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HomeMy WebLinkAbout07/22/93 Board of Public Works Special Meeting MinutesSPECIAL MEETING JULY 22, 1993 A Combined Special Meeting of the Board of Public Works and the Century Center Board of Managers was held at 4:10 p.m., Thursday, July 22, 1993, at Century Center in River Level Suites 2 and 3. The meeting was called to order by Mr. Karl King, III, President of the Century Center Board of Managers. Present were Board of Public Works President John E. Leszczynski and Board Attorney and Member Mary H. Mueller. Mr. Sean Coleman, Mr. Ken Herceg, Mr. Joseph Burkus, Mr. Edwin Ehlers, Mr. Robert O'Connor, Jr., Ms. Carmen Piasecki and Ms. Anne Faherty of the Century Center Board of Managers were also present. Additionally, Thomas Bodnar, Attorney for the Century Center Board of Managers was present, as well as Mayor Joseph E. Kernan, City Attorney Richard Nussbaum and City Controller Kevin Horton and many members of the public. PUBLIC HEARING —_DEFINITIVE AGREEMENTS - COLLEGE FOOTBALL HALL OF FAME PROJECT Mr. Karl King, III, President, Century Center Board of Managers, welcomed everyone to the special combined meeting of the Board of Public Works and the Century Center Board of Managers. Mr. King stated that the purpose of this special meeting was to review two (2) documents which form the legal foundation of the operation of the Hall of Fame. The first document, a License Agreement, is between The National Football Foundation and College Hall of Fame and the City of South Bend. The second document, a Management Agreement, is among the City of South Bend, The National Football Foundation and College Hall of Fame, Inc., and the Century Center Board of Managers. Mr. King further stated that today the boards will go through the Agreements so they can fully understand the documents and receive comments from the public. Mr. King stated that the boards are not present to debate any other item but to deal with the Agreements mentioned. Mayor Joseph E. Kernan addressed members of both boards and advised that since the announcement that the Hall of Fame would be relocated to South Bend, a great deal of work has been done by many people. Mayor Kernan noted that the advisory committee has had invaluable input into this process over the course of the past year. He stated that the three (3) things that have taken place are: (1) the design of the Hall of Fame which has really taken shape; (2) a report from Economics Research Associates which contains some important conclusions about the financial viability of the Hall's operation, and (3) the finalization of the License Agreement and Management Agreement which have been under discussion since a year ago. Mayor Kernan stated that these three (3) steps brings the City to the fourth step which is to garner necessary sponsorship and support for the Hall of Fame. The fifth step to this process is the construction of the Hall of Fame with groundbreaking taking place in March of 1994 and the doors open to the public in the summer of 1995. The Mayor further noted that the Agreements have been negotiated with a number of individuals involved and he thanked City Attorney Richard Nussbaum for his work in this area. Mayor Kernan stated that when the City went out to draft these Agreements they had two (2) goals. One, to protect the City and two, to protect the College Hall of Fame. The Agreements that the Boards are going to consider accomplishes both of those things because of the hard work of a great many people. City Controller Kevin Horton informed the members of both boards that approximately six (6) months ago the Redevelopment Commission engaged Economic Research Associates to do a feasibility study for the proposed College Football Hall of Fame. SPECIAL MEETING JULY 22, 1993 Mr. Horton noted that there are three (3) reasons why this was done. First, to double check internal numbers. Second, the City intends to issue a bond for this project. As part of that process, when the bond is marketed, it will be necessary to have this independent study. Third, any sponsor or donor will want to know the projected cash flow. Therefore, Economics Research Associates was asked to conduct this study. Mr. Horton stated that Economics Research Associates is the best in the field and their methodology was thorough. They studied comparables and did an analysis of every event conducted in this region. The conclusions of the report state that in year one the project will generate approximately $2 million dollars in earned operating revenue and a net operating revenue of $155,000. The net revenue will then decline to a low of $92,000.00 and will then pickup. Mr. Horton noted that it is anticipated that during the first year the project will be heavily support by a local market. There will then be a slight decline and then a pickup as the national share increases. By year ten (10) it is anticipated that attendance will be at 190,000 with revenue of $2.4 million dollars with excess operating revenue at $560,000.00. Mr. Horton noted that Economic Research Associates projects that this project, as an independent free-standing operation, will be self-supporting. City Attorney Richard Nussbaum stated that the Board of Public Works and the Century Center Board of Managers will have submitted to them for their approval and ratification Agreements between the City of South Bend and the Hall of Fame. Mr. Nussbaum noted that on July 13, 1992, a press conference was held announcing that the Hall of Fame was coming to South Bend. Mr. Nussbaum thanked the members of the negotiating team for their hard work which resulted in a fair agreement arrangement that will protect the City and the National Football Foundation and College Hall of Fame. Mr. Nussbaum presented to the members of both boards his overview of the project which is as follows: PARTIES 1. The National Football Foundation and College Hall of Fame, Inc., (NFF), a New York not -for -profit corporation qualified for recognition as exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. 2. City of South Bend - Board of Public Works (BPW) and Century Center Board of Managers (CCBM) AGREEMENTS 1. License Agreement (LA) - Allows use of College Football Hall of Fame (HOF) artifacts, exhibits, intellectual property rights (NFF-BPW). 2. Management Agreement (MA) - Defines management and operation of HOF (NFF-CCBM) 3. License Agreement and Management Agreement cross reference each other and are internally consistent. TERM Forty (40) years and automatic renewals of five (5) years unless one (1) year notice given prior to end of renewal period. GOAL 1. Mechanism for issuance of tax-exempt bonds to finance construction to be paid through private donor and sponsorship program. 2. Establish a revenue stream which will pay for operating expenses to make the Hall of Fame self sufficient. 3. Provide for a world -class redevelopment project in downtown South Bend. 7 2 SPECIAL MEETING JULY 22, 1993 4. Remain true to proposal made by South Bend to the National Football Foundation. LICENSE AGREEMENT CITY RIGHTS 1. Exclusive, non-transferrable right and license to use anywhere in the world the licensed property (existing trademarks and new intellectual property). 2. All Hall Operating Revenue: - Admission Fees - Food and Beverage Concessions - Net Rental Revenues - Gift Shop Sales and Sales of Other Merchandise at the Hall of Fame - 100% Catalog and brochure sales (1st 5 years) - 100% Catalog and brochure sales up to $1,000,000 Gross sales remainder of term - Shared Revenue - 50% - Special programming - Revenues from licensing or sublicensing property to prominent sponsors (i.e., $50,000 contribution any 5- year period). 3. Up to 25% of surplus funds, after all Hall of Fame expenses are met, to be used for any purpose. NATIONALFOOTBALL FOUNDATION RIGHTS 1. License Fees (a) Base license fee - Year 1 $10,000 Year 2 $15,000 Year 3 $25,000 (b) Supplemental license fee - percentage of surplus funds (positive cash after all Hall operating expenses are paid, including pre -opening and carry over expenses and priority expenses). (c) Additional license fee - after $14,000,000 is raised. 2. Shared Revenue Sale of licensed property excluding gift shop, catalog, and brochure sales (greater than $1,000,000 after Year 5). 50% of net shared revenue subject to City use for first five (5) years (becomes operating expense). 3. All Foundation Revenue - Tampa Hall of Fame Bowl - Kickoff Classic - Annual Awards Dinner - Palm Springs Golf Classic - Chapter Activities and dues - i.e., what they have done before the Hall of Fame was built. HALL OF FAME OPERATING EXPENSES - Cost of marketing; goods sold - Personnel costs - Supplies; services including management fee - Capital Improvement Fund - Base License fee - Lease Payments (cost of financing) Unreimbursed pre -opening expense - Unreimbursed prior year losses - Unreimbursed net shared revenues 1 1 SPECIAL MEETING JULY 22, 1993 FLOW OF FUNDS Hall Operating Revenue (less) * Operating Expenses (equals) Net Operating Income (equals) Excess Funds (less) Priority Expenses (equals) Supplemental License fee *Unreimbursed Net Operating Losses (becomes Operating Expense in future years) Unreimbursed Net Shared Revenue (becomes Operating Expense in future years) OBLIGATIONS OF THE CITY 1. Begin construction by July 1, 1994 (target March 1, 1994) 2. Complete and open to public by March 1, 1996. 3. Maintaining paid attendance of 65,000 per year during year ten. 4. Maintain trademark quality control standards. 5. Maintain operating standards in accordance with highest quality sports museums in the United States (i.e., Cooperstown and Canton). 6. Cooperate with National Football Foundation through Joint Committee. 7. Pay all Hall of Fame operating expenses. OBLIGATIONS OF NATIONAL FOOTBALL FOUNDATION 1. Artifacts available to City. 2. Cooperate with City through Joint Committee. 3. Continue to induct members. 4. Use Hall of Fame for meetings. 5. Keep chapters informed of licensing programs to avoid conflicts. 6. Assist in fund raising and marketing. 7. Maintain positive relationships with other organizations, such as the NCAA and CFA. DISPUTE RESOLUTION Contained in the Management Agreement. MANAGEMENT AGREEMENT JOINT COMMITTEE Century Center Board of Managers operates the Hall of Fame with assistance and guidance of Joint Committee. JOINT COMMITTEE - TEN (10) MEMBERS 1. Five (5) appointed by the National Football Foundation. 2. Five (5) appointed by the Mayor, includes at least three (3) who are also members of the Century Center Board of Managers. 3. Chairman - National Football Foundation designates. RESPONSIBILITIES OF JOINT COMMITTEE 1. Operating Standards * 2. Yearly budget preparation 3. Appointment of Director and Historian 4. Initial capital improvement plan and revisions 5. Material exhibitry modifications SPECIAL MEETING JULY 22. 1993 6. Approval of all material consultants, contractors, engineers 7. Artifact maintenance and update plan 8. Licensing and promotional program 9. Operation plan (fees, hours of operation, etc.) 10. Preliminary design approval 11. Other responsibilities as outlined in License Agreement * Requires seven (7) votes to pass CAPITAL IMPROVEMENT FUND 1. Operating Expense: Year 1 $ 60,000 Year 2 $ 80,000 Year 3 $100,000 Year 4 $120,000 Year 5 $140,000 Year 6 and thereafter $100,000 2. Priority Expense: - Before excess funds are distributed, Joint Committee examines and determines if following priority expenses have been satisfied: - Acquisition of additional artifacts - Improvements to archives - Special programming needs - Discretionary capital improvements - Satisfaction of long-term and short-term operating capital and exhibitry requirements MANAGEMENT FEE $50,000 annually due January 1 after completion of facility. DISPUTE RESOLUTION 1. Non -trademark - Claim - 30 days to resolve - Mayor/Chairman meet to resolve - 30 days - Dispute Resolution Panel - 2 by Mayor, 2 by Foundation, 1 Arbitrator selected by Mayor and Chairman (no vote) 8 weeks to resolve - Arbitration in Pittsburgh - Litigation alternates between Indianapolis, Indiana and New York, New York 2. Trademark Accelerated dispute resolution to determine if the City can continue contested use. Litigation alternates between Indianapolis, Indiana, and New York, New York (Federal Court) 3. Loser pays cost of litigation. There being no further presentations to be made to the members of the Board of Public Works and the Century Center Board of Managers, Mr. King inquired if members of either Board had questions concerning the Agreements. Mr. Joseph Burkus, Member of the Century Center Board of Managers, asked Mr. Nussbaum to further explain what type of matter would go to arbitration and why it was decided the loser should pay for the cost of litigation and why that cost is not shared. Mr. Nussbaum stated that a situation in which the matter might go to arbitration would be for instance if the City found out that the Foundation was not living up to their part of the bargain such as inducting members or the licensing program, or if the City was not living up to its responsibility to change exhibitry or in 1 1 SPECIAL MEETING its standards of someone seeks to loser would pay. JULY 22, 1993 operation. Mr. Nussbaum stated that anytime go to litigation that party would know that the Mr. Burkus also questioned why the Chairman of the Joint Committee is selected by the Foundation. Mr. Nussbaum indicated that this matter was the cause of much discussion. He advised Mr. Burkus that the Board would have a right to suggest who should be designated as Chairman. However, at this time, the designation is the right of the Foundation. Mr. Nussbaum noted that this is pursuant to the bylaws. Perhaps the bylaws can be changed in the future to indicate that the designation could alternate from year to year. Mr. Nussbaum noted however that this designation would not be a detriment to the success of the Hall of Fame. Mr. Sean Coleman, Member of the Century Center Board of Managers, questioned the selection of the matters that required seven (7) votes of the Joint Committee. Mr. Nussbaum stated that it was felt that certain matters deserved votes by a super majority. He noted that many matters will have to be dealt with by the Joint Committee, Century Center Board of Managers and the Common Council. Mr. Ken Herceg, Member of the Century Center Board of Managers, had a question regarding the twenty-five per cent (25%) of surplus funds that will be available to the City after all Hall of Fame expenses are met. Mr. Nussbaum explained that if the surplus dollars equal $300,000 or more, the Foundation would receive seventy-five per cent (75%) and the City, twenty-five per cent (25%). If that amount is $300,000 or less, the Foundation would receive ninety per cent (90%) and the city would receive ten per cent (10%). Mr. Nussbaum reiterated that not one dollar will leave the Hall of Fame until all expenses are paid. Board of Public Works President John E. Leszczynski asked if the amount of surplus funds received by the City could be used outside of the Hall of Fame. Mr. Nussbaum stated that they can be and this was a point of discussion at the time of the negotiations. Another member of the Century Center Board of Managers had a question concerning the $50,000 management fee annually due January 1st after completion of the facility. His questions and concerns regarding start up costs, any carry over funds and whether or not they could keep an outside account, were addressed and answered by Mr. Nussbaum. Mr. Sean Coleman, Member of the Century Center Board of Managers, inquired if the City used models from other Halls of Fame. Mr. Nussbaum replied that they did from both the agreement side and the operation side. Other Halls of Fame were looked at but what makes this one different is that a municipality is doing the project. In conclusion, Mr. Nussbaum thanked his family and the families of all other individuals involved in this project. Mr. King advised that the Public Hearing being held today is not a legal requirement but it was the request of the Board of Public Works and the Century Center Board of Managers that the matter be held in public in order to get the perspective of the public which may be useful to Board members. Mr. King stated that individuals wishing to address the Board in favor of this project would be heard first followed by those opposed. At the end of this discussion, time would be reserved for City officials to respond to any comments made. - 2 SPECIAL MEETING JULY 22, 1993 Ms. Sandy Redden, ExecuServices, 17450 Darden Road, South Bend, Indiana, advised that she is a small business owner and is in favor of the Hall of Fame Project. Mr. Andre Gammage, 209 North Main Street, South Bend, Indiana, advised that he is a local attorney and is in favor of the project. Mr. Steve Luecke, 810 Leland, South Bend, Indiana, informed members of the Boards that he is the President of the Common Council and encourages their favorable consideration of the Agreements which have been presented. Mr. Carter Wolfe, Executive Director, Center City Associates, 122 South Main Street, South Bend, Indiana, addressed members and urged their support of these Agreements. Mr. Roland Kelly, 1325 East Wayne Street South, South Bend, Indiana, a member of the Common Council advised that he was a member of the Hall of Fame Advisory Committee and would encourage members to sign the documents submitted to them. Mr. Mark Donahoe, 1345 Northside Boulevard, South Bend, Indiana, representing the St. Joseph Valley Building Trades, offered his support for this project and asked that the Board approve the Agreements. Mr. Pat McMahon,1805 Bader Avenue, South Bend, Indiana, advised that he is the Executive Director of Project Future. Mr. McMahon spoke to the Board at some length about the Hall of Fame Project and how it will affect the City of South Bend and voiced his support of the project and the signing of the Agreements. Mr. Gene Oakley, 2614 York Road, South Bend, Indiana, addressed members of the Board and indicated that he had some questions about the award ceremony and wondered if those ceremonies would be held in South Bend. Mr. Nussbaum stated that there are inductions and enshrinements. The inductions will take place in New York and the enshrinements will be in South Bend. Mr. Oakley stated that he just wanted to make sure that the City get some benefits. The first person to speak in opposition to the Hall of Fame Project was Ms. Joyce Boaler, 1606 Hillsdale Road, South Bend, Indiana. Ms. Boaler spoke at some length about her concerns regarding the project and use of taxpayers dollars for this project. Mr. Jim Cierzniak, 1156 East Victoria Street, South Bend, Indiana, advised that he had some comments to make concerning this project but first wanted to advise the Board that Dr. David Varner, 1306 Clayton, South Bend, Indiana, could not be present at the meeting today but wanted Mr. Cierzniak to relay his opposition to the project. Mr. Cierzniak read to the Board a two (2) page prepared statement in opposition to the Hall of Fame Project. In his prepared statement Mr. Cierzniak stated that the Hall of Fame Project neither addresses a serious need in the community nor does it mesh with the normal responsibilities and obligations of a City government toward its citizens. Mr. Cierzniak further stated that he urged the City and its citizens to insist that the Mayor keep his promise and raise $14 million dollars from private corporations to pay for the construction and exhibits for the Hall of Fame. Further comments mainly addressed the National Football Foundation and its involvement with the Hall of Fame Project. 1 1 1 SPECIAL MEETING JULY 22, 1993 ADJOURNMENT There being no one else present wishing to address the Boards concerning this matter, Mr. Karl.King declared the combined meeting of the Board of Public Works and the Century Center Board of Managers, adjourned at 5:35 p.m. 0 ATT ST: Sandra M. Parmerlee, Clerk 1 BOARD OF PUBLIC WORKS 5hLnE. Leszczy s i Mary Hall Mueller es R. Cal 11