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HomeMy WebLinkAboutIR 7071 No.71 INFORMAL REPORT TO CITY COUNCIL MEMBERS N%1. 7071 Mrarrnr To the Mayor and Members of the City Council December 3, 1985 r B CONTRACT FOR COWTOWN COLISEUM RESTORATION AND Subject: PARTICIPATION IN CENTRAL PLANT Background In December of 1984, the City Council approved the issuance of $2,800,000 of Certificates of Obligation to be used to renovate the Northside Coliseum. At the same time, the City also entered into a 20 year lease with two five-year renewal options with Triad Corporation (a/k/a Stockyards '85) . The approved lease requires rental payments in an amount necessary to amortize the princi- pal and interest on $1 million of the COs over a 15-1/2 year period and con- tinuation of annual payments, based on the schedule above, during the remain- der of the 20-year primary term of the lease. The City's Director of Finance has determined that the annual rental will be $129,362.04. In addition to the fixed rental payments, Triad agreed to pay the City as additional consideration the following percentage rentals: 1. The amount by which the percentage of gross revenue from the sale of food and beverage exceeds the total amount of fixed minimum monthly rent paid for the following calendar years: OPW* 1986 through 1989 - 5% 1990 through 1994 - 8% 1995 through 2004 - 10% 2. In addition to the above percentage rental , and beginning in 1986, an amount equal to 3% of gross revenues over $4,000,000 re- sulting from operation of the Coliseum, including, but not limited to, admission fees ; food and beverage sales; merchandise sales; leasing fees; radio, television or other broadcasting revenues; and advertising. In return for the City's participation in the overall project , the developer has agreed to spend approximately $20,000,000 on facilities that would en- hance the historical Stockyards areas. Construction of, or renovation to, the following facilities are now underway: Billy Bob's Texas Brown Derby Restaurant Sam's Place Texas Dry Goods Exhibit Building Rodeo Drive Cowtown Coliseum Restoration and Central Plant Facility Costs T%c c_938ZV-­FTc3Fm—encTing e a—ward of a contract has been placed on the Decem- ber 3 City Council agenda. The N&C also recommends the City's participation op", in the construction of a central plant facility. -ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS -INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7071-p.2 �Q4SOP)'0 PTE11,a To the Mayor and Members of the City Council December 3, 1985 Subject: CONTRACT FOR COWTOWN COLISEUM RESTORATION AND PARTICIPATION IN CENTRAL PLANT As the M&C points out, a supplemental appropriation in the amount of $1,211,274 is needed in order to complete the project as designed. Total project cost is estimated to be $3,760,700 and the total amount available from the COs is about $2,549,426. The original $2,800,000 has been spent in the following manner: Underwriters Discount after Credit for interest $25,106 Architect/Engineering Fees 220,000 Printing 3,468 Staff Time of City Architect (Fees) 2,000 TOTAL $250,574 Several years ago, a local historic group initiated efforts to have the Coli- seum designated a historic landmark. At that time, the City Council expressed concern that this action could increase the cost of future restora- tion work and requested that the State allow the City the flexibility to com- plete future work on the facility, while keeping in mind the historical sig- nificance of the area. The Texas Historic Commission made the decision to award the designation, despite the City Council 's objections. The City Architect has described some of the reasons for the costs exceeding budget. Although it is difficult to identify a specific amount, some costs are the direct result of having to complete the restoration in compliance with Texas Historical Commission standards. For example, the windows, brick work and plaster work has to be done based on the original design for the building. In addition, the Historic Commission did not want the building to have a HVAC system since it was not originally included in the building. The project would obviously be unworkable without proper heating and air conditioning. Since the building could not house the system, it was necessary to locate it outside of the Coliseum. The Exhibits Building that is being renovated by the developers also needs air conditioning. Therefore, the decision was made to design a central plant facility with the cost being shared on a 60/40 basis, based on the anticipated usage of the Coliseum and the Exhibits Building, respectively. The City Attorney' s Office is working on an agree- ment that will be signed with Triad Corporation to ensure the City's invest- ment in the central plant will be protected in the event of a default. Proposal for Covering Shortfall ?Fie- foil-owi-6g alternatives were considered as a means for covering the $1 ,211,274 shortfall : 1 . have the developers assume responsibility for the entire amount; 2. require the developer to pay at least half of the amount and the City pay the other half; - ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7071-p.3 �ofVOP'. To the Mayor and Members of the City Council December 3, 1985 vs 0 Subject: CONTRACT FOR COWTOWN COLISEUI`1 RESTORATION AND PARTICIPATION IN CENTRAL PLANT 3. Have the developer pay the entire amount and the City waive the lease payments on the Coliseum for the first 9-1/2 years and re- ceive the scheduled $129,362 for the remainder of the 20-year term; and, 4. Refigure the amortization schedule by adding one half the short- fall , or $605,637, to the $1 million and keep the initial term of the lease the same. This would result in payments increasing from $129,362 to $202,293 annually. The above alternatives were not considered -economically feasible by the developer. In addition, their attempts to secure funding in the amount of the shortfall were rejected by lending institutions due to the fact that the City would still own the building. An alternative that appears to be workable involves the City paying for the entire amount of the shortfall in advance. The developer will then agree to pay for one-half the amount by extending the guaranteed lease payments from 20 years to 26 years. An amended lease would provide for a four-year renewal option. The six year extension of the guaranteed payment period will assure the City of receiving $776,172 in lease payments. Because of the obvious economic benefits to the City and the shared invest- ments by the City and developers in the Stockyards area to date, staff recom- mends that the City Council approve the alternative identified above. fI&C C-9385 recommends the necessary changes to the lease agreement, should the Council approve of this alternative. Should additional information be desired, it will be available upon request. City Manager op** -ISSUED BY THE CITY MANAGER - FORT WORTH, TEXAS