HomeMy WebLinkAboutCommunity Center - Correspondence (3)MBMO T0: William J. Brighton, City Manages
FROM: Charles A. Brown, Finance Director ~~rQ
DATE: April 9, 1986
SIIBJECT: Community Center (For April 14, 1986 Meeting)
Sa11y Bailie and Z discussed the Community Center today. A lot of ideas and
proposals have been presented over the last two years, and she and I believe
that perhaps it would be worthwhile to present some of these on one document.
This is not meant to be a total proposal; i*_°s a means of putting the Coaununity
Center operations in perspective.
Construction and Bonding
Apparently, Carmen Gintoli has said that for $2.S million, we can build the
Center, furnish it, and provide a gravel parking Lot. I believe the idea is to
ask the voters to approve a bond sale of $2.5 million. If the state gives the
City $1.5 million, we will build a $4 million facility including a paved parking
lot and landscaping. If the state does not give us a grant, we will build the
$2.5 million facility. Bond debt service of $2.5 million at 7.5% over 20 years
is about $245,000 per year.
Operating Costs
Personnel costs for a
of part-time help are
other operating costs
full-time manager,
about $91,000 per
are listed below:
a full-time secretary, and 1000 hours
year. That, along with rough estimates of
Personnel
Utilities
Telephone
Janitorial
Transportation
Promotion
Supplies and Misc.
Insurance
Annual Operating Costs
$ 91,000
25,000
2,000
20,000
5,000
5,000
20,000
10,000
178 000
Depreciation has not been included, but may be accounted for depending on fund
structure
~ „ `t
ev nue
Cer assumptions must be made in order to make revenue estimates. For the
most part, the assumptions were provided by others. I am unable to vouch for
their reliability, but we have to start somewhere.
ASSUMPTIONS: Annually, we would have 10 large conventions (350 people) and 15
small conventions (150 people). All conventions will last for 3 days.
Large conventions will use 3 meeting rooms each day. Small conventions will
use 2 meeting rooms each day. All conventions will use the ballroom. For
sales tax purposes, we°ve assumed that each person will spend 3 full days in
Kenai, and spend $150 per day in Kenai. (Sales tax would actually be
recorded in the General Fund.)
Page 2
Rental Estimates are:
10 Large Conventions:
Ballroom (5 X $400) + (5 X $600) $ 5,000
3 Rooms (10 X $125 X 3 X 3) 11,250
15 Small Conventions:
Ballroom (15 X $400) 6,000
2 Rooms (15 x $125 x 3 x 2) 11,250
50 Misc. Rentals (50 x $125) 6,250
Total Rentals $ 39,750
Sales Tax Estimates are:
10 Large Conventions (10 x $150 x 350 x 3 x 3%) $ 47,250
15 Small Conventions (15 x $150 x 150 x 3 x 3%) 30,375
Total Sales Tax $ 77,625
Catering Percentage 8 000
Bed Tax: Some people have proposed a bed tax of,
say, 5%. That would be about $3 per room.
After currently planned construction, Kenai
should have about 240 rooms available.
240 x $3 x 180 days (50% occupancy) 129 600
Other Considerations
In the coming 1986-87) budget, we are appropriating $210,000 for the 1974 G.O.
Debt. That is the last time this will be needed. A person could argue that the
debt payments on the new bonds will more or less replace the debt payments on
the old bonds and that the contribution from tax money is therefore reduced. I
certainly wouldn't dispute that, but I might go on to say that the $210,000 not
needed in 87-88 could be used for any general government purpose (debt service
being one of them).
Summary
Based upon the above discussion, we can summarize as follows:
Revenues:
Rentals $ 39,750
8a'Les tax 77,625
Catering percentage 8,000
Bed tax 129,600
Total Revenue 254,975
Operating Costs (178,000)
Excess of Revenues over Operating Costs 76,975
Debt Service (245,000)
Excess of all Costs over Revenues $ (168,025)
If we initiate a bed tax, and the sales tax figures are even close, the revenues
are probably there to support the operation (not the debt service).
If we accept the arguments put forth in "other considerations°' above, and use
the $210,000 of money not needed for the 1974 Debt for the Community Center
debt, I think a person could reasonably say that this project has a good chance
of not forcing a property tax increase.
Page 3
I don't think you can say that it will support itself. The bed tax is certainly
not all attributable to the convention trade and, therefore, will not be a
revenue of the Center. But, the revenues, from whatever sources, might be
available to avoid a property tax increase.