HomeMy WebLinkAbout2024.07.08 EDAPE conomic Development
Authority
City Hall Council Chambers
J uly 8, 2024
AGE NDA
1.Call to Order
The City Council requests that attendees turn off cell phones and pagers during the meeting. A
copy of the full C ity Counc il packet, including E D A (E conomic Development Authority ), is
available to the public. The packet ring binder is located at the entrance of the council
chambers.
2.Roll Call
3.Approval of Consent Agenda
The following items are considered to be routine by the Economic Development Authority (E D A)
and will been acted by one motion. There will be no separate disc ussion of these items unless a
Commissioner so requests, in whic h event the item will be removed from the c onsent agenda
and considered at the end of Commission Consideration I tems.
a.Approval of Minutes
- Motion to approve the minutes.
b.Discussion on Heritage Center Caterer Situation
- Update on caterer at Heritage Center of Brooklyn Center. No action
requested.
4.Commission Consideration Items
5.Adjournment
Economic Development Authority
DAT E:7/8/2024
TO :C ity C ouncil
F R O M:D r. Reggie Edwards, City Manager
T H R O U G H :Reggie Edw ards , D eputy City Manager
BY:Barb S uciu, A ssistant City Manager/C ity C lerk
S U B J E C T:A pproval of Minutes
Requested Council A con:
- Moon to approve the minutes.
B ackground:
I n accordance with M innesota S tate S tatute 15.17, the official records of all mee5ngs must be documented
and approved by the governing body.
B udget I ssues:
N/A
I nclusive C ommunity Engagement:
- None
A nracist/Equity Policy Effect:
- None
S trategic Priories and Values:
AT TA C H M E N TS :
D escrip5on U pload D ate Type
2024.06.24 E DA M ee5ng Minutes 7/2/2024 Backup M aterial
6/24/24 -1- DRAFT
MINUTES OF THE PROCEEDINGS OF THE
ECONOMIC DEVELOPMENT AUTHORITY
OF THE CITY OF BROOKLYN CENTER
IN THE COUNTY OF HENNEPIN AND THE
STATE OF MINNESOTA
REGULAR SESSION
JUNE 24, 2024
CITY HALL – COUNCIL CHAMBERS
1. CALL TO ORDER
The Brooklyn Center Economic Development Authority (EDA) met in Regular Session called to
order by President April Graves at 8:56 p.m.
2. ROLL CALL
President April Graves and Commissioners Kris Lawrence-Anderson, Dan Jerzak, and Teneshia
Kragness. Commissioner Marquita Butler was absent and excused. Also present were Assistant
City Manager/City Clerk Barb Suciu and City Attorney Siobhan Tolar.
3. APPROVAL OF AGENDA AND CONSENT AGENDA
Commissioner Lawrence-Anderson moved and Commissioner Jerzak seconded to approve the
Agenda and Consent Agenda, and the following item was approved:
3a. APPROVAL OF MINUTES
1. July 10, 2024 – Regular Session
3b. RESOLUTION DESIGNATING THE FORMER TARGET BUILDING AS
SUBSTANDARD AND ESTABLISHING AN INTERFUND LOAN
Motion passed unanimously.
4. COMMISSION CONSIDERATION ITEMS
4a. RESOLUTION 2024-04 APPROVING THE FIRST AMENDMENT OT THE
PURCHASE AND DEVELOPMENT AGREEMENT WITH C ALLEN HOMES
Ehlers Consultant Jason Aarsvold explained a Purchase and Development Agreement was
approved with the initial C Alan Homes projects. The agreement was to convey the property to
the developer for $1. There was a requirement to maintain seven units as affordable. The
construction began on Project 1, but the project remains unfinished. As for Project 2, there hasn’t
been any progress.
6/24/24 -2- DRAFT
Mr. Aarsvold noted the property is under threat of foreclosure which would affect the EDA’s
agreements. The agreement would remain in effect and any new owner would be subject to the
obligations in the agreement. The affordability declarations would terminate in a foreclosure. A
new owner would have to engage with the EDA to determine a path forward for any future project.
President Graves asked if she could make the motion to support both projects, though the second
project has been denied elsewhere. City Attorney Siobhan Tolar recommended the EDA approve
an amendment only for one project.
President Graves moved and Commissioner Lawrence-Anderson seconded to adopt EDA
RESOLUTION NO. 2024-04 approving the first amendment to the purchase and development
agreement (with respect to an extension of the time only for project 1).
Motion passed unanimously.
5. ADJOURNMENT
Commissioner Lawrence-Anderson moved and Commissioner Jerzak seconded adjournment of
the Economic Development Authority meeting at 9:02 p.m.
Motion passed unanimously.
Memorandum
To: Reggie Edwards, City Manager
Cordell Wiseman, Parks and Recreation Director
Loretta Halligan, Heritage Center General Manager
From: Finance Department
cc: Siobhan Tolar, City Attorney
Date: June 18, 2024
Re: Heritage Center Business Results Evaluation
Background
On June 10, 2024 at the regular meeting of the City’s Economic Development Authority, staff
recommended terminating the existing contract between The Heritage Center of Brooklyn Center
and Flik International for on-site event catering services. One of the justifications for this
recommendation was excessive costs incurred by the Heritage Center as outlined in the
provisions of the contract. There is also a provision whereby Flik is required to absorb all costs
of sales that exceed 70% of food and beverage revenue as defined in the contract.
Contract Provisions
The current contract with Flik was signed by City Manager Curt Boganey on November 13,
2019. The contract effective date was January 1, 2020. There was an Amendment signed by
Acting City Manager Reggie Edwards on June 20, 2021 with a retroactive effective date of
January 1, 2021. This Amendment revised the contractual management fee and the initial term
of the contract. By definition in the contract, the Manager refers to Flik International, and the
Owner refers to The Heritage Center.
Section 13 of the contract provides eleven provisions that define the “Cost of Business”. These
provisions include staff, benefits, food, beverages, supplies, insurance premiums, and expenses
to repair and maintain the catering facility. The contract states that “All elements of the Cost of
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Business shall by paid or reimbursed by Owner…”. Cost of Business as defined excludes costs
contracted directly by the Owner, and overdraft or late penalties.
Section 15 of the contract reads as follows:
“If the Total Cost of Business as defined is 70% or greater of F & B Sales Revenue, as
defined in Section 14, Manager will absorb all costs greater than 70%.” In this instance,
F & B Sales Revenue is Food and Beverage Sales Revenue.
Financial Results Discussion
On June 7, 2024, Heritage Center staff received an email communication from the Regional
Director of Operations for Flik Hospitality Group, regarding questions about contract
profitability. In the email, a yearly summation of the activity from January 2020 – May 2024
was provided. Historically, the City’s Finance staff process has been to calculate the total cost of
sales under the Catering business unit. However, the Flik contract states that for the purpose of
calculating any amount due back from Flik only certain costs can be included in the calculation.
Heritage Center employee payroll costs have been included in the Cost of Business calculation.
These costs are excluded per the contract, unless requested directly by Flik. City staff included
gratuity amounts in both the catering revenue and the cost of goods sold. Gratuity amounts
should be excluded from both categories per the contract.
Based on this evaluation of contract language and data provided by the Flik finance team it
appears that the City’s calculations were incorrect. As a result, the City’s calculated cost of sales
for prior years were overstated and do not support a payment in the amount previously
communicated to the EDA Board.
Finance Staff Recommendation
The Finance staff’s method of calculating catering cost of sales is reasonable and helpful when
making internal business decisions. It is important for City staff to be able to determine and
manage the total cost of the catering Business Unit. However, these same data points cannot be
used to support a contractually agreed upon condition with an outside vendor, when the contract
has a narrower definition of cost of sales.
Finance staff have reconciled the data provided by Flik to the data posted to the City’s General
Ledger for revenues and expenses. Finance staff substantively agree with Flik’s numbers, with
the exception of some minor variances.
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In total, City Finance staff have determined that a combined total of $350,505 is due to The
Heritage Center for the years 2020, 2021, and 2022. Flik calculations indicate a total of $344,585
due to The Heritage Center for 2020 and 2021. This is a variance of $5,920. A summary of these
amounts is included as Attachment A.
Flik’s calculations indicate that for years 2020 and 2021 the cost of business exceeded 70% of
catering revenue. City Finance staff agree, but because of the variances, the amount we show as
due to The Heritage Center is slightly different. This amount is considered immaterial at this
point.
The Cost of Business for 2022, as calculated by Flik finance staff, is 69.9% of catering sales.
Once corrected for excluded items, City staff’s calculations indicate Cost of Business is 70.4%.
This variance is due to slightly less revenue recognized in the General Ledger then stated by Flik
staff. Finance staff made an inquiry to Heritage Center staff regarding possible reasons for this
variance. Their response indicated that a partial explanation may be Tasting events, where
customers are allowed to come in and sample the menu in advance of their event. Flik may be
including the value of tasting events in their reported monthly sales, but The Heritage Center
never invoices end clients for the tastings. Additionally, there may be adjustments/discounts for
customer complaints.
Overall, Finance staff recommend we accept the calculation as determined by Flik. City staff
believe that will encourage Flik to pay us the amounts over 70% of catering sales from 2020 and
2021 without dispute. In the event Flik decides to dispute these amounts due, Finance staff
would then recommend pursuing the full amount due.
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ATTACHMENT A
Per Flik:
Year Sales
Cost of
Business Cost of Business as % of Sales
Amount over
70%
2020 748,464 734,069 98.1% 210,144
2021 771,826 674,719 87.4% 134,441
2022 1,980,763 1,384,022 69.9%
2023 2,344,877 1,589,918 67.8%
TOTAL DUE $344,585
Per Brooklyn Center:
Year Sales
Cost of
Business Cost of Business as % of Sales
Amount over
70%
2020 740,493 724,902 97.9% 206,557
2021 764,116 670,943 87.8% 136,062
2022 1,963,309 1,382,203 70.4% 7,887
2023 2,332,549 1,594,661 68.4%
TOTAL DUE $350,505