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HomeMy WebLinkAbout1997 08-25 EDAM Regular Session 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 AUGUST 25, 1997 CITY HALL CALL TO ORDER The Brooklyn Center Economic Development Authority (EDA) met in regular session and was called to order by President Myrna Kragness at 8:41 p.m. ROLL CALL President Myrna Kragness, Commission members Kathleen Carmody, Debra Hilstrom, Kay Lasman, and Robert Peppe. Also present: Executive Director Michael J. McCauley, Assistant City Manager Jane Chambers, City Attorney Charlie LeFevere, and Council Secretary LeAnn Larson. APPROVAL OF AGENDA AND CONSENT AGENDA A motion by Commission member Carmody and seconded by Commission member Lasman to approve the agenda and consent agenda as printed passed unanimously. COMMISSION CONSIDERATION ITEMS FINAL REPORT ON THE EARLE BROWN HERITAGE CENTER James M. Klas, Senior Vice President of Marquette Partners, presented the Economic Development Authority Commission with his final report on the operational study of the Earle Brown Heritage Center. Mr. Klas went over the full report which was distributed to the Commission members prior to the meeting. Attached hereto and incorporated here and by reference as Exhibit A is a complete transcript of the full comments given by Mr. Klas regarding the operational study. 8/25/97 _1_ RESOLUTION APPROVING SETTLEMENT AGREEMENT FOR ACOUISITION OF 610 53RD AVENUE NORTH RESOLUTION NO. 97 -24 Member Carmody introduced the following resolution and moved its adoption: RESOLUTION APPROVING SETTLEMENT AGREEMENT FOR ACQUISITION OF 610 53RD AVENUE NORTH The motion for the adoption of the foregoing resolution was duly seconded by member Lasman and passed unanimously. ADJOURNMENT A motion by Commission member Carmody and seconded by Commission member Hilstrom to adjourn the meeting at 9:10 p.m. passed unanimously. President Recorded and transcribed by: LeAnn Larson 8/25/97 -2- Transcript of Mr. Klas, Marquette Advisors Exhibit A Mr. Klas: Thank you. It is a pleasure to be here this evening to wrap up what became a longer process than was originally anticipated, and actually I would like to begin the presentation this evening by apologizing for the length of time it took to get the final report done. It was longer by a considerable amount than anticipated and certainly longer than promised and I apologize for that. It's entirely my responsibility and in no way reflects on management of the City or of the Center, that's simply our inability to produce the report on as timely a basis as promised, and we have made an adjustment in the fees for the project to reflect the fact that we did not perform completely as originally proposed. Moving on then to the study itself, basically all of the members present went through a working session with us back in, I think, April or May. There has been no substantial change to the conclusions or findings or recommendations to the study since that time. The recommendations have remained substantially the same. There were no major substantive issues which we were directed to address following that. The only matter of any substance that we incorporated into the final report that was not specifically discussed at that working session was there was a direction to obtain some additional quantitative data to provide some more support for the benefits of the Inn to the remainder of the complex. At the time, we had simply a listing of numbers of functions or companies rather that helped functions at the convention center that had also used the Inn or had first used the Inn. We were since able to obtain from facility management some more specific data, in particular some revenue figures, figures for revenue generated by those types of functions. They did not in any way alter our recommendations or conclusions. I will reiterate briefly the recommendations basically that we came up with at that time and that we went through in some detail and then I would basically open it up for any questions or comments from the commission. There were, I think, 11 or 12 recommendations and I will go through them briefly from the executive summary. They are discussed in greater detail in the body of the report. The first pertains to the Inn and the recommendation, in fact, the first two pertain to the Inn. The recommendation was to continue to pursue ways to improve the operating performance under the current structure, and I will remind you that the conclusion was that it is not likely that the Inn under its present structure, which is owned by the City and managed by staff of the complex as a whole, will ever in and of itself be a profitable operation. However, it was also our conclusion this was strengthened, in fact, by some of the quantitative data that we obtained after our first working session that the Inn is a benefit to the complex as a whole. That drives then an operating approach for the complex which is perhaps slightly different from that which is currently being used which is to obtain the maximum amount of benefit for the complex as a whole for the minimum cost, which means that you don't necessarily operate the Inn specifically to try to make it as nice of an Inn or as functional of an Inn as you might otherwise do it, but you try to obtain the benefits of the Inn while minimizing your costs. Recommendations that were made were, in general, related to reduction of labor costs. One idea that was identified and I know has been explored subsequent to our working session was to alter the staff 8/25/97 -1- Transcript of Mr. Klas, Marquette Advisors Exhibit A presence during the evenings. It is my understanding that in checking with Mr. LeFevere, or whatever other exploration was done, that there was some concern about liability issues there and not being an attorney, my only comment is that there are certainly other venues of a similar nature that do not have full staffing; however, they also do not have the same not to lose by liability problem should they ever arise as the City of Brooklyn Center would. The other option, and this was actually done for Earle's this year, is to close portions of the facility during slower periods, and in general it may make some sense to focus the operations of the Inn towards weekends, towards periods when functions are available. I will point out that it is not going to be feasible to only run the Inn when there is a function that requires its use; that's not likely to be a viable alternative. There's probably going to be some level of ongoing operation that's required that goes beyond that in order for it to just maintain appropriate staffing and quality and cleanliness and maintenance of the facilities. t es. The second which is the one other alternative for dealing with the Inn which again I think is already in the process of being explored would be to conduct negotiations with management of the Hilton or with perhaps some other area hotel for some sort of joint management agreement for the Inn. You are, I think if you recall from our previous discussions and from information provided by the city attorney, somewhat limited by bond covenants as to your ability to sell or lease the Inn, but there appears to be some flexibility legally to create management agreements which may be lucrative enough to the manager to entice them to do it and which could reduce, perhaps even eliminate, the degree of subsidy that would be necessary to maintain that particular part of the complex. If you are able to do that, then presumably you would be able to maintain the function of the Inn on an ongoing basis and gain its benefits for less cost. The only cautionary note that we have included in the report is that if you do create such a structure, if it works out to be feasible and there is a party that is interested in doing that, that you need to make sure that you maintain the capability of facility management in the City to ensure that the facility is operated in a type of quality level and provides the level of flexibility and accommodation to the needs of the convention center for putting its guests in there that you require and that you desire because, of course, any time you hand over management to somebody else you do run somewhat of a risk that they will, in order to maximize their returns, do something different from what you would like to see happen there. Beyond the Inn then turning to the convention center facility, there is a recommendation that we have made to increase meeting space as office space becomes available. There are some leases that are coming up that are expiring or tenants that are moving on and space will be available. From our analysis of the performance of the convention facilities and including the benefits of the catering, the revenue from catering, at various meetings and those facilities, they generate a higher rate of return than the leasing of office space generates for that complex, and so we have recommended that as that space becomes available that cost effective means of converting it into meeting space be explored in order to increase the supply of meeting space at the facility. We have confidence that 8/25/97 -2- Transcript of Mr. Klas, Marquette Advisors Exhibit A there is sufficient demand for meeting space at the facility, and that space will be used beneficially. Concurrent with that is completing improvements to the lower level meeting rooms. Those meeting rooms are of good size and are in the main complex already; however, by their nature being in the basement they are less desirable to begin with and the quality level of the finish, carpeting, and fixtures further makes them less desirable. There were improvements which I believe are already in process in some form and others which are under consideration which we would encourage. In particular, one of the larger rooms in the basement level would be a very functional area for a reception for dining functions for larger groups that are in the upper level in the main convention facilities, and it's the catering revenue that generates probably the most significant returns for the complex as a whole. There is a recommendation then in terms of communications between the City and the staff and responsibilities of the staff that the accountability of management at the facility for meeting budget goals be increased. The budgeting process has been improved significantly since our 1993 study, and in particular within the past year or so, some initiatives have been undertaken which have dramatically improved that process. Certain additional recommendations that have been made include encouraging and enabling the facility management to track their performance for key areas (revenue, payroll, other key expenditure items) on a more frequent basis than is possible by the financial statements generated by the City accounting department, weekly, bi- weekly, etc. and for them to take the information that they are tracking and to use that to generate forecasts along with the City financial data to generate forecasts looking forward for the remainder of any current year so that they are in a position to anticipate and take proactive steps to changes, positive or negative, from the budget which is enacted because by the nature of the budgetary process here, the budget is enacted well before the current operating year and the nature of the business that the center is in is far more fluid than most other City departments and subject to much greater change. Beyond that, the other item would be to anticipate that the facility management would themselves g be essentially directly responsible for ongoing expenditures within budgetary categories. I know that Mr. McCauley and Mr. Hoffman do have some ongoing involvement in various budgetary areas which extend down to specific purchase items, specific ways of spending money, which otherwise fit within the budgetary categories, and that obviously requires additional time on their part and it's appropriate to expect facility management to be able to handle expenditures at that level without additional input from effectively the owners which would be the City and, of course, the alternative is if you find that they are incapable of doing that then you have to call them to question their ability to manage the facility, and so I would encourage further exploration along those lines or further movement along those lines. There has been already a budget process put in place to look forward towards future capital needs for the complex. In general, it is something that needs to be recognized I think by the commission 8/25/97 Transcript of Mr. Klas, Marquette Advisors Exhibit A that the facility itself will be incapable of covering all of its capital needs on an ongoing basis and that is not an unusual position for a complex of that type to be in, and it is not at all unreasonable, and, in fact, I would strongly recommend that a specific fund be created either within the books of the complex itself or within the books of the City to provide funding for future capital requirements for the complex. The primary purpose of that, regardless of the funding source and we have made recommendations for potential funding sources, but the purpose of that is to provide a more balanced ongoing even process for setting aside those funds which are likely to be necessary rather than being faced with a situation say two, three, four, five years down the line where a very major capital expenditure is required in order for the facility to function properly and no money has been set aside and so in that year that money suddenly has to be set aside making smaller ongoing provisions if it doesn't completely cover such costs it certainly mitigates that cost and takes some of the pressure off of people who are having to make those decisions at the time that those expenditures finally are necessary. We have suggested the potential for using tax increment financing funds that were made available from that district from diverting some portion of hotel tax monies that are collected either from the new hotels that have opened or from, you know, any grouping of that in any way that you would choose to. The reason that we have suggested those is because those are two common means of funding those types of reserve funds for other facilities. Other sources that you know obviously the facility itself to the extent that it does generate any operating surplus which it did last year for the first time, that would be an appropriate use to set aside some of those funds as well. The point I would simply like to make again is that since you retain control over the expenditure of those funds and the expenditures of the facility, that you're not necessarily taking money from anywhere else that you're not ultimately going to have to take as long as you're making an accurate provision as long as you aren't overwithholding or over reserving for your capital needs; ultimately it's money that you're going to have to spend. We are simply recommending that it be set aside on a more orderly basis. One issue that really gets back to the reason I think in part that we have been hired twice in fact, this time and the previous time, is a recommendation at a work shop between the EDA, City management, facility management, whatever parties you consider to be appropriate, we would consider all three parties to be appropriate to create a mission statement for the center and I would like to be specific in saying that I'm not talking about just a typical mission statement of a couple of sentences or a paragraph that speaks in glowing and very vague terms about the goals and objectives but something more specific regarding the purpose of this facility, why it's there, and what ir's expected to accomplish and under what circumstances. And again the reason for that is obviously there are changes over time and management of the facility and management of the City and in the structure of the commission itself. There have been changes in the structure of the commission since I began this engagement. What this does is provide a foundation so that all parties involved know the historic purpose of the facility, that doesn't mean that they are bound to that purpose; that purpose can obviously be changed in the future, but at least there is a foundation for 8/25/97 -4- Transcript of Mr. Klas, Marquette Advisors Exhibit A knowing why it was that you got to where you are. It's also a basis for measuring whether or not you are in fact achieving what it is that that was originally intended. There is some sense for what the original purpose of the facility was, but it was never committed to paper to my knowledge and it's our experience that the original purposes have somewhat been lost with the departure of the people who were originally involved in the project. An additional facility- related recommendation is to increase parking as funds become available. This is a difficult recommendation to make. We make it simply because it's a necessary action for the complex. The parking at the facility right now is at or somewhat below capacity levels, often. If you increase meeting spaces, we recommended that will become more of a problem. It's particularly difficult obviously in the winter time. During one of our visits there to do our work there was a large function there, and I was fortunate to find a space myself but there were a number of vehicles for a function and attendees parked along the access road and this was in January and it was a very long and cold walk for those people. Obviously, with future capital needs simply to maintain operations and with the historic operating performance of the facility, that is a difficult choice to make but it is one that as you move forward you're going to find increasing pressure to take a look at so it is something that effectively I guess this recommendation is more of an early warning signal that that is something that is out there that's going to be an issue if in fact this facility continues to improve and generate further business which it certainly is capable of doing, over time that's going to become more of an issue. There is a recommendation regarding communication with Brookdale Center to improve communications with the center. One of the charges that we were given was to look at the l n interaction between the complex and the surrounding community particularly lodging g g in the surrounding community but also restaurants, retail, etc. We found that the interaction was very much positive with lodging and food and beverage facilities in the community that the facility creates a net benefit for the private businesses. With regard to retail, and particular with the regard to Brookdale Center, there is no discernable impact positive or negative there is no competitive impact between functions at the center and functions at Brookdale: They are booked from different sources and they do not tend to overlap. There doesn't seem to be any noticeable positive benefit either. There did seem to be some interest on the part of marketing staff at Brookdale Center and increasing their relationship with the Earle Brown complex. It is certainly conceivable and would be easy to create coupons or other marketing shopping incentives to entice people attending functions at the complex or staying at the Inn to go over to Brookdale. This is obviously not a major impact on either facility, but it is one area which could be improved. the complex and the surrounding community and clarifying its purpose to the surrounding community that would be considering a change for the name of the complex and taking whatever steps are viable within zoning and other ordinances to improve its highway signage. It is in a fairly visible location, never the -less its signage is not entirely clear, it is not immediately obvious what you are driving past, you can 8/25/97 -5- Transcript of Mr. Klas, Marquette Advisors Exhibit A easily see it but you don't know what you are looking at. Of even greater importance though is the name of the facility, and I'll freely relate to you that even today I was at a function before coming here and I mentioned that I was coming here and what I was coming to do and I was speaking with a woman who owns a travel agency here within the City and is obviously very aware of travel related businesses, hotels, convention facilities, restaurants, etc. and she had no idea. She assumed that this was some sort of a historical society type of function and had no idea that this was a convention facility just by virtue of the name and by lack of awareness. I understand that obviously the name was chosen when it was created and there may be some capital in that and it may not be something you are willing to do and that there may be some limitations on signage and I'm simply telling you that there is to this day yet some lack of awareness as to exactly what that complex does and what it has to offer, and there is a limit to the funds available to explain that to the general public, and there is one very easy step to take which could help improve that. What exactly the name would be, I don't know, but presumably it would be some sort of a name that would more clearly define what the function is and the example that we used in the report was that you already have the Inn on the Farm which is obviously far more clear in terms of what people are coming to see and some sort of similar name particularly for the convention facilities for the consideration. It's not a recommendation that is listed in our report specifically as a recommendation but we have separated and discussed. I alluded earlier that we looked at the interaction between the convention center and the hotel industry in the community. It was our finding and recommendation that the hotel industry is fairly vibrant at this point, it's very active in terms of new development and that given its operating performance as it stands now and the degree of interest in private development within the community, that taking steps as a commission or as the City to offer extraordinary assistance to specifically entice additional lodging development immediately adjacent to that complex or as a part of that complex was not something that we would recommend. We felt that it would be placing undo pressure on private development within the City and that it was not the benefit that you would obtain in terms of improved performance at the convention center was not worth that level of impact at this point. What I want to be very specific about though is that I am not discouraging lodging development near the complex or at the complex if in the course of normal market events a private business or private developer shows interest in creating such development, I would not discourage such development and it would not at all be inappropriate. I'm vying for the City to take the types of steps that it would normally take for similar type of private lodging development elsewhere. The extent of our recommendation and conclusion pertains specifically to an aggressive effectively marketing program for the City to try to entice a developer and to provide them with more than what the City would normally provide in order to get them specifically to go to that location. That's really the summary of our conclusions and recommendations and again I think they are very much similar to what we originally provided you back in April or May. I hope you have had an opportunity to go through the report, and I'm very much willing to take any questions or deal with any issues that have arisen from reading that. 8/25/97 -6-