View Agenda for this meeting

 

SPECIAL MEETING OF THE COUNCIL OF THE CITY OF NOVI

MONDAY, AUGUST 16, 1999 AT 7:30 PM

COUNCIL CHAMBERS-NOVI CIVIC CENTER-45175 W. TEN MILE ROAD

 

 

Mayor McLallen called the meeting to order at 7:35 PM

 

ROLL CALL: Mayor McLallen, Mayor ProTem Crawford, Council Members DeRoche, Kramer, Lorenzo, Mutch, Schmid

 

ALSO PRESENT: Dennis Watson, Dan Davis, Ed Kriewall, Jack Lewis, Tom Anastos

 

AUDIENCE PARTICIPATION: NONE

 

PURPOSE OF SPECIAL MEETING - Ice Arena Management Contract

 

Mayor McLallen said that last fall the Novi Ice Arena opened on Arena Drive. The community looked forward to another recreational program within the City. Unfortunately, the first yearsí operation did not meet everyoneís expectations. There were unanticipated challenges and a lot was learned over the year. The facility did lose money the first year, which is not unusual because many start up businesses actually fail. This is not a failed business but one that did not meet its expectations, and had serious management issues.

 

Council is expected to hear from Community Clubs who is the Cityís representatives in dealing with the ice arena facility. These are citizens, appointed by Council, who oversee all the aspects of the ice arena. They are all volunteers, donate a lot of time and represent a variety of occupations and individual interests. They have different areas of personal and professional expertise in the ice recreation amenities. Some of these volunteers are figure skaters, hockey players, parents of skaters, etc. It is a broad spectrum of all kinds of recreational interests that are focused around ice.

 

It was through the Community Clubs recommendations that we severed the relationship with the previous management company and has hammered out some of the challenges laid out by last yearsí experience. Primarily, we have focused on three areas, which are financial reporting, closer communications through all levels, and expediting information between Council, Community Clubs and the management company. There are challenges not met by the previous ice arena management company. Council felt that the arena was under promoted and under marketed. Ice time is very competitive and there is still room for more competition. We need to be sure that everyone knows what Novi has to offer and that we are known in the region.

 

The task given to the Community Clubs was to interview a variety of ice management professionals in the region, make a selection and come back to Council with a recommendation for the upcoming year. Mr. Davis introduced people who are key components of moving through the process of interview, selection and recommendation. Present from Community Clubs were Board members Tom Kenney, Bo Senter, Jeff Russell and Magan Flynn. These people along with Mr. Davis and Hugh Crawford, sit on the Community Clubs Board as an advisory board for the ice arena.

 

Mr. Davis assigned Jack Lewis, Parks Supervisor for the Department of Parks and Recreation, to work at the arena and help with the transition and maintenance responsibilities to make sure a smooth transition takes place. He will identify any maintenance items relative to interior and exterior components and make sure they are addressed. He will also make sure staffing levels and business operations continue to operate to our expectations during this time of transition.

 

Tom Anastos, President of Suburban Arena Management is present. His firm has been recommended to Council for consideration to manage the arena. Mr. Anastos will be available to address specific questions regarding his previous experience and expectations for the facility.

 

Mr. Davis said the purpose of this meeting was to review a potential management contract. It is not included because we are still in process of completing the contract. This has been a very tedious process over the past six weeks but has been going on in a fairly expeditious way. Council took action on June 24 to terminate the management agreement, termination notice was sent the next day, and then the new selection process began.

 

Mr. Davis would like Council to become familiar with Suburban Arena Management. We will review their expertise, meet them and answer questions to gain a comfort level and acceptance of the recommendation that we bring forward tonight. We anticipate having a contract for recommendation at the August 23rd Council meeting.

 

Mr. Davis said he put together a historical perspective time line. On June 24th with Council action to provide notice to terminate Center Ice Management. The next day a notice was sent and the following week we began to contact potential replacement firms. We were able to coordinate four firms that wished to participate in the selection process. They were Honey Bake Management, Pro Edge, Suburban Arena Management and J.R.V. Management. These firms were invited to send in proposals and sit in on initial interviews. The interviews took place on July 12th. The members of the sub-committee of Community Clubs Board interviewed the four perspective firms. On July 14th at a regular Community Clubs Board meeting the candidates and their proposals were reviewed by the Board and two were chosen. The two remaining candidates were J.R.V. Management and Suburban Arena Management. The second round of interviews were scheduled for July 21st. We worked under very tight time constraints to schedule these, have members conduct the interviews and allow time for the candidates to put together printed information that was relative to our evaluation of their skills and expertise.

 

Prior to the July 21st interviews, Council met jointly with Community Clubs members on July 19th to review past operations and concerns raised by Center Ice Management on reasons why they felt they were let go. This information was taken back to the Community Clubs Board and special attention was paid to the concerns of Council members. Those concerns regarded what was in the contract, how to mainstream things, how to address concerns regarding Community Clubs involvement, the advisory capacity of that board over the arena management and how to get a better handle on fiscal reporting components.

 

Following the July 21st interview, a special meeting of Community Clubs was conducted on July 26th. At that time, we reviewed the candidates that were remaining. It was unanimous that Suburban Arena Management be recommended to the Council and to start the negotiation process of a new management contract.

 

Next, a sub-committee of Community Club members met. Those who attended were myself, Graham Ward, Bob Shaw and Tom Kenney to review the contract and take Councilís questions and concerns and put them into the existing contract format with those modifications. There was a meeting and review with the City Attorney and adjustments and modifications were made. We shared that information with Suburban and it is going back and forth between the two parties currently. Those discussions are on going and should be worked out within the next few days.

 

Some of the items Suburban wanted to provide in the revisions of the contract are the handling of revenues and expenditures. There is opposition of having those monies run through the City accounts. They are looking to have the firm take care of the money in a separate account, which would enable them to have a daily accounting of revenues and a timely reporting of all expenditures.

 

The second set of revisions is the contract and the compensation schedule. We have reviewed the compensation schedule and have included an incentive provision that would reward the operator based on performance. We worked with the attorneys on the Revenue Bond to make sure they were in compliance with the tax codes that are affected by the use of revenue bonds/general obligation bonds for this project.

 

There have been a variety of provisions that had previously required the management firm to seek or be subject to the approval of City Council or the advisory boards regarding some operations at the facility. Those provisions have been eliminated from the contract and our goal is to hire a firm that knows the business and give them the ability to run the arena like a business. The previous management contract had many provisions that dealt with pre-opening. Those contract provisions have been eliminated from the management contract.

 

In summary, the recommendation is that Suburban Arena Management be the new management firm for the Novi Ice Arena. Suburban has demonstrated a long and very successful programming and marketing background in arena operations for well over twenty years. Mr. Anastos has been active as a player and a manager and has been very involved in hockey and currently runs the Suburban Training Facility in Farmington Hills and will soon be operating a new facility in Rochester Hills.

 

We have a well established youth hockey program, learn to skate program and two high school hockey programs skating at the Novi Ice Arena. We have established a very sound foundation but we were missing some marketing, promotion. We believe because of the strong background that Suburban provides within clinics, camps, lessons, special event programming, they will bring strong marketing and programming to our facility.

 

The other candidates brought expertise in a variety of areas. It was not that any were lacking in areas, just a matter of finding what we were missing and the right candidate for our needs. We thought Suburban could fill our needs. We are comfortable and confident they could deliver what they indicated in the interview process. Therefore, we are recommending them to Council for consideration and continued negotiations.

 

In the Council packets, there is correspondence from Graham Ward who is out of state this evening. The other members of Community Clubs Board are present and available to address any questions about the interview process.

 

Mayor McLallen said she talked with Mr. Ward over the weekend and he regretted not being able to be here tonight. He wrote a very detailed letter of his overview and support for Suburban. Also, in the last week she had a conversation with Dennis Neiman, City Bond Attorney, and at the time was surprised that Mr. Neiman spoke to her about this issue which is unusual for him. She thought it indicated his level of concern that our decision this time be as complete and supportive as possible. She also talked with Jack Vivian. Mayor McLallen stated she is very comfortable with the recommendation for Suburban and she would go into the reasons for her support later in the meeting.

 

Mr. Davis said the Community Clubs Board met on July 26th and provided a unanimous recommendation to bring forth the Suburban recommendation. On July 30th Mr. Vivian, our second candidate had corresponded with Community Clubs that he was pulling out his contract proposal. He said he was getting ready to open up the Hazel Park facility and felt he would not be able to provide adequate service to both new facilities.

 

Member DeRoche asked Mr. Davis where he learned of the four applicants? Mr. Davis said other professionals were contacted who operated facilities and he received a lot of phone calls from the media attention when the Notice of Termination was done. There were also individuals that called stating that if the City operated it they were interested in taking it over.

 

Member DeRoche asked Mr. Davis if he kept track of the people that were interested? Mr. Davis replied that he has a list of everybody.

 

Member DeRoche asked how many firms in southeast Michigan manage ice arenas? Mr. Davis asked from a public arena? Member DeRoche said or private. Mr. Davis said from a public arena standpoint, owned by a municipality and leased or managed out, Jack Vivian of J.R.V. has about five arenas in Metropolitan Detroit. The Honeybaked group that is currently running Oak Park and will be taking over Southfield. Pro Edge is a new company and Suburban is running privately owned and operated facilities right now. There are not that many out there and Honeybaked and J.R.V. are probably the two that operate facilities that are owned by municipalities but are privately managed.

 

Member DeRoche said Suburban does not run a public entity ice arena at this time? Mr. Davis said they have their own private facility. Member DeRoche said they do not manage for any city at this time. Mr. Davis said that is correct.

 

Member DeRoche remarked that the other part of the process is Community Clubs and how they handled this. He understood that Community Clubs referred this to a sub-committee, which did all the interviewing and data collection. The sub-committee made a recommendation to Community Clubs or is the recommendation coming straight from the sub-committee to Council?

 

Mr. Davis said the interview process took two steps. A portion of the Community Club Board members conducted the first interviews on July 12th. Other members conducted the second interviews and Bo Senter was the only member who participated in both interviews. We did not include Mayor Pro Tem Crawford because he would have the opportunity to review this at the Council table. Mr. Davis stated he participated in the second round of interviews. After they narrowed it down to two candidates who were interviewed. The recommendation of the final candidate went to the full board for consideration and recommendation.

 

Member DeRoche asked Mr. Davis if he got the impression that Council wanted to be more involved or less involved in the selection process, at the City Council meeting when the contract was terminated and at the joint meeting with Community Clubs?

 

Mr. Davis responded they had already conducted the first set of interviews and at that point Council wanted to have input. He did not get the impression from that meeting that Council wanted to be a party to the interview process. He said the normal process is to work administratively with Council and with other boards to do the legwork and then provide the recommendation to Council for their consideration. Council can then take that recommendation and accept it, reject it or modify it.

 

Member DeRoche thought he had made it perfectly clear that he wanted to be more involved. He felt it was his responsibility as a Council member to oversee these things that have the significant financial aspect that they have on our taxpayers. In his opinion from a process standpoint, this is trying to back Council into a corner and giving this up or down does not give him the input level that he wanted to have in this very large decision. He stated that we are buying into a three year commitment and Councils involvement seemed light. He would have liked to gone to as many meetings as necessary to make a good decision. When he gets the type of information he has received here, a couple of reports, he felt like he was standing on a golf course and trying to hit through a tree and land it on the green. It is a one in a hundred shot. He felt if this worked, we would be getting lucky and it is the same feeling he had when Mr. Seyler was hired. He did not have a good feeling that this would be successful and that it got pieced together very quickly and input from Council was lacking.

 

Member DeRoche asked what Mr. Neimanís concerns were. Mr. Davis advised that he had met with Mr. Neiman and he had always been an advocate of J.R.V. Management. However, when he met with him a week ago they talked for about an hour. Mr. Neiman did not have any concerns with Suburban and had no knowledge of their operations or abilities. Basically, it was a one sided issue where he felt a strong comfort level with the abilities that J.R.V. Management had provided in other municipalities where he is also their Bond Counsel.

 

Member DeRoche asked if it was fair to say that some of the people involved with this had concerns with Suburban running a private facility within a couple miles of this facility?

 

Mr. Davis said it was definitely a concern and he thought it was brought out in the minutes of the Community Clubs meeting. After the first set of interviews part of the discussion was regarding how the close proximity of the Suburban Training Center was going to impact his operations here. If things get lame where are the allegiances going to be? Is it going to be to make sure that the privately owned facility is serviced first before our municipal operation? The response was that we were talking about a different type of facility than what is provided in Farmington Hills. It is in an industrial park, it has limited parking infrastructure, has limited seating capacity and as such would not be able to compete with the same type of programs and services that could be provided at the Novi facility. It would actually be a positive where we could work together and as they fill up different programs and activities the overflow could come to the Novi Arena. One of the provisions that was put into the new contract is an incentive provision where it makes it worth while for them to fill up our facility and the City and the operator would both benefit.

 

Member De Roche asked if Mr. Davis would agree with him that if he owned a private business his allegiance should be with the one he owns and not with the City contract? Mr. Davis said he would prefer not to speak for Mr. Anastos.

 

Member DeRoche said he was not asking him to speak for Mr. Anastos. Mr. Davis thought from the standpoint of business operation he is going to have a management contract that he will need to perform to. It will include a stipulated budget that he will have to live within the expense side of it and a revenue side he will have to hit and with the contract language he will also have the incentive provision. This will make it worth his while to perform. As such, with those things in place, he is going to do his best to fill those obligations to maintain the three-year commitment that he has under the initial contract. He will also be willing and wanting to expand that and move into subsequent years of contract renewal which obviously would be prudent on his part.

 

Member DeRoche said only if any decision he made with Novi would not be at the detriment of his own privately owned business. He hoped that Mr. Davis would respect that someone who owns something for profit would be more motivated to do that then they would be for the City of Novi.

 

Mr. Davis said he would not doubt that but believed the two could work in harmony. He said if Novi and Farmington Hills were municipal run operations and we were doing joint programming we would work together to foster a better skating and hockey environment for the whole area. This would benefit both facilities.

 

Member DeRoche did not understand why we would want to seed anyoneís ice arena around here. He did not believe that Novi should be working with anybody right now. He thought Novi should be worried about their own interest and filling up their own ice time. He felt the Novi Ice Arena should be competing with Suburban trying to get the senior leagues etc., away from them. Mr. Davis said there is no doubt that we should be doing everything to market and promote the use of the facility so it is 100% filled. Member DeRoche said including taking Suburban customers?

 

Mr. Davis said he would rather look at it as building a successful program to foster a good skating environment in the whole area. This is going to benefit everyone including and foremost Novi. If you do proper programming where you are not competing with one another but creating an enthusiasm for the activities that are provided everyone has the ability to win. We are not out to put Farmington Hills out of business but we want to be healthy and successful and that can be done by working jointly together.

 

Member DeRoche asked how concerned other arenas were about Noviís success or failure over this past year? He wanted Council to put priority on our arena and make this profitable before we care about coordination with different types of facilities. Let us get everyone in this and surrounding areas to use our arena. That is why he has concerns with Suburban. He thinks there is a conflict of interest. People will go to the closest arena for the least amount of money that has the time that they want. That is all they care about.

 

Mr. Davis said if time, distance or money were not available at another facility then our facility would be preferred. Those facilities are being used quite a bit and if we could get the over flow business and expand on what we have established it will be a good foundation for programming.

 

Member DeRoche said are we doing this at the detriment to our own City by doing it with someone who runs a rink a couple of miles away that should have concern about their own bottom line first. He asked who had more experience turning around unprofitable ice arenas J.R.V. or Suburban?

 

Mr. Davis he did not know their experience of turning around unprofitable ice arenas. Suburban has not been in that environment. They have been operating on their own and are opening up a new facility. J.R.V. has been in facilities and attempted to turn things around and have not and have left. They have been in some new facilities, Monroe and Mt. Clemens, when they were out in Lansing and in at the ground floor and were very successful. They have also gone into arenas that were not successful such as Cadillac, Luxford County and a place in Maryland and they left on their own accord or by parting companies. He would not go into the details regarding the reasons because he is not privy to all the details regarding this. What we are looking to address is our ability to fill programming and marketing niches that we are lacking. Our main emphasis has been to seek a firm with those skills and abilities. Suburban has the qualities we are looking for that will allow us to turn around our operation.

 

Member DeRoche asked if it was true or false that they turned around some of these arenas such as Flint and Four Seasons Sport Center. He said they were appointed a receiver because it was in bankruptcy. They turned a profit and sold it to local investors. The Hancock Recreational Center in Findlay, Ohio turned a profit and helped establish it as a taxable recreation authority. He asked if these were true or false when Mr. Davis researched it.

 

Mr. Davis stated he did not check out the facilities mentioned but did check out a couple of others. Member DeRoche said it seemed important because we are looking for a firm that can dig us out of a hole and this one puts themselves forward as one that can do that. He was not here to advocate J.R.V. but to say he is frustrated that he could not ask these questions to Suburban and J.R.V. This is a very large decision and we are being asked to make it with a very small amount of material. The Administration, myself and Community Clubs are in full swing, have made a decision and need to get the rubber stamp and Councilís blessing. Member DeRoche said it did not come close to the level of scrutiny he wanted to give it. We are going to give a three year contract and hand over a project that we are anticipating a 40% increase in sales this year to get to a $260,000 deficit. This is monumental and he wanted to know, when talking to the firms, what they thought about that.

 

Member DeRoche said he was not ready to make a decision tonight but he would be as involved as the other Council members wanted to be in this. He thought that a lot more scrutiny needed to be given to this because we are taking a long shot if we go with Suburban tonight.

 

Member Lorenzo said she shared Member DeRocheís concerns and thoughts in this matter. She had a conversation with Mr. Davis and Mr. Kriewall and was very concerned about the process. She was unaware and it was not her intention that the process would go any further than interviewing potential candidates and then coming back to City Council with those recommendations. She thought Mr. Davis took the ball a little too far in going out and suggesting that a sub-committee actually draft a potential contract with any management firm.

 

Member Lorenzo had some concerns about Suburban. In reading the materials she understood that the management arm of the business has only been in existence two years. She asked if that was correct? Mr. Davis said as far as operating the Suburban Training Facility that is correct.

 

Member Lorenzo asked how long had they actually managed it. Mr. Davis said about two years.

 

Mr. Anastos said they just opened the Rochester facility a week ago and the Suburban Training Center opened April 13, 1998. Member Lorenzo said then it has been open just a little over a year.

 

Member Lorenzo said some information is missing from this packet. She asked what the financial status of the Suburban facility was the year and a half that they have been operating? She asked if it had broken even, turned a profit or was in a deficit situation? She said this is an extremely important piece of information missing from this equation. It is one thing to manage a facility, our previous manager managed this facility, and she did not consider this a successful management venture. She stated that she was not in a position this evening to approve any management company. She spoke with Mr. Vivian and he indicated that he was still interested in managing our facility under certain circumstances. They were that he would have sole authority to manage the facility and it appears that Mr. Davis and Community Clubs are in agreement with that part of the arrangement. Secondly, he would like to sit down with Administration and some Council members to discuss the particulars of a contract arrangement. She was not discounting Suburban but was open to discussing a potential contract with the other candidate.

 

Member Lorenzo thought a business plan was also missing from the material on how to turn it around. She thought it was important that a safe and clean environment is the highest priority. The next priority had to be to stop the bleeding of the facility and reduce and eliminate the deficit and the facility needed to be able to take care of itself. That is what was promised and advocated to the citizens of Novi prior to the facility being built and opened and whatever it takes us to get there is of the highest priority. She thought a business plan was needed in order to get there and it is missing from this equation. She would be very interested in hearing from both companies what their business plan would be in order to turn this facility around. She stated she knew nothing about the ice industry so she would be looking to our financial people, Mr. Davis, Community Clubs and Mr. Watson & Company to give all the background information on what is reasonable and acceptable in terms of fees in this industry.

 

Also missing from this information for Suburban is who would be the onsite manager. Does Mr. Anastos plan to have hands on management at the company on a daily basis? Who would that be assigned to if not Mr. Anastos? She stated she has not made any individual preference or decision on any company because she is still in the fact finding mode. She agreed with Member DeRoche that this is one of the most important decisions that this Council is going to be making. She felt Council needed to take a leadership approach and get extremely involved and needs to scrutinize all of this information before making any hasty decisions.

 

Member Schmid said this is a difficult decision and one that has many factors to it. He did not know that J.R.V. was still a viable company that would be willing to look at Novi and run the operation. In the packet it was clear to him that J.R.V. was out of the picture and wanted nothing to do with it. Now he was hearing from Member Lorenzo that they would be willing to sit down and talk again. He felt Council should know that.

 

Mr. Davis said it was new information. He said there were no phone calls from Mr. Vivian and the last correspondence received was a fax followed by the hard copy and a phone call on July 30th when he indicated he was withdrawing his proposal. Four days prior to that withdrawal it was the recommendation from Community Clubs Board to recommend Suburban.

 

Member Schmid thought there had been a demonstration of a difference of opinion as to the process. He was under the impression that the process would follow as Mr. Davis had indicated today. He did fully expect, however, there would be choices to make between 2, 3, 4, or 5 companies that were in contention. He did not think that Community Clubs would make the final recommendation and tell candidates that they were no longer in contention whereby the Council would be held to one company.

 

Member Schmid said the packet was rather sparse. He asked if there was a discussion by Community Clubs or the committee as to how, when and was there a plan as to how Suburban would make the Novi operation successful?

 

Mr. Davis said there were discussions, during second interviews, with the final candidates, J.R.V. and Suburban. They know that we have a deficit and how they were going to work through start up of their of operations, address the current issues and how they would try to repay the deficit. Member Schmid asked how they were going to do that? Mr. Davis said by getting into the expense side of the facilities operations to look for ways to minimize the expenses. He said there are only certain areas that can be hit into. Personnel Services, fixed costs, utilities and operation of the building cannot really change. Then you have to raise the revenues by programming and marketing and bringing people in the door and sell the ice and the hours. We looked for people who could market and sell the ice. If you look back at our budgeting for last year we were hitting right on target with our expenditure side of the operations. We have the fixed debt service, fixed operation utility cost and some flexibility in personnel services. On the other side of the equation, people have to be put on the ice on an hourly basis and provide quality programs. Those people will be buying ice time, food in the concessions, equipment and supplies in the pro shop.

 

Member Schmid said the issue is to sell the ice time and the expenses will take care of themselves. There really was no written plan as to how many hours it would take, how many leagues were needed or free skate, figure skate, senior leagues, etc. He asked if there was any discussion on what would be charged per hour? Why was this not put into written form to give Council some feeling that these areas had been covered and there was a plan?

 

Mr. Davis said the July 12th interview packet from Suburban included a very preliminary outline of a budget that showed a revenue and expense summary. It showed some projection of ice rates and what they would project to get it back on track. In addition, during the interview process questions were asked relative to the operation of the facility. Mr. Senter of the Youth Hockey Board, was questioning the allocation of ice time, Magen Flynn asked pointed questions about figure skating, how it all blended together, their background and interest. Although it was not put in writing for Council they were asked during the interview process to address some of the lacking areas the previous management company did not respond to. Also, how both companies would address those if they were chosen to operate the facility. He thought those issues were addressed and by the action of selecting Suburban were demonstrating by vote from the people who sat in on the interviews to say they felt more comfortable with Suburban addressing our specific issues.

 

Member Schmid asked how critical it was that someone be put in charge of the Ice Arena and be put in charge fairly soon?

 

Mr. Davis said time is of the essence. Center Ice Managementís last day is August 24th. Jack Lewis is going to assist with some transitional issues. However, come August 24th Center Ice is out and either we have a new management company on board or else he has to find ways to run the facility internally from his department. We do not want to close the doors because every hour and day we are not operating is money lost. We are still going to have the fixed cost debt service and fixed cost of operations. The only thing we save is on personnel service. We have gone through a very expeditious process of coming to the recommendation to present to Council. We have a good recommendation for Councilís action and we need to move rapidly to get a professional company in there that knows the business and to get this operating efficiently.

 

Member Schmid stated that he had been in management for a number of years and is not a novice to some of these business areas. He thought it would have been fairly easy for the candidates to include a written proposal of how they would proceed. This not being included concerns him.

 

Member Schmid also had a problem with the lack of management experience. He told Mr. Davis he would never hire a company to manage something if they had never managed anything. They do have a lot of experience in promotion they have almost zero in the management of a facility. It seemed this skill would be a high priority as well as promotion. Member Schmid said J.R.V. seemed to have both of those elements. They were in a management business for a long period of time. They have certainly had promotional success in these facilities if they were successful.

 

Member Schmid was also concerned that Suburban owned a facility within a few miles of our facility. He said the economy is great now but some day it will not be and they will have to make a decision on which facility succeeds and which will have to bite the bullet. Member Schmid felt that the candidatesí own facility would take precedence if things got tough.

 

Mr. Davis understood the concept and the concern that Members Schmid and DeRoche have but felt that they had been addressed with some of the elements in the contract.

 

Member Schmid wanted to talk about the competition between Suburbanís facility and Noviís and asked if they had little leagues?

 

Mr. Anastos said they had programs they rent ice to. To make parallels, Novi Ice Arena primarily rents ice to Novi Youth Hockey and the figuring skating program. These are two essential components of the Novi Ice Arena and are in house type programs. The Suburban Training Center rents ice to the Farmington Hills Hockey Association, Birmingham Hockey Association, Royal Oak Hockey Association and the Novi Youth Hockey Association gets 92 hours of ice at the local facility here in the City. They tell us that they need 121 hours to meet their demand so they are renting at Melvindale and three or four other facilities. The Suburban Training Center does not operate an in house hockey association like the Novi Youth Hockey Program. We are in the business of renting ice. Regarding the detail that Novi has asked for, Novi needs to have an education to see the time line we try to work within to try to help in this process. He spent a week with Mr. Lewis seeing what the problems were and understands why Novi is in the predicament that we are in. He said he did understand it and knew how to get us out of it but it is not going to be easy. There is a financial plan in place, the details and type of utilization by hour over a period of two years that it will take to move in a realistic direction.

 

Member Schmid asked if Mr. Anastos had put the plan together and if it was on paper? Mr. Anastos said he did put a plan together and it is on paper.

 

Member Schmid asked why it was not given to Community Clubs or Mr. Davis and the administration? Mr. Anastos said they have been working on the plan and it has been evolving. He was contacted to interview on a Monday morning and then was told there was going to be a second interview. He submitted the information that was requested based on the proposal that was submitted to them and they were identified as the company that was going to be negotiating in this process. They went through that simultaneously while Mr. Davis put Mr. Lewis in place at the rink. Mr. Anastos said they started their own due diligence within the arena to see where it truly was and where it could go. They met with the user groups, figure skating group and the youth hockey group who consume the majority of prime time ice and looked at the limited non prime time users. Mr. Anastos said they took that schedule and started to further create a plan based on ice utilization that was real. He saw the budget created for this rink in the business plan and in his opinion it was fictitious. It was built on programming projections that are very difficult to forecast.

 

Mr. Anastos explained they take a more conservative approach to budgeting that is focused on the sale of ice time. It is getting money for the actual hour of ice not trying to quadruple the money for that hour. If it can be quadrupled it is a great thing and it is a goal but they do not take that approach. During the past week the details that Council has been referring to, as it relates to understanding the economics of the situation, included a variety of different discussions. These discussions included analysis of ice rental rates and meeting the objectives of the community to service community oriented groups. As we speak today, he thought it was reasonably finished but was not so sure that his due diligence was complete. He saw that there is a contract for ice that was signed by the previous management for considerable ice on Thanksgiving weekend. The contract for the ice was at a rate that he did not think we could afford to charge. The rate was for only $160.00 per hour and it would have a considerable impact on this budget. He tried to help Mr. Davis in the process, in good faith, and said the facility is seriously bleeding. He said Mr. Davis is trying to move along and has placed Mr. Lewis in the facility to try to give them some direction in the transition period. Mr. Anastos said if they had been in there they would have an interest in the transition period. He said they are already going to be set back trying to get in in such a short time and the season that they would go into the facility.

 

Mr. Anastos said all this time they had been talking about contract items, doing their own due diligence finding out where the facility is and where it needs to go and what the expectations of the City are. He heard for the first time tonight that 40% of the budget increase to try to reduce the deficit to $260,000. He said that would be an increase of $146,000. He thought that this was not even a remote possibility and his assumption was that the rink lost a considerable amount of money in June and July based on what he had found out in the last week in a half in due diligence. There is a lot that has tried to evolve over this short period of time and they have an interest in this facility because their business thrives on participants. He said without facilities there are no participants and demand cannot be created without new facilities. This is why they want to see Novi be successful. It creates those participants and the demands that Novi Youth Hockey needs 21 more hours in another facility because their existing facility cannot meet it.

 

Mr. Anastos said they are very detail oriented and take great pride in creating the direction they need and knowing how to get where they are going. He said they had been trying to work in good faith with the Department and the facility and at the same time negotiating a contract and trying to develop a plan on behalf of Novi. Mr. Anastos said he knows a deal is not a deal until it is done and if it falls apart at the eleventh hour hopefully the City can still make the transition to stop the bleeding as soon as possible.

 

Member Schmid asked if they had little league hockey in their club? Mr. Anastos said they rent ice to other communities.

 

Member Schmid said they rent ice to people who have leagues in there so you have the same kind of business we have only you do not have a club per se you have excess time for rent. Mr. Anastos said we are in the exact same business. We rent ice.

 

Member Schmid asked if the major part of his business was little league hockey? Mr. Anastos said the business as it is set up, has the strongest demand from youth hockey. Youth hockey is governed in such a way that they have to play within certain time slots. The younger children play earlier and the adult hockey comes in at later times.

 

Member Schmid said there will be a time when the economy is not as good and there is not going to be money available for families to have the kids in hockey. How will you handle it when the market has shrunk and you have ice time to sell and we have ice time to sell, which will get sold?

 

Mr. Anastos said the demand in this market is so strong that we could have a five year agreement with the City of Novi and the demand will not change in that short of time inspite of the economy.

 

Member Schmid said there are a lot of rinks going in. Mr. Anastos said, as he mentioned earlier, a very important point to remember is that new rinks create new customers; without the rinks you can not have the customers. He stated he loved to see new rinks because the basis of a successful facility, like any other operation, is the quality of its operation and program. If it is good people will continue to attend. If Suburbanís programs are strong and service is strong and Noviís is weak when there is a shrinkage in the market people are going to go to Suburban. If the facilities are equally strong people have a choice. The market right now can not meet the demand and it is not even close.

 

Mr. Anastos said there are a couple of segments he wanted to approach:

 

  1. The heart and core of his business is the service business. We are in the service business and have a strong reputation. We do what we tell people we are going to do. More importantly, if we do not have integrity it kills our business. Mr. Anastos said they have been around for 25 years and a lot of it is because we do what we say we are going to do.
  2.  

  3. Mr. Davis pointed out briefly the difference in programming and it is real. We are limited at the facility. We cannot have events. We could not operate a figure skating program because the marquee event at the end of the year attracts hundreds and hundreds of people. We cannot do that in our facility. They can only seat 50 people in an enclosed viewing area. Mr. Anastos said they are not permitted by City Ordinance to have prime time public skating which is a very profitable program. Also, based on their agreement with the City they cannot have tournaments because the parking is not adequate. This is also a very profitable program. As far as renting ice is concerned, absolutely, that is what every rink is in business to do. Right now the demand is so great that none of us can meet it based on prime time.

 

Member Schmid said the bottom line is you do not think we will ever have too much ice and either you get the business or we get the business.

 

Mr. Anastos said in the short term, shrinkage will show because of more facilities, not necessarily because of economy. As more facilities become available it frees more ice time for adult programs and adults who now have to skate late in the evening will be able to skate at earlier ice times. If that is the case it is not a great thing for the rink because when the adults are participating they do not bring in families, grand parents, who buy your annular income which is so important to this type of operation with such a tight margin. Sales in concession and rental skate sales are needed but adult hockey has proven that it does not do that. As the market shrinks and there are more rinks out there and more ice available to the adults, all of the area rinks will fight for the late night ice time. If there is not enough business out there it will cause ice rinks to go up which is something that has been needed in the ice business for many years.

 

Member Schmid said Mr. Anastos has seen the ice arena and has been in the building and probably briefed on the books and the financial aspect of it and apparently has sufficient confidence that you would be willing to take over the ice arena. He asked what does Mr. Anastos see as a plan to turn it around?

 

Mr. Anastos said there are a variety of things that need to take place. He has concerns over a few of the challenges that exist in the building as it is built today. The existing concerns he has are:

 

  1. The existing deficit and what the expectations of the City are on a return of that money.

 

2. Some of the inherent issues that exist in the building he felt would require more capitol investment at some point. The airflow conditions within the facility are not adequate and can create internal problems. There is a sewage system problem that is quite noticeable. The layout of the ground level floor creates some inefficiencies requiring people to walk up and down stairs constantly which creates some supervisory issues and additional staff. In addition, it hinders concession sales to public skaters because it is a congregating area and they have not had accessibility to the concession area. It is a critical component to try and drive those sales.

 

Mr. Anastos said these were some of his immediate concerns in the facility itself. He is not familiar with everything quite yet.

 

In terms of operations there are a variety of things. We have people calling the Suburban Training Center asking for ice. He knows there is ice for sale and we are trying to make the transition so the existing people who are in the facility can establish ice contracts with the local user groups and go seek other user groups. His plan today would be to solidify the relationships with the Youth Hockey Association who rents 90 plus hours of ice. The figure skating program that is starting to develop and has some strong roots and needs to develop to make the facilities successful and requires the investment of the rink. By investment he means the investment of time which is real dollars into their program to make it go.

 

He felt establishing responsible rates was critical. He could show the estimated ice and the difference in cash flow as how it relates to the bottom line. The margins in these facilities are very tight and efficiency is critical. There is no financial reporting system in place that creates and enhances efficiency. A more sophisticated type of program needs to be instituted that could monitor the sales and inventories and ice bookings. More is needed than cash registers and doing everything by hand. Time is very important to manage as well as the people that have to be managed in the facility. In the ice business every hour lost is an hour that can never be recovered. To maximize the sale of time is critical to making it successful. His concern is how much if any of the debt incurred over the past year, and in what period of time does Novi expect to recover. He thought this was a fair question from his perspective because if he felt it was unrealistic he would be the first one to tell us that they are not the ones for the job.

 

Member Schmid said the expectations of the City are to pay the debt, have sufficient monies to maintain the facility, for improvements, maintenance and so on. He said Mr. Anastos is aware of what the debt is that has to be paid each and every year on the bond issue and he is aware of what it costs to maintain and upgrade the building. Member Schmid said the debt would have to be repaid over a period of years.

 

Member Schmid asked Mr. Anastos considering what the costs were from his studies, did he see this as a profitable or break even situation?

 

Mr. Anastos said he would not be here if it could not achieve that level but it had to be managed responsibly. If it is the Cityís objective to charge $160.00 an hour and operate a facility at that level we are not the people to do it because it would not make it.

 

Member Schmid could not speak for the City but he thought their objective was to pay off the bonding, be competitive and have a facility in a competitive manner. This is not a give away program or meant to give the citizens of Novi free ice time it is meant to be profitable so the citizens do not have to pay out of pocket for the facility. Mr. Anastos is suggesting this is possible if it is competitive.

 

Mr. Anastos said absolutely and he has budgeted for two years. A ten-month cycle starting September 1 through the end of the fiscal year which is June 30th for the City and then a full calendar fiscal year for next year. He forecasts that September 1 through June 30th can be profitable, although very minor, and the following year will be profitable as well and ongoing. His other concern is there would be a contingency fund established that not all profits, if any, would be pulled out of the facility but rather put into a fund for long term capitol investments. He is concerned that the entire lobby has carpet and felt that it should be rubber tile because it is a constant maintenance issue. In the long term plan he wanted money moved, based on profitability of what is available, into these categories over the cycle of the building.

 

Member Schmid asked how Mr. Anastos responds to the question of his not having the management background to run this operation.

 

Mr. Anastos said he flat out disagrees. He has been in business since 1986 at various levels. He has a company that was established in 1974 and has been very successful. They have showed, over a period of 25 years, that the company has shown growth, it is unique, it is very successful and it is built on quality service. He said they managed a lot of people and had about 60 employees. In addition, he has experience managing a variety of different things from competitive hockey league that had an operation of 10 organizations and half a million-dollar budgets to a college hockey association that has nearly a million dollar operation. He did not think this was a sophisticated business but thought it was a business that you have to manage people and manage efficiencies and thought they were very good at it.

 

The Suburban Training Center opened in April 1988 and was profitable in its first year of operation, which did not even complete a full year. He said ice arenas are not usually opened at that time of year because it is the leanest time but they opened and were still profitable. He said they are proud of their success and felt that they are bringing to Novi a strong brand name, a strong management background, talented people and thought they could make this operation successful with a lot of hard work.

 

Member Schmid asked what he thought his major strength was?

 

Mr. Anastos replied the Suburban Brand in the industry was very popular. It gave immediate credibility to what Novi was doing. He said before he was even a part of this process people were coming to their facility, calling their office and asking if they would try to get involved in helping the Novi situation. He said the most important thing they bring to the table is that they are hands on. He would not be the manager of the facility himself they would hire a manager but he would be at the facility regularly several days a week. He said this is what is important to them and has made them successful. It is important to be in the buildings to talk to the people, to know what the issues are and to watch the numbers weekly. He said that is where they separate themselves from any of the competition. They are local and have for 25 years focused their business locally and that continues to be their interest. They are not interested in operating facilities in upper Michigan, and offers have been made, they are interested in the local market and it is where they intend to stay.

 

Member Schmid said he would expect 100% commitment and asked how Suburban could assure Novi of that if they were strung out? Mr. Anastos said they are not strung out because all of their facilities are properly staffed. They would not create a situation that did not allow a dedicated staff to each facility. The Rochester facility opened a little over a week ago but it has been staffed and operating since last February. They have invested in that staff, all full time people and all dedicated to that facility. It would be the same thing here. He said they would not be shortchanging anybody.

 

Member Schmid said he would feel more comfortable if Mr. Anastos had $400,000/$500,000 invested in the Novi rink and then the success or failure would hit his pocketbook instead of the Cityís pocketbook. He asked what their motivation was?

 

Mr. Anastos said he would put his money where his mouth is. He said when he went into the interview he told the interviewers that he thought the number one issued was not their management experience, reputation or how they would accomplish what needed to be done. He said they have proven themselves for a long period of time but the issue before us that we need to confront is a perceived conflict of interest. He said he wanted to approach this issue and did not wait for it to come to the table but he brought it up.

 

Mr. Anastos said they would cut their standard fee that would be charged in a situation like this. He said they were going to partner with Novi, invest their time and money, even though it is not hard dollars it is real dollars, into trying to earn the extra money that they would normally have a fixed part of the agreement. He thought that was great faith and it was one way to show good faith as to why it would be important to them to make sure they were selling ice in the Novi facility.

 

Member Schmid said they did have a proposal, 50/50, not in lease agreement terms of Suburban sharing the first $30,000 in addition to the yet to be determined amount of money that the facility would have to generate to pay the bond, etc. Mr. Anastos said that would not work and they had been instructed that that structure is not permitted within your bond covenants. They had proposed this but were not familiar with the bond covenants.

 

Member Schmid said the City would provide Suburban with a 60 day cure period to remedy any performance deficiencies. If deficiencies are not cured within the 60 days then unless the parties agree otherwise the agreement shall be terminated at the end of the cure period. Member Schmid felt this was harsh. He asked if they were saying they would give us 60 days and see if it can be figured out and if not they would leave. Is that what you are saying?

 

Mr. Anastos said no it is just the opposite. It is an out for Novi. It means if Novi has problems and brings them to our attention and we do not cure them within 60 days to your satisfaction then Novi can get out.

 

Member Schmid said he was not yet decided on which way to go on this.

 

Mayor McLallen said Mr. Anastos had been brought into this discussion somewhat sideways. She was going to let the Council finish their major questions but they seem to have needed to hear from him sooner. She allotted Mr. Anastos time to make his introduction to Council.

 

Mr. Anastos said to hit the meat of Councilís issues he would start with the first issue. Why does he think they can be in a situation where they own a facility down the road? If he had thought it would be such a potential problem he would not have spent as much time over the last two weeks doing this as he has. He said why he would not want to see a facility fail and fail miserably? Why would he dive into this situation that he knows is very challenging and very difficult and stake his reputation that has been built over 25 years and try to turn around a very troubled situation?

 

The answer is he thought they were more than capable; in fact knew they were more than capable. He has spent the time in the facility to look where it is at and where it needed to go and how it needed to get there. He said there would be some tough love for the short go here to get things turned around. It is going to take an education. He understood the political pressures that exist and the visibility that exists on this project. He has a great deal of experience at working under the microscope of media attention and political environments. Experience primarily in university settings or political environments in an organization that he is involved in at the national level He thought there were some inherent challenges that they are a good fit for as it relates to competition and competing with one another. He did not see it in that light but entirely different. He said he admits that he is a guy that sees the glass half full and looks for solutions and not complaints.

 

Mr. Anastos said the opportunities that exist for this facility are tremendous. He brought to the current administration people they can contact to try to fill ice time slots that are not currently filled based on overflow that they contracted four months ago at Suburban. He said Council could talk to the people they do business with, look at their 25 years of history working with various communities developing programs in their rinks.

 

Mr. Anastos said next is the question of management experience. They have people who work for them that have been in the rink management business all their lives. There is a tremendous amount of management experience. He has been in management since 1986 managing various properties. He did not see this as an issue. He said they have been successful, they are going to be successful, they have an energetic successful operation and it is going to continue to develop and they are very proud of it. They could do a fabulous job working with our user groups, cultivating stronger programs, reaching out to various levels including the seniors, local business programs, etc. There are a variety of things that can take place. The reason there is no formalized business plan in your packets is because there is not enough time in the day between when this process started and where we are today to try to put out all the fires that we have been charged with doing to this point.

 

Mr. Anastos said they are very proud of what they do and invited Council members to ask fellow community members who do business with them about Suburban. He said he has heard a lot of issues discussed today about another company who withdrew and now has an interest to come in. He found that interesting. He takes great pride in the fact that the people who interviewed their company and sat with him over the course of two different occasions unanimously endorsed his company as the one that would be right for Novi.

 

Mr. Anastos said he knew they could get the job done for this community. It is not a sales job it is a promise based on being able to move forward in the right manner, with the right support and under the right circumstances knowing full well that it is a very challenging job to do.

 

Mayor McLallen said one thing stated in your proposal was the challenge of this whole prospect was to restore confidence in the Novi Ice Arena. She asked for an example of how he was going to do that? She felt this was the biggest challenge here.

 

Mr. Anastos thought there needed to be a very aggressive public relations campaign that ties not only the users but other constituencies within the business community, families and neighborhood associations to let them know about the facility and to extend ourselves to them for various programs. He said we have talked about senior programs, birthday parties, neighborhood association parties, company parties, getting company involvement in advertising within the facility and working with the local media. Obviously, there are a lot of negative things to write about now when a facility hoped to operate at least at a break even and is operating at a considerable deficit. He said he would bring people to the facility and show them not only the progress being made but also how they are going about making it. He would tie people like Council members into the facility to make them understand where we are going, how we are getting there and why we are doing it the way we are.

 

Mr. Anastos thought this business was a constant education with the user groups, such as the hockey association and figure skating club. People need to understand that the building needed to flourish in order for their program to flourish and there is sometimes a price for that. They need to understand both sides of the business not only the rental but also the operations. People need to feel good about their facility. It is not an easy assignment and will take some time. From day one it would be part of the mission to go out and try to tie all these different groups in because there will be a lot of people that will be skeptical. We have to reach out and get into the community to do that.

 

Member Kramer complimented the Community Clubs group for tackling Councilís charge to them with such exuberance. They have put a lot of work and effort in a very short time to get us to the point where we are. He felt they did a good job to screen the candidates and at this point it is our challenge to build sufficient confidence in making an appropriate decision. He commented, because of the discussion at the table, we need a brief clarification on J.R.V.ís status to see whether they are interested or not.

 

Member Kramer said he would support moving forward to creating the contract with Suburban but before completing that he would request they come back with a more detailed action plan. He said they did lay out the challenge as they saw it and proposed a solution in terms of their approach of managing the facility. They did lay out a game plan and they have a pro form of budget. He thought as there is sufficient time, maybe one week would be enough, and they could lay out some of the action plans. He said one of Suburbanís major strengths is their marketing skill. He asked where they would apply their efforts and what would render the most return for their efforts.

 

Member Kramer said they indicated we would be able to run in the first ten months of their management with a slight profit and from there on be able to make a reasonable return. He commented that Mr. Anastos questioned what was the City interest and to clarify that Council would fully intend to cover the bond requirements. He felt any prudent management would want to set aside a capitol plan foreseeing maintenance.

 

Member Kramer said he was not looking to make a profit for the City but for a facility that pays for itself and its underlying expenses and provides for ongoing operations which would include a capitol fund for maintenance, repair and improvements. He thought Mr. Anastos was on the right track but wanted to hear more about his action plan. He thought his basic foundation, approach and philosophies appeared quite sound. They call on his strengths. He asked Mr. Anastos what he would do, specifically, to get things up and running this fall? What would he do to plug the gaps in preparation for a full blown effort next year. He thought Mr. Anastos should make it very clear up front so that there were good, solid mutual expectations in terms of what are the operating goals for the first ten months. He said during budget time Parks and Recreation was challenged to make up the deficit in one year. He asked if that was realistic and if not what did Mr. Anastos think was realistic so that when we sign on the dotted line we have agreed upon expectations. He thought that if these things could be clarified then the confidence level would build. He said Mr. Anastos obviously had confidence in his capabilities, reputation and experience in the field for 25 years. Novi wants Suburban to adequately translate that into building management. Member Kramer said Mr. Anastos has a lot of expertise but not a lot of expertise in physical building management but he has taken a good look at the facility. He thought that all Mr. Anastos needed to do was indicate whether the challenge is in the building or in the programming. He thought he said it was in the programming and asked him to make it a clear point if that is the case or how much of the challenge is in the building and operations and how much is in the programming. He asked that Mr. Anastos indicate how his background and strengths apply to that.

 

Member Kramer said he would have been more comfortable having the liberty of being able to chose among a number of well-qualified companies. He thought it was important to make a timely decision with a good qualified representative; we do not want to make a hasty decision. Novi started out our operations in the first year, due to circumstances, with one foot in the hole. He did not want to be put into that same position this year due to lack of timely decision. So we need to do as Community Clubs has and has brought to us rapid, well thought out decisions and recommendations and we need to act on them appropriately too so we do not overly encumber our next facility manager.

 

Member Kramer commented that he did appreciate Community Clubs laying out the new contract and has taken into account prudent business practices in untying the hands of the management company so that they could operate on a timely basis. He thought ice leasing time, timeliness of decision and timeliness of reporting and managing are all critical in the private sector. He was very interested in working with a private sector person because they live or die but will they make money; making money is not a negative it is the heartbeat and what keeps the country going. There has to be expertise to know how to manage things and do things well and he liked Mr. Anastosí people based approach. If he can work with the service users and providers and are focused on the customers a service can be provided that they will be happy with. We do need to have one more growth step on Council confidence but if Mr. Anastos can do this in a week that will help Council along the way.

 

Member Mutch wanted to go back to the process. She asked Mr. Davis how many companies are there in a potential pool of people and how many were worthy of interviews?

 

Mr. Davis said it was just the four that he had contacted or they showed interest within the time period of that one week the initial interviews were set up to keep the process moving.

 

Member Mutch said the people who showed an interest but were not interviewed did they just call and then drop it and never call back?

 

Mr. Davis said a variety of things occurred. A couple people as individuals showed interest and Mr. Davis indicated to them he was not looking for individual employees but were looking for a firm. These people felt they might be able to put together a management term. Mr. Davis shared with them the timing issue and if they were going to do that they needed to respond and they did not.

 

Member Mutch asked if Pro Edge, who were on staff with Center Ice Management and currently managing the ice arena, was one of the four that were going to put together a management group and were interviewed. Mr. Davis said that is correct. Tammy Hombirg, General Manager, under the employment of Center Ice was the principle in putting that together. They were interviewed.

 

Member Mutch said there had been some suggestion in the air that if Center Ice Management had been left alone could have managed successfully. We ended the contract with Center Ice Management but the employees were given the opportunity to come forward and inform Council of what they would do given the opportunity. Member Mutch felt this was an important statement to show how fair the process was and how small the pool is for management company possibilities.

 

Mr. Davis said the pool is small if you look at all the arena operations in Metropolitan Detroit he said that more than half are municipal owned and operated by municipal employees. Then you move into private facilities that are privately managed and then the high bred approach of municipal owned and privately managed.

 

Member Mutch commented that somewhere along the way Council and the City of Novi decided that they did not want to manage an ice arena and would hire a private management company.

 

Mr. Davis replied that it had always been their position administratively.

 

Member Mutch said part of the problem of finding potential private management company is from what Mr. Davis said that most municipal arenas are self-managed.

 

Mr. Davis said that is correct and he thought there was a trend that as the newer facilities came on board, Monroe, Mt. Clemens, Hazel Park, they are privately owned or municipal owned and privately managed. He thought the trend was there but more so the larger majority of arenas are still owned and operated by municipal operations employees.

 

Member Mutch thought it was better to go with a private management company then getting into the things that municipalities get into with unions and agreements that change the picture. Member Mutch thought there was a great deal to be said for private management and it is the direction Novi needs to go. With regards to private management and the selection, she thought, because of a comment, that Sunrise Management was a one-man operation. At the beginning it was a design, build then manage agreement, it was not surprising to her that the company/individual seemed to have erred in the design of the building. Council heard that there might be Capital improvements needed before we expected them. Member Mutch thought because we were used to a one-man operation Council may have lost their perspective in regards to Suburban. Suburban had a very articulate, informed business person speak to them and are given the impression the company has management experience in facilities, programming, and marketing. Member Mutch felt more comfortable with the company after hearing these things.

 

She asked if advice was solicited from other Municipalities in the Metropolitan Detroit area?

 

Mr. Davis said he looked in the Detroit Metropolitan market area. He did have contact with an out of state company who was interested in coming into the Metropolitan Detroit area in HL skate.

 

Member Mutch stated she did not ask what management companies, she wanted to know what Municipal Ice Arenas he spoke to.

 

Mr. Davis answered he did not. Member Mutch felt the other Municipal Ice Arenas outside of the Detroit Metro area would provide an interesting perspective even at this late date.

 

Mr. Davis said in the last few years talking with municipal workers from communities across the country, it has been a proven fact in ice arena operations and recreation services, there has been and continues to be a trend that combines private enterprises and their expertise with municipal operations. This trend started about ten or fifteen years ago and continues. What we are doing in Novi or around the Detroit Metro area is not new or unique in this type of facility operation.

 

Member Mutch asked about the financial arrangement mentioned that would provide for incentives to make money. She asked if there was a similar arrangement for anything else done in the City? Mr. Davis stated in the Parks and Recreation Department there is not an incentive-based compensation package. She asked about the use of other facilities, for example competitive swimming. Swim teams form for the purpose of competition, they need a pool to swim, they do not care as long as it is relatively convenient and water time is affordable. If the rates increase, the swimmers do more fund raising, or charge the parents more. When it comes to the point when there is not a big enough block of time for the number of children that want to participate, there are limits to the number of children that can be swimming at a time. She felt it needed to be broken into smaller groups, this kept spreading out the time needed on the schedule. Is this similar to how it works for the hockey teams and figure skaters? When you get to the point it is so popular that you do not have any more time, at the time of day that children can do this, they have to go to another facility. Is this what is happening with the ice arena now? There are teams that are organized, they have made a commitment to buy ice time for practice, yet their needs are such that they need to go outside of our facility?

 

Mr. Davis responded, as Mr. Anastos had pointed out within the operations, there are a variety of components that are essential, youth and adult hockey, figure skating, open skating, pro shop and concession areas. All of these have to be in operation and successful for the entire facility to be successful. A variety of issues can be restrictive from the age of participants and when they can participate, to what times are available within the facility. There is no question that things like youth hockey are restricted to weekends, or early evening hours (prime time ice, 5:00 PM to 10:00 PM) based on the age of the participant. This is sold to a youth hockey organization and they divide it up according to their needs. The amount of time needed is usually 121 hours; we sell them 92 hours to balance other groups ice needs. In essence they need to go elsewhere for ice time to fill that void.

 

Member Mutch asked within a twenty-four hour day there will always be a certain number of hours, not necessarily in one block, which will be impossible to schedule, correct?

 

Mr. Davis responded that is correct and that is where a marketing and programming person is needed to find programs and activities to fill daytime hours, Monday through Friday during the school year. An example would be to work with the physical education departments at each of the school districts in Novi and bring them in to utilize the arena.

 

Member Mutch felt that was a good idea. She recapped there is limited time that you can fill, there are certain blocks that will always be vacant or minimally used so that even when the programs expand they do not expand into the schedule, they have to expand into another facility. She said we have been focused on the perceived conflict between the Suburban Facility and the Novi Facility when it might be an advantage to have a spill over facility nearby with which we are associated and might have influence in terms of getting our programs ice time. Mr. Davis agreed.

 

Member Mutch asked where high school teams would fit in?

 

Mr. Davis said they are another user group and an important element to the overall programming of the facility. They fit in well in some of the void areas and use times that are not used by other user groups. They skate after school in the 2 PM to 5 PM time frame for the practices, they have ten to fifteen home games and there are two schools Novi and Northville. We blend them in and work with youth hockey around the hours of their games to adjust for the game times and then adjust the youth hockey hours to give them their 92 hours a week.

 

Member Mutch commented that just as any other user group the high school teams should have ice available but just as the privately organized groups have to raise money either by charging their members or having fundraisers. She felt the high school teams were better equipped to do that then the private groups are. She thought we should be realistic and not gouge anybody. This is one thing that distinguishes us from a private business as a municipality we are not in it to make a profit. We are in it to pay the bills but to make the opportunity available. She said a municipal arena offers the opportunity to participate in programs that they might not otherwise be able to. When a city or community has a municipal arena it provides opportunity and the opportunity provides motivation for all the participants to see that it succeeds. That success ensures continuity of the opportunity. It is a cycle that we need to be aware of.

 

Member Mutch commented she supports the idea of a municipal arena being there for the citizens that are paying for it.

 

Member Mutch said there were four companies interviewed during two sets of interviews. Two companies survived past that and one company was recommended unanimously. She felt a lot of time was being wasted speculating on the second company. They have said they had a problem because of previous commitments with another facility. They might have said, now, that they are interested but nothing official has been done. Member Mutch would be very weary coming back to a company that has already done the same due diligence that Suburban is in the middle of and come to the conclusion that they can not make the commitment. All of a sudden after another company had invested time and staff in developing an assessment of what our problems are, how they can be defined, tackled and solved; now we have someone coming back in saying they think they can do that too. She is not in favor of going backwards in the process. If the Council as a whole wanted to be involved in the interview process they should have made that clearer.

 

Member Mutch reminded Council that Mr. Seyler and Center Ice Management was the choice of the previous Council. It was a direct Council action. She said individually and together they have so much more personal and professional knowledge about ice arenas, hockey teams, figure skating programs, marketing, special event programming then she would venture any Council person has individually or combined. Member Mutch stated she is in support of the process and the recommendation made.

 

Member Mutch said there had been a question regarding a detailed business plan being given to Council by anyone that was interested in being considered for this management contract. She asked if this was standard procedure. Do companies make this kind of investment before they even know they are getting the contract?

 

Mr. Anastos said he did not see any individual situation as a cookie cutter type situation. The facility here had certain problems. It is operating in a deficit and the first issue to settle is why it is operating in a deficit. If he was asked to put together a business plan to address a turn around situation for the Novi Ice Arena he would not have submitted anything without the opportunity to due diligence. He did not think a cookie cutter business plan was realistic. If talking about a start up you have to make sure your plans are progressing based on marketing conditions and the objectives that need to be identified from the company you are representing. Council articulated a few that he has thought were important to keep in mind and there are operators who would go out and sell hockey ice just to make a profit. He thought keeping the balance in diversity and programming is part of the philosophy that has to be carried based on who you are representing.

 

Member Mutch asked if the restrictions on his location in Farmington were based on the limitations of the site or was it so they could protect their interest in terms of non-competition with their arena?

 

Mr. Anastos said it was because of the site. He worked very closely with the City and they ran substantial programs for the City since they have opened. Mr. Anastos had an office building in the Industrial Park across the street and we just identified that building. Part of their long term strategic plan was to get into the arena management business. Not necessarily with the intent to develop and own our own facility; it was by coincidence that the originally built tennis facility was sixty feet away from the office building that they purchased to run their business from. They investigated it, it fit perfectly to retrofit ice, the demands are enormous in this market so due diligence was started to see if it would work. The building consumed the majority of the land so it was landlocked and we combined the office site and the arena site to combine shared parking of the two facilities. That did not meet City Ordinance so they had to prove that they could meet the demands of normal use in that type of facility. They did studies and so forth and they were landlocked and have no potential for change.

 

Member Mutch asked if this was in the Industrial Park at Grand River and Ten Mile. He said that is correct and they are right behind the Holiday Inn. She said more importantly your only about 3 miles from the Farmington Arena. He said it was actually a little closer than Novi. She asked if they saw that as convenient for the spill over and cooperative programming?

 

Mr. Anastos said they have done cooperative programming. He said the essence of this business is not to manage the time at prime time it is to manage the time at non prime time. Most companies easily manage prime time. We have done some cooperative efforts and have done programs that we initiated for their facility when they started to operate non prime time programs. We have since continued to do that. Example, a spring program was created in 1998 when the facility was opened. They were doing a cooperative program with the City of Farmington Hills and it went quite successfully. The operator of the Novi Facility then wanted to work with them this spring rather than Farmington Hills and he said no because he had a loyalty with Farmington Hills. Eventually, it worked out that they did not work with the Farmington Hills facility and the programs that they operated on their own were very successful and the City of Novi program they tried to operate with Farmington Hills did not go very well. They have done cooperative efforts before and they have been successful and they have a very good working relationship within the City because we are doing what we said we would do.

 

Member Mutch asked if there was ever a regular period of the year where there is no ice?

 

Mr. Anastos said maintenance is always an issue. One of the concerns he has about this facility is that we have installed two sand based floors which do not permit the ice to be removed, or to lessen the economic load on utilities because it is operating at half capacity and operate non-ice related events. It could be used for City events, garage sales etc. That capacity is not here at the same level with a concrete slab floor. Suburban built that facility with one sand and one concrete with the intention if a slow period was hit one could be used for dry land type programming. He said there are limitations as to what this facility and the City of Novi can do in those slow periods and really receive economic value for it. Chances are a sub floor would have to be bought to cover the ice and then there are rental issues, storage issues and moving issues. This is a challenging obstacle to overcome in this building and that is why we are uniquely qualified because a lot of our business is focused on programming.

 

Member Mutch asked if there was anything that would convince Mr. Anastos that this would not be a good business decision for him?

 

Mr. Anastos said if they could not meet the objectives of the City, whether they were realistic or not, they would not get involved. Up to this point and the guidance he received to this point and most of what he heard tonight the objectives seemed reasonable. He still questioned what the time period, if any, there is on the return, if any, on this $406,000 debt that has accumulated this year.

 

Member Mutch asked what the likelihood that Suburban would open another facility?

 

Mr. Anastos said he did not know. When you run a successful business your name comes up in the market place. Their name seemed to be coming up from other companies. We will only grow within our means. The City of Livonia talked with us briefly about their interest in adding a facility there.

 

Member Mutch asked about loyalty and the business weight that would be given to the private facility versus the municipal facility. What was in the proposal that made him think the incentive was there to make our program successful no matter what is happening with the private facility?

 

Mr. Davis said the biggest thing he had seen through the interview process and working with Mr. Anastos is his integrity to perform under the terms of the contract. He does have a business out there. They are Suburban Hockey Schools, the training facilities and now the management arm of his corporation. We have incorporated, within our contractual agreement, the ability for him to let that thrive and give him the ability to make money and allow for him to come in and get our facility back upright and moving in the correct direct. At the same time, giving him the opportunity to let his business continue to thrive as it has in his other ventures over the last 25 years. He saw it as an expansion of his operation and thought he brought a wealth of integrity and expertise that our facility needed.

 

Mayor Pro Tem Crawford commented that he could not think of another question or comment. He felt there had been more than ample questions and comments some repeated several times. He did comment that he was very appreciative of Community Clubs and the interviewing sub-committee. He felt they had done their due diligence. Attorneys, business people, hockey people, figure skating people have represented us and also they are all taxpayers of this City so they have the same interest in mind that Council has. He thought it was time to act and did not think they were acting hastily. This process had been going on for several months and there needs to be a timely decision and it needed to be made tonight. To delay any further would jeopardize the situation even more then it is. The season of hockey is now starting and we need to have people in place to get us back on track.

 

Mayor Pro Tem Crawford said he had not met the gentleman from Suburban but his presentation tonight was enough to sell him. The answers he gave to the questions and comments he could see why Community Clubs and the sub committee recommended him unanimously.

 

CM-08-99-200 Moved by Crawford, Seconded by Kramer: CARRIED UNANIMOUSLY: To accept Community Clubs recommendation of Suburban as the Management contract holder for the Cityís ice arena and that the Contract be developed between the Administration, Suburban and The City Attorneys based on the discussion at the Council table tonight and that one of the key components is a tentative action plan and that the time frame be for the next Council Meeting on September 23, 1999.

 

DISCUSSION:

 

Member Schmid commented that he was not sure there would be an action item this evening. He did not totally disagree with Member Crawford and his motion. It was however; his intention to endorse the Community Clubs recommendation subject to a realistic, knowledgeable and enthusiastic action plan that he would feel comfortable with. Novi does have some perimeters laid out but we do not have a final plan.

 

Member Schmid commented the only way he could support the motion is if it is a motion to go forward and assuming that these matters are brought back and accepted by Council that we would then proceed. If that is the motion he would accept it but if it was a go situation he would not.

 

Mayor McLallen said it was a motion to go forward.

 

Mayor ProTem Crawford said no, the motion is to accept Community Clubs recommendation, enter into contract negotiations with Suburban, have their business plan and some of the other comments addressed and come back. Council can reject that or Council can accept it but it is not to enter in to any thought of another company. If Council rejects it then we begin again.

 

Member Schmid concurred with Mayor Pro Tem Crawford that time is of the essence to get this matter moving for the winter season. However, he was not in the position to say absolutely that based on what Mr. Anastos brings back is going to be a big item as to whether or not we proceed. He would rather do nothing then enter into the wrong agreement. He asked the Mayor if that was her interpretation?

 

Mayor McLallen said it was to answer the questions that were raised tonight, bring an action plan back, put it down for Council to see in black and white and if it meets the Councilís expectations to act upon it and if it does not then go in another direction.

 

Member Lorenzo said she would support the motion somewhat reluctantly. Her reluctance is not based on anything Mr. Anastos has said this evening, in fact quite the opposite. She was very impressed with the presentation and really commended him for stepping up to the plate the way he had. She heard wonderful things from the community about Mr. Anastos and if we can fine-tune the business plan that Mr. Anastos seemed to be formulating and put that in writing. She would also like to see the financials documented but she has more of a comfort level after hearing the presentation. The reluctance is that she would still prefer for other companies to have the same opportunity that Mr. Anastos had this evening to thoroughly hear the Councils questions and concerns and to be able to respond to those on an individual basis. She always liked to have some competition, something to compare something to. Unfortunately, we do not have that in this particular point in time but she understands and is frustrated by the time limitations and very regretful that it is a pushed up against the wall situation. Ideally, she would have liked to see a motion that moved forward with Mr. Anastos and let him fine tune his plan and come forward with the information that we have requested. Meanwhile, also talking to the other interested participant and giving him the same opportunity to respond, perhaps, if not in person in writing to the various questions and concerns that Council had.

 

Member Lorenzo stated she would move forward and support this but whether she supported the actual contract would depend on how everything came out in the next week or so. She stated she appreciated Mr. Anastos coming forward and his presentation this evening. She asked for an honest assessment from him and appreciated that it seemed that that was what they were getting. She was quite alarmed to hear some of the things about the building but not totally surprised as she had heard some of the same concerns from Mr. Vivian.

 

For the record, Member Lorenzo contacted Mr. Vivian this morning of her own volition. She felt that since he had given such a through proposal it did not make sense to her why after doing all that he would suddenly withdraw. He said that he would be willing to participate under certain conditions outlined earlier. She would have liked to see him able to participate in this process like our other candidate here. In terms of the building she wanted a realistic approach. The Council and the community at large need to know what we are dealing with not only on a short-term basis but also on a long-term basis. She was disappointed that the Administration and staff did not come forward with this information that the building might be inadequate in certain areas. In terms of expectations of profit, if and when we do attain a profit, it is likely that that profit will have to be poured into the building. This is not information that she had. She thought it was critical information for the City. In the long term we will have to question whether this is the type of facility Novi wants to own and manage and run or whether we would be better off as a City selling it to a private enterprise. Whether this facility is going to cost Novi money in the long run is a big question. When this facility was built it was supposed to pay for itself if not make a profit. The community at large has been responding in the last several weeks and months and people she had spoken to personally did not want to get into a situation where this City and the General Fund are subsidizing this facility. In the future if this facility cannot pay for itself then we need to know that also. She wanted to know from Mr. Anastos what the realistic expectation of recouping the deficit were and at what rate. She asked for an honest assessment of that. She wanted everything managerially possible to do that but what is impossible we are not going to ask Suburban to do. She appreciated some of the forthright comments Mr. Anastos made regarding the inadequacy of the building and the unrealistic expectations of reducing or eliminating the deficit in a short period of time. She would look forward to additional information in the next week to give Council a clearer picture of what we can expect in the short and long term.

 

Member Mutch said she thought that when the contract is negotiated three years was not unreasonable when expecting someone to do a turn around. She would hope that there would be something in the contract that would allow for an annual review. If things are worse than imagined or to slow to happen from Councilís perspective than there would be a way to get out of it as neither one would benefit by continuing in a bad situation. This could cover some of the problems that arise once you are managing the facility, you have people in there and once you have the challenges of special events that you really get to know the building.

 

Mayor McLallen restated the motion.

 

Vote on CM-99-08-200 Yeas: McLallen, Crawford, DeRoche, Kramer, Lorenzo

Mutch, Schmid

Nays: None

 

Mayor McLallen said she would like to ask the Administration on behalf of the Council and the Citizens for a clarification and perhaps with the finance department what the expectation for the payment of the $400,000 deficit. She said she heard from one to four years and how would that effect the proposed budgets. She asked for a projection from the Finance Department of expected repayment and would that fit into everyoneís objectives. She felt that there needed to be a creation of a capitol line item for the arena. It seemed that this needed to be addressed now rather than later as a budgetary item. The applicant spoke several times of wanting to work with the cityís objectives. She asked that the objectives be more clearly stated as to what they are because if there is a mutual agreement on goals it will restore everyoneís confidence and get us back in a timely way to where we all expected to be.

 

Mayor McLallen stated there were four people present who represent a tremendous amount of work on this. She invited the members of Community Clubs to comment on what they thought their future role would be. She said they had really helped and taken a lot of public heat. She said they are taxpayers of this community and the success of this is as important to the members of Community Clubs as it is to Council.

 

Tom Kenny, Community Clubs member, said he had been a member for the past three years. He was involved in the interview process and commended Council for their selection of Suburban Management. He thought the major reason for the deficit during the past year was because of the lack of programming. Mr. Anastosí reputation in the Detroit Metropolitan area is outstanding, his experience in programming will truly help to resolve the deficit in the future.

 

ADJOURNMENT:

 

There being no further business before Council the meeting was adjourned at 10:47 PM

 

_____________________________ __________________________

Kathleen S. McLallen Tonni L. Bartholomew

 

Transcribed by:

 

_____________________________

Charlene D. McLean

 

 

 

Date Approved: September 13, 1999