668)$ (114,267)$ (114,886)$ (115,525)$ (116,185)$ (116,867)$ (117,571)$ (118,298)$ (119,049)$ (119,825)$ (120,627)$ (121,455)$ (122,310)$ (123,193)$ (124,105)$ (125,048)$ (126,021)$ (127,026)$ Interest (14,756)$ (14,194)$ (13,615)$ (13,016)$ (12,397)$ (11,758)$ (11,098)$ (10,416)$ (9,712)$ (8,985)$ (8,233)$ (7,457)$ (6,656)$ (5,828)$ (4,973)$ (4,090)$ (3,177)$ (2,235)$ (1,262)$ (256)$ Annual Cash Position (32,314)$ (29,148)$ (25,860)$ (22,446)$ (18,902)$ (15,224)$ (11,408)$ (7,450)$ (3,344)$ 914$ 5,329$ 9,906$ 14,650$ 19,565$ 24,659$ 29,936$ 35,402$ 41,063$ 46,925$ 52,995$ Cumulative Cash Position (32,314)$ (61,462)$ (87,322)$ (109,768)$ (128,670)$ (143,895)$ (155,303)$ (162,753)$ (166,096)$ (165,182)$ (159,853)$ (149,947)$ (135,297)$ (115,732)$ (91,073)$ (61,137)$ (25,735)$ 15,328$ 62,253$ 115,248$ $(40,000) $(30,000) $(20,000) $(10,000) $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 $(40,000) $(30,000) $(20,000) $(10,000) $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 15 Capital Reserve Fund The purpose of the Capital Reserve Fund is to provide a financial framework for replacement of the arena infrastructure as it ages including, but not limited to, roofs, dehumidification, and refrigeration systems. The following is a summary of the Capital Reserve Fund Budget. 16 The Capital Reserve Fund reflects debt being issued to fund major capital upgrades starting in 2020. The repayment of the debt is shown here for purposes of showing the impact on fund balances and General Fund transfers. Further discussion would be needed regarding other funding sources (e.g. ISD#194, City of Lakeville, LHA, etc). Separate debt service funds would be established.