1p. Chaska Chanhassen Hockey Assn: Letter of Support.CITY OF 1 -�
CHANHASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
MEMORANDUM
TO:
FROM:
DATE:
SUBJ:
Mayor and City Council
Don Ashworth, City Manager
April 9, 1997
Approval of Letter Supporting Chaska Chanhassen Hockey Association Mighty
Ducks Application
As the city council is aware, the Chaska Chanhassen Hockey Association has been pursuing
potential ice arena locations in the cities that they represent. The final analysis is complete (see
attached). In my opinion, an expansion of the existing ice arena at the Chaska Community
Center can operate at marginal losses. [Note: The City of Chaska has asked that the agreement
with the school district be modified so as to have the school district responsible for paying not
only the normal hourly rental fee, but an additional 530,000 to $60,000. Assuming the school
district would provide this additional subsidy, there is no question in my mind that the new
Chaska facility can operate at a break even point.] It should be noted that there is simply not
enough time to process an application for the Chanhassen site including all of the paperwork that
would go along with it. A second hurdle arose when we found out that the association could not
own the facility, further clouding the waters. It should be noted that the same statistics which
show that the second sheet of ice is needed and that it can be built without cost to the City of
Chaska, also reflect that a third sheet will be necessary in the near future. The necessity for this
additional sheet of ice could very well parallel Chanhassen's need for a community center.
Multi jurisdictional support for a Mighty Ducks grant increases the success ratio significantly. As
the application process must be completed within the next few weeks and recognizing that
Chaska's ability to meet the required time tables, it is recommended that the city council
authorize the Mayor to write a letter supporting the Chaska Chanhassen Hockey Association's
application for a Mighty Ducks grant to build a second sheet of ice at the Chaska Community
Center. I am confident that I can obtain a letter from the City of Chaska that they will support a
Mighty Ducks grant application from the City of Chanhassen should a third sheet be necessary
and the city desires to make that application within the near future.
g:'•ingr \mi ghtyduc ks.doc
January 15, 1997
Steve Olin President
Chaska -Chan Youth Hockey Association
7255 159th Street
Carver, \iN 55315
Dear Steve:
The purpose of my letter is to summarize the City of Chaska's position relative to the
Association's interest in de eloping a second sheet of ice at the Chaska Community Center.
Although I have not reviewed this issue directly with the City Council, I would anticipate
that based on their past discussions, the City would be interested in pursuing a joint effort
with the Youth Hockey Association in developing a second sheet of ice based on the
followhng conditions:
Al There is a demonstrated need for the additional facility to serve the youth within the
School District area.
B) The City would be reasonably assured
operating and debt service costs, and
third -party guarantee of any shortfall.
that the facility would cover its annual
if there was a deficit there would be a
C) The facility would be architecturally and functionally compatible with the Chaska
Community Center.
I do believe that if the Association is willing and able to finance a stand alone ice facility,
the option of a joint project with the City is not only feasible but less costly,
First, let me review briefly the history of indoor ice iu the Chaska area. Prior to 1989, the
Cliaska -Chan Youth Hockey Association. as you are aware, rented ice at a number of area
arenas with its primary home being the Shakopee bubble. As the City of Chaska began
studying the concept of tile. ComIunity Center, representatives of the Youth Hockey
Association presented a veil• convincing case of the need for an indoor arena in the Chaska
area. To improve the financial viability of the ice arena, the Association committed to beiuig
a prime tenant of the Chaska arena and it was understood that the Association would, for
the foreseeable future, rent a minimum of 500 hours of ice t.inle annually. As the
Association is considering a second sheet of ice, the City of Chaska would expect the group
to maintain its commitment to being a prime tenant and renting a minimum of 500 hours
annually.
Based on these commitments and the level of interest of other ice users, the City did proceed
with construction of the facility based on the concept that ice arena revenues would cover
annual operating costs and the Chaska taxpayer would assume responsibility for the annual
debt service costs. For a $2.2 million facility, these annual debt service costs are
approximately $261,000 annually. This is the level of financial commitment that the City.
of Chaska has made for indoor ice to serve the area and it is for this reason that if a second
sheet of ice is constructed, we would need guarantees that additional annual subsidies
would not be required. If these conditions can be met the City would be interested in
working jointly with the Association in developing an arena.
The key advantages of a muuicipali` owned ice arena are:
A) The facility is exempt from property taxes.
B) Financing can be obtained over a longer period of time at. a tax exempt interest rate.
C) An arena adjacent to the
Community Center could be
operated at a significantly less
operating cost as compared to a
free - standing facility.
Rased on a preliminary cost analysis by
our architectural consultants who have
been involved in a number of ice arena
complexes across the state. a second
sheet of ice meeting our architectural
standards could be constructed at a cost
of S 1.7 million.
The table to the right presents a
comparison of an Association owned
facility as compared to a complex owned
by a public entity. In preparing the
comparison the following; assumptions
were made:
A) The Association complex could be.
constructed as a tower quality
facility at a cost. of 51.34 million
as compared to the s1.7 for the
Citv owned facilit.v.
SECV!VD SHEET OEICE COST
ANAL YSIS
CCHA
Cary owned
Arena
Arena
Interestrate
9.00%
5.50%
Term
20
20
Building
51,210
$1,700,000
1 and
$0
SO
Parking lot& site developmet
$100,100
$0
Totalcapital
$1,300,000
$1,700,000
less: State grant
$200.300
$200.000
Ascociano,t contr.
$340,000
S)40,000
tither
50
$0
Amount to beFineaced
$900,000
$1,!60,000
Staffing & Operating costs
$:06.510
571,170
Annual debt set ice
$87,637
$91.068
Annual tola. Expenst5
$;14.447
$174.835
Annual revenues
Ice rental
$150.000
$140.000
Associntinn
School districtlotlter
S'n.d00
Concessions
536,000
ii 500
Other
$38,500
Annual Wal Revenues
5224,500
5 17 5,000
N e t PrefiU doss!
530,053
5162
B) Cinder both concepts, it is asswnerl that a 5200.000 state grant and a S300,000
fund- raiser are used to offset capital costs.
C) Both scenarios are assumed to
be financed over a 20 year
period, with the intf•rest rate for
the City owned facility being
5.5% and the Association
financing being at 9 %.
D) The Association operating costs
are based on your estimate of
S106,810.
E) The Community Center facility
costs are based on the added
costs which would b-I required
to operate a second sheet.
These costs are log Pr than the
Association costs because there
are economies of scale with
having two arenas attached.
Comparison of Freestanding ice
Arenas
T 19
pnaradag Operadng
I" Expenses do not include debt service
Chaska Arena Operating
Revenues
The annual operating revenues from
similar Twin Cities facilities averaged
approximately $170,000. Over the
last vears the Chaska arena has
generated similar annual r enues with
1.996 revenues increasing as a result. of
summer ice rental. Based on this
Reverudes
F..rpense
Excess
Buffalo
5120,722
$129,415
($8,693)
Lakeville-
$208,441
$210,795
($2,354)
Hopkins
$219,593
$206,998
$12595
Farmington
$179,447
$179,300
$147
Princeton
$166,002
$160,000
$11,002
Hastings
$177,157
3196,761
($19,604)
W est St. Paul
$11
$130,178
($8,880)
Delono
$168,177
$139,518
$28,659
ANerage
5170,105
$169,121
$984
I" Expenses do not include debt service
Chaska Arena Operating
Revenues
The annual operating revenues from
similar Twin Cities facilities averaged
approximately $170,000. Over the
last vears the Chaska arena has
generated similar annual r enues with
1.996 revenues increasing as a result. of
summer ice rental. Based on this
Operating Expenses Comparison
1995
Existing 2nd CCC CCHA
Areua Ice Sheet Fstimatc
ltaintenanceStaffirg S70 210 MAN $43,006
Fuel/equipment $18,000 54,5G0 51,400
Naturalgas $10,509 510.500 55,590
Electric $15,200 $25,200 $21,U50
Insurance 57,000 S1,950
Supplies $1,0i0 $500 $2,640
Garbage /water /sewer $1,525 SI
T elephone $5'.5
n ther S9. ^00
Concessions $21,560 SO $18,000
Total 1156,540 $71,710 =106,610
Operating
Revenues
1992
5128.939
1993
5141,171
1994
518;,991
19 �5
S168,22.3
1996
5240,000
" 1996 is an estimate and includes summer ice
Operating Expenses Comparison
1995
Existing 2nd CCC CCHA
Areua Ice Sheet Fstimatc
ltaintenanceStaffirg S70 210 MAN $43,006
Fuel/equipment $18,000 54,5G0 51,400
Naturalgas $10,509 510.500 55,590
Electric $15,200 $25,200 $21,U50
Insurance 57,000 S1,950
Supplies $1,0i0 $500 $2,640
Garbage /water /sewer $1,525 SI
T elephone $5'.5
n ther S9. ^00
Concessions $21,560 SO $18,000
Total 1156,540 $71,710 =106,610
comparison data it would appear that the Association revenue estimates are overly
aggressive.
Similarly. a review of comparable operating expenses would indicate that the Association's
operating expenses may be to low.
If after reviewing these concepts you or members of your committee wish to discuss this
joint concept in greater detail, I would look forward to meeting at your convenience. If you
have any questions concerning these costs please feel free to contact either myself or Tom
Redman. Parks and Recreation Director at your convenience.
Sincerely,
Dave Pokorney
Cite- Administrator
DP:jms
Enclosure
c: Jim Leone, Treasurer
APR 87 '97 08:27 DISTRICT 112;
P.2
Chaska
March 11, 1997
Dr. David Clough
Superintendent
Independent School District No, 112
110600 Village Road
1
Chaska, NIN 5 5 31 8
! Dear Dave:
The purpose of my letter is ito serve as a Letter of Understanding between the City of
Chaska, the Chaska -Chan Youth Hockey Association and Independent School District No.
112 relative to construction, financing and operation of a second sheet of ice. The goal of
this joint project would be to construct a high quality practice facility adjacent to the
existing Community Center Arena which would meet the growing ice time needs for the
Youth Hockey Association and the School District, while at the same time the City of
Chaska would not be in a position of having to subsidize operating or debt service costs.
The City of Chaska's responsibility under the agreement would be:
A. To design and construct an indoor practice facility adjacent to the Community
Center at an estimated cost of $1.8 million.
B. Operate the facility in conjunction with the existing arena.
C. Provide priority ice_ time rental, to the Chaska -Chan Youth Hockey Association
and Independent School District No. 112.
D. To establish a maximum hourly ice rental charge of 5110 per hour for the
School District and the Chaska -Chan Youth Hockey Association. The maximum
hourly rate would increase by 3% a year through 2007.
B. To have the facility operational by September of 1998.
F. To prepare and submit an application for "mighty duck funds" to the State in the
amount of $250,000.
The Chaska -Chan Youth Hockey Association would agree to:
A. Complete a community fund - raiser to raise a minimum of S500,000with the
fundraiser to be completed prior to June 1, 1997.
City of ChWka Minnesota One City Hall Plaza 55318 -1962 Phone 612/448 -2851 Fax 612/4?
APR 07 '97 08 :28 DISTRICT 112 P.3
B. Actively support a Mighty Duck Grant Application.
C. To rent a minimum of 1,000 hours annually from the Chaska Arena annually
through 2007.
Independent School District No. 112 agrees:
A. -That the Chaska Ice Arena would be the home for their boys and girls hockey
teams.
B. To rent a minimum of 480 hours of ice time annually based on a lease providing
for payment of a lump sum of $30,000 to $60,000 per year for a ten year term
plus the per hour, rate as established by the Citv not to exceed the hourly-
maximum. In addition the City will make available at no charge ice time during
zhe school day for physical education classes.
C. To provide the City an easement to construct additional parking for the
Community Center on the east side of the Middle School property.
After the final terms and conditions of the Letter of Understanding are agreed to by each of
the parties, a formal agreement would be developed.
The City of Chaska truly looks.forward to addressing our youth recreational needs in a joint
manner with other community entities such as the School District and the Chaska -Chan
Youth Hockey Association.
If ynu have any questions or comments, please contact me at your convenience.
Sincerely,
ave Po orney
City Administrator
DP:jms