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05-20-2014 City Council Study Session Packet City of Grand Island Tuesday, May 20, 2014 Study Session Packet City Council: Linna Dee Donaldson John Gericke Peg Gilbert Chuck Haase Julie Hehnke Kent Mann Vaughn Minton Mitchell Nickerson Mike Paulick Mark Stelk Mayor: Jay Vavricek City Administrator: Mary Lou Brown City Clerk: RaNae Edwards 7:00 PM Council Chambers - City Hall 100 East 1st Street Grand Island Study Session - 5/20/2014 Page 1 / 37 City of Grand Island Tuesday, May 20, 2014 Call to Order This is an open meeting of the Grand Island City Council. The City of Grand Island abides by the Open Meetings Act in conducting business. A copy of the Open Meetings Act is displayed in the back of this room as required by state law. The City Council may vote to go into Closed Session on any agenda item as allowed by state law. Invocation Pledge of Allegiance Roll Call A - SUBMITTAL OF REQUESTS FOR FUTURE ITEMS Individuals who have appropriate items for City Council consideration should complete the Request for Future Agenda Items form located at the Information Booth. If the issue can be handled administratively without Council action, notification will be provided. If the item is scheduled for a meeting or study session, notification of the date will be given. B - RESERVE TIME TO SPEAK ON AGENDA ITEMS This is an opportunity for individuals wishing to provide input on any of tonight's agenda items to reserve time to speak. Please come forward, state your name and address, and the Agenda topic on which you will be speaking. Grand Island Study Session - 5/20/2014 Page 2 / 37 City of Grand Island Tuesday, May 20, 2014 Study Session Item -1 Heartland Events Center Financial Overview Staff Contact: Mary Lou Brown, City Administrator Grand Island Study Session - 5/20/2014 Page 3 / 37 FONNER PARK EXPOSITION & EVENTS CENTER, INC. FINANCIAL STATEMENTS December 31, 2013 and 2012 Grand Island Study Session - 5/20/2014 Page 4 / 37 1 TABLE OF CONTENTS Page INDEPENDENT AUDITORS’ REPORT 2 FINANCIAL STATEMENTS Statements of Financial Position 4 Statements of Activities 5 Statements of Cash Flows 6 Notes to Financial Statements 7 Grand Island Study Session - 5/20/2014 Page 5 / 37 Grand Island Study Session - 5/20/2014 Page 6 / 37 Grand Island Study Session - 5/20/2014 Page 7 / 37 FONNER PARK EXPOSITION & EVENTS CENTER, INC. STATEMENTS OF FINANCIAL POSITION December 31, 2013 2012 ASSETS Current Assets Cash and cash equivalents (notes A9, B and E)1,065,205$ 1,017,813$ Investments (notes A6 and C)307,558 305,185 Accounts receivable (note A11)14,271 83,012 Accrued interest receivable-investments 508 1,525 Accrued interest receivable-capital lease 4,915 5,030 Prepaid insurance 3,199 2,316 Other prepaid expenses 7,120 - Current portion of capital lease receivable (note H)410,000 405,000 Total current assets 1,812,776 1,819,881 Property and Equipment (note A3) Equipment 1,031,039 998,095 Less accumulated depreciation (536,062) (427,216) Net property and equipment 494,977 570,879 Other Assets Capital lease receivable-City of Grand Island, net of current portion (note H)4,515,000 4,925,000 Bond issuance fees, net of accumulated amortization of $118,399 and $105,055 in 2013 and 2012, respectively (note A10)142,488 155,832 Total other assets 4,657,488 5,080,832 TOTAL ASSETS 6,965,241$ 7,471,592$ LIABILITIES AND NET ASSETS Current Liabilities Accounts payable 11,562$ 5,909$ Gift certificates payable 170 100 Sales tax payable 2,239 2,743 Accrued interest payable 4,915 5,030 Deferred revenue (note I)29,074 71,023 Current maturities of long-term debt (note G)561,501 549,201 Total current liabilities 609,461 634,006 Long-term Liabilities Bonds payable, net of current maturities (note G)5,705,082 6,266,583 Net Assets Unrestricted net assets 650,698 571,003 TOTAL LIABILITIES AND NET ASSETS 6,965,241$ 7,471,592$ See notes to financial statements. 4 Grand Island Study Session - 5/20/2014 Page 8 / 37 FONNER PARK EXPOSITION & EVENTS CENTER, INC. STATEMENTS OF ACTIVITIES Years Ended December 31, 2013 Temporarily Unrestricted Restricted Total REVENUE & PUBLIC SUPPORT Sponsorships 56,000$ -$ 56,000$ Grants - 216,710 216,710 Commission income 75,595 - 75,595 Arena rental fees 187,421 - 187,421 Sign rental income 28,053 - 28,053 Concession income 519,355 - 519,355 Facility use fees 170,074 - 170,074 Box office sales 1,520,182 - 1,520,182 Motel occupation tax 357,267 - 357,267 Interest income-investments 6,065 - 6,065 Interest income-capital lease 114,952 - 114,952 Miscellaneous 3,939 - 3,939 Total revenue & public support 3,038,903 216,710 3,255,613 NET ASSETS RELEASED FROM RESTRICTIONS (note D)216,710 (216,710) - EXPENSES Advertising 113,644 - 113,644 Amortization (note A10)13,344 - 13,344 Bank service charges 502 - 502 Box office contract payments 1,413,791 - 1,413,791 Concession expense 163,442 - 163,442 Contract labor (note J)351,635 - 351,635 Credit card fees 14,854 - 14,854 Depreciation 108,846 - 108,846 Dues and subscriptions 3,047 - 3,047 Equipment rental - - - Equipment maintenance contract 28,214 - 28,214 Insurance 21,405 - 21,405 Interest 187,461 - 187,461 Licenses and permits 1,673 - 1,673 Management and maintenance fees (note J)305,843 - 305,843 Meeting expense 427 - 427 Miscellaneous 5,808 - 5,808 Office supplies and expenses 7,265 - 7,265 Postage and delivery 6 - 6 Professional fees and consulting 23,732 - 23,732 Promotion 7,230 - 7,230 Printing and reproduction 1,586 - 1,586 Repairs and maintenance 70,049 - 70,049 Security service 24,824 - 24,824 Supplies 14,495 - 14,495 Taxes 123,373 - 123,373 Telephone and internet 19,924 - 19,924 Travel 157 - 157 Utilities 147,364 - 147,364 Website development & maintenance 1,977 - 1,977 Total expenses 3,175,918 - 3,175,918 Increase in net assets 79,695 - 79,695 Net assets at beginning of year 571,003 - 571,003 Net assets at end of year 650,698$ -$ 650,698$ See notes to financial statements. 5 Grand Island Study Session - 5/20/2014 Page 9 / 37 2012 Temporarily Unrestricted Restricted Total -$ -$ -$ - 216,710 216,710 70,334 - 70,334 159,264 - 159,264 25,722 - 25,722 501,304 - 501,304 126,232 - 126,232 1,275,658 - 1,275,658 351,703 - 351,703 8,006 - 8,006 116,789 - 116,789 69,520 - 69,520 2,704,532 216,710 2,921,242 216,710 (216,710) - 51,276 - 51,276 13,344 - 13,344 1,863 - 1,863 1,139,539 - 1,139,539 119,759 - 119,759 354,625 - 354,625 10,997 - 10,997 115,096 - 115,096 4,293 - 4,293 - - - 41,042 - 41,042 20,271 - 20,271 196,246 - 196,246 1,401 - 1,401 283,643 - 283,643 133 - 133 3,643 - 3,643 6,988 - 6,988 - - - 9,476 - 9,476 336 - 336 935 - 935 77,520 - 77,520 15,039 - 15,039 17,208 - 17,208 98,701 - 98,701 18,743 - 18,743 - - - 165,468 - 165,468 3,595 - 3,595 2,771,180 - 2,771,180 150,062 - 150,062 420,941 - 420,941 571,003$ -$ 571,003$ 5 Grand Island Study Session - 5/20/2014 Page 10 / 37 FONNER PARK EXPOSITION & EVENTS CENTER, INC. Years ended December 31, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Increase in net assets 79,695$ 150,062$ Adjustments to reconcile increase (decrease) in net assets to net cash provided by operating activities: Amortization 13,344 13,344 Depreciation 108,846 115,096 (Increase) decrease in: Accounts receivable 68,741 (78,293) Pledges receivable - - Accrued interest receivable 1,132 1,475 Prepaid insurance (883) (241) Advanced payments on events (7,120) 31,402 Increase (decrease) in: Accrued interest payable (115) (79) Accounts payable 5,653 (2,156) Sales tax payable (504) (156) Ticket refunds payable - (6,984) Gift certificates payable 70 (1,013) Deferred revenue (41,949) (51,022) Net cash provided by operating activities 226,910 171,435 CASH FLOWS FROM INVESTING ACTIVITIES: Increase in investments (2,373) (2,565) Decrease in capital lease receivable 405,000 400,000 Purchase of property and equipment (32,944) (18,657) Net cash provided by investing activities 369,683 378,778 CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on bonds payable (549,201) (537,252) Net increase in cash and cash equivalents 47,392 12,961 Cash and cash equivalents at beginning of year 1,017,813 1,004,852 Cash and cash equivalents at end of year 1,065,205$ 1,017,813$ SUPPLEMENTAL DISCLOSURES: Cash paid during the year for interest 187,576$ 196,325$ See notes to financial statements. 6 STATEMENTS OF CASH FLOWS Grand Island Study Session - 5/20/2014 Page 11 / 37 7 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. 1. Nature of Operations The Fonner Park Exposition & Events Center, Inc. was incorporated on March 24, 1998, as a subsidiary of the Hall County Livestock Improvement Association (a Nebraska nonprofit corporation). The purpose of the Organization is to plan, develop, construct and operate an exposition and events center in Grand Island, Nebraska. 2. Basis of Accounting and Presentation The Organization uses the accrual basis of accounting for financial reporting purposes. Income is recognized when earned and expenses are recognized when incurred. The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets, as required by the Financial Statements of Not-For-Profit Organizations topic of the FASB accounting standards codification. 3. Property and Equipment Property and equipment are stated at cost for purchased items and fair market value for donated items. The construction and related building equipment was donated to the City of Grand Island under terms of the capital lease agreement during 2006 through 2010. Property and equipment not donated is being depreciated over estimated useful lives of five to ten years using the straight- line method. The Organization has no formal capitalization policy. 4. Contributions The Organization accounts for contributions as required by the Accounting for Contributions Received and Contributions Made topic of the FASB accounting standards codification. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Grand Island Study Session - 5/20/2014 Page 12 / 37 8 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS, Continued December 31, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued 4. Contributions, continued The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. The Organization reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long- lived assets are placed in service. 5. Pledges Receivable Unconditional pledges receivable are recognized as revenues in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. 6. Investments Investments are valued at estimated fair market value as required by the Accounting for Certain Investments Held by Not-For-Profit Organizations topic of the FASB codification. 7. Estimates The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Grand Island Study Session - 5/20/2014 Page 13 / 37 9 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS, Continued December 31, 2013 and 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued 8. Income Taxes The Organization has been granted an exemption from federal income taxes under Section 501(c)(3) of the Internal Revenue Code (the Code) and has been determined not to be a private foundation under Section 509(a)(1) of the Code. As such, no provision for income taxes is reflected in the financial statements. As of December 31, 2013, the 2010, 2011, and 2012 tax years are open for examination by the IRS. 9. Cash and Cash Equivalents For purposes of the statements of cash flows, Fonner Park Exposition & Events Center, Inc., considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 10. Amortization Bond issuance costs are being amortized over the life of the related bonds using the straight-line method. 11. Accounts Receivable Accounts receivable are stated as unpaid balances. The Organization provides for losses on accounts receivable using the direct write off method. Receivables are considered impaired if full principal payments are not received in accordance with the contractual terms. It is the Organization’s policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected. NOTE B - CASH AND CASH EQUIVALENTS At December 31, 2013 and 2012, cash and cash equivalents consisted of: Interest 2013 2012 Rate Balance Balance Checking account: Home Federal Bank - $ 186,403 $ 157,574 Money market account: Five Points Bank 0.42% 850,902 832,339 Ticket office change box - 5,100 5,100 Concession change bags - 22,800 22,800 $ 1,065,205 $ 1,017,813 Grand Island Study Session - 5/20/2014 Page 14 / 37 10 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS, Continued December 31, 2013 and 2012 NOTE C - INVESTMENTS Investments consist of the following certificate of deposit: Maturity Interest Amount Bank Date Rate 2013 2012 Home Federal 3/02/14 0.20% $ 307,558 $ 305,185 NOTE D - RELEASE OF TEMPORARY RESTRICTIONS During the years ended December 31, 2013 and 2012, net assets of $216,710 were released both years from temporary grant restrictions to pay for the Hall County bond payments. NOTE E - CONCENTRATION OF CREDIT RISK The Organization maintains cash balances at two financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2013, the Organization had deposits totaling $886,410 at Five Points Bank that were fully secured by FDIC insurance and additional deposit surety bond coverage. At December 31, 2012, the Organization had deposits totaling $849,515 at Five Points Bank, with $349,515 in excess of FDIC insurance and additional deposit surety bond coverage. NOTE F - LEASE-PURCHASE AGREEMENT The Organization entered into a lease-purchase agreement with the City of Grand Island dated October 9, 2001, with an addendum on August 26, 2003. Under terms of the agreement, the Organization issued $7,765,000 of bonds (see note G) and the City will make principal and interest payments on the bonds (see note H). Grand Island Study Session - 5/20/2014 Page 15 / 37 11 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS, Continued December 31, 2013 and 2012 NOTE G - LONG-TERM DEBT Long-term debt is composed of the following: 2013 2012 On December 10, 2004, the Organization issued $7,765,000 of Building Bonds, Series 2004, issued through the City of Grand Island, for the construction of the Heartland Events Center. The bonds were refinanced in 2011 with interest on the bonds ranging from 0.30 percent to 3.35 percent, and is payable semiannually on June 15 and December 15, through December 15, 2024. $ 4,925,000 $ 5,330,000 On June 14, 2006, the Organization issued $2,300,000 of Development Revenue Bonds, Series 2006, issued through Hall County, for the Heartland Events Center supplemental project (consisting of additions, improvements, and equipment for the convention center and arena facility). Interest on the bonds is five percent and is payable semiannually on March 1 and September 1, through March 1, 2021. Hall County has adopted a resolution creating the Visitors Improvement Fund and has imposed an additional sales tax on lodging within Hall County to make payments into the Visitors Improvement Fund. The County will allocate amounts in the Visitors Improvement Fund to pay costs of the project, including providing of funds to the Organization as a grant from year to year to cover the obligations of the bonds. 1,341,583 1,485,784 6,266,583 6,815,784 Less current portion of long-term debt ( 561,501) ( 549,201) $ 5,705,082 $ 6,266,583 Grand Island Study Session - 5/20/2014 Page 16 / 37 12 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS, Continued December 31, 2013 and 2012 NOTE G - LONG-TERM DEBT, continued Maturities for the next five years are as follows: Year ending December 31, 2014 $ 561,501 2015 574,171 2016 582,229 2017 600,695 2018 614,589 Thereafter 3,333,398 $ 6,266,583 NOTE H - CAPITAL LEASE RECEIVABLE Capital lease receivable comprises the following: 2013 2012 Capital lease receivable from the City of Grand Island dated December 15, 2004, with original issue amount of $7,765,000. The capital lease was refinanced in 2011 with interest ranging from 0.30 percent to 3.35 percent, and final maturity December 15, 2024. (See note G for additional details on the long-term debt). $ 4,925,000 $ 5,330,000 Current portion ( 410,000) ( 405,000) Long-term portion $ 4,515,000 $ 4,925,000 NOTE I - DEFERRED REVENUE Deferred revenue of $29,074 and $71,023, respectively, at December 31, 2013 and 2012, consisted of ticket sales made during the current year for next year’s events. Grand Island Study Session - 5/20/2014 Page 17 / 37 13 FONNER PARK EXPOSITION & EVENTS CENTER, INC. NOTES TO FINANCIAL STATEMENTS, Continued December 31, 2013 and 2012 NOTE J - RELATED PARTY TRANSACTIONS During the years ended December 31, 2013 and 2012, the Organization paid contract labor to Hall County Livestock Improvement Association (HCLIA) of $351,635 and $354,625, respectively. During the years ended December 31, 2013 and 2012, the Organization paid management and maintenance fees to Hall County Livestock Improvement Association (HCLIA) of $305,843 and $283,643, respectively. NOTE K – CONTINGENCIES The Organization is a defendant in a legal issue. While the final outcome cannot be determined at this time, management is of the opinion that the ultimate liability, if any, from the final resolution of this matter will not have a material effect on the Organization’s financial statements. NOTE L – SUBSEQUENT EVENTS Management has evaluated subsequent events through May 1, 2014, the date on which the financial statements were available for issue. Grand Island Study Session - 5/20/2014 Page 18 / 37 Grand Island Study Session - 5/20/2014 Page 19 / 37 Grand Island Study Session - 5/20/2014 Page 20 / 37 Grand Island Study Session - 5/20/2014 Page 21 / 37 Grand Island Study Session - 5/20/2014 Page 22 / 37 Grand Island Study Session - 5/20/2014 Page 23 / 37 Grand Island Study Session - 5/20/2014 Page 24 / 37 Grand Island Study Session - 5/20/2014 Page 25 / 37 Grand Island Study Session - 5/20/2014 Page 26 / 37 Grand Island Study Session - 5/20/2014 Page 27 / 37 City of Grand Island Tuesday, May 20, 2014 Study Session Item -2 2014/2015 General Fund Budget Preview Staff Contact: Jaye Monter, Finance Director Grand Island Study Session - 5/20/2014 Page 28 / 37 GENERALFUND5-20-20142014/2015Budget Preview30,000 Foot ViewGrand IslandStudy Session - 5/20/2014Page 29 / 37 Budget Calendar400 Fund Capital requests prioritized and potential funding identified by 5/16/14Departmental operating expense submissions due 5/23/14Departmental reviews of requests completed and potential funding scenarios determined for July 1 study sessionGrand IslandStudy Session - 5/20/2014Page 30 / 37 SummaryContinued emphasis on a safer communityEffect of council approved additional expense - $638,886 in 2013, $1,124,122 in 2014 and $1,132,002 in 2015Metropolitan Planning Organization - John Adams hired as MPO Program ManagerEffects of becoming a Metropolitan Statistical Area (MSA) and unanimous legislative approve of LB397Increased personnel costs as dictated by laws of comparability$674,388 in 2014 – Fraternal Order of Police and non-unionEstimated $1,185,320 in 2015Budget Provides for:Grand IslandStudy Session - 5/20/2014Page 31 / 37 Initial Budget Progress to DateForecasted 2014 revenue complete2.5% normalized growth2015 budget revenue built from forecast2.6% normalized growthDepartments have been provided targets6.4% overall personnel cost increase driven by comparability0% operation increaseGrand IslandStudy Session - 5/20/2014Page 32 / 37 Normalized Revenue2014 Forecast 2015 Budget GrowthTotal Revenue $42,718,000 $42,154,000(1.3)%Asset Sales(1,251,000) (25,000)Transfers Out(4,623,000) (4,475,000)Municipal Equalization(552,000) (425,000)Normalized Revenue $36,292,000 $37,229,000 2.6%Grand IslandStudy Session - 5/20/2014Page 33 / 37 Revenue Projection GENERALFUND2014 2014 2015Budget Forecast Budget GrowthSales Tax 15,225,000 15,319,000 15,702,000 2.5%Property Tax 7,112,000 7,000,000 7,210,000 3.0%Fees & Services 5,019,000 5,134,000 5,277,000 2.8%Intergovernmental 2,965,000 3,019,000 3,110,000 3.0%Municipal Equalization 591,000 552,000 425,000(23.0)%Gas Tax/Other Transfers 4,523,000 4,623,000 4,475,000(3.2)%Food & Beverage Tax 1,504,000 1,524,000 1,592,000 4.5%Occupation/Other Taxes 2,628,000 2,608,000 2,655,000 1.8%Licenses & Permits 507,000 602,000 615,000 2.2%Other Revenue/Interest 1,123,000 2,337,000 1,093,000(53.2)%Total Revenue 41,197,000 42,718,000 42,154,000(1.3)%Grand IslandStudy Session - 5/20/2014Page 34 / 37 2015 Budget SummaryIncremental Cash Needs:Revenue Decline 955,000Personnel costs including MSA impact 1,734,000Debt retirement - Library 1,590,000Capital Improvement Projects 400 Fund 556,000TOTAL 4,835,000Incremental Funding:Reduced debt payment 795,000Reduced transfers 1,300,000Unspent appropriations 2014 Budget 1,150,000Cash reserve usage to pay Library debt 1,590,000Total 4,835,000Grand IslandStudy Session - 5/20/2014Page 35 / 37 Based on the assumptions used to date the 2014/2015 budget provides for:Emphasis on safe communityContinued implementation of Metropolitan Planning OrganizationOngoing effects of becoming a Metropolitan Statistical AreaConclusionGrand IslandStudy Session - 5/20/2014Page 36 / 37 Budget Timeline6/17/20147/01/2014Week of 7/27/20147/22/20148/12/20148/14/20148/19/20148/21/20148/26/20148/28/20149/09/2014FTE and Fee schedule changes – Study Session5,000 foot view of 2014/2014 budget – Study SessionBudget books distributedApproval of BID budgets, assessments and set date for Board of Equalization – Regular MeetingPublic hearing on City and CRA budgets opens – Regular MeetingStudy Session / Special MeetingStudy Session / Special MeetingStudy Session / Special MeetingRegular Meeting / Study SessionStudy SessionBudget approval – Regular MeetingGrand IslandStudy Session - 5/20/2014Page 37 / 37