AGENDA #8

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:      Options for Operation of the Homestead Park Skate Park and Batting Cage Facilities

 

DATE:            April 10, 2006

 

 

PURPOSE

 

The purpose of this report is to discuss options for operation of the skate park and batting cage facilities at Homestead Park. Option 1 is for the Town to select a concessionaire to operate the facilities, Option 2 is for the Town to operate the facilities, and Option 3 is for the Town to close the facilities.

 

The attached Resolution A would authorize the Manager to execute a concession agreement with Aloha II, Inc. (Vertical Urge) for operation of the Homestead Park skate park and batting cage facilities.

 

The attached Resolution B would authorize the Manager to continue operation of the skate park facility.

 

The attached Resolution C would indicate the Council’s intent to shut down the skate park and batting cage facilities and sell the equipment.

 

If the Council chooses to continue operations by a concessionaire or by Town staff, certain capital repairs are needed, totaling about $40,000. Budget Ordinance A would make $9,360 in payment in lieu of recreation area funds provided by the Avalon Park Subdivision available for skate park renovations. Budget Ordinance B would provide $30,000 in the Capital Improvements Program from fund balance for the purpose of making repairs to the skate park facility.

 

The Manager recommends adoption of Resolution A, Ordinance A, and Ordinance B.

 

BACKGROUND

 

On October 27, 1999, the Council approved a concession agreement with Ryan’s World for operation of a skate park and batting cage facilities at Homestead Park. The skate park opened for business in November 1999. The batting cage facility was completed and operational on September 24, 2000. The cost of both facilities was about $400,000.

 

In April 2005, a lapse in liability insurance led to the termination of the agreement with Ryan’s World. The Town subsequently assumed operation of the facility on May 11, 2005.

 

DISCUSSION

 

Description of Operations: The Chapel Hill Skate Park is located at Homestead Park. The facility includes a 10,000 square foot concrete slab, has a variety of ramps for skaters of all ability levels, is enclosed with a chain link fence and has room for future expansion. The skate park is served by a concession/restroom building. The facility is open all year as long as the skating surfaces are not wet.

 

The batting cage facility is a seven station batting cage that ranges from fast baseball to slow pitch softball. It is primarily used from spring through fall. The batting cage cannot be used when the surfaces are wet or when the temperatures drop below 40 degrees Fahrenheit. Tokens for use of the batting cages are sold at the skate park concession building.

 

Current Participation Status:  Since May 2005 the Town has operated the skate park and batting cage facilities. In that time we have compiled the following information related to the numbers of participants using the facility:

 

 

SKATE PARK

 

Average Monthly Participation (all year)

176

Average Monthly Participation (summer)

236

Average Monthly Participation (winter)

116

Highest Monthly Participation (August)

311

Lowest Monthly Participation (February)

96

 

 

BATTING CAGES

 

Average Monthly Participation (all year)

132

Average Monthly Participation (spring/early summer)

241

Average Monthly Participation (winter)

29

Highest Monthly Participation (June)

279

Lowest Monthly Participation (December)

12

 

Current Revenues Status:  We estimate that from May 2005 to the end of April 2006 the Town’s costs for day-to-day operation of the skate park and batting cages will be about $38,000. This amount has been partially offset by about $21,000 in revenues from admissions and concessions.

 

Option #1 - Selection of a Potential Concessionaire:  The skate park and batting cage operations were operated by a private concessionaire from 1999 to 2005. We believe that, with the right business operator, the concessionaire approach could work. In October 2005 we solicited every skate park interest of which we were aware, in order to generate proposals for operation of the facility. We received four proposals. However, one of the prospective vendors withdrew his proposal. In November 2005, we interviewed the three remaining candidates.

 

We believe that of those who submitted proposals only Vertical Urge has the necessary business experience and a realistic business plan. Vertical Urge currently operates an indoor skate park in north Raleigh and a full retail store.

 

We have negotiated a draft agreement with Vertical Urge that includes the following major points:

 

1.                  Condition of Facilities Upon Assumption of Lease: The Town would make repairs to the facility, including:

·         Replacement of skatelite skating surfaces on the ramps.

·         Repair of smaller stand alone ramps.

·         Fence repairs.

·         Fix drainage problems.

·         Repair viewing stand.

·         Paint and repair the concession building.

·         Make landscape improvements.

 

2.                  Term of Agreement: Vertical Urge would have exclusive concession rights to the facilities for a period of one year from the date of execution of the Agreement. There would be an option to extend the terms of the Agreement for two (2) additional consecutive one (1) year periods. 

 

3.                  Schedule of Use of Facilities: Vertical Urge would operate the facilities generally on the following schedule, weather permitting:

 

August 26th – May 31st

 

Monday – Thursday

3:00 p.m. until 8:00 p.m.

Friday:

3:00 p.m. until 9:00 p.m.

Saturday:

10:00 a.m until 9:00 p.m.

Sundays:

12:00 noon until 6:00 p.m.

Holidays, teacher work days

10:00 a.m. until 8:00 p.m.

 

 

June 1st – August 25th

 

Mon – Sat                                     

10:00 a.m. – 9:00 p.m. 

Sun

12:00 p.m. – 6:00 p.m.

 

4.                  Admission Fees and Charges: Upon start of operations Vertical Urge could charge up to the following amounts:

 

Skate Park:

Residents are defined as patrons residing in Chapel Hill and/or Orange County.

 

LONG-TERM PASSES

Residents

Non-Residents

 

 

 

PLATINUM membership

$200

$250

Platinum membership is an unlimited skate access pass good for 1 year from the date purchased.

 

 

 

GOLD membership

$25

$30

Orange county residents, 1 year membership with $4 per session fee, 1st session is free.  Renewal membership is $15.

 

 

 

Non – residents, 1 year membership with $5 per session fee, 1st session is free.  Renewal membership is $20.

 

 

 

Regular session fee

$7

$8

Skate park helmet rental

$2

$2

 

 

 

Batting cage fees will remain at the current level of $2 per 25 pitches

 

5.                  Payment Schedule: The following Schedule would be based on total revenues from operations.

 

A.    If total revenue collected by Vertical Urge from 12 months of operations for the term of the agreement was $60,000 or less, the Town of Chapel Hill would make a $12,000 supplemental payment to Vertical Urge.

B.     If Vertical Urge collected a minimum of $60,000 within a 12-month term of the agreement, the supplemental payment would be reduced by $600 for every additional $1,000 in revenue collected by Vertical Urge until such supplemental payment to Vertical Urge was $0.

C.     If total revenues collected by Vertical Urge reach $80,000 during the term of the agreement, Vertical Urge would pay the Town of Chapel Hill $600 for each $1,000 in revenue collected by Vertical Urge until total revenues reach $89,000.

D.    If total revenues collected by Vertical Urge during the term of the agreement reached $89,000, Vertical Urge would pay the Town of Chapel Hill at a rate of 6 percent per $1,000 revenue collected by Vertical Urge.

 

6.                  Maintenance: The Town would be responsible for extraordinary maintenance, renovations, and replacement of equipment. Vertical Urge would be responsible for routine maintenance and repair of equipment and cleaning of the concession/restroom building. After the initial renovations, we estimate that repair costs to the Town would likely be about $1,000 per year. Greater costs would likely be incurred in the event the facility is vandalized or some major piece of equipment, such as a batting machine or HVAC unit breaks. In about three to four years we would expect the skating surface panels on the skate park ramps to begin to wear out. When this occurs we should expect to make about $15,000 in repairs per year over three to four years until all of the panels are replaced as needed. This cycle would likely be repeated every three to four years.

 

7.                  Operation of Facilities: Vertical Urge would be responsible for all necessary staffing, programming, and operations of the facilities.

 

On March 15 and March 26, 2006 we published advertisements in the Chapel Hill News that provided details for the proposed agreement so that any interested persons would have the opportunity to know about the proposed lease.

 

Budget Issues: We believe there are two primary budget issues that must be addressed if the Council decides to proceed with the proposed concession agreement.

 

The initial issue is that of capital renovation of the existing facility. We need to make repairs to the facility. The proposed concessionaire is willing to contract with the Town prior to the Town making the repairs, but wants assurance that the repairs will be made in a reasonable time frame. We have evaluated the situation and agree that about $40,000 of repairs listed earlier, should be made.

 

We believe that there are two sources of funds that could be used for this project. The first is a $9,360 payment in lieu of recreation area provided by the Avalon Park Subdivision. We recommend that if the Council desires to continue to operate the skate park that the Council enact the attached budget ordinance that would make the Avalon Park funds available for skate park repairs. The second potential source of funds would be $30,000 from fund balance. We believe that the current fund balance could be used for this purpose.

 

The second budget issue would be the Town’s obligation under the terms of the contract to provide $12,000 per year to supplement the concessionaire’s operations. This amount would have to be incorporated into the Parks and Recreation Department’s operating budget.

 

However, we believe that this amount would be offset by a reduction in the Town’s insurance rates. Our insurance carrier currently charges the Town $11,000 per year to insure the skate park. They have informed us that if we contract with a concessionaire that is properly insured our rates will be reduced by at least $6,000. The proposed concessionaire is currently insured at acceptable limits.

 

In the event that Vertical Urge’s revenues would reach $60,000 the Town’s supplemental payments would reduce. If revenues reach $80,000 per year the concessionaire would make payments to the Town. Based on prior experience, we believe this would not occur.

 

Below is a chart showing the anticipated day-to-day cost of operating the skate park for one year based on the most recent history and the terms of the potential concession agreement.

 

Annual Cost of Operations

to the Town

Operated by Town of Chapel Hill

Operated by Concessionaire

Insurance

$11,000

$6,000

Personnel Costs 1

$22,000

0

Payments to Concessionaire

0

$12,000

Supplies and Items for Resale

$4,000

0

Maintenance 2

$1,000

$1,000

 

 

 

Total Annual Expenditures

$38,000

$19,000

 

 

 

Offsetting Revenues

$21,000

0

 

 

 

TOTAL ANNUAL COST

$17,000

$19,000

 

1 The estimated personnel costs assume continued operation by part-time student employees.

2 This amount does not include a one time capital investment of about $40,000 to make capital renovations and repairs.

 

Potential Benefits of the Option to Contract with a Concessionaire

  1. We believe that this would be the best option for the long term operation of the facility. Parks and Recreation staff lack experience in working with the skating community. A concessionaire who understands skaters could better react to trends in the sport and attract greater participation.

 

  1. A knowledgeable concessionaire could offer special programs such as competitions, camps, and other programs that require specialized knowledge.

 

  1. This concessionaire could build additional interest by using the site as a pro shop, thus drawing larger numbers of people interested in skate sports.

 

  1. This option would reduce the need for Town staff to operate the facility on a day-to-day basis.

 

  1. This option would free the Public Works Department from performing day-to-day maintenance of the site.

 

Potential Issues with the Option to Contract with a Concessionaire

  1. This option would likely cost the Town about $2,000 more to run the park for a period of one year.

 

  1. We would have to make about $40,000 in repairs in a fairly short time.

 

OTHER OPTIONS FOR OPERATION OF THE FACILITY

 

We have identified two other potential options for operation of the skate park and batting cages. Each has costs and benefits.

 

Option #2 - Operation by the Town: The Town could continue to operate the facility. This would mean that staffing and operation of the facility would become a regular function of the Parks and Recreation Department’s Athletic staff.

 

Potential Benefits of the Option to Continue Town Operation of the Facility

1.      We believe that we could operate the facility for about $2,000 per year less than the cost of supplementing the concessionaire, based on current levels of participation.

 

2.      We would have more control over day-to-day operations.

 

Potential Issues with the Option to Continue Town Operation of the Facility

  1. Our staff lacks experience working with the skating community. We believe that unless a very knowledgeable (and more costly) supervisor is hired, skate park usage would not increase because of our lack of knowledge of the sport.

 

Option #3 – Close the Facility: Another option would be to close the skate park and batting cages. We could sell the batting cage equipment and convert the area to some other use. If the Council decides to close the facility we would work with the Parks and Recreation Commission to develop recommendations for future use of the area.

 

Potential Benefits of the Option to Close the Facility

  1. If the facility were closed, we would not have to pay the costs associated with day-to-day operation of the skate park and batting cages. We would no longer have to pay for salaries, utilities, renovation of worn out equipment, and insurance. Currently, we would save about $17,000 per year not counting maintenance and repair expenses.
  2. We would be able to save about $40,000 in renovation costs currently identified for the skate park.
  3. Some funds could be generated by sale of equipment.

 

Potential Issues with the Option to Close the Facility

  1. The skate park is the only such public facility in the community. At this time the closest other public facility is in Cary.
  2. The skate park provides a sports facility and gathering place for a group of residents that is for the most part not served by other Town parks and recreation facilities and programs.
  3. There would likely be some cost of demolition, although the extent of demolition would depend on the future use of the area.

CONCLUSION

 

We believe that if the Council desires to continue operation of the skate park the best option would be to hire a concessionaire. A concessionaire would be in the best position to add programs and grow participation at the facility. However, at least in the first year of operation it would likely cost about $19,000. This is about $2,000 more than it would cost to run the facility ourselves.

 

If the Council decides to contract with a concessionaire or continue to operate the facility we believe that it would cost about $40,000 to make repairs to the building, ramps, and grounds. The Council could make $9,360 available from a payment-in-lieu of recreation area and $30,000 from fund balance.

 

The Council could also close the facility and sell the ramps, equipment, and batting cages. This would result in annual operating savings of about $17,000. Some costs related to demolition of the facilities would be expected. Some revenues related to sale of the equipment could also be expected.

 

RECOMMENDATIONS

 

Manager’s Recommendation: That the Council adopt the attached Resolution A, which would authorize the Manager to execute a concession agreement with Aloha II, Inc. (Vertical Urge) for operation of the Homestead Park skate park and batting cage facilities.

 

The Manager also recommends that the Council enact the attached budget ordinances, which would allocate $30,000 from fund balance and $9,360 in payment in lieu of recreation area funds for skate park repairs.