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Norwalk Council members look to make Oak Hills solvent with loan restructuring; maybe fund driving range

Updated, 2:17 a.m., full story

NORWALK, Conn. — One of Norwalk’s financial gurus tentatively endorsed Thursday the validity of a $3.2 million expenditure to build a driving range at Oak Hills Park while cautioning that perhaps the proposal should go through normal capital budget procedures.

Director of Management and Budgets Bob Barron, while admitting that he is no golf expert, told the Common Council Finance Committee that he had studied the figures presented by the Oak Hills Park Authority and found the revenue projections to be conservative and the expense estimates to be realistic.  He recommended spending the $25,000 requested by OHPA to do a feasibility study on the driving range, a.k.a. “golf learning center.” Barron also outlined some financial gymnastics that would reduce the loan payments Oak Hills is obligated to give the city, giving the Authority significantly more wiggle room on its “historically thin operating margins.”

Both Barron and Finance Director Thomas Hamilton said these are “loose recommendations” in “an ongoing discussion.”

“We are not putting a proposal on the table, the mayor hasn’t signed off on this saying this is a proposal he is in support of, but he certainly has been involved with meeting with the Oak Hills Authority and has indicated that he wants us to continue pursuing the discussion to see if there are avenues or areas where we could reach an agreement that would provide the Authority with the ability to put themselves on firmer financial footing,” Barron said.

This discussion started in March at the behest of Finance Committee Chairman Bruce Kimmel (D-At Large), who invited Oak Hills Park Authority members to explain their financial situation and plans to the committee. This resulted in a forceful pitch from OHPA Ad Hoc Driving Range Committee Chairman Ernie Desrochers to have Norwalk forgive the debt the Authority incurred when it built the restaurant at the course during the Knopp administration.

Hamilton balked.

“The debt exists and the debt is going to be paid, it’s going to be paid and the bond holders are going to be paid so really what you’re saying is you want the taxpayers to pay it instead of Oak Hills Authority to pay it and the golfers to pay it,” Hamilton said in March.

“We thought it is an obligation of the Authority that we think they should continue to pay back,” Barron said Thursday. “However, to address the historically thin operating margins, we thought perhaps we could restructure the debt to our current cost of capital.”

OHPA has met with the city finance department twice, once in April and once in May, to negotiate, he said. The Authority suggested the city take over the debt service for the restaurant, and take in the lease payments from whatever business was using the space, he said. OHPA also suggested restructuring the debt to the current cost of the capital, he said.

Authority members did not request financing from the city for the driving range, but said that would be least expensive option, Barron said.

The Authority’s debt has been restructured twice, but each time the interest rate remained set at the original rate, Barron said. The city has refinanced the money, he said.

“Our cost for the debt is lower than what they are paying us in interest, so we thought it would be a reasonable proposal to say let’s reduce the remaining balance to our current cost of capital,” Barron said.

Additionally, the Authority has been required to put $40,000 a year into a reserve account since it came up empty three years ago and requested a $150,000 bridge loan to make it through the winter, he said. The goal was to get the account up to $200,000 in the event Oak Hills defaulted, and there is $120,000 in the account now.

Hamilton and Barron said the city should give that money back. Oak Hills will not have to make the $40,000 payment in September, Barron said.

“This provision was put in there modeled after a revenue bond structure,” Hamilton said. “… That’s not really the situation we are in. The situation we are in is in fact, we own the land, it’s city-owned property, it’s a city-owned asset, it’s a city golf course. At the end of the day we are going to be responsible for it one way or another.”

The city has a $320 million budget with $36 million in its fund balance, Hamilton said. “We don’t really need the added security that this $200,000 debt reserve provides,” he said.

Oak Hills owes $2.215 million on its principal. The loan payment is $161,000 a year, at the original 4.56 interest rate, and would drop to about $131,000 at the current interest rate of 2.43 percent.

But Barron said Oak Hills has to make the $161,000 payment this year because that’s what’s been budgeted. The $30,000 in excess would be applied to the principal, he said. The balance would be $2.1 million after the payment is made in September, he said. Next year Oak Hills will owe $129,000 as its payment.

“It’s kind of a wash. Their budget planned on making that $161,000 payment … plus $40,000 (for the reserve payment). Now we are saying don’t give us the $201,000. We will give you this $120,000 from our reserve. Instead of giving us $201,000 they have to give us the difference between the $120,000 we are giving them and the $161,000. So I think it’s a reasonable accommodation for that. So that was our discussions. I think we have gone back and forth a few times. I think there is a general consensus.”

On to the “more debatable” golf school, he said.

The Authority has made this proposal for the last three or four years and Barron said he has become familiar with the figures, making an analysis based on his years working for FedEx, where he would do a cost/value appraisal on such things as buying airplanes, he said.

“I think their revenue projections are conservative. I think they could be better. I think their expense projections are right on,” Barron said.

There’s not a lot of labor associated with a driving range, so “not a great lot of expenses associated with it,” he said. Oak Hills projects $381,000 profit in its first year with a 1 percent growth increase over 10 years, which is “not an aggressive growth figure,” he said.  The payment on a 15-year loan would be about $287,000 a year, he said, and Oak Hills plans to set aside $30,000 a year for capital improvements.

The break-even point for a $3.2 million loan would be 12 years after it opened, Barron said.

Kimmel and Council President Jerry Petrini (R-District D) fidgeted simultaneously at that remark.

The 15-year loan, even if you imagined the golf school went away at that point, would get a 6.6 percent rate of return, Barron said, calling that “healthy.”

“I think the golf school proposal has a real opportunity to bring a surplus back to the golf course as a whole and help them accomplish those goals that we mentioned at the beginning of the presentation: Shore up their financials, help them weather the fluctuations in revenues and expenses due to the seasonality of golfing and have more money to invest back into the park,” Barron said. “… I think we have a loose consensus that would give them what they need and it would from a financial perspective protect the city.”

He recommended that the city spend the $25,000 requested by DesRochers to fund a driving range feasibility study by an independent third party to see if the numbers are viable. Oak Hills could then make its $3.2 million request in December as part of the capital budget process.

Committee members said they supported the $25,000, with an eye toward expediting it and getting the study under way. Present were Doug Hempstead (R-At Large), David McCarthy (R-District E), Kimmel and Petrini; John Igneri (D-District E), Travis Simms (D-District B) and David Watts (D-District A) were absent; Igneri was out of town, Hempstead said.

Kimmel suggested sending it straight to the full Council after it runs through the Board of Estimate and Taxation, but Hamilton protested that he needs to talk to Mayor Harry Rilling first.

The loan modification would be voted on by the committee on July 9 and go to the full Council on July 14, Kimmel said.

Original story: 

NORWALK, Conn. — One of Norwalk’s financial gurus tentatively endorsed the validity of a $3.2 million expenditure to build a driving range at Oak Hills Park on Thursday, while cautioning that perhaps the proposal should go through normal capital budget procedures.

Director of Management and Budgets Bob Barron, while cautioning that he is no golf expert, told the Common Council Finance Committee that he had studied the figures presented by the Oak Hills Park Authority and found the revenue projections to be conservative and the expense estimates to be realistic.  He recommended spending the $25,000 requested by OHPA to do a feasibility study on the driving range, a.k.a “golf learning school.” Barron also talked about refinancing the debt that Oak Hills owes the city, given that the city is paying a low interest rate on the funds.

Both Barron and Finance Director Thomas Hamilton said these are “loose recommendations” in “an ongoing discussion.” Mayor Harry Rilling wanted the feedback from the Council, before discussing things further, they said.

“The mayor has not signed off on this,” Barron said. “He has indicated he wants us to continue pursuing the discussions.”

The return on investment for a driving range would be 6.6 percent, with a break-even point 12 years after it opened, Barron said.

Council members said they supported the $25,000 for a study, with an eye toward expediting it and getting it under way.

“We own the land, it’s city owned property, it’s a city owned asset, it’s a city golf course… at the end of the day the city is responsible one way or another,” Hamilton said.

This story will be updated.

Comments

29 responses to “Norwalk Council members look to make Oak Hills solvent with loan restructuring; maybe fund driving range”

  1. Jim Perkins

    It’s official now all financial staff for the City and the fools controlling taxpayer money have to go.

  2. Betsy Wrenn

    If Norwalk can gamble millions on a dying sport, and forgive debt on past lame business plans, how about reducing our property taxes instead?

  3. John Levin

    “Guru”?

  4. sofaman

    “Financial gymnastics”. . . well, that’s being kind.

    Golf is a dying sport. Bad money after good.

    Where is the (real-world local) research showing pent-up demand for this range?

    Oh, and “it’s a city golf course”, well technically no.

    It’s a CITY PARK operating as a city golf course. This distinction matters.

  5. Mrs. Ruby McPherson

    @ Jim Perkins, THANK YOU
    […] They need to pay what they own back to the city, so funding can go where it’s really needed. We wound do better building a sports center more like Bridgeport Webster Center

    This post was edited to comply with our comment policy.

  6. Paul Cantor

    Below is the statement that I made to the Finance Committee last night. The statement and the excellent comments made by other members of the taxpaying public were ignored.

    TWO CONTRADICTORY CLAIMS

    The Oak Hills Park Authority is asking you to turn millions of dollars it borrowed from taxpayers to construct a restaurant and make capital improvements to the course into a gift. At the same time it is asking you to appropriate $25,000 for a study to determine if a large commercial driving range will solve its financial problems.

    The Authority makes the following two contradictory claims:

    CLAIM ONE. The restaurant is the source of its financial problems. Without the restaurant it would be able to cover its costs.

    CLAIM TWO. It cannot solve its financial problems without the income from a large commercial driving range.

    Let’s look at those two claims in turn.

    First: The claim that the restaurant is the source of its financial problems. That is not true. The primary source of its financial problems is the well-documented decrease in the demand to play 18-holes of golf.

    Just consider the following:

    1. Rounds played by Norwalk residents on the 18-hole golf course in Oak Hills Park fell 44% from 38,918 rounds in 2002 to 21,618 last year. That 17,300 decrease in rounds played by residents reflects a nationwide trend.

    2. As last month’s issue of Golf Magazine noted, for example: “The number of rounds played in the United States has been falling for a decade, and the number of U.S. golfers has dropped from 30 million in 2005 to about 23 million today – fewer than we had in 1990. The erosion of the industry’s customer base has caused great distress for course owners and operators. Last year, 174 U.S. golf courses went out of business…These days, even municipalities that manage their golf operations capably aren’t guaranteed smooth sailing.”

    3. Or as a recent article in The Economist put it (Dec 2014): “Last year around 25m people played golf, 18% fewer than did so in 2006, although the population grew by 6%. Although still played by men and women, including businesspeople hoping to bond over more than lunch, golf does not hold the same appeal for the young and minorities, groups that will determine its future health. In recent years more people have abandoned than taken up the game.”

    4. Or as the WSJ reported last year Aug 1, 2014: The golf industry is suffering from a generation gap. A drop in participation rates and disinterest among young people, particularly millennials, have sent both the retail and sporting ends of the business scrambling for a new strategy.

    5. Or as an article in the New York Times noted: golf has lost five million players in the last decade, according to the National Golf Foundation, with 20 percent of the existing 25 million golfers apt to quit in the next few years.

    6. Or as Time Magazine put it: “Golfer numbers are down. Golf equipment sales have been tanking. The number of golf courses closing annually is supposed to dwarf the number of new courses opening for years to come. ‘We really don’t know what the bottom is in golf,’ Dick’s Sporting Goods CEO Edward Stack said in a recent conference call, attempting to explain why golf gear sales have fallen off a cliff. ‘We anticipated softness, but instead we saw significant decline. We underestimated how significant a decline this would be.’”

    7. Or as Bloomberg News pointed out the sport “is suffering from an exodus of players, a lack of interest among millenials and the mass closure of courses.”

    And on and on and on.

    In summary, the OHPA’s financial difficulties are not due to the debt it took on to build the restaurant and now want taxpayers to shoulder. They are primarily due to the dramatic decrease in the demand to play 18 holes of golf. And even the OHPA implicitly recognizes that fact when in the words of its former chairman Robert Virgulak, it claims “a driving range is needed so the golf course will survive. Without that additional revenue, there’s no way. We need another source of revenue and the only one that makes sense is a driving range.”

    So what is the reason no member of this committee has recognized that it is because of the dramatic decrease in the demand to play 18 holes of golf that the OHPA hasn’t been able to and won’t be able to cover the cost of the 18-hole golf course? Clearly, the emperor has no clothes. The 18-hole golf course in Oak Hills Park is losing money and will continue to loose money. It is time to open your eyes recognize that fact.

    Now to the OHPA’s second claim. The OHPA’s first claim is that the restaurant is the key sources of its financial difficulties. The second claim implicitly recognizes that is not true. Indeed, it implicitly rests on the understanding that in order to cover its capital costs it had to rely on a $1.5 million dollar grant from taxpayers and numerous loans that had to be restructured.

    What is the reason it needs to rely on taxpayer subsidies to survive? The question answers itself. It has to rely on taxpayer subsidies to survive because user fees haven’t been able to cover the costs of the golf course and won’t cover them in the future.

    Hence, the need for an outside source of revenue – i.e. ongoing taxpayer subsidies. And it claims those subsidies should come from the revenues generated by a large commercial driving range. Will a large commercial driving range in a residential neighborhood that as The Hour pointed out is off the beaten track and will have to compete with the driving range in Stamford’s Sterling Farms even generate the revenue needed to pay off the cost of constructing it? That is highly questionable.

    Clearly the private sector didn’t think a driving range in Oak Hills would be a moneymaker. That is the reason it was unwilling to loan the OHPA the money to construct one. But even if it might make money, a large commercial driving range does not belong in an AAA residential neighborhood anymore than does a Mosque.

    Finally, members of this committee and golfers like to repeat a mantra that goes like this:
    “The golf-course is a gem. We can’t afford to loose this gem.” That, of course, is a mantra that plays well with golfers but it does not indicate an awareness of your fiscal responsibility to all the taxpayers of the city.

    Think about it. The Tiffany diamond is also a gem. And the cost to maintaining it in a glass case for the enjoyment of visitors to Tiffany’s flagship store on Fifth Avenue must be as high as maintaining a golf course. But there is no more justification for requiring taxpayers to shoulder that cost than there is to require taxpayers to shoulder the cost of maintaining the golf course in Oak Hills Park.

    Please be fiscally responsible. As sympathetic as you may be to the problems the OHPA faces please understand that you should not relieve it of its responsibility to make good on its loans from the city’s taxpayers.

  7. Paul Cantor

    Not one city official nor any member of the Finance Committee has yet acknowledged that the dramatic decrease in the demand to play golf should factor into their consideration of how many millions more of our taxpayer dollars should be used to subsidized the money losing golf course in Oak Hills Park.

    Unfortunately, as the article above makes clear, our city under the stewardship of Bruce Kimmel and other members of the Common Council’s Finance Committee is moving full steam ahead toward restructuring the Oak Hills Park Authority debt another time and then loaning the Authority more than an additional $3 million dollars for a driving range.

    This is an example of special interest politics at play. It is something that is difficult to stop without strong leadership from the Mayor or other city officials with the courage to stand up for what is right not what is politically expedient.

    Of course the more people who become aware of what is going on and who express outrage that millions of taxpayer dollars are used to subsidize a money losing golf course that makes the only major park near the center of our city inaccessible to the 90% of us who do not play golf the more likely our elected officials will begin to pay attention.

    But keep in mind what we are up against: a well organized special interest group of golfers. If you would be interested in meeting to begin mobilizing others to demand that our politicians stop subsidizing the golf course in our park please send an email to [email protected].

  8. cc-rider

    Except for the fact that rounds at the course increased last year

  9. Yvonne Lopaur

    The statement I made to FInance Committee:

    As long as the OHPA continues to manage the golf course its first responsibility is to use any revenues it obtains over and above its operating costs to service its debt. But if it can’t even cover its operating costs then the OHPA should be disbanded and the Park turned over to the Recreation and Parks Department to be managed in the interests of all the residents of Norwalk not just the minority that play golf.

    Just consider that if there is one thing Norwalk sorely lacks it is a large multi-use park near the city center. Consider too that the golf course makes Oak Hills Par inaccessible to 90% of Norwalk taxpayers yet the proposal before you asks you to use their money, our money, my money to continue to subsidize the it – adding insult to injury.

    Of course I recognize that some of you are golfers who have played the course and like the course. And I recognize also that one of you has even served on the OHPA in the past. But that does not absolve you of your responsibility to do the right thing. The right thing is to hold the OHPA responsible for its obligation to repay the money it borrowed from taxpayers.

    Please rise above your desire to satisfy the special interests of golfers at the expense of the interests of all taxpayers. As the city’s finance director, Mr. Hamilton, pointed out: the Oak Hills Authority is legally committed to repay the money it borrowed from the city. Hence to relieve it of that commitment would be fiscally irresponsible and set a dangerous precedent.

  10. Yvonne Lopaur

    Behind closed doors talks between Oak Hills Park Authority members, Finance Director Thomas Hamilton and Director of Management and Budgets Robert Barron and the Mayor have been going on since March. There are questions that should be explored as to the number of hours spent on these talks and the dialog between the parties should not be kept secret from the taxpayers.

    It is time for taxpayers to call the Mayor to protest the amount of time and money city officials have been spending in an effort to salvage the money losing 18-hole golf course that makes Oak Hills Park, the only major park near the center of our city, inaccessible to the 90% of us who do not play golf.

    None of the members present at the Finance Committee last night were there to do the right thing. All of them were there to help OHPA restructure the debt it owes taxpayers and then to find a way to loan the Authority more than three million dollars to construct a driving range.

    The first step in the process of moving forward with loan for the driving range all parties agreed, would be to spend $25,000 to hire a firm to assess the prospects the driving range will make money.

    Think about it. If a driving range was such a sure fire money winner the OHPA would be able to obtain a loan from the private sector to construct it. But the OHPA couldn’t obtain a loan from the private sector. That by itself is an indication that the driving range is not likely to earn enough to be able to service the loan taken out to construct it. So spending $25,000 on a study to see if it will make money is a waste of money. But the purpose of the study is not to provide city officials with an unbiased point of view.

    Rather the firm city officials will hire will provide them with the kind of assessment they are looking for. Then they will use the results of that study to justify loaning the OHPA the more than $3 million it seeks to construct a large commercial driving range.

    The whole process is scandalous. Our elected officials are allowing the special interest of golfers to trump the interest of all taxpayers.

  11. cc-rider

    No bidder could get financing to build a range because of how the deal was structured. They actually didn’t own the land, would have to turn over the range to the city after the lease was up, and had to give part of the take. It is disingenuous to suggest that OHPA went to the bank and tried to secure a loan for a driving range.

  12. Suzanne

    I see a trend in Norwalk: we are running like crazy to be the City of the 1980’s when covered Malls were thriving and golf courses a profitable take.

    The intransigence of the Finance Director and friends in the face of overwhelming data showing why these “big ideas” are just not going to fly in, wait, check it, it’s 2015 everyone!,seems to render them deaf and mute to the Norwalk taxpayer.

    There are special interest groups, read OHPA and GGP, grabbing there ears and holding on, month to month, week by week, and if they are bull doggish enough, figure they will get what they want, again, in spite of data showing these ventures to be foolish and potentially damaging to the City.

    Who will be the third party “impartial” group studying the feasibility of the driving range (please call it what it is?)

    All due respect to Mr. Barron, buying airplanes for FedEx is not a qualification for analyzing financial data for a golf course, its expenditures and its future. Apparently quite handy in re-structuring loans to a group running a public park as a golf course, though.

    How many of these guys have a vested interested in continuing their golf game? Why, if not an issue, is it so hard to understand the status of golf nationwide, the past record of poor performance at Oak Hills and not look at other more tenable options benefiting all taxpayers?

    It is clear where the public service lies in these matters: special interest groups all the way. Norwalk taxpayers and citizens be darned.

  13. Tauber

    OMG. You guys STILL really don’t get it, do you? It’s not even worth trying to argue anymore. There WILL be a driving range. There WILL be a golf school. There WILL be plenty of cash for capital improvements that WILL make Oak Hills the true destination that it should have always been.
    Let me give some advice for those of you who are “long with the pen”. Anything over 500 words doesn’t get read.

  14. EveT

    The restaurant debt is an albatross around the city’s neck. I say “the city’s neck” because Oak Hills belongs to the city.
    If the Authority were to be dissolved, as certain frequent and long-winded commenters seem to want, that debt would be on the backs of Norwalk taxpayers instead of where it is now, on the backs of the Authority.
    That albatross debt is being paid off, gradually, by those who pay to use the areas of the park that charge money: golfers, tennis players, restaurant patrons.

  15. LWitherspoon

    “Oak Hills projects $381,000 profit in its first year with a 1 percent growth increase over 10 years, which is “not an aggressive growth figure,” he said. The payment on a 15-year loan would be about $287,000 a year, he said, and Oak Hills plans to set aside $30,000 a year.”

    For what purpose is $30,000 per year being set aside?

    I’d like to know how the rate of return was calculated. A 6.6% rate of return doesn’t excite me considering the 3.2 million risks associated with the project. I’m also less than enthusiastic about a government body engaging in a commercial enterprise. Fiscal prudence would suggest finding a private entity to finance construction, run the range, and pay rent plus a portion of the profits to Oak Hills, so that taxpayers aren’t exposed to whatever could go wrong.

    1. Mark Chapman

      @LWitherspoon

      There is nothing in the story that says $30,000 is being set aside. A fund balance, to which OHPA contributed $40,000 a year, is recommended to be discontinued. OHPA gets the balance back, but still must make its full loan payment to the city. The difference between an adjusted loan and the current figure is apparently $30,000, which will be applied to the loan principal.

      It’s all in the story. For more clarification, we suggesting contacting Mr. Hamilton or M. Barron directly.

    2. Mark Chapman

      @LWitherspoon

      As they say in the NFL, “Upon further review, the call on the field is reversed…”

      My apologies. I missed that the first two times through. While I could speculate that it has something to do with what I explained in my previous response, which has now been discredited and can be reasonable looked upon as FUBAR, I will discuss with Nancy and see if we can clarity that.

  16. Suzanne

    Tauber, declarative statements with no underlying support do not an argument make. Just because you think it is so doesn’t make it so. Something more than “The Little Engine That Could”, please.

  17. Kevin Di Mauro

    @LWitherspoon

    I have no enthusiasm for a commercial enterprise in a residential zone no matter how high the rate of return might be.

  18. Mark Chapman

    @LWitherspoon

    The passage in question now reads: “Oak Hills plans to set aside $30,000 a year for capital improvements.”

  19. TReynolds

    I find a lot of these rants humorous. If you get up and speak “your opinion” before the Finance Committee and before the Common Council and they STILL make decisions and vote opposite to your desires, shouldn’t that tell you that your position is not going to win in the end? The OHPA is doing the right thing. The City fathers are doing the right thing.

  20. Suzanne

    Mr. Reynolds, A couple of points. Opinions in front of the Finance Committee supported by research national to local doesn’t make the opinion maker wrong.

    Rather, one would have to question a Committee unwilling to listen to all sides taking into consideration not just their feelings about a given special interest but the facts being represented in the name of all Norwalk citizens.

    In fact, it is not a matter of winning as though a game were being played, it is a matter of shaping a community that reflects all citizen concerns.

    If every person, every citizen, were to defer to The City Fathers (and one can presume there are a few mothers in there too) as though supported, coontrary documentation didn’t matter, this would certainly not be called a democracy.

    Unfortunately, it appears that the Finance Committee, in this case, would rather over ride the very City documents that confer any power of opinion or management by the OHPA at all and stick with the game in lieu of most of the citizens of Norwalk who do not play golf. Not an opinion, a fact by their very actions.

  21. Suzanne

    Mr. Reynolds, Exactly. You just don’t get it.

  22. Tauber

    The 9 people who oppose Oak Hills out of 80,000 Norwalk residents make up just 0.0000125% of the population. Just insignificant.

  23. Tauber

    There WILL be a driving range. There WILL be a golf school. There WILL be plenty of cash for capital improvements that WILL make Oak Hills the true destination that it should have always been.

  24. Suzanne

    Open up your check book, Mr. Tauber. The Norwalk taxpayer should not have to pay for your hobby.

  25. Debora

    This is the worst remake of the movie Groundhog Day except for the POKO extensions…

    Mr. Barron needs to re-read the lease between the City and OHPA. Even if the debt is restructured, the repayment scheme outlined in the lease remains the same. The City does not have the option of giving OHPA any relief except to defer payments in deficient years.

    Here is some of the relevant language:
    ===================
    The AUTHORITY’s rental obligations throughout the
    period of Bond Issue shall include the repayment of all costs
    incurred in connection with the initial Bond Issue of the Oak
    Hills Park Project Bond Series dated 1997, as well as all other future BONDS, and any expenses related thereto, including debt service costs other than with regard to the $2.5 million Bond Issue dated 1997, described above.

    […]starting in year six and continuing thereafter throughout the term of this LEASE, a capital account which may be maintained throughout the term hereof and into which up to $250,000.00 may be deposited annually. The AUTHORITY shall also maintain a fund balance as set forth in Paragraph 4.02, hereof, as a contingency reserve for its costs of operations. (4.02 defines this contingency reserve as follows: At the end of each fiscal year during the initial five (5) years of this LEASE term an amount equal to five percent (5%) of the AUTHORITY’s operating budget, shall be deducted from the net operating revenues and placed in a separate reserve fund for the PARK in the name of the Oak Hills Park Authority. This reserve fund will be used only in emergencies to cover expenses of the PARK.)

    Beginning in the sixth year of this LEASE, commencing on March 1, 2003, and continuing throughout the remainder of the LEASE term, the AUTHORITY shall pay as additional rent to the CITY an amount equal to fifty percent (50%) of the PARK’s net operating revenues up to $200,000.00, plus seventy-five percent (75%) of any net operating revenues
    beginning with $200,000.00 up to and including $400,000.00, and eighty percent (80%) of any net operating revenues in excess of $400,000.00.

    Subsequent to the payment of the BOND Issue as provided
    herein if, in any succeeding year, the revenue from the
    operations of the PARK is insufficient to make the rental
    payments as set forth herein, the CITY may, at its sole option, agree to defer the collection of any rental payments until the next succeeding fiscal year. In such event, any profit or surplus generated in any succeeding year from any source of revenue to the AUTHORITY shall be paid to the CITY and applied first to make up the deficit from the prior year or years which has been deferred. Provided, however, that the CITY’s exercise of this option shall not be deemed a waiver of any rights the CITY may have under this LEASE, and the CITY shall be under no obligation to grant any future deferrals.
    ==================
    Continually restructuring this debt, or forgiving it will cost the City more than just the debt and the debt service. It is also costing us the upside in the out years.

    It’s cute that OHPA is proud of setting aside $30k annually for capital improvements, a mere 12% of what could be set aside. And giving back the contingency is not only in violation of the lease, but downright irresponsible for an organization that has had to get bridge loans to get through the winters in years past.

    Here’s another little factoid that is being ignored. OHPA is supposed to be reimbursing the City for all this time spent by Mr. Barron and others working on the finances.

    Here is the relevant language:
    ==========================

    In the event that the CITY is requested to provide any administrative and/or technical services to or for the benefit of the AUTHORITY, the CITY will be reimbursed for the actual cost of said administrative and/or technical services. Said reimbursement shall be payable as an
    operating expense under the terms of this LEASE.
    ==============================

    Will the BET kindly account for the time spent and provide the public with an accounting of what OHPA owes the City IN ADDITION to the bond debt?

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