6b CCHA Ice ArenaCITY OF ----
MEMORANDUM
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
DATE: April 9, 1997
SUB J:
Approval of Letter Supporting Chaska Chanhassen Hockey Association Mighty
Ducks Application
As the city couficil is aware, the Chaska Chanhassen Hockey Association has been pursuing
potential ice arena locations in the cities that they represent. The final analysis is cornplete (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 $30,000 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:\mgr'md ghtyducks.doc
JanuaL'y 15, 1997
Steve Olinger, President
Chaska-Chan Youth Hockey Association
7255 159th Street
Ca~,er, MN 55315
Dear Steve:
Tile purpose of my letter is to summarize the City of Chaska's position relalive to the
Association's interest in developing 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 tlleir past. discussions, the City would be interested ~1 pursuing a joint effort
with the Youth Hockey Associatio~ in developing a second sheet of ice based on the
lbllowh~g con'ditions:
A) There is a demonstrated need lbr the additional i'acilitv to serve the youth within tile
School District area.
B) The City would be reasonably assured that the l;qcility would cover its annual
operating and deb~ service costs, and if there was a deficit there wotLld be a
third-party guarantt,e of any shortfall.
C) Tile facility would tae architecturally and ftmctionally compatible with the Chaska
Community Center.
I do believe that if the Association is willing and at, re to finance a stand alo;~e ice facility,
the option of a joim project with the City is not only feasible but less costly,
First, let me review briefly the histm3? of indoor ice itl tile Chaska area. Prior to 1989, the
Chaska-Chan Youth Hockey Association. as you are aware, rented ice at a number of area
arenas with its prima .fy home beh~g the Shakopee bubble. As the CiD, of Chaska began
studying the concept of the Community Center, representatives of the Youth Hockey
Association presented a very 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 being
a prime tenant of the Chaska arena and it was understood that the Association would, for
the tbreseeable future, rent a minimum of 500 hottrs of ice time annually. As the
Association is considering a second sheet of ice, the City of Chaska would expect the group
to maintahl its commitment to being a pr[me tenant and renting a minimum of 500 hours
annually.
Based on these COlUmitments and tile 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 faciliky, these annual debt sen-ice costs are
approximately $261,000 annually. This is the level of financial commitment that hhe Ci_ty
of Chaska has made lbr indoor ice to serve the m'ea and it is for this reason that ff a second
sheet of ice is constructed, we would need guarantees that additional annnal subsidies
woukt not be required. It' these conditions can be met the City would be interested in
working iointly with the Association in developing an arena.
Tile key advantages of a mauicipally owned ice arena are:
A) The facility is exempt from property tmxes.
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
operat'ing cost as tompm'ed to a
free-standing he[lit5.
Based on a preliminao: cost analysis by
our arclfitectural consultants who have
been involved in a nmnbcr of ice arena
complexes across the state, a second
sheet of ice meeting om' architectural
standards could be constructed at a cost
of $1.7 million.
The table to the right presenks a
comparison of an Association owned
he[lily as compared to a complex owned
by a public entity. In preparing the
comparison .tile follow[n}; assumptions
were made:
A) The Association complex could be
constructed as a {owe]' quality
facility at a cost of $1.34 tn[Ilion
as compared to the $1,7 for the
City owned hell[tv,
· SECOND StIEETy~v,,tL ISIsOF ICE COST
CCHA
Arena
]ntere~t rate 9.00%
l'erm 20
Arena
5.50%
20
Building 51,240000
I and $0 50
Parking lot & site deve!opmet 5130,300
T o~a[ capRal $i,340.000 ~l,700,OOO
A~suc:a~io,~ contr· $340,000 $)40 OOO
Amount {o be Fin~accd S88U,00~
,qtatIiing. & Operating cosu $106,Si0 577,770
Annual debtservice $$?,637 $97 ~68
ice rental
School d~ict%~h e r
Other
$150.000
$38,500
.4tttlual total Revenue~
N et Profiq (Dss}
530,o$J $IG2
B) Under both concepts, it is assmned that a $200.000 stale 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
l;eriod, with the inWrest rate lbr
the City owned facility being
5.5% and the Association
financing being at 9%.
D)
The Association opt'rating cost~
are based on your estimate of
$106,810,
E) The Community Center facility
costs are based op. the. added
costs which woukl be required
to operate a second sheet.
These costs are lower than the
Association costs because there
a,'e economies of scale with
having two arenas auached.
The annual operating revenues from
similar Twin Cities facilities averaged
approximately $170,000. Over the
last vear~ the Chaska areua has
generated similar annual r,.wenttes with
1996 revenues increasing as a result of
sunnner ice rental. Based on this
,.
Comparison of Freestanding Ice
^rcna~
1995
(~peraxing Operating
Reverutes Expense Excess
hd[alo $120,722 5129,415 ($8,693)
.akev ille $208,441 .$210,795 ($2,354)
Hopkins $219,593 $206,998 $12,595
Far mingle n $170,447 $179300 $147
Princeton $166,~2 $160,000 56,~2
H a.sli,gs 5177,157 5196,761 ($19,004)
~,k' est St. Paul 5121,~)8 $130,178 ($8,880)
Delono 5168,177 $139,518
A~erage 5170,i05 $160,121 $984
'* Expet:~es do not include debt service
Chaska Arena Operating
Operating
Revenues
1992 $128.939
!993 5141,171
1994 $181,99!
10c, 5 $168,223 .
1906 $240,000 JJ
· 1906 is an cstima!e and includes summer ~cc Jl
CCHA
E stim
$4,400
$2 l,US0
Operating, Expenses Comparison
E zixtin& 2nd CCC
·Arena Icc Sheet
$15,000 ~4,5G0
$10,500 ilo SOO
$25,200 SZ5,200
$1,050 $500
$1,525
$2,640
$1 ,~,2'0
$9.q00
SZz,soo $o $1s,ooo
aulte nance StaJIi;- g
Fneilequipmen~
Namral gas
Ele c~'ic
i lnsur~nc~ Supplies
G arb~g¢/water/se,~er
T*l~p~one
O~cr
C once *~io n s
~ o~al
comparison data it would appear that the Association revenue estimates are overly
aggressive.
Similarly. a review of comparable operating expenses would indicate fl~at the Association's
operating expenses may be to low.
If after reviewing these concepts you or me~nbers of your committee wish to discuss this
joint concept in greater detail, I would look Ib~*ward to meeting at your convenience. If you
have any questions conceraing these costs please feel fi'ee to contact either myself or Tom
Redmm~, Parks and Recreation Director at your convenience.
Sincerely,
Dave Pokorney
City Administrator
DP:ires
Enclosure
c: Jim Leone. Treasurer
APR 07 "9? 0:--',:27 DISTRICT 112 P.2
Chaska
March 11, 1997
Dr. David Clough
Superintendent
Independent School District No, 112
110600 Vil, lage Road
Chaska, MN 55318
Dear Dave:
The purpose of m.v letter is ,to 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 quali, ty practice facility adjacent to the
existing Communi~ 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 ruth the existing arena.
C. Provide priority ice time rental to the Chaska-Chan Youth Hockey Association
and Independent School District No. 112.
To establish a maximum hourly ice rental charge of $110 per hour for the
SchooI District and the Chaska-Chan Youth Hockey Association. The maximum
hourly rate would increase by 3% a year through 2007.
E. 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 $500,000with the
fund-raiser to be completed prior to June 1, 1997.
of Chaska Minnesota One ci /Hall Plaza $53~8-1962 Phcne 61Z44g-285~ Fax 612/445-930C
F~F'F' 07 "9?' [3F:: £8 'r)I'_=;TRTC:T :t:t:---" 'F'. :_:'," o, .- . -
B. Actively support a ,Mighty Duck Grant Application.
C. To rent a minimum of 1,000 hours annually Ii-om 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.
13, To rent a minimum of 480 hours of ice time annually based on a lease providing
for payment of a lump sum of 530,000 to $60.000 per year for a ten year term
plus the per hour. rate as established by the City not to exceed the hourly
maximum. In addition the City ~vili make available at no charge ice time du~ng
[i~e school day Ibr physical education classes.
C. To provide the City an easement to construct additional parking for the
Community Center on the east side of the M_/ddle School property.
After the final terms and condkions 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 recreat/onal needs in a joint
manner w/th other community entities such as the School District and the Chaska-Chan
Youth Hockey Association.
If you have any questions or comments, please contact me at your convenience.
Sincerely,
a'~-~Pc~ orney
City Admtn/strator
lDP:jms