Someone says “uh-oh” . . . lets see!
Overview
Greg McManners says it feels like he has been talking about his capital budget for quite some time now. They have $2.6M in renovations to do in 2014. The dollars are room tax not general fund. They are also thinking about using their reserve fund for this because the fund would be replenished when the first bond retired in October 2014. So they are working with the City Finance Department and that is a strong option. Of the $2.6 they are asking for, $2.2 is solely renovation related. It is related to the carpet, restroom design, painting of ceiling and floor resurfacing, the replacement of meeting signs which is a new development over the course of the year. They found out they could power the signs through the internet and not cable and put in conduit and electrical, they can do it for half the cost they could do it for before. This will present new marketing opportunities for them and their clients. They are also replacing some items after 17 years of wear, tables, chairs, movable bar equipment and other items. 80% of the cost are in those items, there are some other miscellaneous items they will be working on.
Signage
Larry Palm asks about the signage. Can you be more specific about the opportunity cost. He says presently there is a paper sign printed on the computer, it would be a digital sign that looks like an iPad, it is a computer where we can put up any type of logo, change agenda items, if there are session we can change throughout the day. We can put logos of the sponsors up. This is a technology used in a lot of public facilities and we have not done it because of the conduit and now we can use cat-5 cable and it will help us market and support our customers.
Palm asks what it will cost. $125,000. (Someone audibly sighs) He says that last time it was $300,000 mostly for labor, it might be less now. Palm asks about not having conduit for cat-5. McManners says it is not required by code. He says you can patch it through the walls instead of tearing out drywall.
Reserves
David Ahrens asks about that half the funding will come from the reserves, what is the current reserves. $1.4M. So you’d be left with .2? Yes, we would be left with very little over time, but it would be replenished in October.
Ahrens asks what other department has reserves at this level as a percentage of their expenditures. Dave Schmiedicke from Finance says that typically Enterprise Agencies, like the utilities will have reserves. Te percentage depends upon the activities that they do. The Water Utility will have have larger reserves because of their capital requirements. The library has a reserve, their guideline is 5%. Ahrens asks if it is usually 20%. Schmiedicke says no, that it depends upon its reliance on its revenue stream and the volatility of the revenue stream. With the reliance on the sales and room tax can be a little more volatile, the library depends on the property tax and that is a little more stable.
Ahrens asks about the $2M in the budget, how much of it is already spoken for, it seems that much of it has been already dedicated. McManners says that they worked with the finance department to “smooth” their renovations so they don’t have spikes. In 2013 they spent in addition to the $1.235 approved by the council in the capital budget, they also got $600,000 for the room tax distribution at the end of 2012 so they have spent approximately $1.4M towards the renovation. The commitment they made out of this budget, with the last council approvals, $300 – 400,000 has been committed out of this budget. Ahrens asks if that includes the carpet. McManners says the carpet was paid for in 2013, the installation has to be paid for. We haven’t made a commitment to install it. Ahrens says that we have committed to hundreds of thosands of dollars that we are voting on here. McManners says that they have committed to over $1M. Ahrens says then this is pro forma to some extent. McManners says that he hopes the council has been appraised over time, this is not a surprise to the council. We have been talking about it for some time, for the newer alders it might be different, from his perspective it has been a process of approval along the way. Ahrens asks if there are any commitments for 2015. He says they will not get into these commitments again in 2015.
Mark Clear asks him to talk about the timing of the renovation and how it plays into the turn over of the fiscal year. McManners says that the renovations start in December, they have to be open for New Years and one other event, but the bulk of the renovations will start in January, it becomes problematic because it is a new budget year. He says that in retrospect it should have been scheduled in 2013 and 2014. January is the slowest month, the lowest revenue month and that is when they can do it with the least disruption.
Customers demand the best and the latest/Carpet
Joe Clausius says that as far as he is concerned the customer demand the best and the latest. It doesn’t take long for the word to get around. You have been advising the council all along and it seems like we need to find you another 300 – 400 room hotel. Clausius asks if they stuck with the orange.
No. McManners says that the background will be burgandy. They are retaining the design, otherwise it will be a dramatic change. Clausius says that he hopes Mr. Wright approves.
Signage
Denise DeMarb says that there is a sense of frustration that decisions have already been made and she is hoping they can get past that. She says she understands that computers are really cool, and we want to be cool, but have we really looked at what it would cost to print a sign for the life of the computer vs. having to change the signs. She says the triple bottom line is that it is hard for her to believe that they cannot print signs cheaper than have computers. There is more costs than just the initial. McManners says what they are talking about is versatility. He says that Monona Terrace is often a reach for conferences or meetings to come in. If we can offer them to display the sponsors and give the sponsors the visibility they are looking for, it makes us much more affordable. DeMarb says that this is more than what is going on in a conference room? McManners says that they might have 5 or 6 sessions in a room in a day. If you are looking at signs and labor, this provides us with versatility for the client and ourselves. DeMarb says she thought he said it was less expensive. He says he did not say that. DeMarb says then we are doing it for advertising? Why are we doing it? We are doing it for a variety of reasons says McManners. They are doing it for the versitility for the clients, it is more affordable because the sponsors get more exposure and it helps with the clients demands, if the sessions change every few hours we can change that out easier. The demands of our clients, this eliminates the concern, but it does allow us to sell additional sponsorships.
Reserve Fund Replenishment
Mike Verveer asks how the council would choose to replenish the reserve fund. Schmiedicke says it would be in the 2015 budget. He says what is envisioned is that the Monona Terrace would spend down its reserves in 2014, combined with what they get in room tax to pay for the renovations in 2014, this would be in lieu of the amount of room tax going to the general fund or borrowing. There are G.O. bonds outstanding paid with room tax, they will be fully paid off in 2014 and the debt service is a little under $700K and that will then be available for appropriation by the council to replenish the reserves. He says the Monona Terrace Board members are concerned about using all the reserves and they are looking for assurances that the city would replenish the reserves. Verveer asks if it would be prudent, in its professional opinion, to replenish the reserves. Schmiedicke says that as an entity it is extremely prudent to have reserves and he says given the volatility with the economy and because of the need for renovations, he thinks that 1/3 of the surplus in the room tax makes sense. Replenishing the reserves is a priority. He says this is a way to avoid borrowing and there is the opportunity with the debt service being freed up.
Verveer also asks about the history of the use of the reserve fund. McManners says they rarely use it, a few times it was to cover operating expenses due to going over, retirements and sick leave pay outs, that was a transfer of funds, but they have never used it at any scope as they are talking about today. They have only used it for $15 – 20K at a time, they do not arbitrarily use the funds and they use it as a rainy day fund like the events you are talking about, downturn or renovations.
Placemaking
Verveer says that he would like McManners to talk about the details of what they have planned for the rooftop. McManners says that they did a little study this year by placing chairs and tables on Olin Terrace. Staff were holding meetings out there. They believe the rooftop is a canvas that hasn’t been painted yet. He says the biggest issue is the sun and the heat and they are going to put 35 different tables, 125 chairs and then umbrellas at each table. They would have a different color tone than the earth tones. He says that the placemaking was starting to take place on Olin Terrace and they would like to expand that. They saw what occurred and they think it is a good thing. They would also like to incorporate public art. It’s a beautiful thing on a night when a concert is going on, but it can be the same during the course of the day.
History of the Building
Verveer asks to explain how they will be having photos and other things to celebrate the history of the building. McManners says the mission statement is to be a public gathering place, a destination and a place for economic impact. One of the things they think they are not great at, they are a great ambassador for Frank Lloyd Wright, but not for Madison. They will be replacing some photos with panoramic views of the city because they want their visitors to get out and see the city. In a lot of cases they take a shuttle to the terrace, use the skywalk and then take a shuttle back and don’t get out and explore. They also need to tell the history of the Monona Terrace better, they are working with the Frank Lloyd Wright Foundation to get early drawings and they want to talk about the history and how long it took to get it built, its about a 40 or 50 year period. He says it is a place that needs to be explained.
Reserves
Lisa Subeck where the reserves came from, how were they built up. When dean Brasser was hear they established that they should have a 20% of their operating funds as reserve. They built that over the course of the years by having more revenue or less expenses. Whatever the excess is at the end of the year goes in the fund. Over the past few years it was $20 – 25K, in previous years it was $75 – 100K per year, but they were reaching the 20% mark.
McManners remembers the “less expensive” comment, it is about the installation of the projects because of the conduit and not having to tear out the walls. It used to be $300,000 to do it, now its $125,000.
Another Note for Monona Terrace
Ahrens points out that there are two notes and although one will expire in 2014, another remains. Schmiedicke says that there is about $950,000 a year going into debt service until 2020.
