3.0. SR 10-17-1996 - Laserfiche WebLink

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Page 2 The second option is the issuance of gross revenue recreational facility bonds, Minnesota Statutes, Section 471.191. These bonds are repaid by the "gross" revenues of the facility. The City pledges that it will continue to operate the facility while bonds are outstanding (here 20 years). This pledge requires the City to pay operating costs should gross revenues be insufficient to pay both debt service and operations. For each option we have structured a debt repayment period of 20 years. Because this is not a general obligation offering and bondholders rely solely on revenues of the facility, in order for the bonds to be marketable certain financial conditions will have to exist; such as a funded one- year, debt service reserve, and revenues exceeding debt service by an appreciable margin, coverage, at a minimum of 125%. The preliminary estimates of project costs, financing costs and MSF contributions are as follows: Project Costs Capitalized Interest Reserve Fund Costs of Issuance Discount Subtotal MSF Contribution - 10% Total Bond Issue $2,100,000 190,826 205,188 54,066 44,365 2,594,445 <259,444> $2,335,000 Schedule A is enclosed as a preliminary estimate of the issue's structure and repayment. Risks to The City There are always risks when bonds are sold depending on revenues for debt service payments. A facility dependent on recreational revenues is more vulnerable than one with revenues from a more essential purpose such as water or electricity. Schedule B is a summary of the MSF pro forma. Using the conservative totals, we have the following comments: 1. Volleyball and associated gym recreational activities are estimated at 27% of total revenues. 2. Ancillary revenues from the pro shop, snack bar/lounge, video games, vending machines and batting cages represent approximately 28% of total revenues. A significant share of these revenues could be assumed to be linked with the volleyball operation. 3. Fitness center revenues, with a projected 500 members, are estimated at approximately 30% of all revenues. 4. Other revenues from clinics, office rental and advertising are estimated at approximately 15% of all revenues. 5. Based on MSF experience in volleyball tournaments and programming, and our experience with other recreation facilities, albeit not volleyball operations, our review shows that all major cost categories are included. We believe additional questioning may be in order relative to the staffing levels and resulting payroll estimates. While these estimates may be accurate, a question exists as to how costs will be allocated between existing MSF staff and the staff of this