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85 E. SEVENTH PLACE SUITE 100 <br />SAINT PAUL, MN 55101-2143 <br />612-223-3000 FAX: 612-223-3002 <br /> <br />September 4, 1996 <br /> <br />SPRINGSTED <br />Public Finance Advisors <br /> <br />Mayor Hank Duitsman <br />Members, City Council <br />Mr. Patrick Klaers, Administrator <br />Ms. Lori Johnson, Finance Director <br />13065 Orono Parkway <br />Elk River, MN 55330 <br /> <br />Re: Minnesota Sports Federation Volley Ball Complex <br /> <br />We have completed our preliminary review of the Minnesota Sports Federation (MSF) request <br />for assistance by the City. In conducting our review we obtained more detailed information from <br />the MSF though its representative, Mr. Pat Pelstring of Public Resource Group, Inc., and <br />conversations with other persons involved with competitive volley ball programs. The purpose <br />of this letter is to comment on the MSF pro forma estimates and outline risks to the City. We <br />also discuss potential financing options for the facility. <br /> <br />MSF has an advantage to other programs being developed in that they already have a program <br />in place and are conducting approximately 40 tournaments each year. They are currently <br />renting space where available and would move all of these tournaments to the new facility. <br /> <br />The Plan <br />The MSF proposes that the City bond for the construction costs for the new eight court facility <br />and lease it to the MSF for the cost of the debt service. MSF would make a down payment of <br />ten percent of the project costs and fund all equipment purchases. After the bonds are entirely <br />repaid the City would sell the facility to the MSF at an agreed upon price. The MSF would pay <br />for all annual operating and maintenance costs of the facility. <br /> <br />Capital Financing <br />The City has two potential financing options, exclusive of a referendum-approved process. The <br />City/EDA can issue lease revenue bonds secured in large part by lease payments from MSF. <br />While this is a potential approach, its actual use for this project may prove very challenging in <br />achieving a marketable issue. Given recent defaults in lease revenue transactions for <br />recreational facilities, investors carefully scrutinize the essentiality of the facility, the revenue <br />and expenditure performance estimates and the potential for competing facilities. This option <br />requires more analysis, once additional issues outlined in this letter are addressed. <br /> <br />SAINT PAUL, MN MINNEAPOLIS, MN BROOKFIELD, WI OVERLAND PARK, KS WASHINGTON, DC IOWA CITY, IA <br /> <br /> <br />