AGENDA #10

 

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 24, 2006

 

 

PURPOSE

 

The purpose of this report is to respond to questions raised by the Council on April 10, 2006 and 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 and Option 2 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 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 of the skate park, 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.

 

On April 10, 2006, the Council discussed options for operation of the skate park and batting cage facilities at Homestead Park and asked for additional information. Please see the attached agenda item from April 10, 2006.

 

DISCUSSION

 

At its April 10, 2006 meeting, the Council asked the Manager to report back with additional information, specifically about levels of participation and fiscal controls.

 

Participation during Time Facility was Operated by Ryan’s World (2000 through 2004):  Prior to May 2005 the skate park and batting cage facilities were operated by Ryan’s World. During that time we did not receive direct participation numbers from the vendor. However, we do have revenue figures that we can use to interpolate participation data. Based on these numbers, our best estimates for attendance during this time are:

 

SKATE PARK

 

Total Estimated Participation (2000)

3,295

Total Estimated Participation (2001)

7,589

Total Estimated Participation (2002)

4,891

Total Estimated Participation (2003)

1,702

Total Estimated Participation (2004)

2,093

 

 

BATTING CAGES

 

Total Estimated Participation (2000)

475

Total Estimated Participation (2001)

709

Total Estimated Participation (2002)

42

Total Estimated Participation (2003)

219

Total Estimated Participation (2004)

328

 

Unlike the current proposal, the previous agreement did not include a provision for the Town to pay the concessionaire and attendance reporting was not required.

 

Participation Status during Town Operations (May 2005 through mid-April 2006):  Since May 2005 the Town has operated the skate park and batting cage facilities. In that time we have compiled the following information about participants using the facility:

 

SKATE PARK

 

Total Estimated Participation for one year

2,112

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

 

Total Estimated Participation for one year

1,584

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

 

Fiscal Controls: An issue raised during the April 10, 2006 Council discussion concerned that of fiscal controls. If the Council agrees to contract with the concessionaire we would propose to establish the following procedures:

 

Cash Register Tapes – A condition of the agreement would be that a duplicate cash register tape be provided to the Town that would show all transactions placed through the register. We would review each day’s transactions and maintain a spreadsheet that would track revenues produced by the facility over time. Tapes would be submitted on a weekly basis.

 

Signage – We would make it a requirement of the agreement that the concessionaire post a prominent sign asking patrons to contact the Town in the event that they are not offered a receipt from any sale.

 

Monthly Sales Tax Report – The concessionaire would be required to provide a copy of the North Carolina sales tax report form from the facility on a monthly basis.

 

Monthly Sales Report – The concessionaire would provide a monthly report that would total all sales and admissions by department. We would compare this report with the sales tax report and cash register tapes.

 

Oversight – We would visit the facility each week. The site visits would allow us to monitor compliance with requirements dealing with helmet use, smoking, parking, and other issues.

 

Capital Improvements: If the skate park is to remain open we need to make about $40,000 of repairs to the facility. This would also be true if the Town were to operate 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 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.

 

Operating Budget Impacts: Under the terms of the proposed contract the Town would have to budget $12,000 for payment of a management fee to the concessionaire. The cost of insurance would be a reduction from the current level of $11,000 to $6,000 per year.

 

In addition, once we determine how much longer the Town will directly operate the facility, we would expect to bring a budget amendment to the Council to account for expenditures and revenues related to skate park operations in FY 2005-06.

 

OPTIONS

 

Option #1 - Operation by a Concessionaire: We believe that 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 an outline agreement with Vertical Urge. The major points of the agreement are included in the attached Council agenda item dated April 10, 2006. We would add conditions that would allow us to better monitor participation and revenues.

 

Potential Benefits of the Option to Contract with a Concessionaire

 

  1. This option would allow continued use of the facilities which cost about $400,000 to build.
  2. A knowledgeable concessionaire could potentially improve operations by offering programs such as competitions, camps, and other programs that require specialized knowledge.
  3. This concessionaire could build additional interest by using the site as a pro shop, thus drawing larger numbers of people interested in skate sports.
  4. This option would serve a population that is generally not interested in other Town recreation programs.

 

Potential Issues with the Option to Contract with a Concessionaire

 

  1. This option would likely cost the Town about $19,000 annually to run the park. This amount includes a $12,000 management fee, $6,000 in insurance, and about $1,000 in maintenance costs.
  2. We would have to make about $40,000 in repairs in a fairly short time.

 

Option #2 – 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. We would save about $19,000 per year.
  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 contract with 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.

 

If the Council decides to contract with a concessionaire 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.

 

If the Council decides to contract with a concessionaire we would implement a program to provide greater oversight of the operations including gathering participation numbers, monitoring revenues, and reviewing safety rules and regulations.

 

The Council could also close the facility and sell the ramps, equipment, and batting cages. This would result in annual operating savings of about $19,000. However, some costs related to demolition of the facilities would be expected. Some revenues related to sale of the equipment could also be expected.

 

RECOMMENDATIONS

 

Parks and Recreation Commission’s Recommendation: The Commission is expected to address the issue at its April 19, 2006 meeting. The Commission’s recommendations will be distributed to the Council on April 20.

 

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
[ 2006-04-24/O-5a and 2006-04-24/O-5b ], which would allocate $30,000 from fund balance and $9,360 in payment in lieu of recreation area funds for skate park repairs.

 

ATTACHMENT

  1. April 10, 2006 Council agenda item (begin new page 1).
  2. Additional Materials (Parks and Recreation Committee)