City of Racine, Wisconsin. Frequently Asked Questions about Financing for the Event Center and Hotel Project

Transcription

1 Frequently Asked Questions about Financing for the Event Center and Hotel Project 1. What does the event center project cost? The Master Project Budget has a range from $51.4 million to $61.2 million. The high range of the cost estimates include deep foundations (geotechnical engineers do not anticipate needed deep foundations), an option for 12 added suites, and a high equipment bay to allow large machinery/boats onto the Event Center floor. The project team has made the decision to target a master project budget of $55 million based on an Adjusted Master Project Budget that takes out the deep pile foundations and the high equipment bay. The Adjusted Master Project Budget range is $52.9 million to $59.3 million. The project team s best estimate of costs, based upon three contractor estimates of conceptual plans, is $55 million. Project costs are broken down, as follows: Event Center Site Improvements Project Contingency Total Project Costs $49MM $3.5MM $2.5MM $55MM 2. What is the financial model for paying for the event center? The financial model spreads costs and payments for the event center across a variety of funding partners. This minimizes the cost burden on any one partner and also keeps taxpayer contributions low. Financial Model for the event center Event Center Cost $49MM Existing Funds from TID Balance Used - $10.6MM Cost of Issuance $1.4MM Total Bond Amount $39.7MM The project team recommends a two-stage bonding process wherein there is an initial bond for 16 years of $39.7 million with an annual payment of $2.5 million. In year 17, the project team anticipates that the unpaid principal be refinanced for another 14 years with an annual payment of $1.8 million. The annual payments for the bond is the area in which the City will be required to find a wide variety of funding sources. The project team recommends the following sources: 1

2 Initial Bond (Years 1016) Refinanced Bond (Years 17-30) Hotel Incremental Property Taxes $294,000 $294,000* Hotel Occupancy Tax $301,000 $301,000 Cell Tower Lease $30,000 $30,000 Exterior Building Naming Rights Lease $285,000 $285,000 Anchor Tenant Capital Contribution $90,000 $90,000 Ticket Surcharge $127,500 $127,500 Intergovernmental Funds $800,000 City of Racine Levy Contribution $365,000 $365,000 Other Funding Partner Contribution $365,000 $365,000 TOTAL ANNUAL CASH FLOWS $2,700,000 $1,900,000 *Hotel Incremental Property taxes will expire in Year 27 Site Improvements of $3.5 million are expected to be paid from other TID cash flows. Present value (at 4%) of $8.7 million. Project Contingency of $2.5 million would be paid from Intergovernmental Fund balance, if needed. We believe that this contingency is unlikely to be required. 3. Will the events and activities at the proposed event center be affordable? Yes, ticket prices for the proposed anchor tenant, a USHL hockey team, are very affordable general admission tickets for USHL teams typically range between $8 and $25 depending on the seat location and age of the attendee. General admission ticket prices will be designed to encourage area families to attend. Tickets in suites range from $20 to $50, depending on the package sold. Other events (concerts, trade shows, community events) will be priced depending on the event and seat location. A small ticket surcharge will be added to tickets to cover debt service costs and operations costs of the event center. 4. What is the impact of the event center project on my property tax? For the City to increase its General Fund Debt Service levy (property tax levy) by $365,000 per year (the proposed dedicated contribution to fund part of the event center), it would require an increase to the tax rate of $ per $1,000 of assessed value. For the owner of a typical home valued and assessed at $100,000, the resulting yearly tax increase would amount to $11.78 per year. 5. How many events a year? And what kind? What new events? There is the potential to have between 100 and 175 events each year. This could include sporting events (hockey, basketball, rodeo, etc.), ice-related events (Disney on Ice, skating competitions, etc.), concerts, conventions and special events like proms, weddings and other celebrations. 2

3 6. What is the impact to Festival Hall and Memorial Hall? The goal in building a new event center is to add opportunities for the City of Racine to capture events that cannot be held in the already well-functioning Festival Hall and Memorial Hall due to event size, seating, ceiling height or rigging needs. The new event center and the existing Festival Hall and Memorial Hall serve events of different sizes and needs (and budgets), so there will be no major impacts to the existing spaces and more opportunity to partner together to serve large conferences and events. The three event spaces will complement each other and provide a broad range of venue space to fit nearly any event from small gatherings to 3,000+ seat events. 7. What is status of the hotel? The project team has developed a hotel development prospectus that describes the development opportunity and outlines the criteria for selection. This prospectus will be issued to potential hotel developers in July We have informed nearly 30 hotel developers about the upcoming prospectus issuance and more than 10 developers have signed non-disclosure agreements, which is a first step in participating in a hotel selection process. 8. Will financing the event center preclude completing other projects and needs (i.e., public safety building, Machinery Row)? The event center and hotel project will have its own budget, construction team, designers and developers that would not compete with the continuing work on other projects and needs throughout the City of Racine. The event center is relying on tax increment financing, intergovernmental revenue funds, and other sources of funding that are for economic development purposes that do not preclude the City from responding to, financing and developing in other areas of the City or continuing its work to updates its own public facilities. 9. How will the event center management work? Who will operate the event center? The City has an existing one-year contract with Venueworks, the company that manages the Civic Center properties, that expires in December During the late summer and fall of 2017, City staff and the Civic Center Commission will evaluate a possible extension to the Venueworks contract with Common Council. If approval is given to move to Phase II, the City would issue a request for qualifications for event center managers with the idea that opportunities to manage all three City event properties would attract a large range of potential operator interest. If approval is not given to move to Phase II, then City staff and the Civic Center Commission will need to make a recommendation about whether or not a competitive bidding process should occur in How would the event center attract concerts? Part of the event center management would include a talent and promotions booking agent who would be in charge of filling the center with appropriately sized concerts and events for the market. 3

4 The talent and promotions booking agent would represent the event center among other booking agents, showcasing that Racine now has the market demand and venue space that would make an appearance profitable to that particular talent. 11. What s in it (the event center) for funding partners? An economically revitalized downtown and City Multiplier effect from tourism and events that is the result of a catalytic investment A larger tax base generated by development induced by this investment More jobs generated mean fewer individuals within the community that are unemployed or in need of human services assistance 12. What is in it (the event center) for county residents? A venue that attracts large shows and cultural events than Festival/Memorial Halls Reduced travel out of the County for cultural and sporting events Family oriented activities near the City s walkable downtown Increased tourism for countywide attractions A larger tax base generated by development induced by this investment 13. What is in it (the event center) for silver teens (senior citizens)? The event center will attract many shows and cultural events that will appeal to a wide range of audiences including silver teens. Silver teens with grandchildren will have more activities to enjoy with their grandchildren, including community ice skating or concerts and shows. Everyone who lives in the City of Racine and Racine County will be able to reap the benefits of the development from both an entertainment, cultural and economic standpoint. 14. How will you select a contractor? Once a vote has been made to proceed with construction, the City and RDA will issue a request for qualifications and will select a construction manager-at-risk through a competitive and public selection process. 15. Will you have local employment? Yes, Racine community job-seekers will be able to apply for management positions and hourly positions within the event center and hotel. Area contractors and subcontractors will be recruited and encouraged to bid on the project and will be utilized if there is a mutual fit. The City has an expressed desire to see as much local employment used in the construction and operations of the building as possible. 4

5 16. Are we building this just for a hockey team? No, a hockey team is only part of the dedicated usage for the event center. The floor of the event center will also be used for concerts, conventions and other sporting events such as basketball, rodeos, etc. 17. Wouldn t the event center work better if located at the interstate? Because this is a City of Racine project, the development must be created within the City proper. City boundaries do not extend out to the interstate. The area chosen for this project is perfect for a number of reasons, notably the lakefront access and that it will add to the vibrancy and growth taking place in downtown Racine. The location is also perfect for drawing visitors and tourists into the downtown area so they can experience all of the great things our city has to offer. When Rob Hunden of the Hunden Group was reviewing the project feasibility, he noted that event centers at interstates do not have a good record of success. Interstate event centers may be easier to access by vehicle, but are typically not walkable to other restaurants, bars and hotels. The end result of not having direct access to walkable, urban development (restaurants, bars, retail, other hotels) means that the economic impact of those event centers are substantially less than when attendees can park once and walk to area attractions and the event center. Interstate locations are less appealing to event center attendees and full-service hotel patrons. The City of Racine wants to see event center attendees shop at our downtown stores, eat at our downtown restaurants and patronize our downtown bars because these activities will spread the economic benefit beyond the event center and throughout our community. 18. Won t this only work if the travel time from the interstate is reduced? No. Residents in this area currently have to travel upwards of one hour or more to see a show or event at a venue of this size. Our studies have shown there is a demand for events in the local market, and for those in the area, that reduction in overall travel time still makes this a desirable location for an event center. Additionally, our traffic analyses show that the downtown can manage the traffic and parking induced by both the hotel and event center. 19. What is the economic impact of the event center? According to market analysis conducted by Hunden Strategic Partners: The hotel and event center is estimated to generate $7 million in net new local spending annually. Over the next 30 years, the hotel and event center will bring in an estimated $104 million in net new earnings locally in businesses outside the event center. The hotel and event center is expected to draw approximately 50,000 visitors annually. The hotel and event center is expected to create approximately 200 full-time jobs. 5

6 Construction jobs are estimated at approximately 400 jobs years during the term of construction. 20. How will the event center affect downtown businesses? Downtown businesses will see additional growth and sales as a result of the hotel and event center. Those attending a game or concert don t typically just come to the venue area for that one reason and leave. Studies show visitors will meander the local shops and restaurants for a bite to eat and some shopping before or after their event. Because the event center will be bringing in those from outside of the city as well (Hunden study says 40% of attendees will be outside of Racine County), there will be a spike in tourism and dollars spent within our city that weren t previously being spent before. As a result, local businesses will see numerous growth opportunities. The traffic and parking analysis studied the impact of the induced vehicular traffic and parking on the downtown and found that the existing parking facilities and streets can accommodate the increases in traffic/parking expected. 21. How will this impact downtown parking? There is sufficient structured parking and street parking to serve the needs of the event center within a six-block walk, taking into account current parking demand. The hotel and event center will be served, primarily, by the two parking ramps directly adjacent to the site. Larger events, like concerts, may require parking in other downtown parking ramps. 22. How will the event center affect the condo owners and nearby residential buildings? The hotel and event center will not be obstructive to views and will bring more entertainment and restaurant options to the residents in those buildings. The current state of the site is a gravel lot. By developing the site into an event center and hotel, there will be additional streetscaping and landscaping and visually appealing transformations made so the general aesthetics of the area is greatly improved. We note that City officials have always anticipated that 233 Lake Street would be developed. In the early 1990s, the hotel/event center site was planned to be a multistory retail center with structured parking, and before the site was vacant, it was used as a coal gasification plant. 23. Who are the potential competitors to the proposed event center? The closest competing venues are located in Milwaukee, Wisconsin (25-30 miles from Racine). These venues include the Bradley Center (20,000 capacity), the UW Milwaukee Panther Arena (12,700 capacity), the Eagles Ballroom (4,000 capacity), and the Riverside Theater (2,400 capacity). Given the much larger capacity of the Bradley Center and the Panther Arena, the proposed Racine Arena would not be heavily competing with these two arenas for events or event attendees. 6

7 The next closest market with competing venues is Rosemont, Illinois (65 miles from Racine), with the Allstate Arena (18,500 capacity). Again, this arena does not pose an overwhelming threat to the proposed Racine arena as the Racine arena would target small- to midsized events and performances, which would not likely be supportable in larger venues such as the Allstate Arena. 24. What is the project and construction schedule? As of June 27, 2017, the project team is seeking approval to finalize Phase I by recruiting and engaging with a hotelier and finalizing project financial partners. We anticipate needing until mid- November to finalize those tasks. In December 2017, we will ask the RDA and Common Council for funding to move forward with Phase II. In Phase II, the project team will develop the schematic drawings and design for the project and will work toward a Guaranteed Maximum Price (GMP) with the project manager. The current timeline indicates that Phase II work would be completed in about six months. In May 2018, it is anticipated the RDA and Common Council will vote on final design and financing. This will kick off Phase III of the project, which focuses on construction through the projected Spring 2020 construction completion. At the beginning of Phase III, the project team would begin the qualification selection for a project manager-at-risk. 25. Who are the primary tenants in the building? We have a USHL team tenant confirmed. A letter of intent will be forthcoming, depending on the vote to move forward to Phase II. 26. Why is this not being built on the former Walker site (now called Harbourside)? The Walker site has several limitations for a hotel and event center development. First, there is not a finalized cleanup letter on the site from the Department of Natural Resources, although one is expected. Second, currently, there is currently little street and infrastructure capacity on the site to accommodate a hotel and event center. Street and infrastructure (water and sewer, etc.) would need to be built, which would far outstrip the budget anticipated for the 233 Lake Street location, which has streets and infrastructure on site. The City s recently adopted Area Wide Plan for the Rootworks area calls for the Walker site to become a residential neighborhood. 27. If you extend Phase I over a longer period of time, won t you need more money for Phase I? No, it is our intention to do all the work of Phase I within the $600,000 budget approved in March. 7

8 28. Why aren t we waiting until there is a new mayor? A project of this complexity transcends administrations and will be a major focus for the Redevelopment Authority and Common Council for several years. We have a very talented project team and have hired an experienced project manager so that the work could be done professionally. 29. Why are we looking at one-way/two-way streets? Converting Lake Avenue into a two-way street is a consideration for the City because it is a potential solution to accommodate extra traffic before and after events. Two-way traffic would enable traffic to disperse over a larger number of streets (thus, more quickly) and would improve the pedestrian experience because two-way traffic is typically calmer than one-way traffic. 30. How will the bridges impact the traffic? The bridges will be operated normally and will be adjusted to accommodate traffic patterns as necessary. 31. Will there be increased security? Yes. Traffic control will be present during peak times before or after events. The event center and hotel will have their own security teams. 32. Will this project be included in the 2018 budget? Yes. 8