City Council on Ice Rink
Unable to move forward, project dead for now
September 14, 2009
Item 4A on the City Council Agenda for September 14, 2009.
Streaming
video of meeting
About 2 hours of discussion.
Once it starts playing you
can go directly to the ice rink item by choosing "4. A. PROPOSED ICE
RINK FACILITY" from the menu underneath the picture.
Staff
Report explaining what the Council was being asked to decide
Correspondence
official subset of letters to Council which is only those
sent to City Clerk by September 14
Summary
The City Council was asked to make a decision on whether
to:
1. Spend up to 4 more months studying and
negotiating a "public/private partnership" with Polar Ice Ventures for
the Ice Rink project to be located next to us,
(the City Manager's recommendation)
Or
2. If the City Council does
not want to go forward with negotiations with PIV, then it should
direct staff to put together a proposal by Feb 28 for renovating the
existing Convention Center facility and operating it after the current
lease expires in September 2011.
With one member absent (Gordo) the
Council came one vote short of agreeing to go forward, effectively
ending work on the project. Voting against were Council members
Tornek, McAustin, and Holden. Voting to go forward with
negotiations were Council members Madison, Haderlein, Robinson and
Mayor Bogaard.
Although dead for now, it could be rejuvenated if someone puts
forward a proposal that requires fewer financial resources
from the city. Or at a future time when the fiscal situation is
less severe. This will remain a possibility until the land is
used for some other purpose and/or a full ice rink facility is built
somewhere else.
In the meantime, the city staff is to work with the other
stakeholders to see what the possibilities are for renovating the
existing rink at the convention center and continuing to operate it
after termination of the existing lease in September 2011.
The proposal that could not be agreed upon
The staff recommendation was a slightly revised version of the "public/private partnership" presented on August 3.
- The city would formally enter
negotiations with Polar Ice Ventures (PIV) to come to a "ground lease" agreement by the end of the year.
- The city would lease the land to PIV and PIV would be responsible for
both building and running the project. The proposed lease would be for 30 years with two 10 year extensions.
- PIV would select their own building contractor (one they have
worked with on another rink), would assume the construction costs
risks, "reduce construction costs through value engineering",
provide construction management and oversight (thereby reducing those
costs). As a result it was believed that "capital costs" might be
reduced to $18 million (more study required).
- The
staff indicated that PIV was only willing to take
on responsibility for $10 million of debt. The city would have to
be responsible for the other $8 million. (A pointed question is
if PIV really believes in the cash flow projections, why is it not
willing to take on responsibility for all of the projected cost?
Or is it just thought to not have a sufficient reputation as a company
for bond purchasers to support that much commitment? )
- The
projections showed the cash flow coming up a million dollars short of
what is needed to pay off the bonds during the first 3 years. The
city would have to pay that difference also.
- The projections were based on a 5% interest rate on the bonds.
- The
city's allocation of $11.1 million in Recovery Zone Economic
Development Facility (aka "Build America") bonds authorized by the
federal stimulus legislation would be used to issue tax-exempt
bonds.
PIV would be responsible for paying off any such bonds issued to
it. The staff report does not indicate if just $10 million would
be issued if that is all PIV is willing to be responsible for. It
is additionally confusing because the staff report discusses talking
with the County about getting some of its issuing
authority. So would the city be issuing the remainder to
itself? There wasn't a clear answer in the meeting.
- The staff report does not mention whether the city would still be responsible for the PCC and Edison
contracts and for building the access road and utility connection
infrastructure. On August 3 that was the plan. That would be as much as almost $1 million for
the utilities, $200,000 for the traffic signal, $100,000 for the access
road, $15,000 per year for the Edison lease. At the meeting staff said these costs were included in the $18 million.
- The staff report barely mentions private fund raising to reduce
the city's financial exposure. Essentially an acknowledgment
that it probably wouldn't amount to anything.
Council Discussion notes
PIV investment would be $300,000 in fixtures and equipment plus construction management.
As a private development property taxes would be paid. Those would
be an estimated $150,000 yearly, increasing at 2% per year. About
$30,000 of that would come back to the city.
If had agreed contract in Jan 2010 it would open at best guess in Jan 2012.
Have not talked with PIV in detail. Many unknowns including
availability of County funding authority and how financial markets
would receive it. Think County receptive.
PIV pushed to limit and highly unlikely to get more favorable agreement with them.
Staff talked to Arcadia, San Marino, Glendale, Burbank in two
aspects. One as a Pasadena facility, one as located in their city
with Pasadena contribution. Arcadia has some interest in the idea
of putting it in their city, but did not consider having a rink a
priority. Burbank already has a rink (though also considered
substandard). Other cities said not a priority for them.
Madison repeatedly pointed out that $3 million of Pasadena Civic
Operating Company funds already spent on this project. As
Council's representative to that board and one who pushed them to
allocate those funds, what is he supposed to tell them. They have
nothing to show for it.
Tornek asked why only $10 million commitment by PIV. Bruckner
said it is a business decision. Most rinks they build are only 10
to 12 million. This is a much more expensive rink then
normal. Tornek - if they have confidence in the pro forma, why
impose that limit? Equity only about 2%. That's
"minuscule". Construction risk not a blue sky number,
should be seeing tremendous confidence by PIV. "Something not
consistent here."
Recourse of bondholders if PIV fails? Structure would be the
backup. City would have right to cure and bring in new operator.
Has city explored whether anyone else has interest in this bonding
authority? Beck - one question about a potential hotel
downtown. But bonds have to be sold by Dec 2010, so really have
to be close to going forward.
Argument between McAustin and Madison whether usage is consistent with
property's designation as open space. She felt that there is a policy
not to build on open space. He said entirely consistent, done it
many places, and in general plan and park master plan. Also an
argument as to whether Council had had a discussion about making it a
priority to be a provider of a regional skating center.
Seemed to be misunderstanding by some Council members about the
possibility of County agreeing to use of some of its bonding
authority. Some seemed to think it was County contributing funds
rather then just County providing authority to issue tax exempt bonds
which would still be responsibility of city or PIV to pay.
Discussion about whether it makes sense to put a million into
renovating the existing Convention Center ballroom ice rink facility
for use for at most another 7 to 10 years.
Robinson said she did not think public benefit portion was sufficient but thought owed to themselves to do due diligence.
Mayor inclined to support proposal to keep project alive.
Vote was 4 to 3, insufficient to go forward.
On instructions for current rink renovation, modified to have staff get
together with PCOC and other stake holders and see what possibilities
are.