SPECIAL JOINT MEETING OF THE COUNCIL OF THE CITY OF NOVI

AND THE NOVI PARKS AND RECREATION COMMISSION

MONDAY, DECEMBER 18, 1995 AT 8:00 PM EST

ACTIVITIES ROOM - NOVI CIVIC CENTER - 45175 W. TEN MILE ROAD

 

 

 

The meeting was called to order at 8:05 PM by Mayor ProTem Crawford.

 

 

Mayor ProTem Crawford indicated Mayor McLallen was passing out the Tree Lighting Awards so the record should reflect that all Council Members are here except the Mayor and Councilwoman Mutch.

 

 

CITY COUNCIL

ROLL CALL: Mayor McLallen (Present), Mayor Pro Tem Crawford (Present), Council Members Cassis (Present), Clark (Present), Mutch (Present-arrived late), Mitzel (Present), Schmid (Present)

 

 

PARKS & RECREATION

ROLL CALL: Chairman Pheiffer (Present), Commissioners Atiyeh (Present), Colligan (Present), Koneda (Present), Racey (Present), Shaw, Jr. (Present), Staab (Present)

 

 

ALSO PRESENT: Edward Kriewall - City Manager

 

Dennis Watson - Assistant City Attorney

Dan Davis - Director of Parks & Recreation

Tonni Bartholomew - City Clerk

 

 

APPROVAL OF AGENDA

 

Mr. Kriewall said he would like to add two Resolutions that were passed out that evening by the Planning & Community Development Department. He said they sent City Council a memo last week about legislation that might knock out their grant application. Mayor ProTem Crawford said the Resolution for Parks & Recreation would be Item #3 and Resolution for City Council would be Item #4.

 

It was,

 

Moved by Councilman Clark

Seconded by Councilman Mitzel

 

 

For Tentative Approval of the Agenda.

 

(Voice vote) MOTION CARRIED

 

ITEMS FOR DISCUSSION AND/OR ACTION

 

1. Schedule An Executive Session to immediately follow Special Joint Meeting - Property Acquisition.

 

It was,

 

Moved by Councilman Schmid

Seconded by Councilman Clark

 

 

To schedule an Executive Session to immediately follow Special Joint Meeting.

 

(Voice vote) MOTION CARRIED

 

 

2. Proposed Ice Arena.

 

Mr. Dan Davis indicated he would begin with a brief synopsis. He said at tonightís meeting are representatives from Center Ice Management to bring Council up to speed and he was asking for some directions that night and possible action by Council to move this project forward. He said basically through the last year and a half to two years, they have been meeting administratively and through their legal counsel, developing basically three sets of contract documents, one being a Design and Build and one an Operational Agreement, and then a Management Agreement and they were looking at a project public partnership to bring this Ice Arena proposal to completion here for the City of Novi.

 

Mr. Davis said throughout the whole process, everything that the City has brought forward as far as recommendations, modifications and changes have been modified and brought into the contracts and documents that are included within the packet and the large packet was passed out at the September 28, 1995 Joint Meeting with Council and Parks & Rec Commission. He said following that, an Executive Session was directed by Council to ask the Center Ice Management firm to incorporate some caps on compensation within the contractual agreements and those things have been worked out and those items are reflected in the correspondence from Mr. Dennis Watson and follow-up correspondence from Center Ice Management dealing with those issues.

 

Mr. Davis said they were at a point now where hopefully some decisions can be made. He said obviously Center Ice is here and he asked them if they had any comments to bring forward to Council or asked Mayor ProTem Crawford if he had any preference as to how to proceed.

 

Mayor ProTem Crawford asked Center Ice Management if they had any information to present or he could open up the discussion for the Council and Commission and a gentleman from Center Ice Management indicated he would be happy to answer any questions. Mayor ProTem Crawford then opened up the meeting for questions.

 

Mr. Kriewall first explained for the new members of Council that the initial discussion on how to proceed with this project dates back two to three years at which time they met with the Bonding Attorneys and several other Consultants over a period of time to study and talk about alternative ways of approaching this particular project.

 

Mr. Kriewall explained the two ways it really boiled down to is exactly what Farmington Hills did, which was to vote a general obligation bond issue and to treat the project like a revenue bond issue, wherein all the revenue derived goes into the retirement debt and the operational costs of the project and Farmington Hills, the City of, actually owns that particular arena and they have hired appropriate staff to operate the arena and they have all seen enough information from Mr. Davis that he put together last week, indicating that it appears that the City would be able to meet their target, which provided that they could actually pay for the debt and pay for the operation of the rink without levying any tax millage.

 

Mr. Kriewall said he wanted Council to have that information from a historical prospective. He said they did look at that several years ago with their bonding attorneys and at the time, there was discussion between the Parks & Rec Commission and the City Council as to that bond versus doing a public/private partnership as proposed by Mr. Seyler and the Council chose to go in the direction of the public/private partnership and that is what they have been working on for the past couple of years.

 

Mr. Kriewall said he wanted them to know historically they did look at the other method and explored it and as they could see, that works equally as well and the City of Farmington Hills appears to be very successfully moving down that particular track. He said they did look at that track themselves a couple of years ago, but for various reasons, political and otherwise, City Council and the Parks & Rec Commission chose to pursue the public/private partnership and that is what they have been working towards.

 

Mayor ProTem Crawford said in their packet they do have on that particular proposal, some costs of implementing it as far as staffing and such, so if there are any questions along those lines, probably Mr. Davis could answer those questions because he thought he had gathered that information.

 

 

COUNCIL DISCUSSION

 

Councilman Mitzel asked what was their goal and were they trying to reach a consensus on whether they proceed with the private/public partnership.

 

Mr. Kriewall stated they have had some discussions with their City Attorney in the Executive Sessions to look at the contract documents, and he felt the attorneys have indicated that this other method was available and they do have some concerns about profits and profit incentives and how this other project is shaping up. He said they still have the alternative of going back to the original method. He said that was a policy decision made by the Parks & Recreation Commission and City Council, but there were some concerns that did surface and some of those concerns he felt they need to at least clear the air philosophically and move this project forward down one track or down this one.

 

Mayor McLallen arrived at the meeting at 8:10 PM and Mayor ProTem Crawford explained what the Council has done thus far.

 

Councilman Mitzel said given the two methods, either going out for a vote for bond or proceeding with the Center Ice Proposal, what would be the target opening date.

 

Mr. Davis replied he thought in both scenarios, but predominantly the one going out for a GO Bond to the voters, he was looking at the possibility of 1997, and realistically, he was shooting for September, 1996. He said September 1st is their typical start-up point for all their hockey classes etc., and that is when the contractual period starts and so forth and that was their target date and obviously that window is closing rather quickly. He said they still need to go through all the site plan review processes here in the City and there are still issues to be resolved out on the site and nothing has been done regarding that. He said some preliminary information has been gathered and provided. He said it would be very tight to meet that September, 1996 goal.

 

Mr. Davis said realistically they were pushing into 1997 and if they have it open and working by June of 1997, that will give them an opportunity to work out the bugs and get it open and operating and some management in place and contracts signed and things like that, and then really for a full year of operation by September of 1997.

 

Mr. Davis said if they go with the GO Bond, they would be looking at a September or November election period and that pushes them back anyway.

 

Councilman Mitzel stated then for the Bond Issue, the soonest would be fall of 1997 and with the Center Ice proposal, there is still a chance of Fall of 1996 or maybe winter of 1997, and Mr. Davis indicated it would be quicker with the partnership.

 

Commissioner Atiyeh indicated he was in favor of the private and working with Center Ice but his only concern, which he has expressed to Mr. Davis before and the Commission, was he didnít know Center Ice and he would still like to see a Balance Sheet from the Corporation and it was mentioned it was a shell corporation, and a shell corporation in his business is an empty company and Center Ice is the landlord to the City and the City is a landlord to them for the rent on the property and was he correct on that and Mr. Davis said no.

Mr. Davis then asked Mr. Terry Seyler from Center Ice to walk through the Flow Chart for everyone and explained how Community Clubs in Novi would be involved with that.

 

Mr. Seyler indicated mainly they were the developers/agent, for the City. He said there were three entities here: The City of Novi, and a main entity which will own and run it - The Community Clubs of Novi, and then he was the developer and manager. Commissioner Atiyeh asked if Community Clubs of Novi was non-profit and Mr. Seyler indicated Community Clubs of Novi was non-profit, and the Board of Trustees, except for one member, would be appointed by the Council, and the Manager will have one representative on the Board of Trustees to maintain communication between the Manager and the Trustees.

 

Mr. Seyler indicated they will operate as a Consultant to Community Clubs, first as a design builder, to design and build the facility and to obtain the financing and once that is done, as the Manager of the Facility for a period of three years to maybe five years, it would be up to Community Clubs as to what they want to do and if they want to operate it themselves.

 

Mr. Seyler said but as an agent, it is not us that is financially responsible for it, and it would be the Community Clubs and as a builder and developer, we will provide the appropriate bonds to guarantee that it is done, but it is not our responsibility, beyond lending $100,000 at front end, to take any financial liability beyond that. He also pointed out in the original submission that he did do for the City in response to the RFP, all information was provided such as the Balance Sheets, etc.,

 

Commissioner Atiyeh said the only organization on the hook to the City would be the Board of Trustees or the Community Clubs of Novi and Mr. Seyler indicated that was correct.

 

Councilman Schmid asked if this project fails, who is going to be responsible and Mr. Seyler indicated Community Clubs of Novi and Councilman Schmid asked who is responsible to the Community Clubs of Novi, and Mr. Seyler said the Council will be appointing the Trustees that will be the controlling entity and Councilman Schmid asked who is going to pay the bill for this project if it goes bust and Mr. Seyler indicated if the project doesnít fly financially, the people who buy the bonds will not get repaid and Councilman Schmid asked if there was any recourse for that and Mr. Seyler said there was no recourse other than the operations and the income.

 

Commissioner Atiyeh said he heard mentioned a General Obligation Bond and he asked what kind of bond were they speaking of. Mr. Seyler said a General Obligation Bond, and Commissioner Atiyeh said that puts the whole City on the hook. Mr. Seyler said that is not what they were talking about and they were talking about a revenue bond which is secured by the revenue from the facility. Commissioner Atiyeh asked if they were going with an Economic Development Bond or something similar and Mr. Seyler said it was similar.

 

Commissioner Koneda asked doesnít the facility become part of the equity and Mr. Seyler said no because the facility is on land owned by the City and the bond holders have a lease-hold in it for a period of the lease and under the terms of the lease, and if they donít maintain the terms of the lease, obviously the control of it goes back to owner, which would be the City.

 

Commissioner Koneda said to Mr. Watson if Community Clubs of Novi canít pay the bond interest, the bond holders go after the Community Clubs and if it is broke, they canít go to the City.

Mr. Dennis Watson explained what they go after is the facility. Commissioner Koneda agreed and said that was his point and that is as far as it goes. Mr. Watson said and any money the facility can earn.

 

Commissioner Koneda said the land is still held by the City of Novi and they canít go after that and was that correct and Mr. Watson explained one of the provisions of the lease is that the interest in the land will be security for the bonds and there is risk and the land is a risk.

 

Commissioner Koneda said so not just the facility and it includes the land, so in a worse case scenario, the City could lose the land, the 15 acres. Mr. Watson said that was possible, but the City would have a recourse to pay off the bonds too, to make up whatever revenue the facility is not making in order to make those payments.

 

Councilman Schmid said one of the problems of this project is exactly what is happening right now, and the developer is saying no, their attorney is saying yes, and for some reason he has a fear of this project, although it has been studied for 2 1/2 years. He said the Council still doesnít know too much about the developer, and he was still confused as to how they pay it off if it goes bust and no one seems to know. He said he was not blaming the attorney or the developer, but someone has to be right and they should know if someone wants action that evening.

 

Mayor McLallen asked Mr. Watson, Mr. Davis or the Petitioner, if they could answer precisely Councilman Schmidís question. Mr. Seyler said the issue is a matter of law and he would rather defer to Mr. Watson, but in the lease, he didnít know of any provision that says it could be waived by the bondholders, but in a court action it was a question of law whether they could come after us. He said he would have to defer to Mr. Watson, but he didnít know of anything and it was always his understanding that the land was not really a risk.

 

Councilman Schmid asked Mr. Seyler if he could tell him his experience in building ice arenas and managing them or being responsible for them. Mr. Seyler said he has been responsible for approving and managing one ice arena and that was in the City of Detroit a place called Highland Field. Councilman Schmid asked if it was still in operation and Mr. Seyler replied it was not and it was built as a temporary facility for a program that was in dire need for ice, so he put it up and operated it for one year. He said he did have experience in real estate development operations, and ice rinks are not that much different than real estate.

Councilman Schmid asked Mr. Seyler where would he obtain his expertise of building an ice arena, in building the equipment, and the proper base for the buildings and proper refrigeration, etc.

 

Mr. Seyler indicated the gentleman who is going to do the ice rink has built ice arenas at the Detroit Skating Club, one in Farmington Hills, one in Toledo and he just finished one in Royal Oak.

 

Mr. Watson explained the provision of the lease deals with the fact there is going to be a mortgage on the premises. He said in the case of the Intent, Community Clubs has agreed to build and own a community oriented double rink ice arena facility on the land that is the subject of this lease. In order to obtain necessary financing for the construction and equipping of said facility, it will be necessary for landlord to subordinate its right to receive rental payments under this ground lease as good faith security toward the repayment of the debt service on revenue bonds proposed to be issued to finance said construction. Landlord hereby agrees to consent to the subordination of its right to receive rental payments under this ground lease to the interests of the holders of the revenue bonds.

 

Mr. Watson said he took that to mean the Landlord is going to put up his interest in the land. He said if Mr. Seyler believes that the financing can be obtained only by subordinating the right to rental payments and not by subordinating the land itself, he would be more than happy to clarify the language and he felt that would be much better for the City to eliminate that risk.

 

Councilwoman Cassis said her question was for the Attorney and she also read in one of the opinions to them that there was a concern about the ability for the rental payments to be paid on a timely basis and that if the revenues were not flowing, that the rental payments would be one thing that could be defaulted.

 

Mr. Watson said the revenues from the facility are going to be needed, not only to operate the facility, but to make those payments and pay those revenue bonds and also to make the rental payments. He said if there is not enough money to go all the way around, the rental payments are going to be deferred.

 

Mr. Watson said in other words, they wouldnít be eliminated and they would just be held off for awhile and would accrue.

 

Councilwoman Cassis asked if that would be related to a mechanism regarding the Cityís risk and you just mentioned either to do it by way of the rental payments or subordinating the property.

 

Mr. Watson said if it is possible to obtain the financing only by securing them through the right to rental payments, that is much better and the property wouldnít be at risk.

 

Mayor McLallen asked if anyone has done a cash flow or a business plan and Mr. Seyler said he did and Council had received copies of it last year, last September, and he did a feasibility study and they have actually updated that and then he did another one this spring.

 

Mr. Seyler said in the contract package, there is a copy of the original proposal, which does have some financial projections in it and it was almost three years old, but you do have some, and Mayor McLallen said you donít have anything that has been updated and Mr. Seyler said he had them in his office but didnít bring them.

 

Mayor McLallen said in this particular Budget, it seems that the Councilís immediate control is over the Community Clubs of Novi and could he bring them up to date as to why they are and if they exist or going to exist, or how are they coming to exist.

 

Commissioner Pheiffer said they would be appointed by City Council and once the project is approved to go ahead, then the Council would appoint members and in the contract he thought it specifies 8-24 members and there are certain requirements. Mayor McLallen said there are a number of people that are already anticipating interviewing for that position.

 

Mayor McLallen said her concern was that his flow chart looks like they should be dealing with them and then they with Center Ice Management.

 

Mr. Davis indicated there is no question that the appointment of the Community Clubs of Novi is going to be a very important appointment in the process of the City of Novi and that will be a board and it would be a non-profit group that would oversee the aspirations of the facility in a similar fashion as to how the EDC works for the City of Novi. He said they anticipate in the process as outlined anywhere from 8-24 people could be appointed subject to the discretion of the Council. He said as he indicated previously, that could be a wide range of individuals from a community who have a varied background, some in financial, planning analysis, business operations, and he felt they would find a selection of candidates that are available and who have shown a willingness to want to start, so they will get that process and they will be charged with that responsibilility to deal directly with Center Ice.

 

Mayor McLallen said after that, the rest of it is really is up to Community Clubs to get a proposal together and report the details. She said the issue right now is really back to the very beginning and does the City as a City, want to go into the ice arena business or do they want to merely be a leaseholder to a private development, and they were still not able to set the balance.

 

Mr. Kriewall said he summarized how they got to this point earlier, but he felt Council at the time said here is one issue and just get into the private sector and see if it works because they want to be voting on community pools and road bond issues and several other things, and the fire millage is coming so they felt they should get into the private sector. He added that Councilman Tim Pope was a strong proponent of having the private sector.

Mayor McLallen said she agreed with that, but as the City Councilís primary concern, what is the ultimate risk to the City, and even though it may be a cost-effective way to deliver a service based on the user fees, it would allow the Council to cut down a lot of time and deliver a service. She said it appears though that there is still some hesitation as to what the risk is.

 

Councilman Mitzel said the risk is if they go with the General Obligation bonds and if the facility fails, it would mean a tax would have to be levied to pay off the revenue, which means basically the City would have to pay off the bonds. He said with this method if the revenue isnít sufficient to pay off the bonds, there is the possibility they could go after the facility or the City has the option to step in and pay off the bonds, just the same way the General Obligation bonds would be paid off by the City. He said the only difference is with the General Obligation Bonds, they are being pre-authorized to levy a tax in case they need a tax, but with this route, they would have to find the funds or let the facility go, so either way if it totally fails, it still comes out of the City pocket. He said it was a little different mechanism on how it would be paid, but it would still come out of the City pocket.

 

Chairman Pheiffer said he wanted to comment that they had spent considerable time Thursday evening in their Commission meeting discussing this and the Commission was under the opinion for the last two years, that the decision up front was this seemed to be the least risk for the City and seemed to be the fastest way to get it up and going. He said they were under the impression that it was just a matter of working out the details of the contracts, because it was just only within the last couple of weeks here that they became aware there was an issue of whether they were going to go back to a GO Bond type of approach and in their meeting Thursday, they came to a consensus that they were at the same place they were at two years ago, and they feel the public/private is the least risk to the City and the fastest way to get it going and they recommend that is the way to proceed.

 

Chairman Pheiffer said the one thing that came up this evening and he didnít think they followed up on, was the potential for the risk of the Cityís land, and they could indeed reword that to eliminate it and again he thought they could just change the words to reflect that the land wouldnít be part of the entire goal if the payments arenít made, and was that something that would be acceptable.

 

Mr. Seyler said he wasnít about to sit here and try to negotiate. He said that language was put together not only by his attorney but by First of Michigan and they have to go back to them to see if they could sell the bonds. He said his understanding of it was if there was a default, the bondholders would have up to a 20 year term of the lease to use the facility and make the money back, but after the end of the lease, the land ownership, their interest in the land, would end. He said that is the way he understood it. He said there may be a possibility of going to court and doing something else, which he couldnít address.

 

Mr. Watson indicated that if Michigan National is comfortable that bonds can be marketed under that type of arrangement, he felt that would be much better.

 

Commissioner Atiyeh said Mr. Watson mentioned that the bonds were subordinated by the land and now is that correct or not, because that is the whole crux of the problem here, either they were revenue bonds or they were subordinated revenue bonds or they were subordinate bonds.

 

Mr. Watson said he read in the provision that the landlord has to subordinate its interest in the ground use as including its interest in the land. Commissioner Atiyeh said so as it sits right now, the land is at risk and Mr. Watson said yes, but if that is not intended to be the case, it can be readily reported. Commissioner Atiyeh said he would have to go back to the bond issuers to see if they agree with that or not and it canít happen that evening in other words.

 

Mr. Seyler asked his attorney to address this matter, and his attorney stated he was not involved in the negotiations on this lease, but this Paragraph 22 is pretty clear and says it was subordinated by the Cityís interest in the ground lease and this is the ground lease agreement and it has a 20 year term, so what they were really talking about is a 20 year interest in the land, which is a substantial interest, but to keep in mind that these bondholders are going to want some security, and he didnít think that First of Michigan is going to want to take away this.

 

Mr. Watson said no one is suggesting that it go without any security, but there is no question that they are willing to go with simply the rights to payment under the lease as their security, and he felt the language should be modified to make that crystal clear.

 

Commissioner Shaw asked if he felt that the bond would fly without the security of the land and Mr. Seylerís attorney replied he was saying there is no security, and the security is this lease agreement itself and this Paragraph 22 is part of what is called a ground lease agreement. He said it was a 20 year term with provisions for extensions when payments are made, but if there are no payments, then it was a 20 year term, so it was a 20 year interest that the bondholders would have and after 20 years, it would come back to the City.

 

Commissioner Shaw said it was not really interest in the land then and it was just interest in the lease and that makes a big difference and he felt they really could lose the use of the land for 20 years.

 

Mr. Watson agreed that it was a huge difference and if that is how they are interpreting the agreement, then it should be reworded to clarify.

 

Councilman Clark indicated he was not opposed to the concept of an Ice Arena. He referred to City Government and said the purpose and intent to provide recreational facilities for the citizens of their community is an excellent idea, but at the same time, he didnít think they should be trying to be all things to all people at the extent of putting the public, i.e., the taxpayers of the community, at substantial risk. He said as the lease agreement stands now, someone is saying one thing and then someone is saying something else, so obviously they were not in agreement as to what it means and what it means is crucial because it could create some substantial liabilities for the taxpayers in this community and also cause the taxpayers in this community to lose a substantial corporate asset, i.e., a large chunk of the Cityís land if their assumptions were incorrect.

 

Councilman Clark said so he felt that definitely has to be clarified before they proceed and he was real concerned about that, and not with the concept and not with the idea, but how it was done and what the exact obligations for potential exposure they would be creating for the community and that was a real concern that he had. He said until that is clarified, he had some serious reservations.

 

Commissioner Koneda asked how many acres are they talking, and when they started they were talking 5 acres and what are they talking about that night and Mr. Davis replied it was about 15 acres.

 

Commissioner Koneda said if the condition arises where they have to forfeit the ground lease, they no longer have a ground lease arrangement with the building, so there is no payment that comes to them and the people who would then take over the lease, to his understanding, would control the building until the term of the ground lease expires, which is 20 years, and then they would give it back to them, but for that 20 year period, they wouldnít have any control. He asked if that was correct and they would forfeit the rights of the lease.

 

Mr. Watson said they were forfeiting the rights and what Mr. Seyler is indicating is they would secure it simply by the right to the lease payments, and Commissioner Koneda said so the payments would be back to the City and Mr. Watson said once the debt is paid off. Commissioner Koneda said the Community Clubs would no longer exist and Mr. Watson said they would still exist.

 

Commissioner Shaw said he would like to remind them where they were in September of 1994 and they had a very similar situation where they sat around and talked about defaults and road default and what the financial aspects of the ice arena operations would be, and Mr. Seyler made a presentation at that time, showing a large demand and all the studies and finances involved, and at that time, they all began to feel very comfortable with the studies and not only the ones the Study Committee had put together, but what Mr. Seyler put together for Center Ice Management.

 

Commissioner Shaw said the ice rinks have gone up considerably more than the rate of inflation or the rate of wages, so he felt there may be more profit than in the past.

 

Commissioner Shaw said they were getting very concerned about the risk of failure and looking at the failure and looking at the financial projections, he would like to remind everyone that they were not really looking at a high risk of failure in this operation and if a City such as Farmington Hills can run it as a City operation and still clear $15,000 with all of their burdens that they have to follow, turning it over to private management would indicate that they would certainly be turning more profit.

 

Commissioner Shaw said that is what they were looking at and if the City can do it, private management can do it better and he felt they have all agreed to that in the past, so their risk of financial obligation to the City becomes that much stronger to do this as a City-run operation. He then said Mr. Seyler has some numbers that he could remind them of that night as to what the financial projections were, but the numbers they were seeing as far as profits from the Arena were very favorable and he felt they were looking at a very slight change and he agreed they need to clarify the language and when he read it, he thought it was clear. He then asked Mr. Seyler to remind them of what the projections were.

 

Mr. Seyler said in the projections, he has done a three-year out period and assuming that the first year they would catch the cream of the crop and run all the premium time that is under a great deal of demand, he assumed it would take them an additional two years to bring them to what they call a "stabilized income position." He said considering minimal inflation and ice rates, practically the ice rink inflation since they did the original study a year or 15 months ago, was well more than their projections, and they show a $60,000 profit, generating to as much as $400,000 at the end of three years. He said that $400,000 could go $600,000 if they wanted to make the assumptions that they charge the maximum rates for everyone.

 

Mr. Seyler said at that point, they would make a decision on how much do they want to charge people for rent, and should they give a special rate to the high school, special rate to their young children and things like that. He said after three years, when they get a stable income, they could determine if they want to take this cash flow and if they want to generate $400,000 or $500,000 or $600,000 a year to use for some other purpose or do they want to maintain a steady cash flow filled reserve for operations and debt service and maintain the service to the community and ice rink, and that becomes a policy decision that they could make at that time.

 

Mr. Seyler said over time, if the ice rink continues to go the way ice has gone over the last five to ten years, they could be generating a million dollars a year out of that, and they could do like some other communities have and they could generate a lesser amount and maintain a more steady supplier in terms of price rates for the citizens and the ice rinks. He said those are decisions that they have to make, but every rink that has been built has generated this level of business that he has projected at the rate that he has projected and the rates today were built under a technology and a cost-efficiency that the rinks, even five years ago, couldnít even imagine in terms of efficiency and electrical efficiency, conservation of energy, and other things that bring the prices down and the costs down. He said so there is no reason to believe that the numbers are not real.

 

Councilman Mitzel asked Mr. Watson about the changes that have been requested and whether they have been incorporated in the lease agreement and there were four changes listed there that they had agreed to.

 

Mr. Watson said they were agreed to with two minor changes. He said one change was there were caps on the architectural engineering fees of $250,000 and on the construction fees of $350,000 and there is at Mr. Seylerís request one exception, an exception that applies to both of those and the crux of those was if there were changes to the design of the facility after they were in process, the cap would not apply to that and then under the current proposal, the restaurant and pro shop are not built out and they are anticipating leasing it out to a third party to operate those facilities.

 

Mr. Watson said they are suggesting if for some reason Community Clubs wants this built out and operated by Community Clubs, there would be additional compensation for that.

 

Councilman Mitzel felt they were at a point where they have to decide whether they wish to proceed with this concept of a private/public partnership construction of an ice arena in the city and it still seems to be a good way to go and he would make a motion.

 

It was,

 

Moved by Councilman Mitzel

Seconded by Councilman Crawford

 

 

To ask the City Attorney to clarify the language in Section 22 and the legal documents for authorizing this development come forward to the City for a City Council meeting in January.

 

 

DISCUSSION

 

Mayor McLallen said the Council moved to send this project forward and have the attorney clarify Section 22 in the language and come to the first meeting in January.

 

Councilman Mitzel explained his motion was to ask the City Attorney to clarify Section 22 and the legal documents for adopting this to be brought to their first meeting in January and to bring it to the table for Council action.

 

Councilman Clark discussed the correspondence at the table that evening and stated he was missing pages.

 

Mr. Davis apologized and indicated he had the originals and he could provide everyone with copies if they wish that evening and it would take him a few minutes. Councilman Clark said his only concern was that he would like to see the full letter from Mr. Seyler. He said the Council was being asked to give their support and approval that night but literally, he was groping in the dark.

 

Mayor McLallen said Councilman Mitzel would like to restate his motion for everyone.

 

Councilman Mitzel stated the intent of his motion was to have that one section clarified and bring the whole document for Council Action at their meeting in January and they were not approving anything that night and they were just saying to place it on the Agenda for the first meeting for consideration at that time with the clarifications.

 

Councilman Mitzel said his understanding of the letter of December 4th was that Mr. Watson would clarify that all four of those conditions have been changed.

 

It was stated those changes were made and the entire agreement was in the book here. Councilman Mitzel said the memo outlines the pages that were changed in the agreement.

 

Mr. Watson said Mr. Seylerís communications were the proposed changes.

 

Councilman Clark asked if they would have the entire agreements in it and also the partial construction contract. Mr. Watson indicated the entire agreements are in the larger packet. He said what is intended to be attached to Mr. Seylerís letter were copies of those pages that were changed with the corrections shown.

 

Mr. Davis said basically the changes were a part of Mr. Seylerís letter and just the changes that were requested by the City Attorney and those would be inserted into the larger booklet and he felt basically what Councilman Mitzel has indicated, within his motion, was they would go back and produce a complete up-to-date booklet with all modifications for everyoneís benefit and that way everyone would have that prior to any further action by Council.

 

Councilman Schmid stated this has been worked on for two years and this is the only show we have on paper right now. He said after seeing the contracts, it seems extremely lucrative. He said but nothing has been brought forward by the Administration or anyone else that would give this Council any possibility of giving any other thoughts to anything else, so from that standpoint, they have no choice but to go forward, which he was comfortable with.

 

Councilman Schmid said there are however, several revisions, notwithstanding the huge book they have that is still unclarified and there are some issues that should be brought forward and he would hope that when this is discussed somewhat seriously at the meeting in January or whenever, someone would stand up before the Council and walk him through it as to what happens first.

 

Councilman Schmid said he would like to know what happens first, and then take him through the entire project. He indicated he wants to know exactly where the money is coming from, what takes place before the Community Club is appointed by Council, and what takes place after they are appointed, and at what stage are they appointed that they become part of this whole concept. He said the building design, including all the buildings, must meet the Cityís standards and ordinances, including the exterior of the facade and it should be a quality development.

 

Councilman Schmid said there was a big issue that was brought up about a week ago about a restaurant and the developer almost out of the blue said he wanted a 250-300 seating capacity of a restaurant for parties, etc., including a liquor license. He said that should be clarified as to exactly what the developer or whoever was going to ask for at that time.

 

Councilman Schmid said he needed sufficient information that he could make a reasonable judgement of what is really going to happen down the road. He said if someone wanted 250 seat restaurant or maybe additional rooms/meeting rooms, that has to be up front and the Council has to decide if that is what the City wants and if they want to give him the liquor license and he wasnít opposed to any of those things, but he felt that was something that has to come out up front.

 

Councilman Schmid said Mr. Watson indicated that was not billed out in the design of this $250,000 cap or the $350,000 cap and he would ask how much would that cost, and that was an open door now, so they get $250,000 and that is all they are going to get, but if they want that restaurant, which they will probably want, now the cap is off again, so he felt that has to be clarified and he asked couldnít a figure be put on that. He said if that happens, can we say that it is going to cost $275,000 or $300,000. He said it seems there are a lot of loose ends here that probably could be closed without a major problem.

 

Councilman Schmid felt it should be clarified with a comprehensive report back to the Council and the community as to what was being proposed. He felt the concept has merit, but there is a lot of clarification that is needed and timetables too.

 

Councilwoman Cassis said the concept of a public/private partnership arrangement has been something that she has certainly supported and there was no question about the desire for an ice rink in this community and there are many people who have indicated that is something they would really like and desire and she was certainly in favor of such.

 

Councilwoman Cassis said there has been two years of background on all of this and she firmly believed they need to dot all the iís and cross all the tís. She said in reading through this document, it was very detailed and confusing and she would like it simplified the best that could be done as to the Cityís contribution or obligation via the Ice Management. She would also like to know what Ice Managementís commitment is to the City so that in January, they would all be playing on the same level field and be able to go forward and they may still have some questions, but at least at that point, they would have something concrete to go by.

 

Councilwoman Cassis felt that will go a long way to facilitate this matter because she felt they were all hoping for it to go forward and the sooner the better and she did not mean to delay it but if this has been delayed two years already, there must be very good reasons why it didnít get further until 1995 and she didnít know what those reasons were and maybe they were not even pertinent anymore, but she certainly wanted to be able to see this simplified and to know exactly what the Cityís risk is, what Center Ice Managementís risk is, and get it all out on the table and then move forward. She felt it was a very good productive discussion that evening, but she felt several questions were asked that make it seem that by the time they get Mr. Watsonís final formal language before them, they would need this other kind of background to be able to move on it.

 

Councilman Mitzel asked Mr. Watson to clarify or address the question about the restaurant and make it clear whether or not the language will basically allow Community Clubs at a future date, to venture into a contract with a third party or some other party as opposed to necessarily having to have Center Ice get an extra deed to design the restaurant.

 

Mr. Watson said the reason that was being left as essentially shells, was whoever the third party was that would run the pro shop or the restaurant, probably would have their own ideas as to what type of facility it would be and the details.

 

Councilman Mitzel said he thought he recalled as far back as June of 1994, it was mentioned that there would be a restaurant and pro shop in the original proposal and at that point, he thought it was supposed to be built at the same time, but he wasnít sure.

 

 

Mayor McLallen said to Council there was a motion on the floor to have the language in Section 22 clarified and to have Mr. Watsonís letter of December 4, 1995 completely be brought up to date and then that this information be put in the proper form for the Councilís first meeting in January.

 

(Voice vote) MOTION CARRIED UNANIMOUSLY

 

 

3. Resolution to the Michigan Department of Natural Resources - PA 116 Grant.

 

Mayor McLallen said this concerns the criteria that is being proposed in Lansing that will jeopardize this Cityís ability to acquire the first transfer of development rights.

 

Mr. Dan Davis explained he has reviewed this and it was approximately 45 acres over at the Ten Mile and Meadowbrook area, the Berger-Lewiston parcel, and Mr. Cohen from the Planning Department was coordinating the Grant Application.

 

Mr. Davis said the issue, as Mr. Cohen has outlined in the correspondence, is that there is discussion at the State level regarding a change in the law that would basically throw out their application and grant opportunity on this particular parcel of land. He said Mr. Kriewall and Mr. Cohen have been involved in negotiations in the State Legislatures and also through their lobbyist efforts to make sure that it doesnít happen. He said the Resolutions before them that evening would go a long way in attempting to stall off that effort.

 

 

PARKS & RECREATION RESOLUTION

 

It was,

 

Moved by Commissioner Shaw

Seconded by Commissioner Staab

 

 

To support the Resolution as attached.

 

(Voice vote) MOTION CARRIED UNANIMOUSLY

 

 

CITY COUNCIL RESOLUTION

 

Mayor McLallen said the Resolution on the Berger/Lewiston Property for Council members was the parcel which adjoins the Orchard Hills Subdivision. She asked for a motion.

 

It was,

 

Moved by Councilman Crawford

Seconded by Councilman Schmid

 

 

To support the Resolution as attached.

 

(Voice vote) MOTION CARRIED UNANIMOUSLY

 

 

 

 

 

 

 

 

 

 

 

ADJOURNMENT

 

Mayor McLallen said since there was no further business before City Council, the meeting was adjourned at 9:15 P.M.

 

____________________________________ ______________________________________

MAYOR CITY CLERK

 

 

 

 

Date Approved:_______________________