Downtown Redevelopment Authority Agenda – Feb. 21, 2019 City Hall, Council Chambers 415 W 6th Street, 11:30 AM MEETING AGENDA 11:30 AM ACTION TO BE NO. ITEM TAKEN 1. Call to Order Richard Keller, Board President • Roll Call • Excusal of absence, if needed 2. Approval of Minutes Jan. 17, 2019 Approval Richard Keller, Board President 3. Monthly Financial Report Update Christine Smith, TDJ CPA, Inc. 4. Claims and Administrative Expenses Approval Christine Smith, TDJ CPA, Inc. 5. Asset Manager’s Report Update Art Burger, CHMWarnick 6. Hotel Manager’s Report Update Mike McLeod, General Manager, Hilton Vancouver 7. Capital Projects Approval Paul Lewis, Executive Director 8. Finance Committee Report Update Paul Lewis, Executive Director 9. Other Business a. Moss Adams Project Audit Approval Paul Lewis, Executive Director Engagement Letter b. DRA Annual Report to City Update Paul Lewis, Executive Director Council c. 4th Street Parking Lot License Update Paul Lewis, Executive Director Agreement 10. Executive Session, if needed Jonathan Young, Assistant City Attorney
Citizen Communications This is the place on the agenda where the public is invited to speak regarding any issue. Each speaker is requested to fill out a pre-printed testimony card (provided at the meeting entrance) with their name/address and matter to be discussed. They are also asked to sit at the table at the place marked “Citizen Testimony” and give their name and city of residence for the audio record. Please notify the Staff Assistant if you are unable to sit at the table to give your testimony and wish to have a wireless microphone provided to you. Citizens testifying are asked to limit testimony to three minutes.
Adjournment
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DOWNTOWN REDEVELOPMENT AUTHORITY MEETING MINUTES Vancouver City Hall – Council Chambers – 415 W. 6th Street PO Box 1995 – Vancouver, Washington 98668-1995 www.cityofvancouver.us
Richard Keller • Marc Fazio • Debi Ewing • Jack Onder • Brad Hutton • David Copenhaver • Jan Robertson Jan. 17, 2019
REGULAR MEETING (Vancouver City Hall, Council Chambers) The meeting agenda materials referenced in these minutes can be found online.
CALL TO ORDER AND ROLL CALL The Jan. 17, 2019 meeting of the Downtown Redevelopment Authority was called to order at 11:30 am by President Richard Keller in the Council Chambers of City Hall, 415 W. 6th Street, Vancouver, Washington.
Present: Richard Keller, Debi Ewing, David Copenhaver, Brad Hutton, Marc Fazio, Jack Onder Absent: Jan Robertson
ITEM 2: APPROVAL OF MINUTES Motion by Ewing, seconded by Copenhaver, and carried unanimously to approve the minutes from Dec. 20, 2018.
ITEM 3: OFFICER ELECTIONS Motion by Ewing, seconded by Onder, and carried unanimously to elect Richard Keller as President and Marc Fazio as Secretary/Treasurer of the DRA.
EXCUSAL OF ABSENCE Motion by Ewing, seconded by Hutton, and carried unanimously to excuse the absence of Jan Robertson who gave adequate notice of her anticipated absence.
ITEM 4: FINANCIAL REPORT Item Summary Christine Smith, TDJ CPA, Inc., summarized the narrative overview of the financial statements for the period ending Dec. 31, 2018. These statements are provided in the document titled “Narrative Overview of the December 2018 Financial Statements”.
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ITEM 5: APPROVAL OF CLAIMS AND ADMINISTRATIVE EXPENSES Item Summary For December 2018, the claims totaled $1,778,160.14 and the Administrative expenses totaled $20,299.28. The payment to the Clark County Public Facilities District required by the annual year-end Flow of Funds totaled $1,396,151.00.
Motion by Hutton, seconded by Ewing, and carried unanimously to ratify the December claims and approve the Administrative Expenses and payment to the Clark County Public Facilities District as presented.
ITEM 6: ASSET MANAGER’S REPORT Item Summary Art Burger, CHMWarnick, reported on Hilton Vancouver’s progress through December 2018. Please see the December report from CHMWarnick: Monthly Asset Manager’s Report for December 2018.
ITEM 7: HOTEL MANAGER’S REPORT Item Summary Mike McLeod, General Manager of the Hilton Vancouver WA, presented the Hotel’s 2018 year end results. • Total revenue for the year was $18M, down 2.5% to budget and down 0.5% to last year. • Total year occupancy rate was down 0.3% to budget and down 0.5% to last year. • The Average Daily Rate was up 0.2% to budget and up 1.9% to last year. • Food and Beverage for the year was down 7.4% to budget and down 4.7% to last year. • Net Operating Income (“NOI”) for the year will be $4.8 M, down 1% to budget, and down 6.3% to last year due to the multi-year tax credit last year which impacts the year over year variance. • Revenue per Available Room (“RevPAR”) finished the year at $115.60. • The overall SALT score for the year was 69.2%, and was down 2.3% to last year and down 1.3% to budget. o The overall SALT score for Q4 was 73.9%, up 5.2% to last year. o The Hilton Vancouver ranked 45 of 290 hotels.
ITEM 8: CAPITAL PROJECTS Item Summary and Related Discussion Paul Lewis, DRA Executive Director, presented a request for a capital project totaling $47,254.68 for the replacement and installation new kitchen equipment that will support banquet and Grays food production.
Motion by Ewing, seconded by Fazio, and carried unanimously to approve the request for capital projects.
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ITEM 9: FINANCE SUBCOMMITTEE REPORT Item Summary Paul Lewis provided updates from the Finance Subcommittee. • A Lodging Tax workshop with City Council is scheduled for January 28, 2019. The Council has requested clarification regarding the 2% of the lodging tax dedicated to tourism related purposes that is not distributed via the Lodging Tax Advisory Committee grant process. Natasha Ramras will present the workshop to Council. President Keller requested that Paul Lewis be available to advocate on behalf the DRA in the ensuing discussions. • The Finance Committee discussed the Fourth Street Parking Lot project. Improvements will be minimal, consisting of striping and the installation of permanent fencing. This would be accompanied by a formal lease between the DRA and City. • The DRA Annual Report will be presented at a City Council workshop in March.
ITEM 10A: OTHER BUSINESS – DRAFT 2019 WORK PLAN Item Summary Paul Lewis presented the draft work plan for the upcoming year. Please see Downtown Redevelopment Authority Draft 2019 Work Plan Schedule.
ITEM 10B: OTHER BUSINESS – MANAGEMENT AGREEMENT AMENDMENT: FINANCIAL IMPACT Item Summary Paul Lewis provided information regarding the financial impacts of the Management Agreement Amendment for the board to review independently as a supplement to his comments provided during the discussion of this topic at the Dec. 20, 2018 meeting.
ITEM 10C: OTHER BUSINESS – LEHMAN BROTHERS HOLDINGS CLAIM STATUS Item Summary Paul Lewis provided background on the Lehman Brothers Holdings bankruptcy claim. In the last two months the DRA received two offers to buy the remaining balance of the claim. Both offers were declined. The DRA’s total claim amount is $751,921 with $507,098.86 received through the end of 2018 leaving a balance of $244,822.14.
ITEM 11: EXECUTIVE SESSION No executive session.
CITIZEN COMMUNICATIONS President Keller opened Citizen Communications and receiving none closed Citizen Communications.
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ADJOURNMENT
12:23 PM
______Richard Keller, President
Meetings of the Downtown Redevelopment Authority are electronically recorded on audio. The audio tapes are kept on file in the office of the City Clerk for a period of six years.
To request other formats, please contact: . City Manager’s Office (360) 487-8600 | WA Relay: 711 [email protected]
DRA Meeting 21 FEB 2019 Page 4 Downtown Redevelopment Authority Narrative Overview of the January 31, 2019 Financial Statements
STATEMENT OF NET POSITION The Restricted Cash with Fiscal Agent has decreased $3.7 million since December 31, 2018. This is a result of debt service payments of principal and interest totaling $2.9 million as well as the payment of amounts at the bottom of the Waterfall to the Clark County PFD for $1.4 million offset by the receipt of the lodging tax and sales tax credit as well as cash generated by operations.
The debt to the Clark County PFD totals $5,392,257. This is a decrease from year-end due to the payment made to the Clark County PFD of the $1.4 million discussed above. Debt to the County PFD has been reduced from $7.8 million at the end of 2016 and from $6.6 million on January 31, 2018.
STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET POSITION Hotel revenues for the first month of 2019 of $1,422,845 have outpaced that of January 2018, by $155,000 as well as the budget, by $178,000 for this period. There is Miscellaneous Income this month due to participating in an energy efficiency program with Clark Public Utilities. This $14,525 is a result of the lighting fixtures installed in Grays during the renovation. These funds will be deposited directly into the Renewal and Replacement Account.
There is Operating Income of $30,000 as of January 2019 compared to $32,000 in January 2018. As discussed above, revenues were stronger than the prior year, operating expenses also exceeded both the prior year and budget. One component of this is depreciation expense. Due to the change in useful lives assigned to our “renovation” asset, we will continuously see depreciation in 2019 exceeding that of 2018. Depreciation expense in January 2019 was $54,371 or 39% higher than it was in January 2018.
Hotel profit for the month of January 2019 was $220,000 compared to a budget of $138,000.
STATEMENT OF CASH FLOWS Overall cash reflects a decrease of approximately $3.7 million compared to year end. o Notable sources of cash for the month-ending January 2019 included $276,000 from operations and $358,000 in tax receipts from other governments. o Notable uses of cash included $1.4 million in payments to other governments and debt service payments of $2.9 million.
TAX REVENUE COLLECTIONS Through January 31, 2019, tax revenue collections are at 14% of the Tax Cap.
Through January 2019, receipts of City Lodging Tax, City PFD Sales Tax Credit and County PFD Sales Tax Credit were up 12.9%, 29.2%, and 23.6%, respectively, compared to the same period last year.
FLOW OF FUNDS Account balances reflect the Waterfall flow that occurred in January.
With current operations and tax collection flows we are currently at 47% of the annual requirement for the Project Revenue Debt Services and 21% of that for the Tax Revenue Debt Service. Amounts on hand at the end of January are sufficient to pay the interest only payments due on July 1.
TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 5 Downtown Redevelopment Authority (A Component Unit of the City of Vancouver) Statement of Net Position Substantially all Disclosures Required by GAAP are omitted. As of January 31, 2019 and December 31, 2018
Change from 1/31/2019 12/31/2018 Prior Year End % Change ASSETS Current assets Cash and cash equivalents 89,876 89,758 118 0.1% Restricted cash with fiscal/escrow agent 11,304,129 15,019,887 (3,715,758) (24.7%) Receivables (net) Taxes 642,823 642,823 0 0.0% Accounts 243,102 226,164 16,938 7.5% Interest 21,333 24,782 (3,449) (13.9%) Inventory 41,515 39,203 2,312 5.9% Prepaid expenses 224,082 173,467 50,615 29.2% Total current assets 12,566,860 16,216,084 (3,649,224) (22.5%)
Noncurrent assets Capital assets Buildings and equipment 61,073,000 61,041,306 31,694 0.1% Accumulated depreciation (22,755,535) (22,561,507) (194,028) 0.9% Total noncurrent assets 38,317,465 38,479,799 (162,334) (0.4%) TOTAL ASSETS 50,884,325 54,695,883 (3,811,558) (7.0%)
DEFERRED OUTFLOWS OF RESOURCES Unamortized deferred amount on refunding 1,037,339 1,043,134 (5,795) (0.6%)
LIABILITIES Current liabilities Accounts payable 375,031 244,519 130,512 53.4% Accrued interest payable 201,005 1,240,756 (1,039,751) (83.8%) Accrued liabilities 1,312,132 1,281,515 30,617 2.4% Unearned revenue 578,832 617,787 (38,955) (6.3%) Bonds, notes and leases payable - 1,685,000 (1,685,000) (100.0%) Total current liabilities 2,467,000 5,069,577 (2,602,577) (51.3%)
Noncurrent liabilities Other long-term payables 476,174 485,158 (8,984) (1.9%) Bonds, notes and leases payable from restricted assets 56,216,135 56,218,577 (2,442) (0.0%) Due to other governments 5,392,257 6,645,513 (1,253,256) (18.9%) Total noncurrent liabilities 62,084,566 63,349,248 (1,264,682) (0.3%) TOTAL LIABILITIES 64,551,566 68,418,825 (3,867,259) (5.7%)
NET POSITION Net investment in capital assets (16,861,331) (18,380,644) 1,519,313 (8.3%) Restricted for capital purposes 891,254 - 891,254 #DIV/0! Restricted for debt service 1,358,506 6,544,856 (5,186,351) (79.2%) Unrestricted 1,981,669 (844,020) 2,825,690 (334.8%) TOTAL NET POSITION (12,629,902) (12,679,808) 49,906 (0.4%)
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TeresaDRA DMeeting Johnson, 21 CPA,FEB 2019 Inc did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 6 Downtown Redevelopment Authority (A Component Unit of the City of Vancouver) Statement of Revenues Expenses and Changes in Net Position Substantially all Disclosures Required by GAAP are omitted. For the month ended January 31, 2019 and 2018
Actuals Budget
Variance to Budget Month ended Month ended Favorable/ January 31, 2019 January 31, 2018 $ Change % Change YTD Budget (Unfavorable) % OPERATING REVENUES Charges for services 1,422,845 1,267,518 155,327 12.3% 1,244,903 177,942 14.3% Miscellaneous 14,525 - 14,525 - 14,525 Total operating revenues 1,437,370 1,267,518 169,852 13.4% 1,244,903 192,467 14.3%
OPERATING EXPENSES Supplies and contractual services 1,213,503 1,096,153 117,350 10.7% 1,121,594 (91,909) -8.2% Depreciation 194,028 139,657 54,371 38.9% 166,667 (27,361) -16.4% Total operating expenses 1,407,531 1,235,810 171,721 13.9% 1,288,260 (119,271) -9.3%
Operating income (loss) 29,839 31,708 (1,869) (43,357) 73,196
NONOPERATING REVENUES (EXPENSES) Interest earnings 21,335 9,983 11,352 113.7% 15,833 5,502 34.7% Intergovernmental contributions 243,814 226,812 17,002 7.5% 212,333 31,481 14.8% Intergovernmental payments (20,653) (13,303) (7,350) -55.3% (19,031) (1,622) -8.5% Interest and fiscal charges (233,413) (244,346) 10,933 4.5% (238,505) 5,092 2.1% Total nonoperating revenues (expenses) 11,083 (20,854) 31,937 153.1% (29,370) 40,453 137.7%
SPECIAL ITEMS Gain on extinguishment of Debt 8,984 8,984 - - 8,984 Total special items 8,984 8,984 - - 8,984
Change in net position 49,906 19,838 30,068 -151.6% (72,727) 122,633 168.6%
TOTAL NET ASSETS - BEGINNING (12,679,808) (13,930,221) 1,250,413 9.0% Prior Period Adjustment 0 - 0 TOTAL NET ASSETS - ENDING (12,629,902) (13,910,383) 1,280,481 9.2%
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DRA Meeting 21 FEB 2019Teresa D Johnson, CPA, Inc did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 7 Downtown Redevelopment Authority (A Component Unit of the City of Vancouver) Statement of Cash Flows Substantially all Disclosures Required by GAAP are omitted. For the month ended January 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES Cash received from operating activities $ 1,337,394 Cash payments for goods and services (1,061,218) Net cash provided (used) by operating activities 276,176
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipts from other governments 357,654 Payments to other governments (1,416,803) Net cash provided (used) by noncapital financing activities (1,059,149)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on capital debt (1,685,000) Interest paid on capital debt (1,240,756) Purchase of capital assets (31,693)
Net cash provided (used) by capital and related financing activities (2,957,450)
CASH FLOWS FROM INVESTING ACTIVITIES Receipts of claims settlement 0 Receipt of interest 24,782 Net cash provided (used) by investing activities 24,782
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,715,640)
CASH AND CASH EQUIVALENTS - BEGINNING 15,109,645 CASH AND CASH EQUIVALENTS - ENDING $ 11,394,005
Reconciliation of operating income (loss) to net cash used by operating activities: Net operating income (loss) $ 29,839
Adjustments to reconcile net operating income (loss) to net cash provided by operations: Depreciation expense 194,028 (Increase) Decrease in receivables (61,021) (Increase) Decrease in inventories (2,312) (Increase) Decrease in prepaid items (50,615) Increase (Decrease) in current payables 205,212 Increase (Decrease) in unearned revenue (38,955) Total adjustments 246,337 Net cash provided (used) by operating activities $ 276,176
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TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 8 Downtown Redevelopment Authority Tax Revenue Collections sent to the Trustee As of January 31, 2019
City County 2019 2018 City LT PFD STC PFD STC Totals Totals
January 109,467 134,347 113,840 357,654 334,011 February - March - April - May - June - July - August - September - October - November - December - 2019 Totals 109,467 134,347 113,840 357,654
2018 Totals 96,928 103,984 92,122 334,011 Change from Last Year 12,539 30,363 21,719 64,621
2019 2018 2017 Tax Related Revenue Cap 2,548,000 2,483,000 2,420,000
2006-2019 Downtown Redevelopment Authority Tax Revenues 4,500 4,000 3,500 3,000 2,500 2,000
Thousands 1,500 1,000 500 - 06 07 08 09 10 11 12 13 14 15 16 17 18 19
City Lodging Tax City Sales Tax Credit County Sales Tax Credit
Notes on recent events: * As of January 2019, receipts of City Lodging Tax, City PFD STC and County PTD STC are up 12.9%, 29.2% and 23.6%, respectively, compared to January 2018.
* The 2019 Tax CAP has increased to $2,548,000, or 2.6% over the 2018 CAP. As of January 2019 collections is at 14% of the CAP.
Definitions: Tax Related Revenue Cap: An aggregate amount of Total Tax Revenues for the 2018 calendar year available for debt service and operations of the Hotel and Convention Center Project.
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TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 9 Flow of Funds and Operating Cash Pursuant to Trust Indenture
Financial Statement Period Jan-19
Feb 1, flow and deposits and Excess management fee Cash balances (Deficit) Period to Date payment after debt after flow of Amounts Account name Amount payment funds Required Due date of the minimum Requirement 1 Operating Petty Cash Account 320,605 320,605 - 320,605 2 Available Revenue Account/Lockbox 796,517 (296,516.52) 500,000 500,000 1st working day of each month 0 3 Taxes and Insurance Fund 114,291 - 299,741 118,000 Annual estimated need 181,741 4 Administrative Expense Fund 153,891 - 153,891 17,000 Monthly estimated need 136,891
Current annual requirement - $2,645,463. The portion of the payment due on July 1, 5 Project Revenue Debt Service Fund 1,000,851 244,475.77 1,245,327 2,645,463 2019 - Interest only $875,231. The portion of the payment due January 1, 2020 - Principal (1,400,135) and Interest $1,770,231.
Current annual requirement - $1,696,600. The portion of the payment due on July 1, 2019 - 6 Tax Revenue Debt Service Fund 357,654 - 357,654 1,696,600 Interest only $330,800. The portion of the payment due January 1, 2020 - Principal and (1,338,946) Interest $1,365,800. Monthly calculation of 4% of gross operating revenues. Funds flow annual only to the 7 Renewal and Replacement Fund 707,660 14,791 722,451 784,670 (62,219) extent that there is combined excess of Funds in #5 and #6 above Amounts flow annually into this Fund, up to the requirement only and only to the extent 8 Contingency Fund 2,000,000 2,000,000 2,000,000 there is excess available beyond the requirements of Funds #5 through #7, above. Once 0 requirement is met amounts flow below this point.
Beginning in calendar year 2016, pursuant to the Amended and Restated Project 9 Management Fee Fund 76,000 76,000 76,000 Operating agreement, the subordinate component of the management fee becomes due. 0 The amount for 2018 is $181,000
Monthly calculation of 1% of gross operating revenues. Funds flow annual to satisfy the deficit calculation only and only to the extent that there is combined excess in Funds 10 Subordinate Renewal and Replacement Fund 183,594 183,594 199,149 (15,555) described in #5 through #9, above. Once the requirement is met amounts flow below this point.
Funds flow annual only to the extent that there is combined excess in Funds described in 11 Authority Reserve Fund 500,000 500,000.00 500,000 0 #5 through #10, above. Once the requirement is met amounts flow below this point.
Funds flow annual only to the extent that there is combined excess in Funds described in 12 Cash Trap Fund 2,500,000 2,500,000 2,500,000 0 #5 through #11, above. Once the requirement is met amounts flow below this point.
Funds flow annual only to the extent that there is combined excess in Funds described in #5 through #12, above. Amounts in the Excess Revenue Fund in each calendar year shall 13a Authority Revenue Fund 2,593,066 2,593,066 3,123,161 be applied as follows: (i) 50% of such amounts shall be deposited in the Authority Reserve (530,095) Fund; and (ii) 50% of such amounts shall be paid by the Trustee to the County PFD in accordance with the County Interlocal Agreement. Funds flow annual only to the extent that there is combined excess in Funds described in #5 through #12, above. Amounts in the Excess Revenue Fund in each calendar year shall 13b County PFD Fund - - 5,392,257 be applied as follows: (i) 50% of such amounts shall be deposited in the Authority Reserve (5,392,257) Fund; and (ii) 50% of such amounts shall be paid by the Trustee to the County PFD in accordance with the County Interlocal Agreement. Totals 11,304,129 (37,250) 11,452,329 19,552,300
DRA Meeting 21 FEB 2019 Teresa D Johnson, CPA, Inc did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 10 Notes to Accompany Bank Balances
1 The Operating Petty Cash Account is the account from which the Project Manager, Hilton, 6 Tax Revenue Debt Service Fund is maintained to meet the debt service requirements of the 11 The Authority Reserve Fund was established pursuant to Appendix A of the Amended deposits the funds withdrawn from the Lockbox solely for the purpose of paying Operating Conference Center Project Refunding Revenue Bonds Series 2013B, which is the portion of the bond and Restated Trust Indenture - the Authority Reserve Fund Requirement is an amount Expenses, Pursuant to Section 3.07 of the Amended and Restated Operating Agreement. offering secured by the tax revenue flow, without regard to revenue generated by operations of the Hotel equal to $500,000. Funds can be used to meet an obligation of the DRA when shortfalls and Convention Center Project. - July 1, 2019 Requirement - Interest only ($330,800) January 1, 2020 exist in other accounts otherwise designated to pay that obligation but only after the Requirement Principal and Interest ($1,365,800). Total debt issued $18,045,000. Total debt Contingency fund is fully depleted. outstanding as of Dec 2018t - $15,660,000. Full maturity of the debt - January 1, 2034. A complete schedule of interest and principal payments from the Bond offering Official Statement is attached.
2 The Available Revenue Fund was established pursuant to Section 5.03 of the Indenture. 7 The Renewal and Replacement Fund is the account for which capital projects are funded. The amount 12 The Cash Trap Fund was established pursuant to Appendix A of the Amended and The Lockbox accounts is maintained pursuant to Section 5.05 of the Indenture and required to be deposited is calculated at 4% of the Monthly Gross Operating Revenue. The deficit is Restated Trust Indenture - the Cash Trap Fund Requirement means the amount of established pursuant to Section 2 of the Amended and Restated Cash Management and calculated on a cumulative basis from the beginning of the project, less cumulative deposits from the $2,500,000. Funds can be used to meet an obligation of the DRA when shortfalls exist in Lockbox agreement. At the beginning of each month the Lockbox is required to have the beginning of the project. The ending cash balance represents cumulative deposits from the beginning other accounts otherwise designated to pay that obligation but only after the Operating Cost Set Aside Amount, which Pursuant to Appendix A of the Amended and of the project, less cumulative expenditures from the beginning of the project. The amounts to fund the Contingency fund and Authority Reserve Fund are fully depleted. Restated Trust Indenture - the Operating Cost Set Aside Amount means $500,000. deficit flow into this account annually. The 4% Subordinate Renewal and Replacement Set Aside Amount requirement is Pursuant to Appendix A of the Amended and Restated Trust Indenture.
3 The Taxes and Insurance Fund is maintained to ensure significant fund for annual 8 The Contingency Fund holds an amount Pursuant to Appendix A of the Amended and Restated Trust 13a The Authority Reserve Fund - additional holds amounts used to repay ACA Note insurance premiums when due. There is no requirement to maintain a minimum balance. Indenture - the Contingency Requirement means an amount equal to $2,000,000. These funds can be Payable Pursuant to the Financing Agreement between ACA and the Authority. ACA Average annual need is $118,000. Established pursuant to Section 5.03 of the Indenture. used to meet an obligation of the DRA when shortfalls exist in other accounts otherwise designated to was the Authority's bond issuer for the 2003 debt series. Principal amount is pay that obligation. $1,430,554.61 with 4.42% interest, bringing the total amount due to $3,123,161. Maturity Date is January 1, 2044. Principal and Interest Payment are scheduled to commence on January 1, 2033. Funds flow annual only to the extent that there is combined excess in Funds described in #5 through #12, above. Amounts in the Excess Revenue Fund in each calendar year shall be applied as follows: (i) 50% of such amounts shall be deposited in the Authority Reserve Fund; and (ii) 50% of such amounts shall be paid by the Trustee to the County PFD in accordance with the County Interlocal Agreement.
4 The Administrative Expense Fund is maintained to ensure monthly administrative 9 The Management Fee Fund is the account that will accumulate the funds that the Authority is 13b The County PFD Fund holds amounts used to repay liability to County PFD. This obligations are funded when due. There is no stated minimum amount required to be obligated to pay, in arrears, subject to the availability of amounts in this fund the subordinate component balance increases monthly with flow of County Sales Tax Credit Revenue. Established maintained. Average monthly need is $17,000. Established pursuant to Section 5.03 of the of the management fee. The obligation to accrue the amount monthly becomes effective in calendar pursuant to Section 5.03 of the Indenture. Amounts are applied to interest first. Interest Indenture. year 2016. The 2016 annual obligation is $171,000. Exhibit J of the Amended and Restated Project rate is 5.63%. Amounts in the Excess Revenue Fund in each calendar year shall be Operating Agreement outlines the on-going obligation. applied as follows: (i) 50% of such amounts shall be deposited in the Authority Reserve Fund; and (ii) 50% of such amounts shall be paid by the Trustee to the County PFD in accordance with the County Interlocal Agreement.
5 The Project Debt Service Fund is maintained to meet the debt service requirements of the 10 The Subordinate Renewal and Replacement Fund is the second available account for which capital Conference Center Project Refunding Revenue Bonds Series 2013A, which is the portion of projects are funded. The amount required to be deposited is calculated at 1% of Monthly Gross the bond offering secured by the revenue flow of the Hotel and Convention Center Project. Operating Revenue. The deficit is calculated on a cumulative basis from the beginning of the project, July 1, 2019 Requirement - Interest only ($872,231) January 1, 2020 Requirement Principal less deposits made into the account less cumulative deposits from the beginning of the project. The and Interest ($1,770,231). Total debt issued - $41,185,000. Total debt outstanding as of ending cash balance represents cumulative deposits from the beginning of the project, less cumulative Dec 2018 - $40,365,000. Full maturity of the debt - January 1, 2044. A complete schedule expenditures from the beginning of the project. The amounts to fund the deficit flow into this account of interest and principal payments from the Bond offering Official Statemen is attached. annually. The 1% Subordinate Renewal and Replacement Set Aside Amount requirement is Pursuant to Appendix A of the Amended and Restated Trust Indenture.
NOTE: City of Vancouver Commitment to Downtown Redevelopment Authority (DRA), with respect to the Vancouver Conference Center: The City signed an agreement on December 1, 2003, to participate in the construction and operation of the Vancouver Conference Center, using tourism funds. In June 2013, the DRA refinanced the debt associated with the construction of the Vancouver Conference Center. As a part of the refinancing, the City agreed that, if, prior to each Interest Payment Date or Principal Payment Date, the amounts on deposit per the Trust Indenture are insufficient to pay the principal and interest due on the 2013 Project Revenue Bonds, upon notice of such deficiency from the Trustee, the City shall pay to the Trustee an amount equal to the deficiency; the maximum obligation on that payment date being the debt service amount of the 2013 Project Revenue Bonds due on such date. Any payment by the City of this conditional payment amount shall constitute a loan by the City to the DRA, with interest payable on such amounts at the rate or rates on the 2013 Project Revenue bonds. If a payment obligation is made and a loan created, the obligation for repayment become subordinate to the obligation of the Authority Revenue Fund and the County PFD Fund.
DRA Meeting 21 FEB 2019 Teresa D Johnson, CPA, Inc did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 11
VANCOUVER DOWNTOWN REDEVELOPMENT AUTHORITY VOUCHER AND ADMINISTRATIVE EXPENSE APPROVAL
Ratification of Claims Paid by Trustee We, the undersigned members of the Board of Directors of the Downtown Redevelopment Authority, do hereby certify that the merchandise or services hereinafter specified have been received and the vouchers listed below are hereby approved in the amounts of $2,869,172.91 this 21st day of February 2019.
Approval of New Administrative Expenses Additionally, we, the undersigned members of the Board of Directors of the Downtown Redevelopment Authority, do hereby approve for payment Administrative Expense Fund expenses in the amount of $33,349.82 this 21st day of February 2019.
PRESIDENT SECRETARY/TREASURER
Paul Lewis, EXECUTIVE DIRECTOR BOARDMEMBER
DRA Meeting 21 FEB 2019 Page 12 Fund:DRA Period Name:JAN-19 DRA CLAIMS PAID IN JANUARY 2019
Date Supplier Amount Description Document Number 18-Jan-2019 CITY OF VANCOUVER 2,817.75 AFF 194 Admin Costs - 9461256 December 18 17-Jan-2019 CLARK COUNTY 1,396,149.98 Req 3 County PFD Fund 2018 9479631 Waterfall 02-Jan-2019 HILTON HOTELS 36,166.67 Management Fee - December 9460723 2018 02-Jan-2019 15,083.33 Sub Management Fee - 9460727 December 2018 30-Jan-2019 31,693.61 R&R 18-1B Garage Gate 9479511 30-Jan-2019 162.60 R&R 19-10A Reader Board 9479524 Replacements 03-Jan-2019 105,589.44 Req 1792 AP Invoices 9479603 10-Jan-2019 171,440.95 Req 1793 AP Invoices 9479605 17-Jan-2019 136,398.81 Req 1794 Sales & Use Taxes 9479607 17-Jan-2019 91,313.63 Req 1795 AP Invoices 9479609 25-Jan-2019 200,416.77 Req 1796 Payroll Check Run 9479611 01/04/19 25-Jan-2019 260,510.31 Req 1797 Payroll Check Run 9479613 01/18/19 25-Jan-2019 96,482.83 Req 1798 AP Invoices 9479615 30-Jan-2019 77,872.57 Req 1799 Misc AP & Payroll 9479617 31-Jan-2019 19,142.31 Req 1800 Bank True-up/CC Fees 9479619
30-Jan-2019 210,449.82 T & I 52 WA B & O 9479627 18-Jan-2019 PAUL LEWIS 1,397.50 AFF 194 Executive Director Fees - 9461240 Dec 18 18-Jan-2019 TERESA JOHNSON CPA, INC 3,492.50 AFF 194 Accounting Services - 9461246 Dec 18 18-Jan-2019 US BANK 1,230.50 AFF 194 Admin Fees - 04/01/18 - 9461252 06/30/18 18-Jan-2019 WARNICK & COMPANY 11,361.03 AFF 194 Asset Manager - 9461236 December 2018 Total: 2,869,172.91
DRA Meeting 21 FEB 2019 Page 13
Administrative Expenses related to 2018
Administrative Expenses related to 2019
Total Administrative Expense for Pre-approval $33,349.82
DRA Meeting 21 FEB 2019 Page 14 DRA Meeting 21 FEB 2019 Page 15 DRA Meeting 21 FEB 2019 Page 16 DRA Meeting 21 FEB 2019 Page 17 DRA Meeting 21 FEB 2019 Page 18
Asset Manager’s Report to the DRA Board
January 2019
DRA Meeting 21 FEB 2019 Page 19 HILTON VANCOUVER WASHINGTON DASHBOARD SUMMARY – JANUARY 2019
1 PERFORMANCE RELATIVE TO THE COMPETITIVE SET 2 FUTURE GROUP BOOKINGS The following table summarizes the Hotel’s revenue per The following table summarizes future group business available room (“RevPAR”) performance, relative to the booked during the past 12 months. competitive set.
RevPAR Performance Comparison to Competitive Set Yield Hilton Comp Set Index December 2017 $69.22 $66.79 103.6% January 2018 $92.38 $74.86 123.4% February 2018 $94.63 $96.22 98.3% March 2018 $124.41 $96.83 128.5% April 2018 $119.91 $105.15 114.0% May 2018 $125.46 $103.47 121.2% June 2018 $152.13 $130.53 116.5% July 2018 $150.07 $134.21 111.8% August 2018 $155.41 $137.66 112.9% September 2018 $130.96 $118.37 110.6% October 2018 $136.01 $109.52 124.2% November 2018 $106.14 $90.26 117.6% December 2018 $73.55 $68.98 106.6% Trailing 12 Months $121.92 $105.52 115.5% Indicator Explanation: Group business is one of the Smith Travel Research Source: most important market segments for the Hotel because it fills the meeting rooms and generates banquet, as well as room, revenue.
In January, the Hotel added 991 group room nights to the books. In the last 12 months, the Hotel has booked over 22,800 group rooms nights.
Indicator Explanation: RevPAR is calculated by multiplying the occupancy percentage times the average room rate. RevPAR helps management identify the optimal mix of occupancy and average rate. The RevPAR yield index measures the performance of an individual hotel against its competitive set. A yield index of 100 percent means a hotel is operating at the average of the competitive set.
Driven by increases in average daily rate (“ADR”), RevPAR growth for the Hotel continues to be stronger than the competitive set
DRA Meeting 21 FEB 2019 Page 20 HILTON VANCOUVER WASHINGTON DASHBOARD SUMMARY – JANUARY 2019
3 MONTHLY FINANCIAL RESULTS The following table summarizes financial results for January 2019.
Indicator Explanation: Rooms and food and beverage (“F&B”) are the primary source of Hotel revenues. Expenses are impacted by the large amount of meeting space in relation to a relatively small number of guest rooms. Payroll is the largest individual expense.
In January, total revenue finished over budget with strength in Rooms as well as F&B revenues. Gross operating profit (“GOP”) exceeded budget with favorable flow through
DRA Meeting 21 FEB 2019 Page 21
HILTON VANCOUVER WASHINGTON ASSET MANAGER’S REPORT TO THE DRA BOARD JANUARY 2019
The following represents the Asset Manager’s Report for the Hilton Vancouver Washington (the “Hotel”) for January 2019.
Asset Manager’s Focus Attainment of budgeted revenues and net income RevPAR growth 2019 group and transient booking pace Grays revenue growth
Market Conditions The table below summarizes the performance for the competitive set1 of Vancouver hotels in December 2018 (the most current information available). The RevPAR yield indices for the trailing 13 months is presented in the chart to the lower right.
Performance of the Competitive Set Occupancy ADR RevPAR December 2018 Competitive Set 57.1% $120.81 $68.98 % Chg. from Prior 2.1%1.2% 3.3% Hilton Vancouver 58.2% $126.49 $73.55 % Chg. from Prior 7.4% -1.0% 6.3% Yield Index 101.8% 104.7% 106.6% Trailing 12 Months Competitive Set 74.6% $141.42 $105.52 % Chg. from Prior -0.3% 1.6% 1.3% Hilton Vancouver 75.7% $161.04 $121.92 % Chg. from Prior -0.5% 1.9% 1.3% Yield Index 101.5% 113.9% 115.5%
The Hotel continues to be a RevPAR leader with a trailing 12-month RevPAR yield index of 115.5% as reported by STR.
1 The competitive set consists of the DoubleTree Vancouver, Heathman Lodge, Homewood Suites Vancouver Portland, Red Lion Hotel Vancouver On the River Jantzen Beach, Sheraton Hotel Portland Airport, and SpringHill Suites Vancouver Columbia Tech Center.
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DRA Meeting 21 FEB 2019 Page 22 ASSET MANAGER’S REPORT TO THE DRA BOARD January 2019
Group Booking Pace The following table summarizing the group booking position as of month-end January 2019.
Group Booking Pace Room Nights as of January 2019 Variance to Variance to 2019 Last Month 2020 Last Month Budget 24,354 N/A Definite 19,453 898 11,731 83 Tentative 1,325 333 654 654
The Hotel has booked 2,256 more group rooms for 2019 than the same time last year equating to 79.9% of budgeted room nights.
Hotel Operations The graph below illustrates revenues and expenses for January 2019.
The following are some brief comments regarding January 2019 performance. Room revenue finished over budget driven by a 7.7-point increase in occupancy that offset 2.0% ADR shortfall. F&B revenues finished the month 16.4% over budget and 18.1% higher than last year. Grays revenues actualized 41.9% higher than last year while 9.1% below budget. Total revenue finished above budget and last year by 14.3% and 12.3%, respectively.
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DRA Meeting 21 FEB 2019 Page 23 ASSET MANAGER’S REPORT TO THE DRA BOARD January 2019
The following charts illustrate the trend in revenues, expenses, and GOP for the trailing 12 months.
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DRA Meeting 21 FEB 2019 Page 24 ASSET MANAGER’S REPORT TO THE DRA BOARD January 2019
DEFINITIONS
Competitive Set – A sample of hotels in the Vancouver market. The RevPAR for the Vancouver Hilton are measured against these hotels using what is called a “yield index.” A yield index that is greater than 100 percent means that a hotel is performing at a level that is above the average for its competitive set. A yield index that is below 100 means that performance trails the average for the competitive set.
Departmental Expenses – Expenses that are incurred in relation to the operation of each distinct operating department. Generally, departmental expenses include costs of goods sold, payroll, and other expenses.
Fixed Costs – Expenses are costs of occupancy that cannot be influenced by property management. These include business taxes, insurance expenses, Hilton management fees, and other miscellaneous expenses.
F&E Reserve – The F&E reserve is a fund for the future replacement of fixtures and equipment. The intent of the F&E Reserve is to accumulate monies over a period of time to spend on periodic hotel renovations. Periodic renovations are needed to keep the Hotel in good physical condition so that it can maintain its competitive position against other hotels in the market.
Gross Operating Profit – Calculated by deducting departmental expenses and undistributed expenses from total revenues. Gross Operating Profit (referred to as GOP) measures the profit that is under the control of hotel management. Hilton uses the term “Income Before Fixed Charges” and the HVS study used the term “House Profit” rather than GOP. We use the term GOP because that is the term used in the Bond Documents.
Group Booking Pace – A measure of the future group business that is on the books. Usually, the pace is broken into three classifications: 1) Definite bookings, for which a signed contract has been received; 2) Tentative bookings for which a contract has been issued but not signed; and 3) Prospects, which represent groups that have been contacted but for which a contract has not yet been issued. Booking pace information is used to track performance relative to the budget, to prepare and update forecasts, to quote rates for future business and to track the productivity of sales personnel.
Hotel Payroll – Hotel payroll represents the salaries and wages, payroll taxes and employee benefits for all Hotel employees. Payroll is the largest single operating expense in a hotel.
RevPAR or Revenue Per Available Room – Calculated by multiplying the occupancy percentage times the average room rate. The occupancy percentage can be managed, to a certain degree, by manipulating room rates. For example, hotel operators may choose to lower (or discount) room rates during certain periods in an effort to maximize occupancy. RevPAR helps management identify the optimal mix of occupancy and average rate.
Total Revenue – The revenues generated by all departments in the Hotel, net of allowances.
Undistributed Expenses – Expenses that apply to the hotel as a whole and cannot be assigned to an individual operating department (such as rooms). Undistributed expenses are further classified as Administrative and General, Sales and Marketing, Property Operations and Energy.
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DRA Meeting 21 FEB 2019 Page 25 Memo To: Paul Lewis From: Tom Morone
Date: February 5, 2019 Tel: (310) 489-5029
Subject: Hilton Vancouver Washington – Capital Project Approvals
Hilton has requested approval to move forward with the following capital projects.
Document Scanner & Centralized Terminal Scanner - $8,991.17 Hilton is requesting approval to purchase a document repository scanner and centralized terminal server with related software and installation (see the attached memo), which will allow remote access and secure document transfers to and from Hilton centralized services.
The estimated cost of the project is $8,991.17. The approved 2019 capital plan includes a combined budget of $9,718.06 for this project ($3.631.40 for document repository scanner and $6,086.66 for centralized terminal server), so it is $806.90 under budget. CHMWarnick recommends that the DRA Board approve this project.
Laptop & Printer Purchase - $13,700.44 Hilton is requesting approval to purchase four laptops and two network printers (see the attached memo). The laptops will replace aging equipment for Director of Finance, Revenue Management, Executive Admin, and General Manager as well as office printers and includes software, configuration, and installation costs.
The estimated cost of the project is $13,700.44. The approved 2019 capital plan includes a combined budget of $13,875.20 for this project ($11,707.20 for the laptops and $2,178.00 for the printers), so it is $174.76 under budget. CHMWarnick recommends that the DRA Board approve this project.
Grays Patio Wind Screen - $18,957.00 Hilton is requesting approval to install a wind screen around the top of Grays patio wall (see the attached memo). The wind screen will be tempered glass with metal fasteners, which is more cost effective and will hold up longer to the outside elements compared with the originally proposed Plexiglas framed in cedar. The wind screen will complete the Grays Patio project.
The estimated cost of the project is $18,957.00. The approved 2019 capital plan includes $23,848.00 for this project, so it is $4,891.00 under budget. CHMWarnick recommends that the DRA Board approve this project.
1800 Century Park East, Suite 600, Los Angeles, CA 90067 602.955.9393 | www.CHMWarnick.com
DRA Meeting 21 FEB 2019 Page 26 Capital Project Approvals February 5, 2019 Page 2
Kitchen Compressor - $6,438.96 Hilton is requesting approval to procure parts for one of the original kitchen compressor units (see the attached memo). The walk-in cooler is not holding temperature and requires frequent Freon charges. The requested parts include new expansion valves, solenoid valves, and temp controls for the walk-in cooler. The cost to repair this unit is greater than the costs incurred for a similar replacement in 2018 as this is a larger, two-coil unit.
The estimated cost of the project is $6,438.96. The approved 2019 capital plan includes $5,853.60 for this project, so it is $585.36 over budget, which will be applied against the 2019 contingency. CHMWarnick recommends that the DRA Board approve this project.
Banquet Countertop Display Freezer - $2,556.54 Hilton is requesting approval to purchase a display-case style freezer (see the attached memo) that can be used on the event floor during events. The Hotel currently does not have a suitable freezer for banquet use; a portable, carnival-themed box freezer has been used when needed.
The estimated cost of the project is $2,556.54 The approved 2019 capital plan includes $2,845.50 for this project, so it is $288.96 under budget. CHMWarnick recommends that the DRA Board approve this project.
DRA Meeting 21 FEB 2019 Page 27
Date: January 25, 2018
To: Tom Morone & Art Burger CHMWarnick
From: Mike McLeod Hilton Vancouver Washington
Subject: Document Scanner & Centralized Terminal Scanner Amount of this Request: $8,911.17
The 2019 Capital Budget includes two projects, a Document Repository Scanner ($3.631.40) and a Centralized Terminal Server ($6,086.66). This equipment will allow remote access and secure document transfers to and from Hilton Centralized Services. The actual cost for the project is $8,911.17, came in under the combined budgeted total of $9,718.07 by -$806.90.
Scan Station $2,654.24 RDS-1T Tower $2,717.29 Software/Installation/Licensing $1,686.76 Hilton Mgmt. Contacting & Sales $625.25 Shipping $537.10 Sub-Total $8,220.64 Sales Tax $690.53 Total $8,911.17
Please let me know if you have any questions.
DRA Meeting 21 FEB 2019 Page 28
Date: February 4, 2019
To: Tom Morone & Art Burger CHMWarnick
From: Mike McLeod Hilton Vancouver Washington
Subject: Laptop & Printer Purchase Amount of this Request: $13,700.44
The 2019 Capital Budget includes $11,707.20 for (4) laptops and $2,178.00 for (2) network printers ($13,875.20 combined total). The laptops replace 3 ½ year old DOF, Revenue Management, Executive Admin and GM computers and the printers will replace office printers. This request for $13,700.44 is just slightly under budget and includes all necessary software, hardware and installation.
(4) Laptops w/Docking Stations $7,262.76 (2) Monitors $275.14 (2) Printers $1,143.66 Software/Licensing $2,317.52 Hilton Project Management/Configuration $1,205.62 Sub-Total $12,204.70
Shipping $434.08 Sales Tax $1,061.66 Total $13,700.44
Please let me know if you have any questions.
DRA Meeting 21 FEB 2019 Page 29
Date: February 4, 2018
To: Tom Morone & Art Burger CHMWarnick
From: Mike McLeod Hilton Vancouver Washington
Subject: Grays Patio Wind Screen Amount of this Request: $18,957.00
The 2019 Capital Budget included $23,848.00 to install a wind screen around the top of the patio wall. The budget for the project was established using Plexiglas framed in cedar. After further review it was determined that tempered glass with metal fasteners would be more cost effective and hold up longer to the outdoor elements.
This request for $18,957.00 from Schommer & Sons came in under budget and can be completed before the patio season.
Materials $4,358.00 RDS-1T Tower $8,420.00 Software/Installation/Licensing $3,120.00 Profit & Overhead $1,590.00 Sales Tax $1,469.00 Total $18,957.00
Please let me know if you have any questions.
DRA Meeting 21 FEB 2019 Page 30
Date: February 4, 2018
To: Tom Morone & Art Burger CHMWarnick
From: Mike McLeod Hilton Vancouver Washington
Subject: Kitchen Compressor Amount of this Request: $6,438.96
The 2019 Capital Budget included $5,853.60 for kitchen compressor rebuilds. The project was included in our 20 Year Capital Plan to replace original equipment from the 2005 opening.
This request for $6,438.96 includes two new evaporator coils with new expansion valves, solenoid valves and temp controls to be installed in a walk-in cooler (called R2). Note that this request exceeds the cost of a similar project in 2018 due to the larger size of this unit requiring two coils, not one coil like last years. The overage for this project will be covered using contingency funds.
Kitchen Compressor (parts & labor) $5,940.00 Sales Tax $498.96 Total $6,438.96
Please let me know if you have any questions.
DRA Meeting 21 FEB 2019 Page 31
Date: February 4, 2018
To: Tom Morone & Art Burger CHMWarnick
From: Mike McLeod Hilton Vancouver Washington
Subject: Banquet Countertop Display Freezer Amount of this Request: $2,556.54
The 2019 Capital Budget included $2,845.50 for a display case style freezer to be used on breaks or buffets in banquets. The hotel does not have a freezer suitable for breaks but does utilize a box freezer on occassion. The actual unit we selected came in slightly under at $2,556.54.
Display Case Freezer $2,358.43 Sales Tax $198.11 Total $2,556.54
Please let me know if you have any questions.
DRA Meeting 21 FEB 2019 Page 32
DOWNTOWN REDEVELOPMENT AUTHORITY STAFF REPORT NO. 02‐21‐19‐1
TO: Downtown Redevelopment Authority Board DATE: 02/21/19 FROM: Paul Lewis, Executive Director
Subject: 2018 Audit of the Conference Center Hotel Project
Objective: Authorize the Vancouver Hilton General Manager to Sign an Engagement Letter with Moss Adams to Complete an Audit of the Conference Center Hotel Project
Present Situation: The Project Operating Agreement and the Trust Indenture stipulate that the Manager shall cause to be prepared and delivered to the Authority and the Bond Trustee, as an Operating Expense, Certified Financial Statements for the Conference Center Hotel Project for the preceding Operating Year. This requirement is memorialized in sections 7.26, 7.29, and 7.30 of the Amended and Restated Trust Indenture.
During 2016, staff requested proposals from auditing firms in order to determine the best available service and pricing. Moss Adams LLP was identified to be the auditing firm with the best qualifications to conduct the audit for fiscal year ending December 31, 2016. Moss Adams completed the required 2016 and 2017 audits and was recently contacted to submit an engagement letter to complete the audit for fiscal year ending December 31, 2018. Moss Adams has quoted a fee of $19,000 plus expenses to complete the 2018 audit which is the same fee they charged for the 2017 audit. Typically, solicitations for audit services are not completed annually but periodically to ensure the services are appropriate and the costs are competitive. Moss Adams expects to begin and complete fieldwork in April 2019, and issue a report no later than May 31, 2019.
In addition to the audit of the project required by the Trust Indenture, in the State of Washington all municipalities are required to be audited by the State of Washington Auditor’s Office. The Washington State Auditor’s Office will complete an audit of the DRA later in 2019 and will have access to review reports and working papers prepared by Moss Adams to support their work.
Proposal: To engage Moss Adams to complete an audit of the Conference Center Hotel project. . Action Requested: Authorize the General Manager of the Hilton Vancouver Washington to sign the Engagement Letter with Moss Adams LLP. An example motion would be: “I move to authorize the General Manager of the Vancouver Hilton to sign the proposed Engagement Letter with Moss Adams LLP”.
Attachments: Moss Adams Engagement Letter
DRA Meeting 21 FEB 2019 Page 33
February 7, 2019
Josue Castanon, Director of Finance Hilton-Vancouver Washington 301 West 6th Street Vancouver, WA 98660
Re: Audit and Nonattest Services
Dear Vancouver Hotel and Convention Project:
Thank you for the opportunity to provide services to Vancouver Hotel and Convention Project. This engagement letter (“Engagement Letter”) and the attached Professional Services Agreement, which is incorporated by this reference, confirm our acceptance and understanding of the terms and objectives of our engagement, and limitations of the services that Moss Adams LLP (“Moss Adams,” “we,” “us,” and “our”) will provide to Vancouver Hotel and Convention Project (“you,” “your,” and “Project”).
Scope of Services – Audit You have requested that we audit the Project’s financial statements, which comprise the balance sheet as of December 31, 2018, and the related statements of income, changes in owner’s deficit, and cash flows for the year then ended, and the related notes to the financial statements. We have not been engaged to report on whether the bonds payable, presented as supplementary information, is fairly stated, in all material respects, in relation to the financial statements as a whole.
Scope of Services and Limitations – Nonattest We will provide the Project with the following nonattest services:
1) Assist you in drafting the financial statements and related footnotes as of and for the year ended December 31, 2018.
Our professional standards require that we remain independent with respect to our attest clients, including those situations where we also provide nonattest services such as those identified in the preceding paragraphs. As a result, Project management must accept the responsibilities set forth below related to this engagement:
Assume all management responsibilities.
Oversee the service by designating an individual, preferably within senior management, who possesses skill, knowledge, and/or experience to oversee our nonattest services. The individual is not required to possess the expertise to perform or reperform the services.
DRA Meeting 21 FEB 2019 Page 34 Vancouver Hotel and Convention Project Kaicy Sweeney, Director of Finance February 7, 2019 Page 2 of 3
Evaluate the adequacy and results of the nonattest services performed.
Accept responsibility for the results of the nonattest services performed.
It is our understanding that you have been designated by the Project to oversee the nonattest services and that in the opinion of the Project you are qualified to oversee our nonattest services as outlined above. If any issues or concerns in this area arise during the course of our engagement, we will discuss them with you prior to continuing with the engagement.
Timing Julie Desimone is responsible for supervising the engagement and authorizing the signing of the report. We expect to begin and complete our audit in April 2019, and issue our report no later than May 31, 2019. As we reach the conclusion of the audit, we will coordinate with you the date the audited financial statements will be available for issuance. You understand that (1) you will be required to consider subsequent events through the date the financial statements are available for issuance, (2) you will disclose in the notes to the financial statements the date through which subsequent events have been considered, and (3) the subsequent event date disclosed in the footnotes will not be earlier than the date of the management representation letter and the date of the report of independent auditors.
Our scheduling depends on your completion of the year-end closing and adjusting process prior to our arrival to begin the fieldwork. We may experience delays in completing our services due to your staff’s unavailability or delays in your closing and adjusting process. You understand our fees are subject to adjustment if we experience these delays in completing our services.
Fees We estimate that our fees for the services will be in the $19,000. You will also be billed for expenses.
Our ability to provide services in accordance with our estimated fees depends on the quality, timeliness, and accuracy of the Project’s records, and, for example, the number of general ledger adjustments required as a result of our work. To assist you in this process, we will provide you with a Client Audit Preparation Schedule that identifies the key work you will need to perform in preparation for the audit. We will also need your accounting staff to be readily available during the engagement to respond in a timely manner to our requests. Lack of preparation, poor records, general ledger adjustments, and/or untimely assistance will result in an increase of our fees.
DRA Meeting 21 FEB 2019 Page 35 Vancouver Hotel and Convention Project Kaicy Sweeney, Director of Finance February 7, 2019 Page 3 of 3
Reporting We will issue a written report upon completion of our audit of the Project's financial statements. Our report will be addressed to the management of the Project. We cannot provide assurance that an unmodified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the engagement. Our services will be concluded upon delivery to you of our report on your financial statements for the year ended December 31, 2018.
______
We appreciate the opportunity to be of service to you. If you agree with the terms of our engagement as set forth in the Agreement, please sign the enclosed copy of this letter and return it to us with the Professional Services Agreement.
Very truly yours,
Julie Desimone, Partner, for Moss Adams LLP
Enclosures
Accepted and Agreed: This Engagement Letter and the attached Professional Services Agreement set forth the entire understanding of City of Vancouver – Hilton Project with respect to this engagement and the services to be provided by Moss Adams LLP:
Signature: \S1n\
Print Name:
Title: \S1nT\
Date:
Client: #602774 v. 1/17/2019
DRA Meeting 21 FEB 2019 Page 36 PROFESSIONAL SERVICES AGREEMENT Audit and Nonattest Services
This Professional Services Agreement (the “PSA”) together with the Engagement Letter, which is hereby incorporated by reference, represents the entire agreement (the “Agreement”) relating to services that Moss Adams will provide to the Project. Any undefined terms in this PSA shall have the same meaning as set forth in the Engagement Letter. Objective of the Audit The objective of our audit is the expression of an opinion on the financial statements and supplementary information. We will conduct our audit in accordance with auditing standards generally accepted in the United States of America (U.S. GAAS). It will include tests of your accounting records and other procedures we consider necessary to enable us to express such an opinion. If our opinion is other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. Procedures and Limitations Our procedures may include tests of documentary evidence supporting the transactions recorded in the accounts, tests of the physical existence of inventories, and direct confirmation of certain receivables and certain other assets, liabilities and transaction details by correspondence with selected customers, creditors, and financial institutions. We may also request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. The supplementary information will be subject to certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves. At the conclusion of our audit, we will require certain written representations from management about the financial statements and supplementary information and related matters. Management’s failure to provide representations to our satisfaction will preclude us from issuing our report. An audit includes examining evidence, on a test basis, supporting the amounts and disclosures in the financial statements. Therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Also, we will plan and perform the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free from material misstatement. Such material misstatements may include errors, fraudulent financial reporting, misappropriation of assets, or noncompliance with the provisions of laws or regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity that may have a direct financial statement impact. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk exists that some material misstatements and noncompliance may not be detected, even though the audit is properly planned and performed in accordance with U.S. GAAS. An audit is not designed to detect immaterial misstatements or noncompliance with the provisions of laws or regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors, fraudulent financial reporting, misappropriation of assets, and noncompliance with the provisions of laws or regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any time period for which we are not engaged as auditors. Our audit will include obtaining an understanding of the Project and its environment, including its internal control sufficient to assess the risks of material misstatements of the financial statements whether due to error or fraud and to design the nature, timing, and extent of further audit procedures to be performed. An audit is not designed to provide assurance on internal control or to identify deficiencies in the design or operation of internal control. However, if, during the audit, we become aware of any matters involving internal control or its operation that we consider to be significant deficiencies under standards established by the American Institute of Certified Public Accountants, we will communicate them in writing to management and those charged with governance. We will also identify if we consider any significant deficiency, or combination of significant deficiencies, to be a material weakness. We may assist management in the preparation of the Project’s financial statements and supplementary information. Regardless of any assistance we may render, all information included in the financial statements and supplementary information remains the representation of management. We may issue a preliminary draft of the financial statements and supplementary information to you for your review. Any preliminary draft financial statements and supplementary information should not be relied upon, reproduced, or otherwise distributed without the written permission of Moss Adams. Management’s Responsibility for Financial Statements As a condition of our engagement, management acknowledges and understands that management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America. We may advise management about appropriate accounting principles and their application and may assist in the preparation of your financial statements, but management remains responsible for the financial statements. Management also acknowledges and understands that management is responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. This responsibility includes the maintenance of
DRA Meeting 21 FEB 2019 Page 37 Professional Services Agreement Audit and Nonattest Services Page 2 of 5 adequate records, the selection and application of accounting principles, and the safeguarding of assets. You are responsible for informing us about all known or suspected fraud affecting the Project involving: (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud could have a material effect on the financial statements. You are responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the Project received in communications from employees, former employees, regulators or others. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements as a whole. Management is also responsible for identifying and ensuring that the Project complies with applicable laws and regulations. Management is responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. Management agrees that as a condition of our engagement management will provide us with: access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters;
additional information that we may request from management for the purpose of the audit; and
unrestricted access to persons within the Project from whom we determine it necessary to obtain audit evidence.
Management’s Responsibility for Supplementary Information Management is responsible for the preparation of the supplementary information in accordance with the applicable criteria. Management agrees to include the auditor’s report on the supplementary information in any document that contains the supplementary information and that indicates that we have reported on such supplementary information. Management is responsible to present the supplementary information with the audited financial statements or, if the supplementary information will not be presented with the audited financial statements, to make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance by the entity of the supplementary information and the auditor’s report thereon. For purposes of this Agreement, audited financial statements are deemed to be readily available if a third party user can obtain the audited financial statements without any further action by management. For example, financial statements on your Web site may be considered readily available, but being available upon request is not considered readily available. Dissemination of Financial Statements Our report on the financial statements must be associated only with the financial statements that were the subject of our engagement. You may make copies of our report, but only if the entire financial statements (including related footnotes and supplementary information, as appropriate) are reproduced and distributed with our report. You agree not to reproduce or associate our report with any other financial statements, or portions thereof, that are not the subject of this engagement. Offering of Securities This Agreement does not contemplate Moss Adams providing any services in connection with the offering of securities, whether registered or exempt from registration, and Moss Adams will charge additional fees to provide any such services. You agree not to incorporate or reference our report in a private placement or other offering of your equity or debt securities without our express written permission. You further agree we are under no obligation to reissue our report or provide written permission for the use of our report at a later date in connection with an offering of securities, the issuance of debt instruments, or for any other circumstance. We will determine, at our sole discretion, whether we will reissue our report or provide written permission for the use of our report only after we have conducted any procedures we deem necessary in the circumstances. You agree to provide us with adequate time to review documents where (a) our report is requested to be reissued, (b) our report is included in the offering document or referred to therein, or (c) reference to our firm is expected to be made. If we decide to reissue our report or provide written permission to the use of our report, you agree that Moss Adams will be included on each distribution of draft offering materials and we will receive a complete set of final documents. If we decide not to reissue our report or withhold our written permission to use our report, you may be required to engage another firm to audit periods covered by our audit reports, and that firm will likely bill you for its services. While the successor auditor may request access to our engagement documentation for those periods, we are under no obligation to permit such access.
DRA Meeting 21 FEB 2019 Page 38 Professional Services Agreement Audit and Nonattest Services Page 3 of 5
Changes in Professional or Accounting Standards To the extent that future federal, state, or professional rule-making activities require modification of our audit approach, procedures, scope of work, etc., we will advise you of such changes and the impact on our fee estimate. If we are unable to agree on the additional fees, if any, that may be required to implement any new accounting and auditing standards that are required to be adopted and applied as part of our engagement, we may terminate this Agreement as provided herein, regardless of the stage of completion. Representations of Management During the course of our engagement, we may request information and explanations from management regarding, among other matters, the Project’s operations, internal control, future plans, specific transactions, and accounting systems and procedures. At the conclusion of our engagement, we will require, as a precondition to the issuance of our report, that management provide us with a written representation letter confirming some or all of the representations made during the engagement. The procedures that we will perform in our engagement will be heavily influenced by the representations that we receive from management. Accordingly, false representations could cause us to expend unnecessary efforts or could cause a material error or fraud to go undetected by our procedures. In view of the foregoing, you agree that we will not be responsible for any misstatements in the Project’s financial statements and supplementary information that we fail to detect as a result of false or misleading representations, whether oral or written, that are made to us by the Project’s management. While we may assist management in the preparation of the representation letter, it is management’s responsibility to carefully review and understand the representations made therein. In addition, because our failure to detect material misstatements could cause others relying upon our audit report to incur damages, the Project further agrees to indemnify and hold us harmless from any liability and all costs (including legal fees) that we may incur in connection with claims based upon our failure to detect material misstatements in the Project’s financial statements and supplementary information resulting in whole or in part from knowingly false or misleading representations made to us by any member of the Project’s management. Fees and Expenses The Project acknowledges that the following circumstances will result in an increase of our fees: Failure to prepare for the audit as evidenced by accounts and records that have not been subject to normal year-end closing and reconciliation procedures;
Failure to complete the audit preparation work by the applicable due dates;
Significant unanticipated transactions, audit issues, or other such circumstances;
Delays causing scheduling changes or disruption of fieldwork;
After audit or post fieldwork circumstances requiring revisions to work previously completed or delays in resolution of issues that extend the period of time necessary to complete the audit;
Issues with the prior audit firm, prior year account balances or report disclosures that impact the current year engagement; and
An excessive number of audit adjustments.
We will endeavor to advise you in the event these circumstances occur, however we may be unable to determine the impact on the estimated fee until the conclusion of the engagement. We will bill any additional amounts based on the experience of the individuals involved and the amount of work performed. Billings are due upon presentation and become delinquent if not paid within 30 days of the invoice date. Any past due fee under this Agreement shall bear interest at the highest rate allowed by law on any unpaid balance. In addition to fees, you may be billed for expenses and any applicable sales and gross receipts tax. Direct expenses may be charged based on out-of-pocket expenditures, per diem allotments, and mileage reimbursements, depending on the nature of the expense. Indirect expenses, such as processing time and technology expenses, may be passed through at our estimated cost and may be billed as a flat charge or a percentage of fees. If we elect to suspend our engagement for nonpayment, we may not resume our work until the account is paid in full. If we elect to terminate our services for nonpayment, or as otherwise provided in this Agreement, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our work. You will be obligated to compensate us for fees earned for services
DRA Meeting 21 FEB 2019 Page 39 Professional Services Agreement Audit and Nonattest Services Page 4 of 5 rendered and to reimburse us for expenses. You acknowledge and agree that in the event we stop work or terminate this Agreement as a result of your failure to pay on a timely basis for services rendered by Moss Adams as provided in this Agreement, or if we terminate this Agreement for any other reason, we shall not be liable to you for any damages that occur as a result of our ceasing to render services. Limitation on Liability IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR OTHERWISE ARISING OUT OF THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR EXEMPLARY OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT. Subpoena or Other Release of Documents As a result of our services to you, we may be required or requested to provide information or documents to you or a third- party in connection with governmental regulations or activities, or a legal, arbitration or administrative proceeding (including a grand jury investigation), in which we are not a party. You may, within the time permitted for our firm to respond to any request, initiate such legal action as you deem appropriate to protect information from discovery. If you take no action within the time permitted for us to respond or if your action does not result in a judicial order protecting us from supplying requested information, we will construe your inaction or failure as consent to comply with the request. Our efforts in complying with such requests or demands will be deemed a part of this engagement and we shall be entitled to additional compensation for our time and reimbursement for our out-of-pocket expenditures (including legal fees) in complying with such request or demand. Document Retention Policy At the conclusion of this engagement, we will return to you all original records you supplied to us. Your Project records are the primary records for your operations and comprise the backup and support for the results of this engagement. Our records and files, including our engagement documentation whether kept on paper or electronic media, are our property and are not a substitute for your own records. Our firm policy calls for us to destroy our engagement files and all pertinent engagement documentation after a retention period of seven years (or longer, if required by law or regulation), after which time these items will no longer be available. We are under no obligation to notify you regarding the destruction of our records. We reserve the right to modify the retention period without notifying you. Catastrophic events or physical deterioration may result in our firm’s records being unavailable before the expiration of the above retention period. Except as set forth above, you agree that Moss Adams may destroy paper originals and copies of any documents, including, without limitation, correspondence, agreements, and representation letters, and retain only digital images thereof. Use of Electronic Communication In the interest of facilitating our services to you, we may communicate by facsimile transmission or send electronic mail over the Internet. Such communications may include information that is confidential. We employ measures in the use of electronic communications designed to provide reasonable assurance that data security is maintained. While we will use our best efforts to keep such communications secure in accordance with our obligations under applicable laws and professional standards, you recognize and accept we have no control over the unauthorized interception of these communications once they have been sent. Unless you issue specific instructions to do otherwise, we will assume you consent to our use of electronic communications to your representatives and other use of these electronic devices during the term of this Agreement as we deem appropriate. Use of Third-Party Service Providers We may use third-party service providers in serving you. In such circumstances, if we need to share confidential information with these service providers, we will require that they maintain the confidentiality of your information. Enforceability In the event that any portion of this Agreement is deemed invalid or unenforceable, said finding shall not operate to invalidate the remainder of this Agreement. Entire Agreement This Professional Services Agreement and Engagement Letter constitute the entire agreement and understanding between Moss Adams and the Project. The Project agrees that in entering into this Agreement it is not relying and has not relied upon any oral or other representations, promise or statement made by anyone which is not set forth herein. In the event the parties fail to enter into a new Agreement for each subsequent calendar year in which Moss Adams provides services to the Project, the terms and conditions of this PSA shall continue in force until such time as the parties execute a new written Agreement or terminate their relationship, whichever occurs first.
DRA Meeting 21 FEB 2019 Page 40 Professional Services Agreement Audit and Nonattest Services Page 5 of 5
Use of Moss Adams’ Name The Project may not use any of Moss Adams’ name, trademarks, service marks or logo in connection with the services contemplated by this Agreement or otherwise without the prior written permission of Moss Adams, which permission may be withheld for any or no reason and may be subject to certain conditions. Use of Nonlicensed Personnel Certain engagement personnel who are not licensed as certified public accountants may provide services during this engagement. Dispute Resolution Procedure, Venue and Limitation Period This Agreement shall be governed by the laws of the state of Washington, without giving effect to any conflicts of laws principles. If a dispute arises out of or relates to the engagement described herein, and if the dispute cannot be settled through negotiations, the parties agree first to try in good faith to settle the dispute by mediation using an agreed upon mediator. If the parties are unable to agree on a mediator, the parties shall petition the state court that would have jurisdiction over this matter if litigation were to ensue and request the appointment of a mediator, and such appointment shall be binding on the parties. Each party shall be responsible for its own mediation expenses, and shall share equally in the mediator’s fees and expenses. If the claim or dispute cannot be settled through mediation, each party hereby irrevocably (a) consents to the exclusive jurisdiction and venue of the appropriate state or federal court located in King County, state of Washington, in connection with any dispute hereunder or the enforcement of any right or obligation hereunder, and (b) WAIVES ITS RIGHT TO A JURY TRIAL. EACH PARTY FURTHER AGREES THAT ANY SUIT ARISING OUT OF OR RELATED TO THIS AGREEMENT MUST BE FILED WITHIN ONE (1) YEAR AFTER THE CAUSE OF ACTION ARISES. Termination This Agreement may be terminated by either party, with or without cause, upon ten (10) days’ written notice. In such event, we will stop providing services hereunder except on work, mutually agreed upon in writing, necessary to carry out such termination. In the event of termination: (a) you shall pay us for services provided and expenses incurred through the effective date of termination, (b) we will provide you with all finished reports that we have prepared pursuant to this Agreement, (c) neither party shall be liable to the other for any damages that occur as a result of our ceasing to render services, and (d) we will require any new accounting firm that you may retain to execute access letters satisfactory to Moss Adams prior to reviewing our files.
DRA Meeting 21 FEB 2019 Page 41
Downtown Redevelopment Authority 415 W 6th Street | PO Box 1995 | Vancouver, WA 98668‐1995
TO: Mayor McEnerny-Ogle and the Vancouver City Council Eric Holmes, Vancouver City Manager
FROM: Richard Keller, President Downtown Redevelopment Authority (DRA) Board
DATE: February 25, 2019
SUBJECT: DRA 2018 Annual Report to City Council
I am pleased to submit this report to City Council which summarizes the work of the DRA Board this past year. As a reminder to Council, the DRA owns the Hilton Conference Center Hotel and the DRA Board oversees the management of the property and the requirements related to its financing. DRA Board members serve through appointment by the Mayor and City Council.
The DRA’s bylaws as codified in Vancouver Municipal Code require the DRA to submit an annual report to City Council. A summary of significant accomplishments in 2018 and activities planned for 2019 are provided below. DRA unaudited December 31, 2018 financial report and the DRA’s 2019 budget are included as attachments.
Downtown Redevelopment Authority Activities: 2018
The Vancouver Conference Center Hotel and the DRA had a successful 2018, the 13th full year of operations. Here are a few of the notable highlights from last year.
Financial Highlights Total operating revenues in 2018 were $18.10 million and just slightly below the $18.14 million in 2017. Group room nights were down approximately 15% in 2018 compared to record 2017 levels due to expected cyclical trends. Revenue performance was especially good considering that an airline crew that the hotel had served for the past several years relocated to be closer to downtown Portland when its contract expired in the spring. Gross operating profit was $5.6 million compared to about $6.1 million in 2017. The year over year decline is primarily related to the lower group business which contributes to lower catering revenue and the impact of a one-time multi-year worker’s compensation expense refund received in 2017. Bond debt service payments of $4.2 million were paid on time in 2018. Outstanding long-term debt declined by $2.9 million from $66.7 million to $63.3 million. Clark County Public Facilities District debt declined $1.2 million to $6.6 million. Capital investments in the facility totaled just under $1.3 million including completion of the Grays renovation and renovation of the team member restaurant and garage elevator landing. Contributed approximately $1.4 million to reserves earmarked for the major renovation planned for 2021-2023.
DRA Meeting 21 FEB 2019 Page 42 Hilton entered into a collective bargaining agreement with its union employees that calls for starting wages to be $1.50 higher than the increased Washington State minimum wage by 2021.
Operating Highlights The Conference Center hosted over 1,500 groups with more than 127,000 people attending events. Groups accounted for 21,781 room nights at the hotel during the year or roughly 35 percent of total room nights. Total hotel occupancy for 2018 was 75.7 percent compared to 76.1 percent in 2017 and compared to 74.5 percent for peer hotels in the area. The renovation of Grays was completed on budget in the 1Q 2018 and the new outdoor patio opened in August. Despite being completed roughly six weeks later than planned total Grays revenue in 2018 came in just 2 percent under the original budget estimate. The expanded and light filled bar area has been particularly popular. In 2018, the facility earned an overall guest satisfaction and experience score of 69.2 which ranked 45th out of 290 Hilton hotels (16th percentile). Guest satisfaction scoring was slightly revised in 2018 and is not directly comparable to prior years. Guest surveys reflected the disruption caused by the Grays renovation which impacted the lobby, bar and restaurant. The Conference Center hosted five Vancouver-based/focused non-profit events providing the non-profit organizations a discount on services valued at approximately $7,000. The Vancouver Conference Center Hotel employs 190 people, of which about 90 percent live in the Vancouver/Clark County area. Total 2018 wages and benefits were about $7.2 million. Operating costs included approximately $950,000 spent with vendors within Washington State. Of that amount, $577,000 or 61 percent was spent within Vancouver and the broader Clark County area. The Vancouver Conference Center Hotel remitted just under $1.3 million in sales taxes, over $390,000 in lodging taxes (all returned to Vancouver) and paid approximately $125,000 to Visit Vancouver USA, the local non-profit tourism promotion organization. Security staff from Hilton’s corporate office collaborated with Vancouver Police Department SWAT personnel to complete a security review of the hotel. The hotel implemented several of the recommendations in late 2018 and others will be implemented in 2019. DRA staff compiled detailed procedures to help the DRA respond to the many accounting, compliance and reporting requirements associated with the bond financing and inter- agency agreements. Hilton and the DRA entered into an amendment to the project operating agreement to clarify certain tax liability, lower management fees and extend the agreement through 2038.
Downtown Redevelopment Authority February 25, 2019 415 W 6th Street | PO Box 1995 | Vancouver, WA 98668-1995 2
DRA Meeting 21 FEB 2019 Page 43 The Vancouver Conference Center Hotel had a successful 2018 working through the challenge of a seasonal reduction of group business, the loss of the airline crew and the Grays renovation. Much of the success is attributable to the hard work by the project’s management team led by Mike McLeod, Hilton Vancouver General Manager. Mike and his team, assisted by Tom Morone and Art Burger representing the DRA’s Asset Manager, responded to the challenges the market presented in 2018 and achieved financial results just shy of original goals. In addition, the team delivered the Grays renovation on budget and continued to earn high marks from customers. We acknowledge and appreciate their work on behalf of the DRA and the community.
Downtown Redevelopment Authority Work Plan Highlights: 2019
The DRA Board reviewed its 2019 work plan at its January meeting. Issues that the Board will be focused on this year include: Monitoring the facility’s 2019 financial performance. The 2019 budget forecasts revenues and gross profit to be higher than last year thanks to a rebound in group bookings and continued strong performance from non-group bookings. Finalizing a plan to fund future capital needs including a major renovation likely to occur in the 2021-2023 time frame. Participating in the master planning process for City owned property in downtown Vancouver and working to secure adequate parking for the Conference Center Hotel in the long term. Monitoring the status of new hotel developments on the Vancouver Waterfront, in downtown and elsewhere in the market. Reviewing the DRA’s investment practices to ensure investment earnings on reserves are appropriate given the DRA’s need to have access to funds, low-risk investment objective and bond covenants. Assessing Grays performance relative to the expectations identified prior to investing in the 2017-2018 renovation. Completing various other projects that help ensure the continued success of the facility.
On behalf of the entire DRA Board, I thank you for your support and the opportunity you have given us to serve the citizens of the City of Vancouver. Please do not hesitate to contact me or any of the board members if you would like to receive additional information about our activities or our work with the Vancouver Conference Center Hotel.
2018 DRA Board of Directors Richard Keller, President David Copenhaver, Director Debi Ewing, Director Mark Fazio, Director and Board Secretary/Treasurer Brad Hutton, Director Jack Onder, Director Jan Robertson, Director
Attachments: December 31, 2018 Financial Report and 2019 Budget
Downtown Redevelopment Authority February 25, 2019 415 W 6th Street | PO Box 1995 | Vancouver, WA 98668-1995 3
DRA Meeting 21 FEB 2019 Page 44 Downtown Redevelopment Authority Narrative Overview of the December 31, 2018 Financial Statements
STATEMENT OF NET POSITION The cash with fiscal agent has surpassed the 2017 year-end balance by $1.5 million. This is a result of strong operations and tax collections, offset of course by purchases of capital items and repayment of debt. In December, alone, the cash accounts have increased by more than $700,000.
The debt to the Clark County PFD totals $6,645,513. The liability reflects a decrease since December 2017 due to payments to Clark County PFD for tax revenues above the CAP. Additionally, this debt will be reduced further by the waterfall payment that will be made before the end of January 2019.
STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET POSITION Hotel revenues through year-end 2018 continue to be slightly off pace compared to 2017. The original revenue budget for December anticipated just less than $1.3 million with actuals materializing at just over $1.3 million. Closing the year, revenues are short of budget by $461,000.
There is Operating Income of $2.3 million for 2018 compared to operating income of $3.3 million for 2017. This is a result of both revenue shortfalls as well as higher operating expenses, including depreciation expense. Depreciation expense is approximately $600,000 higher in 2018 specifically due to a reassessment of useful lives of assets, primarily the rooms and conference remodel from 2016, which was reassigned a 10-year life versus 40.
Hotel profit for the month of December 2018 was $320,905 compared to a budget of $199,666. Approximately $110,000 of this relates to the terms of the management agreement amendment signed in December.
STATEMENT OF CASH FLOWS Overall cash reflects an increase of approximately $1.5 million compared to year end. o Notable sources of cash for the year-ending December 2018 included $5.3 million from operations and $4.1 million in tax receipts from other governments. o Notable uses of cash included $2.5 million in payments to other governments, debt service payments of $3.7 million and $1.5 million in capital expenditures.
TAX REVENUE COLLECTIONS Through December 31, 2018 tax revenue collections are at 164% of the Tax Cap compared to 156% for the same period in the prior year. To date, $1,588,433 above the 2018 CAP has been returned to the Clark County PFD.
Through the December 2018, receipts of City Lodging Tax, City PFD Sales Tax Credit and County PFD Sales Tax Credit ended the year up 3%, 8.4%, and 11.4%, respectively, compared to the same period last year.
FLOW OF FUNDS The debt service payments for the Project Revenue and the Tax Revenue Bonds in the amount of $2,925,756 was paid on January 2, 2019.
The Trustee has received instruction for the excess amount in the debt service funds of approximately $3.6 million. The details on the allocation are shown in the Bank Balance Report.
The bottom “waterfall balance” totaled $2,791,409, of which is split 50/50 between the Authority Revenue Fund and the Clark County PFD fund with a minor adjustment for the excess DRA administrative expenses in 2017.
TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them.Page 45 TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them.Page 46 Downtown Redevelopment Authority (A Component Unit of the City of Vancouver) Statement of Revenues Expenses and Changes in Net Position Substantially all Disclosures Required by GAAP are omitted. For the year ended December 31, 2018 and 2017
Actuals Budget
Variance to Year ended Year ended Budget December 31, December 31, Favorable/ 2018 2017 $ Change % Change YTD Budget (Unfavorable) % OPERATING REVENUES Charges for services 18,056,956 18,139,871 (82,915) -0.5% 18,517,593 (460,637) -2.5% Miscellaneous 39,386 - 39,386 - 39,386 Total operating revenues 18,096,342 18,139,871 (43,529) -0.2% 18,517,593 (421,251) -2.5%
OPERATING EXPENSES Supplies and contractual services 13,463,534 13,089,251 374,283 2.9% 13,660,304 196,770 1.4% Depreciation 2,319,364 1,710,716 608,648 35.6% 1,800,000 (519,364) -28.9% Total operating expenses 15,782,898 14,799,967 982,931 6.6% 15,460,304 (322,594) -2.1%
Operating income (loss) 2,313,444 3,339,904 (1,026,460) 3,057,289 (743,845)
NONOPERATING REVENUES (EXPENSES) Interest earnings 201,962 75,871 126,091 166.2% 10,000 191,962 1919.6% Intergovernmental contributions 2,763,629 2,660,634 102,995 3.9% 2,483,000 280,629 11.3% Intergovernmental payments (250,789) (242,506) (8,283) -3.4% (315,906) 65,117 20.6% Interest and fiscal charges (2,917,139) (3,015,275) 98,136 3.3% (2,932,462) 15,323 0.5% Total nonoperating revenues (expenses) (202,337) (521,276) 318,939 61.2% (755,368) 553,031 73.2%
SPECIAL ITEMS Gain on extinguishment of Debt 107,813 107,813 - - 107,813 Claims Settlement 13,993 31,146 (17,153) - 13,993 Total special items 121,806 138,959 (17,153) - 121,806
Change in net position 2,232,913 2,957,587 (724,674) 24.5% 2,301,921 (69,008) 3.0%
TOTAL NET ASSETS - BEGINNING (14,124,243) (17,081,829) 2,957,586 17.3% Prior Period Adjustment (788,595) - (788,595) TOTAL NET ASSETS - ENDING (12,679,925) (14,124,243) 2,232,913 15.8%
Page 3
DRA Meeting 21 FEB 2019Teresa D Johnson, CPA, Inc did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them. Page 47 TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them.Page 48 TeresaDRA D Johnson, Meeting CPA, 21 FEB Inc 2019 did not perform an audit, review or compilation engagement on these financial statements, and no assurance is provided on them.Page 49 ATTACHMENT A
Downtown Redevelopment Authority 2019 Operating Budget 2019 Budget Revenues Tax Revenues$ 2,548,000 Conference Center & Hotel Operations$ 19,547,010 Total Revenues$ 22,095,010
Operating Expenses Conference Center & Hotel Operations$ (13,212,862) Professional Services (Includes Management Fee)$ (780,000) City Administrative Support, Exec. Director & Accounting$ (93,715) Insurance, Taxes and Other Operating Expenses$ (383,442) A Total Operating Expenses$ (14,470,019)
Other Income/(Expense) Interest Earnings & Other$ 190,000 B County Interest Expense$ (450,000) C Interest Charges-Series 2013 Project Revenue Bonds$ (1,750,463) D Interest Charges-Series 2013 Tax Revenue Bonds$ (661,600) Total Other Income/Expenses$ (2,672,063)
Net Budgeted Revenue and Expense Affecting Cash $ 4,952,928
Non-Cash Budgeted Expense Items Depreciation$ (2,000,000) Amortization$ (70,000) E Total Non-Cash Budgeted Expense Items $ (2,070,000)
Other non-budget items, forgiveness of debt, bankruptcy settlement, amortization of refunding. Misc refunds from prior years
Projected Income/(Loss) $ 2,882,928
Total Operating Budget Appropriation A+B+C+D+E$ (19,402,082)
Downtown Redevelopment Authority 2018 Capital Budget
Capital Expense Budget Summary by Category 2019 Budget Building Improvements$ 183,001 Furniture, Fixtures, and Equipment$ 330,430 Information Technology$ 265,400 DRA - 4th Street Parking Lot$ 275,000
Total Capital Budget Appropriation$ 1,053,831 Memo Total: Hilton Capital Budget$ 778,831
DRA 2019 Budget_12_13_18; 2019 Budget Attachment DRA Meeting 21 FEB 2019 Page 50