Loading...
HomeMy WebLinkAbout03-14-05 Finance Com. MinutesDUBLIN CITY COUNCIL Finance Committee Monday, March 14, 2005 Minutes of Meeting Mr. Keenan, Chair, called the meeting to order at 6:05 p.m. Council members present were Mr. Mayor Chinnici-Zuercher, Mr. Lecklider and Mr. McCash. Mrs. Boring arrived at 6:25 p.m. Staff members present were: Ms. Brautigam, Ms. Grigsby, and Ms. Puskarcik. Mr. Keenan stated that tonight's topic is discussion regarding the status of the current grant provided to the Dublin Convention & Visitors Bureau, in excess of the 25 percent allocation required by state law. Ms. Grigsby provided background information on the current $80,000 per year grant, over and above the 25 percent allocation from hotellmotel tax revenues, to the Bureau. It is paid in equal monthly installments and was awarded in the year 2000 far afive-year period. It will expire in November of 2005. Last summer, the DCVB asked the City to provide for continuation of the additional funding, via an increase in the percentage of hotellmotel tax allocation or by continuing the $80,000 grant. The grant was originally requested by the Bureau when they were considering a move to their present location at 9 S. High Street. They had outgrown the offices they shared with the Chamber at 129 S. High. Another benefit was to locate in the Historic District at the corner of Bridge and High, making a Visitors Center available to the public. As part of the packet for tonight's meeting, Council was provided information on the existing ordinance authorizing the grant. It provided far a grant of $80,000 and has provision for adjustments in case the hotellmotel tax allocation increases by $60,000 or more from the previous year. Another adjustment can be made to the grant if the Dublin Irish Festival experiences bad weather, impacting festival revenues to the City in terms of beverage sales and admissions. The goal was to provide some flexibility on the City's part regarding funding, in the case of changes in the financial conditions or revenues from the Festival. The packet also contains memos and minutes of meetings from 2000 to understand what led to adoption of the five-year grant. Information on the growth in the hotellmotel tax revenues over the past ten years and the distribution to the Bureau was included. The tax funds are distributed as follows: 75 percent of the total is distributed to the City's hotel/motel tax fund and 25 percent to the Bureau. The 75 percent allocated to the City's hotellmotel tax fund is used to support the Dublin Arts Council in accordance with the lease agreement executed with the DAC (approximately 25 percent of the tax collected}, the annual debt service obligation for the bonds issued for acquisition and renovation of the DAC facility, the City sponsored events and the additional grant to the Bureau. If any funds remain, the Finance Committee reviews grant requests from outside organizations for events held in Dublin. Staff's recommendation, as discussed previously with the Bureau representatives, is that staff would not recommend modifying the percentage of hotellmotel tax revenues, but instead to continue the existing policy of a grant with the same contingencies relating to revenues or weather during the Irish Festival. Finance Committee March 14, 2005 Page 2 Mr. Keenan invited Mr. Dring, Executive Director of the DCVB to address the Committee. Scott Dring introduced the executive committee members who were present: Craig Baldridge, President and City Council representative; Lee Palaschak; Sharon Roberts; Clay Rase; Kevin Denny; and Mike Jenkins. They are happy to respond to any questions. Mr. Keenan invited input from Committee Members. Mr. Lecklider stated that he appreciates the various options proposed, but under the circumstances, he would support the staff recommendation of continuation of the grant as in the past five years. He, too, is hopeful that hotel/motel tax revenues increase in the coming years. He believes that it is important far the DCVB to be located where it is presently, as it is a tremendous asset to the community and to Historic Dublin. He recalls that the grant was originally provided with the intent of lending support to Historic Dublin and its businesses. At this point, he supports the continuation of the grant for the next five years. Mayor Chinnici-Zuercher stated that the Bureau has done a wonderful job in creating new venues to fill the hotel rooms and generating revenue. They are on the right track, and she believes that there will be a continued increase in the occupancy rate as the corporate economy rebounds. Given the many meetings, events and the great freeway location of Dublin, and the many events taking place in Central Ohio, the Dublin location ensures continued occupancy growth for the Dublin hotels. She does have some concerns regarding the monetary issues that she has discussed previously with Mr. Dring. The present grant has run for five years. What has the DCVB done during this time to raise more revenue outside of the hotel/motel tax revenues in order to reduce their dependency on City funding? What discussion have they had with their landlord regarding a reduction in the rental package? She would like a response to these questions prior to voting on a recommendation at Council. Mr. Dring stated that the DCVB is a 501 c6 organization. At the time the Visitors Center was opened in November of 2000, they attempted to secure a 501 c3 category that would have allowed for grants, but it was denied. Convention bureaus, in general, are very reliant upon hotellmotel taxes. In Dublin, the hotel/motel tax revenues comprise 91 percent of their entire budget, while across the state, they average 96 percent. There are several options: membership dues could bring in some funds, but they could not limit membership and would then have to share leads with hotels outside of Dublin. The membership base is small, so it would bring little additional revenue. They secured sponsors for the Center at the time they opened and raised $60,000 for five-year sponsorships. Most, if not all, of that money went to the build out of the facility. Looking at the bed tax residual, they have increased .66 in the five years since November of 2000. Therefore, the anticipated income did not come in. As a marketing organization, it is difficult to generate income outside of the hotel/motel tax without spending resources that take away from their mission. Mayor Chinnici-Zuercher asked about the potential of a reduction in rent. Finance Committee March 14, 2005 Page 3 Mr. Dring responded that they had initial conversations with Mr. Grabill. The Board wanted to first check on the status of the grant continuation. They are hoping for some reduction in rent, because they incurred build out costs initially. Apart from inflation, they are hoping for a minimal increase, if any, in their rent, and potentially a decrease. Mr. Keenan asked about the square footage of their space. Mr. Dring responded that they have 1,800 square feet of space downstairs and 1,850 upstairs. They pay more per square foot downstairs than upstairs - $19 downstairs and $17 upstairs. They are considered a Class "A" property and the rent is in line with what others are paying, from what he has been told by realtors. Mr. McCash responded that it is actually overpriced for the market. Around the corner, he has Class A property and can't rent it for $15 per square foot due to market conditions. Mayor Chinnici-Zuercher suggested that Mr. Dring research this before meeting with the landlord. Mr. McCash asked if the DCVB awards grants from the monies they receive from the City. Mr. Dring responded that 71 percent of the revenue is allocated directly to marketing. This is a reinvestment in that it generates more revenues for the hotel/motel tax fund. Mr. McCash stated that his understanding is that the grant was done on a five-year basis versus a permanent basis to allow the Bureau to go through a budgeting cycle. What efforts have been made in budgeting this cast into operations? He understood this to be a five-year assistance program from the City, and that the rent expense would then be included in the budget for the DCVB. Mr. Dring responded that in 2000, projections of a 13 percent increase in hoteUmotel tax revenues over the next five years were made. Instead, it has been .66 percent. This revenue decrease was one factor. The 9-11 event had a major impact in travel. On the other hand, they have been able to retire the debt incurred from the build out and have built up $65-70,000 in reserves. Mr. Jenkins added that there have been increased administrative expenses such as in health benefit costs. Mr. Keenan asked about the annual rental costs -are they $65,000? Mr. Dring stated that there are common area charges that are not included in that figure. Those add $15,000 per year. Mr. Keenan asked about the square footage. Mr. Dring stated that he could provide this information at a later date. Mayor Chinnici-Zuercher stated that the audited statements indicate that the rent, utilities and maintenance costs totaled $85,800. Mr. Jenkins stated that a staff member was added when the Visitors Center was opened. Finance Committee March 14, 2005 Page 4 Mr. Keenan noted that there were monies allocated for relocation expenses referenced in previous discussions - a total of $28,000. Mr. McCash noted that he had heard comments that space heaters were being used to supplement the heat in the Visitors Center. This would be a safety concern. Mr. Dring responded that this is not accurate. They are not using space heaters in their facilities. Mr. Keenan noted that a clause in the previous ordinance referred to a windfall reduction factor. He asked Ms. Grigsby for additional clarification. Ms. Grigsby stated that if the increase to the DCVB in hotel/motel tax revenues exceeded $60,000 in any one year, anything above that would be reduced from the grant. Mr. Keenan stated that over the past three years, the revenues have been very flat. He can support a grant for the DCVB, but he would want to include the escalator clause in any new legislation. He does concur with Mayor Chinnici-Zuercher that there should be some progress made by the DCVB in terms of less reliance upon this type of subsidy in the future. Mr. McCash asked if a future grant would be for five years, or perhaps far a shorter period of time? What incentive is there for negotiation of rent with the landlord if the same amount of grant funding is available from the City? There is other available office space in the Historic District and elsewhere in the City. Mr. Keenan stated that this could be addressed in the motion. Mayor Chinnici-Zuercher commented that it is a catch 22 situation. If Council approves a grant, the landlord will be aware of this and so any negotiation power is diminished. On the other hand, she does understand the Bureau's need to know of Council's decision for their future budget planning. Perhaps the Committee could recommend to Council tonight that a grant be continued at less than the previous amount, subject to review after the new lease is negotiated. There are several options available. Mr. Lecklider asked if the DCVB contemplates another five-year lease or less than five years. Mr. Jenkins responded that the best lease rate is available with alonger-term lease, sa they would probably seek afive-year lease. Mr. Keenan stated that perhaps they should consider athree-year as well as five-year lease term. Mayor Chinnici-Zuercher responded that they likely would not see a reduction in the lease rate if they move to a shorter term. Mr. Keenan stated that there must be a basis on which to make a decision in terms of a future grant. He acknowledged that if he owned the property, he would be inclined to provide a discount for alonger-term lease. It is definitely a catch 22 situation. Finance Committee March 14, 2x05 Page 5 Mr. McCash added that a landlord might be inclined to offer a deeper discount in view of the potential of having a tenant move out and having empty office space in an already glutted office space market. Mr. Keenan asked if they have explored alternatives for office space. Mr. Jenkins responded that they did explore some alternatives, but by the time they would move and do another build out, it was determined that it would be a "wash" unless they moved into something such as an existing strip mall that was underutilized. But then the access as a Visitors Center would not be good. Mr. Keenan acknowledged that it is definitely difficult to negotiate a lease in a public forum. Ms. Grigsby stated that it might make sense for the Committee to recommend continuation of a grant, without setting a specific dollar amount, subject to the DCVB's negotiation with the landlord. The specific grant amount can then be discussed at the time they conclude their negotiations for the lease and the legislation is prepared. Mr. Keenan responded that he would support this recommendation from the Committee. Mr. Keenan moved to recommend to Council that the City agree to provide continuation of a grant, in excess of the 25 percent of hotel/motel tax revenues per state law, in an amount to be determined after the DCVB has completed lease negotiations with their landlord. Mr. Lecklider seconded the motion. Mr. McCash suggested that the language instead indicate that the City would entertain a grant at the time lease negotiations are concluded, versus recommending continuation of a grant at this time. Mayor Chinnici-Zuercher stated that she believes the intent of the motion is to demonstrate support to the DCVB, so that they can go forward, recognizing that they would receive something greater than the 25 percent of hotel/motel tax revenues they are entitled to by state law. The language, "entertain" is somewhat more nebulous. Vote on the motion: Mr. Keenan, yes; Mr. Lecklider, yes; Mrs. Boring, yes Mr. Keenan stated that the recommendation would be brought to Council at tonight"s meeting. Mr. Keenan adjourned the meeting at 6:40 p.m. Clerk of Council