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HomeMy WebLinkAbout2025.02.10 EDAM2/10/25 -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 FEBRUARY 10, 2025 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 8:47 p.m. 2. ROLL CALL President April Graves and Commissioners Kris Lawrence-Anderson, Dan Jerzak, Teneshia Kragness, and Laurie Ann Moore. Also present were City Manager Reggie Edwards, Parks and Recreation Director Cordell Wiseman, Fiscal and Support Services Director Angela Holm, City Clerk Barb Suciu, and City Attorney Siobhan Tolar. 3. APPROVAL OF AGENDA AND CONSENT AGENDA President Graves moved and Commissioner Lawrence-Anderson seconded to approve the Agenda and Consent Agenda, and the following item was approved: 3a. APPROVAL OF MINUTES 1. January 13, 2025 – Regular Session Motion passed unanimously. 4. COMMISSION CONSIDERATION ITEMS 4a. RESOLUTION AUTHORIZING THE HERITAGE CENTER OF BROOKLYN CENTER TO ENTER INTO A CONTRACT WITH MINTAHOE CATERING AND EVENTS FOR MANAGEMENT AND OPERATIONS OF THE HERITAGE CENTER CATERING FACILITIES AND AUTHORIZING THE EXECUTIVE DIRECTOR AND RECREATION DIRECT TO EXECUTE SUCH CONTRACT Executive Director Reggie Edwards introduced the item and noted the contract wouldn’t normally be presented to the Council. Due to the history of the catering contract, Staff decided to provide information on the contract. He invited Parks and Recreation Director Cordell Wiseman to continue the Staff presentation. 2/10/25 -2- DRAFT Parks and Recreation Director Cordell Wiseman noted Mintahoe provided an opportunity for the Heritage Center to minimize its expenses. The caterer will take on the food and staffing needs. The revenue should increase with this change. There will be a $300,000 investment into the Heritage Center thanks to Mintahoe. The new space will be able to generate additional revenue. Mr. Wiseman added the new catering agreement will better meet the needs of the community. The food will be a lower cost. There has been a request to allow community vendors. Mintahoe offers subsidized contracting with other licensed caterers. Mintahoe understands the community’s needs, which is a highlight. Commissioner Jerzak pointed out he requested the annual net balances for the Heritage Center over the past ten years and received information and commentary from Dr. Edwards. The accumulative net negative balance has been over $5 million. Only in 2016 and 2018 has there been a positive net balance, which was less than $150,000. The net balance for 2025 is projected at $518,000. The sales have been around $700,000. The Heritage Center has not been supported with any General Fund dollars. However, the reserve funds have been drained. Commissioner Jerzak noted the Heritage Center is projected to operate in the positive over the next few years. However, the savings account has been drained, and replenishing it would be a heavy lift. A presentation on the Heritage Center’s solvency needs to be expedited due to financial hemorrhaging. Commissioner Jerzak implored the Council to consider denying the two-year contract. His concerns have nothing to do with the contractor itself. The contract includes the $300,000 investment, but it isn’t necessarily a benefit to Brooklyn Center. Until the Heritage Center returns to profitability, additional investment is premature. He noted he would entertain a month-to-month contract. Commissioner Jerzak added while the General Fund has not been used to fund the Heritage Center, the purpose of an enterprise fund is to offset the tax levy and benefit the General Fund. The dismal ten-year financial history needs to be considered. Commissioner Jerzak stated their residents are struggling to pay their water bills, and they are set for a 25 percent increase for three years. There is nearly $400,000 in delinquent accounts. There is no need to subsidize business lunches or private weddings. The liquor stores and golf course also need to be reviewed. Commissioner Kragness noted that 72 percent of the contract goes to the manager. She asked if the last contract was 70 percent. Mr. Wiseman confirmed that this is correct. Commissioner Kragness stated the City is giving the caterer more money then. Mr. Wiseman stated they would be giving the contractor more money, but the contractor would be paying for food and personnel. With the last contract, once the caterer met their maximum, they had no incentive to continue generating money. The new caterer also has affordable catering costs. 2/10/25 -3- DRAFT Commissioner Kragness stated the last contract was not set up to make money for the City. It is difficult to support a new contract that gives away even more money. She asked where in the contract it states the caterer will pay for personnel and food. Mr. Wiseman explained it is not in the contract. Now the billing process is different. Commissioner Kragness noted there is a monthly wire transfer. Wire transfers are expensive, so it doesn’t make sense for the City to pay for wire transfers. Fiscal and Support Services Director Angela Holm explained wire transfers are common for the City’s vendors. The fee for wiring is not oppressive and is preferred by vendors over ACH. Commissioner Kragness stated the ACH doesn’t have any fees. It is unreasonable for the City to sign up for additional transfer expenses on a regular basis. Ms. Holm stated she would look up the wiring fee and provide the information to Council. Commissioner Kragness stated she would like to know how many vendors are being paid through wire transfers. Ms. Holm stated she would collect that information as well. Commissioner Moore noted the enterprise fund has lost $5 million over the past ten years. The City cannot keep subsidizing such a loss. She stated she would like more information on where the money came from to bail out the Heritage Center. While she cannot support a two-year contract, she would consider a monthly contract as there are already some 2025 events planned with catering. There needs to be an alternative solution to handle the Heritage Center in the long run. Commissioner Lawrence-Anderson agreed the financial loss is concerning. She asked if the City wants to stay in the events business or to rent out the space for another group to operate. The numbers are staggering. The enterprise fund is supposed to generate money for the City. The liquor stores and golf course also need to be reviewed. The City cannot afford to pay for others to do business. The management model needs to be reviewed. Commissioner Jerzak asked if the Heritage Center is operating without a contract. Mr. Wiseman stated the temporary contract that was previously approved allowed for him to negotiate an extension. Commissioner Jerzak asked if the existing contract allows for a month-to-month extension. Dr. Edwards stated the contract allowed for an extension, which has been entered. There is not an option for month-to-month in the contract, and it was not included in the RFP. A month-to-month RFP may not result in a contractor. Commissioner Jerzak agreed he wants to consider all alternatives such as how Brooklyn Park became a landlord. He asked if the deposits for upcoming events are a liability until the contract is executed. If the contract cannot be extended, then the deposits can be refunded. They may need to halt operations until a more viable plan can be discussed by Council. Commissioner Jerzak asked if other vendors could be considered with a new RFP. 2/10/25 -4- DRAFT Dr. Edwards explained there isn’t anything to give back to those who have booked with the Heritage Center. The Heritage Center would be at a loss for not making money with a given event. As it stands, there is only one vendor contracted with the Heritage Center. If the contract isn’t renewed, then there isn’t a caterer available to use for planned events. They don’t know the implications of halting business altogether. Dr. Edwards added the Heritage Center brings more people to Brooklyn Center than any other entity. Halting operations would impact more than the enterprise fund as other businesses would be affected. Dr. Edwards pointed out the model costs less, and there is an opportunity to invest $300,000 into the Heritage Center and, subsequently, earn more money. The City doesn’t have the revenue to afford a $300,000 investment on their own. Therefore, they are leveraging the opportunity with Mintahoe to invest in the Heritage Center. Dr. Edwards stated if the Heritage Center operated at a loss of $200,000 in 2026, it would run a negative balance that would need to be paid back. However, the Heritage Center brings so much to Brooklyn Center. Commissioner Jerzak stated if the Heritage Center was a private business, it would already have been shut down. The Council has not been presented with facts to support the claim of the Heritage Center’s significant impact on other Brooklyn Center businesses. Commissioner Jerzak asked if Mintahoe would consider less than a two-year contract and if there is another contractor who would be interested in a shorter contract. Dr. Edwards stated the original RFP received three proposals, so it is unlikely a shorter contract would attract another vendor. It would be difficult to convince a contractor to take on business with Brooklyn Center without long- term security. Mr. Wiseman agreed it would be difficult to find another contractor interested in taking on a short- term contract. There is a lot to learn about a new contract such as the equipment, working with Staff, the planning process, and so on. Mr. Wiseman noted other vendors rent the facility for an event. The payment may be received as a payment plan which will not be returned. Mr. Wiseman offered to return with alternative strategies. The business was hit really hard after COVID-19. The cash flow has moved to a positive. He is unsure where the $5 million deficit came from. Staff has significantly improved the outlook of the Heritage Center. Mr. Wiseman added Staff has had conversations regarding a timeline and exit strategy should the proposed plan not work. An exit itself is costly and would impact employees and the community. Staff is looking to better track the full impact of the Heritage Center in the City. 2/10/25 -5- DRAFT President Graves noted the Northwest Tourism Board has done similar data collection. She encouraged Staff to consider a survey to better measure the Heritage Center’s reach. She asked if there was a calculation to show the savings between the last contract and the new contract. Mr. Wiseman stated that $49,000 would be saved for a $3 million scenario. President Graves asked when the potential renovations would be complete. Mr. Wiseman stated once the contract is signed, the City will have access to the space. Then the timing would depend on finding contractors. Dr. Edwards stated the returns on the renovation investment wouldn’t be until the fourth quarter. They plan for a lighter year of scheduled events and building a reputation. Dr. Edwards pointed out the renters of the Heritage Center have a 90 percent return rate. Commissioner Kragness stated the Heritage Center is a Brooklyn Center staple, and she doesn’t want it to close. However, the numbers need to make sense. She noted her appreciation of the regular budget submissions. There also needs to be an audit to identify issues sooner. They need to learn from their past mistakes. Commissioner Kragness noted a contract will take time to generate money. Finding another contract will take even longer to generate money. The Council is hesitant to enter into another contract after the last one. Commissioner Kragness asked if renters of the space could find their own caterers for their events. Mr. Wiseman confirmed the idea has not been officially presented to Staff, but it is part of the long- term plan. He reiterated if the threshold is not met, then Staff will implement an exit strategy. It would be a process that includes meeting with other Staff. They plan to review both expenses and revenue. Commissioner Kragness asked how Mintahoe plans to get their $300,000 back. Mr. Wiseman stated Mintahoe has asked to be the preferred vendor. They are invested in the community, and they believe the investment will benefit the Heritage Center. Commissioner Kragness stated businesses intend to make money, and they should have a plan to recoup their investment. Dr. Edwards noted Staff has been asking themselves the same question about Mintahoe’s return on investment. The new space presents an opportunity to earn more revenue. Without a new space, everyone’s ability to earn revenue is inhibited. Commissioner Kragness asked what is preventing Brooklyn Center from getting the $300,000 capital investment and then finding a new vendor after the contract has expired. Dr. Edwards stated any early exit would require the City to pay back the investment. Commissioner Kragness asked what is preventing Brooklyn Center from getting the $300,000 capital investment and then finding a new vendor after the contract has expired. The vendor wouldn’t be able to recoup their investment within the two-year contract period. 2/10/25 -6- DRAFT Commissioner Jerzak read a portion of the contract that explained the investment of up to $300,000 is intended to increase revenue streams. Upon completion of the space, it would be marketed as another space for events. The parties agreed if the contract is exited early, prorated monies would be reimbursed to the manager. If it sounds too good to be true, then the Council needs to be skeptical. He asked if the caterer would consider a shorter contract without the $300,000 investment. Dr. Edwards stated the contract is for three years, and the space renovation is part of the strategy. He requested the contract not be negotiated at a public meeting. Staff may have created some advantages as part of the negotiation process that need not be revealed. Commissioner Kragness noted the contract has benefits to the City no matter what. Commissioner Jerzak agreed the contract shouldn’t be negotiated in public, but there are hard questions that need to be addressed. He suggested moving to the vote. Commissioner Moore stated the contract would be through the end of 2027, so it is actually a three- year contract while people have been mentioning two years. She asked how many events have actually been scheduled for 2025. There isn’t a path forward that gets the Heritage Center operating with a net gain while also replenishing the reserves. It is unclear where the money has come from to bail out the Heritage Center. Commissioner Moore asked how the residents are benefitting from the City subsidizing events at the Heritage Center. It is no longer a namesake for Brooklyn Center after its recent name change. She noted she couldn’t fathom supporting a contract longer than through 2025 purely because events have been scheduled. Tami Buetow-Staples stated there are 50-60 events planned throughout 2025. There are also some contracted events in 2026, 2027, and 2028 for repeat renters. Most folks pay a 25 percent deposit to hold the space. Commissioner Jerzak stated the rental agreements are likely to repeat patterns of loss over the last decade, which is concerning. He asked if Mintahoe or another entity would be interested in taking over the operations while Brooklyn Center becomes a landlord. Dr. Edwards stated any answers would be only speculative. Dr. Edwards explained Staff was planning to return to the Council at the end of March with a strategy to get out of the red, benchmarks to measure its success, and possible exit strategies. Mayor Graves asked how quickly the Council could receive an update on benchmarks after the March presentation. The council wants to keep close tabs on the Heritage Center. She asked what the communication plan is to keep the Council informed. Dr. Edwards stated the March presentation would include a financial plan. The departmental presentations have already been scheduled for the year, and an update on the Heritage Center will be provided at the relevant 2/10/25 -7- DRAFT presentation. There is also an opportunity for quarterly updates on enterprise funds from the Finance Department. Commissioner Jerzak noted President Graves would be absent from the next meeting. He expressed his disappointment in the Council not being informed of the purpose of the presentation and Staff’s plans. At this time, he cannot support a contract. The item should be tabled, and the Mayor needs to be part of the discussion. Commissioner Moore asked if the contract had already been signed. Dr. Edwards explained contracts aren’t signed until the Council approves it. Commissioner Moore reiterated that she cannot support the Heritage Center as it doesn’t directly benefit the residents. There are no reserves, the enterprise funds are bleak, and the utility rates are increasing. Commissioner Lawrence-Anderson asked if the $300,000 is the total cost of the renovations. Mr. Wiseman stated only the lower level of the space would be renovated. There is not an estimate for the necessary renovations. Commissioner Lawrence-Anderson stated the Council needs to know the cost of the renovations and calculations on the potential profitability of the space. Dr. Edwards stated Staff doesn’t anticipate costs would be beyond $300,000. Staff isn’t interested in spending more than $300,000. Mr. Wiseman confirmed that this is correct. President Graves suggested tabling the item because it doesn’t seem promising to get the contract approved at the present time. She asked when the March presentation is scheduled for. Dr. Edwards stated they hope to present at the end of March or the beginning of April. President Graves asked if the business could continue while the item was tabled. Dr. Edwards stated the extended contract is through April 10, 2025. President Graves pointed out that the trajectory of the Heritage Center in recent years has been promising. She thanked Staff for their work on the contract. She also noted her understanding of the Council’s hesitation. Commissioner Jerzak agreed with President Graves. Commissioner Jerzak moved and Commissioner Lawrence-Anderson seconded to table a RESOLUTION authorizing the Heritage Center of Brooklyn Center to enter into a contract with Mintahoe Catering and Events for management and operations of the Heritage Center catering facilities and authorizing the Executive Director and Recreation Director to execute such contract. Motion passed unanimously. 5. ADJOURNMENT 2/10/25 -8- DRAFT Commissioner Moore moved and President Graves seconded adjournment of the Economic Development Authority meeting at 9:52 p.m. Motion passed unanimously.