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r'ity of <br /> <br />iver <br /> <br />FROM: <br /> <br />DATE: <br /> <br />SUBJECT: <br /> <br />MEMORANDUM <br /> <br />Mayor & City Council <br /> <br />Lori Johnson, Asst. City Administrator/ <br />Finance Director <br /> <br />October 15, 1996 <br /> <br />MSF Worksession <br /> <br />The Minnesota Sports Federation (MSF) has requested that the city <br />participate in the financing of a proposed sports facility to be constructed in <br />Elk River. Bond Consultant Dave MacGillivray of Springsted and I have <br />reviewed the proposal and offer some comments on the project. Our <br />comments relate to the financial status of MSF as presented by MSF, <br />financial feasibility of the project based on the pro forma provided by MSF, <br />and the implications to the city if it chooses to issue bonds for the <br />construction of the facility. Attached is a letter from Dave MacGillivray on <br />his review of the project. This memo will briefly highlight some of <br />Springsted's issues and other financial items related to this project. <br /> <br />As I stated, MSF has requested that the city issue bonds to finance <br />construction of the facility. As Dave's letter indicates, the bonds would most <br />likely be gross revenue recreational facility bonds. All revenues generated by <br />the facility would first go to pay debt and the remaining revenues would be <br />used for operation. The city would be required to fund any operating <br />shortfall if there were not sufficient revenues available for both debt service <br />and operation of the facility. <br /> <br />In the bond schedules prepared by Springsted, a 10 percent MSF <br />contribution is included. It is important that the city not proceed with the <br />issuance of bonds until MSF has met this obligation. If it is determined that <br />annual MSF revenues will not be sufficient to meet the debt requirements, <br />MSF could contribute additional funds to make the project feasible. <br /> <br />Other issues raised when reviewing the financial information include the <br />following: <br /> <br />Memberships. The first pro forma indicated that club <br />memberships were 30 percent of the revenue stream. Is the <br />Council comfortable that 200-300 memberships can be sold each <br />year? (This was decreased by MSF from MSF's original <br /> <br />13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425 <br /> <br /> <br />