Memorandum

City of Lawrence

City Manager’s Office

TO:	Mayor and City Commission
FROM:	City Manager, David L. Corliss
DATE:	November 8, 2012
RE:	Recreation Center

This memorandum provides an update on staff’s continued analysis on recreation center options.

Attached, you will find:

• A brochure of Recreation Center options
• A letter from the KU Endowment Association
• Overland Park Drive Site Plan
• Rock Chalk Park Site Plan
• Rock Chalk Park Site Plan – Updated 11/08/12
• Comparison between sites
• Recreation Facility Matrix
• Lower Floor Plan
• Upper Floor Plan
• A powerpoint presentation from the Lawrence Parks & Recreation Department
• A chronological summary
• Response to Madre Lawrence

Additionally staff has analyzed the ability of the City to debt finance $25 million for either the Rock Chalk park site or the Overland Drive site.    The City’s current debt finance schedule in the sales tax reserve fund (City share of County 1% sales tax) is approximately $1,361,000 from 2013 thru 2016, inclusive.    With existing fund balances the City is able to start a new sales funded project in 2014 if desired.   If the City issued $21 million in debt – to be paid from sales tax revenues beginning in 2014 – this debt could be financed over 20 years with approximately $1,350,000 in revenues.   A 20 year sales tax projection demonstrating positive fund balance with this debt – at either 2% or 3% annual sales tax growth is also attached.    This 20 year sales tax plan also begins in 2014 with a $350,000 year increase in recreation center operations to pay for the difference between recreation center revenues and expenditures.  Also beginning in 2017 $100,000 a year is set aside for major maintenance of the 181,000 square foot facility (growing to $150,000 in 2027).

The remaining $4 million in city debt obligations would come from the City’s annual capital debt budget which has $3 million allocated for recreation center infrastructure in 2013 and $1 million allocated in 2014.  The total debt obligation of $25 million is thus met with $21 million in general obligation debt financed with sales tax revenue over 20 years and $4 million in general obligation debt from the City’s annual debt program.   Staff does not anticipate the necessity of raising taxes for either the capital or operating expenditures for this project.   If revenues from either sales tax or recreation/tournament operations do not meet projections, expenditures in recreation center programs and activities will be reduced to meet revenues.

The $21 million 20 year debt would be paid by $1,350,000 per year from the sales tax reserve fund (total $1,350,000 X 20 years = $27,000,000).  The $4 million from the City's annual debt would cost approximately $800,000 in interest/issuance costs (we typically do 12 year debt for most general obligation projects).   In summary, the $25 million project would cost approximately $6.8 million in interest, for a total principal/interest cost of $31.8 million.   

It is somewhat difficult to compare these two options with the proposal which was pursued earlier this year on the property west of K-10.   While that smaller site did not include as many features as the Rock Chalk site (no KU softball, reduced paved parking, reduced trails, etc.) it was based at that time on a lease-purchase for the facility ($24 million in payments over $20 years, or $1.2 million per year).  The City would have borne all of the architect costs for the project.   Additionally, while we continued to budget $4 million for infrastructure costs, our preliminary estimates ($6.4 million) indicated that we would need to reduce the scope of infrastructure and/or spend water/sewer funds to achieve that budgeted amount.  Additionally, there was no agreement on City/KDOT financial participation in necessary improvements to West 6^th Street (Highway 40) which was estimated at $4 million for improvements west of K-10.  If this site was pursued with these estimates, the total project cost could be estimated at $35.2 million – plus any applicable interest costs for the debt financed portions - ($24 million in lease payments, $800,000 for architect fees, $6.4 million for infrastructure, and some portion of $4 million for improvements to West 6^th Street).    

Staff sees very strong value in partnering with the University of Kansas at the Rock Chalk park site.  Additional parking, hiking trails, the opportunity to locate lighted tennis courts, the opportunity to expand, the availability of the Overland Drive site for other parks and recreation or other City uses, and the significant opportunity to partner with KU on sporting, recreational and other community uses makes the Rock Chalk park site a unique opportunity for our community.

City Commission options:

1.  Direct staff to prepare necessary documents – for future City Commission review and approval – for a partnership with KUEA for the Rock Chalk park site.  These documents would include, but not be limited to City approval of all plans and specifications, review of bids and costs, property transfer, common area maintenance and access, and other necessary items related to the project.

2.  Direct staff to pursue the necessary procedures for the Overland Drive site.  This would include contract with architect, land use approvals, etc.

3.  Direct staff concerning additional information on one or both options.

4.  Decline to proceed with recreation center at this time.