Lucas County Arena Action Plan
August 9, 2006
An Action Plan for the Development of a New Multi-Purpose Arena Linked to the SeaGate Convention Centre Submitted to: Lucas County Commissioners
TABLE OF CONTENTS
Lucas County Arena
Turning Talk Into Action: An Action Plan Submitted to the Lucas County Commissioners for the Development of a New Multi-Purpose Arena Linked to the SeaGate Convention Centre
SECTION 1 Executive Overview
SECTION 2 Site Selection Review
SECTION 3 Preliminary Convention Center Study
SECTION 4 Determination of Arena Size
SECTION 5 Funding and Financing
SECTION 6 Governance Plan
SECTION 7 Project Delivery Process and Project Timeline
SECTION 8 Tenant Selection Process
SECTION 9 Next Steps
SECTION 10 Exhibits Section 1: Executive Overview
Executive Overview
Lucas County Arena Action Plan | Page 1 Section 1: Executive Overview
Executive Overview
The Lucas County Commissioners contracted with the team of Pizzuti Solutions LLC, Garfield Traub Development and Gateway Consultants Group, acting as the Project Fiscal and Management Consultant, to create an Action Plan for the development of a new multi-purpose arena linked to the SeaGate Convention Centre in downtown Toledo. The team is pleased to present a comprehensive Action Plan that meets the needs of Lucas County and its residents.
In completing this Action Plan and formulating the team’s recommendations, certain assumptions were made. The recommendations contained in the plan are not the only workable solutions to bringing a new downtown arena to Lucas County, and the planning team recognizes that a certain degree of flexibility may be required as the project moves forward.
Following is a brief overview of the major topics addressed in the Action Plan.
Site Selection
Following an extensive review of potential arena locations, it was determined that five sites were sufficiently close to the SeaGate Convention Centre to allow for the development of physical connectors between the convention center and a new arena. A physical connection would aprovide operational and development benefits such as the combined use of some “back of the house” operations, savings from combined management, and the use of the arena floor as additional flat exhibit floor space for the convention center.
The action plan team concluded that connecting the new arena to the convention center would allow the new facility to complement the economic impact of the convention center and Fifth Third Field, rather than serving as a competitor.
This arrangement would assist in the cross-marketing of events that could be staged in both the convention center and arena, and could lead to possible related development of restaurants, specialty retail and innovative housing options in the Warehouse District and the area north and west of the convention center.
This type of development has been nurtured in recent years by the presence of Fifth Third Field, and would likely increase if an arena, with its year-round event-booking capability, is added to the area.
Preliminary Naming Rights Study
Gateway Consultants Group conducted a first-phase naming rights study relative to the SeaGate Convention Centre. The opportunities and challenges associated with pursuing a naming rights sponsorship for the convention center were addressed in this report.
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The possibility of a new downtown arena linked to the SeaGate Convention Centre was considered throughout the course of the convention center naming rights study. At the time, it appeared likely that potential sponsors might be hesitant to consider a naming rights deal for the convention center because of the uncertainty of the possible arena project.
However, an arena built in connection with the convention center would present an opportunity for an entity to put its name on the entire complex rather than on just one facility or the other. The newly built arena would also likely attract potential naming rights sponsors because it would be a new facility with all of the exciting visuals as well as the media and public enthusiasm that naturally accompany such an effort.
Determination of Arena Size
The recommendations relating to arena size are the result of the “Phase II Market Financial Feasibility Study” conducted by Convention Sports and Leisure (CS&L), a nationally known firm. The study involved a review of arena capacities in comparable markets, a review of suites and premium seating in the Toledo market, interviews with league officials and concert promoters and a survey of corporate users in the local market.
The CS&L study concluded that an arena with a fixed seat capacity of between 8,000 to 9,000 seats would accommodate the attendance projected for minor league hockey and indoor football events. In addition an arena with close to 10,000 total seats for concerts would attract the majority of touring shows and family events. Therefore the team has recommended that two arena sizes be considered. Depending upon the final bowl design and seat configuration, an 8,000 fixed-seat arena could accommodate 9,500-10,000 attendees for concerts; a 9,000 fixed-seat arena could accommodate between 10,500 and 11,000 for concerts. Premium seating for either arena size would be composed of private suites, loge boxes and club seating.
Funding and Financing
The expertise of two national construction firms and a review of comparable arena construction costs were the basis for estimating the cost of constructing a new Lucas County arena. Without a detailed program and design scheme, the construction cost estimates were based on industry experience and comparable per square foot costs. The estimates were then projected for a construction period to begin in the third quarter of 2007 and adjusted for construction costs in the Toledo area.
The projected operating revenue to be generated by the new arena is dependent upon the sports teams and programs that are anticipated to be tenants in the arena. Two scenarios were considered as revenue estimates were completed:. The first with an East Coast Hockey League (ECHL) franchise, and the second with an American Hockey League (AHL) franchise.
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Indoor arena football teams were also identified as potential tenants. For non-tenant events, the arena would likely attract concerts, family shows such as Stars on Ice or Sesame Street Live, along with local and non-tenant sports events. Studies indicated that the arena would host between 127 and 131 events annually, and attract 513,000 to 551,000 attendees.
After consulting with bond counsel and investment bankers familiar with the specific legal and financial aspects of financing a public facility such as the arena, it was determined that Lucas County has the financial capacity to fund the development of the project. This could be done through extending the hotel-motel tax and by the early retirement of the debt on the SeaGate Convention Centre. Other public components of the arena funding could come as grants from sources such as the Ohio Cultural Facilities Commission and the U.S. Department of Transportation.
Additional funding would come from the private sector in the form of naming rights and private suite and premium seats, as was done successfully in the development of Fifth Third Field.
The Action Plan also addresses the potential economic impact for Lucas County when the new arena is built. A detailed review and summary of the CS&L study is included as well as information gathered from a review of similar studies summarizing the impact of comparable facilities, and interviews with community leaders and public sector staffers from communities with multi-purpose arenas.
Governance Plan
The recommended governance plan for the new arena was developed after consideration of several operating options available to the county. The new arena, as a regional asset, should be designed, built, owned and operated by a to-be-formed not-for-profit corporation. The new corporation would be incorporated pursuant to the Ohio Revised Code, and would act on behalf of the county to develop and operate the arena and the renovated SeaGate Convention Centre.
This recommendation was made because of the complexity of arena and convention center business, which may require more flexibility than county governance could easily accommodate. Additionally, this operating model would allow the county to maintain appropriate oversight and supervision through a board of trustees to be appointed by the county commissioners.
Project Delivery Process and Project Timeline
A review of potential project delivery mechanisms was conducted. The team engaged Project Management Consultants LLC (PMC), to assist in this analysis, which was done in the context of the existing statutory framework that governs public construction projects in Ohio.
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In addition, the possibility of a statutory change to allow different methods of construction delivery, including a “design build” option, was explored. However, it is recommended that the project proceed under the existing statutory framework. This will avoid political challenges in the General Assembly, while also keeping with the methodologies familiar to the contractor community.
Tenant Selection Process
The presence of one or more stable and successful sports franchises as tenants is a key to the long- term financial success of an arena. For purposes of the action plan, several potential tenant franchises were considered, most notably a minor league hockey franchise and a professional indoor arena football franchise.
In determining the best tenants for the new facility, it is recommended that the county consider a league’s financial strength, longevity, promotion and historical attendance in comparable markets. Additionally, the county should focus on the individual franchise and the financial strength of the ownership group. The County should also consider the purchase of either an ECHL or AHL minor league franchise, possibly under the same ownership framework and entity employed for its ownership of the Toledo Mud Hens. The County should explore the benefit of possible operational efficiencies if the management of the new franchise was combined with that of the Mud Hens.
Recommended next steps
As a first step the County should examine the Action Plan and determine that all relevant issues have been covered. If the plan is approved and adopted, the County should initiate a process to encourage public involvement and comment, activate a business advisory group, and engage the advice of community leaders and elected officials. After public discussion the County should make the final determination of the specific site for the arena As part of these next steps the County should provide support in the passage of any enabling legislation, and oversee the formation of the not-for-profit ownership entity and the funding model.
Conclusion
The Project Team is pleased to present the results of the following Action Plan. We believe this plan provides a achievable solution that will allow for development of a first-class downtown arena that best meets the needs of the citizens of Lucas County.
We look forward to working with the County to ensure the successful completion of this project.
Lucas County Arena Action Plan | Page 5 Section 2: Site Selection Review
Site Selection Overview
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Site Selection Review
Introduction
Does Northwest Ohio need a new multi-purpose Arena? How would it be funded and financed? Where should it be built? The residents and leaders of Lucas County, the City of Toledo and others in the region have wrestled with these questions for more than seven years. At the core of these three questions is the very real concern that the Sports Arena located on the east side of the Maumee River in downtown Toledo is reaching the last phase of its useful life as a public assembly building. The discussion and debate on this very public issue has ebbed and flowed for more than seven years as demonstrated by the following narrative:
March 1999: The community of Rossford in Wood County announces a plan to develop a 10,000 seat arena plus an adjoining amphitheater at the intersection of Interstate 75 and the Ohio Turnpike. By 2001 the project will be abandoned due to the lack of a viable funding and financing plan.
April 2000: The City of Toledo along with V/Gladieux Enterprises and Continental Realty of Columbus announce a development along the east bank of the Maumee named the “Marina District” which will include a new 10,000 seat arena.
September 2001: The voters of Toledo approve a waiver to Section 79 of the City Charter to allow the City to be involved in providing infrastructure support for a new arena in the Marina District. It was not a vote on where the voters would like to see an arena located, it was an effort to seek the approval to provide infrastructure support for an arena in the Marina District.
January 2003: Gateway Consultants Group (“Gateway”) issues a report assessing the Marina District Plan and specifically the economic viability of building a new arena in the Marina District (Gateway was not asked to do a site analysis as part of that study). Absent the institution of a new tax or the increase in a current county tax, the report concluded that the funding for a new arena at the Marina District at that point in time would be a “…difficult challenge.”
September 2003: Respondents to a Request For Proposal (“RFP”) process are interviewed as potential new developers of the Marina District. Continental Realty Company does not participate thus effectively ending their participation in the process. A group that includes local developers the Douglas Companies, Dillin Development and national companies such as Cherokee Development and the Arena Group are selected to develop the Marina District. By the Spring of 2004 this group will withdraw from negotiations with the City of Toledo.
Summer 2004: In response to a second RFP process a new group of firms led by the Pizzuti Companies of Columbus will be retained by the City of Toledo to develop the Marina District.
May 2005: A report by CS&L commissioned by Pizzuti concludes that a new arena would have greater viability developed in downtown Toledo in the same area as SeaGate Convention Centre and Fifth Third Field rather than as part of a development in the Marina District.
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March 2006: Lucas County retains the services of a consulting group consisting of Gateway, Garfield Traub Development and the Pizzuti Companies to develop an action plan that can provide a viable funding and financing plan for a new multi-purpose arena while also recommending a site for the new arena that could also advance the strategic needs of the SeaGate Convention Centre. In addition this team could address the issues of the appropriate ownership entity, governance structure and construction delivery process
During this seven year odyssey, there have been changes in leadership, developers, consultants and attitudes but the one constant has been the goal of providing the residents of Lucas County and by extension the whole Northwest Ohio – Southeast Michigan market with a state of the art multi-purpose arena which is deserving of their support. While this project was originally viewed as a City of Toledo project it has now evolved into a project led by the Lucas County Commissioners with the advice and input of the Mayor and the City of Toledo leadership.
The current leadership of the Lucas County Commissioners convened a meeting on March 6, 2006 of the political, business, labor and civic leadership of Northwest Ohio to state their intention to resolve the issue of developing a new multi-purpose arena. To this end they made it clear that the first question that had to be addressed was that of funding and financing the project. If that could not be answered in a satisfactory manner then they would not go forward with the project. If a responsible funding and financing plan was developed then they would proceed in an arrangement that allows them to only expend funds at incremental stages as they are convinced that appropriate safeguards are in place to proceed on a project that is maintained on schedule and within the scope of money developed and designated for each step. This type of arrangement was necessary in order for the Commissioners to fulfill their fiduciary role as responsible stewards to the interests of the residents of Lucas County.
In order to achieve the goal of bringing a new multi-purpose arena to fruition the three key questions that need to be answered are those which we stated at the beginning of this introductory section:
1. Does Northwest Ohio need a new multi-purpose Arena? 2. Where should it be built? 3. How would it be funded and financed?
The Commissioners wanted an action plan for pursuing this project in an appropriate fashion and decidedly not another feasibility study. As can be seen from the history of this issue, the Lucas County community has had enough studies about this issue. What is needed is an action plan that sets forth a road map that will move this issue from talk to action or as Mark Twain said, “Action speaks louder than words but not nearly as often”.
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Site Selection Criteria Before discussing the site criteria a threshold issue had to be addressed; what is the right size for an arena in the Northwest Ohio market. To answer this question we engaged the firm of Conventions, Sports & Leisure International (“CS&L”) which conducted a study on this issue in 2005 regarding the size and market demand for an arena in this market.1 CS&L examined the market demand for various sports leagues, family shows and concert acts and the attendance that they draw in order to determine an appropriately sized arena for the Northwest Ohio market (a copy of their report is attached as Exhibit 1). Based upon their work they determined that an arena with a maximum seating capacity in the range of 10,000 seats in a concert configuration would be sufficient for the Toledo market.
Using the CS&L report as a guide, and based upon prior work experience as well as discussions with construction managers and architects we determined that an appropriate seating combination for the Northwest Ohio market would be an arena that could seat 8,000 in a hockey configuration, 9,000 in a basketball configuration and 10,000 for concerts. The footprint for such a building would require a length of 425 feet and a width of 300 feet.
In examining the question of what would be the optimal site for a new multi-purpose arena, we were guided by the following three criteria:
1. Was there sufficient parking within a six block walk of the site? 2. Could the site be physically linked to the SeaGate Convention Centre? 3. Was the site large enough for the construction of an arena?
When the public conversation about a new arena was started in March 1999, a plan was put forth to develop it in conjunction with an amphitheater near the intersection of I-75 and I-90 (the Ohio Turnpike) in Wood County. About a year later the talk of arena location shifted closer to the population center of Northwest Ohio with the idea of including it within the Marina District project. Throughout this arena discourse there were many people who spoke about the merits of locating an arena close to the SeaGate Convention Centre. Those who advocated such a linkage did so with an idea premised upon taking advantage of the existing infrastructure, particularly the parking inventory, which also serves the SeaGate Convention Centre and Fifth Third Field. An arena in close proximity to the convention center and ballpark would also help to energize the downtown by creating a regional entertainment district.
In doing so, Toledo would be one of the few cities in the country that would develop the urban trifecta of having its convention center, ballpark and arena all within the same area. Examples of cities that have followed this model of putting their convention center and arena connected to or near each other can be found close to Toledo. Columbus, Duluth, Indianapolis, Lexington and Rochester have all developed these two buildings in close proximity to or connected with each other. It is also a model Cleveland is considering in siting a new convention center (See Exhibit A “Convention Center/Arena Locations” contained within the attached Exhibit 2). However, few
1 CS&L is familiar with the arena size issue in this market having conducted a study on this issue in a report it provided to the City of Toledo in 2005 when the discussion involved the development of an arena at either the Marina District or in downtown Toledo.
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communities have placed all three in the close proximity that Toledo could as shown in this report.
A concentration like this would help in the cross marketing of events that could be staged in both the convention center and the arena. It could also lead to potential related development of restaurants, specialty retail, and innovative housing options in the Warehouse District as well as the area north and west of the convention center. This type of development has been nurtured by the presence of the ballpark. It should increase when an arena, with its year round event booking capability, is added to the mix.
The Lucas County Commissioners have a very practical reason for desiring a linkage between a new arena and SeaGate. The County owns and provides ongoing financial support to the convention center. If an arena is not linked to the convention center it might become a rival competitor for shows currently playing at SeaGate. This could mean a loss of business to SeaGate and might cause the County to provide a larger ongoing subsidy to SeaGate with fewer shows in the building. The County should be involved in funding and financing of a new arena if it helps to create more business opportunities in support of its other two major public assembly buildings – SeaGate Convention Centre and Fifth Third Field.
In the work conducted for this report we determined that there were five sites in downtown Toledo sufficiently close to the SeaGate Convention Centre to allow for the development of physical connectors between the convention center and a new arena. A thorough discussion of each is set forth in Exhibit 2 The sites are shown in the following photograph and are referred to as: Option 1: The Superior Site; Option 2: The Fiberglass Tower Site; Option 3: The Water Street Site; Option 4: The Ft. Industry Square Site; and Option 5: The Perry Street Site.
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1 2 3 SeaGate
4 5
The five sites considered for a new arena that could be connected to the SeaGate Convention Centre.
If the new arena is in close proximity to those two county buildings it will be a complement to their economic impact on the county rather than a competitor. Unless a site offers direct linkage which can be leveraged in support of its current public assembly buildings, it is not a viable site for the county to invest its money into the arena project. Before discussing the recommended site (as noted above, the full review of all five sites considered is set forth in Exhibit 2), it is important to understand the issues facing the convention center within the context of the development of a new arena.
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Parking Sufficiency
With every major public assembly building in any downtown location, parking will be an issue at the forefront of any discussion. While this issue has been discussed in many reports regarding downtown development in Toledo, we think it is important to address it in this report in order to allay any concerns regarding the inventory and availability of parking currently in the downtown area.
According to figures maintained by the Downtown Toledo Parking Authority (“DTPA”), there are 19,992 total parking spaces (public and private) within the borders of Cherry Street to the north, Summit Street to the east, Lafayette Street to the south and 11th Street to the west.
1
5 2
3 4
Parking Inventory In Relation To The Five Possible Arena Sites
Within the red area above there are 19,992 parking spaces. Using Jefferson Street as a dividing line there a re: 15, 478 parking spaces to the north of Jefferson within the green area above. There are 4,514 parking spaces to the south of Jefferson within the orange area above.
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The commonly used formula for determining the adequacy of parking comes from the Urban Land Institute (“ULI”) and was the basis of the parking study conducted for the ballpark project by the Downtown Toledo Parking Authority. The DPTA using the work of the ULI relating to arenas, ballparks and similar facilities determined that, “2.4 people per car attend an event” and available parking is considered to be any space that is within “2,000 feet” (or about six blocks) from the venue.
When the parking study was done for the 10,000 seat Fifth Third Field, there was a need to establish that there were 4,166 spaces within a six block walk of the proposed location. It was determined that 9,884 spaces were within a six block walk of the site that would eventually become the “best minor league ballpark in America” according to Newsweek magazine. That number of spaces, 9,884, would be enough parking for a building that could seat 23,700 people. That is enough for a sold out 10,000 seat ballpark for a Mud Hens game (4,166 spaces), and a sold out concert at a 10,000 seat arena (4,166 spaces) while hosting an event for 3,700 people at SeaGate all on the same night (1,552 spaces). It is clear that downtown Toledo has more than sufficient parking for all three public assembly buildings within the same entertainment district.
It can be safely stated that no new parking has to be built for a new arena at any of the five locations examined for this report. Of the 19,992 parking spaces in downtown within the borders of Cherry Street, Summit Street, Lafayette Street and 11th Street, we looked at how many fall on either side of Jefferson Street. To the north of Jefferson there are 15,478 spaces (9,609 public spaces and 5,869 private spaces). To the south of Jefferson there are 4,514 spaces (2,086 public spaces and 2,428 private spaces). What this parking inventory demonstrates is that any arena site north of the convention center will have access to far more parking options than a site south of the convention center.
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Recommendation – Option 1: The Superior Site
Based upon our work and the criteria used in evaluating the sites we recommend that the County focus on the Superior Site for the development of a new arena. The reasons for this recommendation are:
1. It has sufficient size; 2. Access to more than sufficient current parking without having to build any new parking; 3. Access to a current connection into SeaGate Convention Centre; and 4. It does not remove valuable riverfront property from future greenspace use and development.
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\A. Major Site Advantages:
1. Existing Connectivity This site is already physically connected to the convention center. There currently exists a walkway connecting the Port Lawrence Parking Garage to SeaGate. At this site the arena could be connected to the Port Lawrence Garage to provide parking directly into the building.
Two vie ws showing the current physical link between SeaGate and the Port Lawrence Garage
In this configuration, there would be no additional cost to build an elevated walkway from the convention center into a new arena as it would already exist (depending on length, design and features a connector can cost from $1.5 to $3 million). In fact, depending upon the design of the arena, the current elevated walkway may be at or near the elevation of a concourse. This would allow for a seamless transition from one venue to the other.
C urrent walkway connector with a potential entry way onto a possible concourse of an arena (located at the Option 1 – Superior Site) at the corner of the walkway.
2. Parking As noted earlier in the parking discussion, a site to the north of SeaGate falls within an area that has 15,478 parking spaces within a six block walk of the arena. At 10,000 seats, the arena needs just 4,166 parking spaces. This site is the most centrally located for
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accessing more parking than the other four. Therefore parking availability will not be an issue for this site. This site is also an easy walk from all of the major office buildings in downtown.
3. Site Size As we mentioned in the discussion on arena size in Section II above, the type of arena contemplated for all five of the sites would seat 8,000 for hockey, 9,000 for basketball and 10,000 for concerts. An arena that could house these three types of events would require a minimum footprint of approximately 425 feet in length and 300 feet in width. That is the footprint that that has to be available in order to develop an arena onto a site that can be attached to the SeaGate Convention Centre. The Superior Site, of the five sites studied, is the one of two locations that can reasonably accommodate an arena of those dimensions.
The Superior Site could range from 2.6 acres to 3.3 acres depending upon how much land can be reasonably negotiated for and acquired. The more land acquired, the better the opportunity to provide some pedestrian space around the perimeter so that it would not have to encroach right up to the sidewalk. In other words, its size could be scaled somewhat to make it a more inviting rather that looming presence in downtown. Furthermore, the building line would start about sixty feet from Madison. This could allow the land that was Superior to be used as a pedestrian plaza entrance into the arena which could be designed in a very welcoming and human scale.
Potential plaza entry (in blue) on what is presently Superior in relation to the proposed Option 1 Site (in orange).
As shown on the massing study below, provided by the Columbus-based design firm of Glavan Feher Architects, the Superior Site can accommodate the footprint of an arena with some surrounding space for external activities from Madison to the building line and along Huron.
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Port Lawrence Garage SeaGate Convention Centre
Superior Site Massing Study This view shows the arena in relation to the street grid of downtown Toledo.
As the massing study above shows, an arena on the Superior Site would accommodate the footprint of the building as well as allow for sufficient space for pedestrian plazas. One other aspect that needs to be considered is the ability to walk from the office buildings north of Madison not just to the arena but onto the Warehouse District and Fifth Third Field. While there are north – south walking corridors along Huron and Summit there is likely to be concern expressed because an arena at the Superior Site could create a “super block” effect; a long block impeded by the arena. This does not have to be the case and it could be a requirement in the Request For Qualifications (“RFQ”) for design firms to develop a walkway that can accommodate north – south pedestrian foot traffic.
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SeaGate Convention Centre
Fifth Third Field
View of the arena on the Superior Site in relation to the downtown Toledo business district, SeaGate Convention Centre and Fifth Third Field
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B. Major Site Concerns: 1. Losing a Block of Superior An arena at this site would require the removal of one block of Superior between Jefferson and Madison. The concern is that removing this block could disrupt a north – south pedestrian corridor and create the “super block” effect mentioned above.
Another potential concern is that it would also diminish vehicular traffic flow in downtown. This may not be a real stumbling block to the site as this street has already been blocked by the construction of Fifth Third Field one block south. There is also a diminished amount of traffic on this stretch of Superior, so it should not be a significant traffic flow issue.
The block of Superior between Monroe The view from Madison looking
& Washington being removed during south on Superior towards Fifth Third the construction of Fifth ThirdF iFfthi eTlhdird Field Field during morning rush hour.
According to city traffic counts, the block of Superior between Jefferson and Madison carries about 4,100 vehicles in a 24 hour period. By contrast, Summit in the same block and time period carries 18,000 vehicles; Erie and Michigan on the same block and during the same time period carry between 11,000 and 12,000 vehicles. Huron carries about 3,300 within the same parameters. These four parallel streets should be able to handle the traffic flow of 4,100 vehicles dispersed among them.
2. The Combined Sewer Overflow
Underneath Superior Street is the 162 inch Combined Sewer Overflow (“CSO”) that is located about thirty-five (35) feet below street level. An arena at this site would quite obviously sit right on top of the CSO just like Fifth Third Field. Because the CSO is 35 feet below the street surface it would allow for sinking or depressing the seating bowl of the arena. This is an important point, because sinking the seating bowl has certain advantages. First, it allows for designing an arena with its main concourse at or close to the same elevation as the surrounding sidewalks. This allows for greater ease in complying with
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the Americans With Disabilities Act (“ADA”) as you may not have to build as much vertical transportation in the building to move people up and down. Second, as a construction matter, it is generally more cost effective, in most cases, to excavate soil rather than to start at grade and build up with a lot of steel and concrete. While the CSO is a concern, the entry points to it for service are near the intersections of Madison and Jefferson and not in the block of Superior that runs between them. Thus, an arena on this block would not have to be concerned with providing for an access point into the CSO.
Cit y of Toledo drawing denoting the location of the CSO in relation to the surface level of Superior Street
Along with the CSO, a preliminary review shows that there is a twenty-four (24) inch sanitary/combined sewer running down the alley that is half way between and parallel to Superior and Huron, which appears to service only the local buildings. This line could be abandoned. In addition there is a six (6) inch water line on Superior Street that would need to be relocated or abandoned. Further investigation with the City of Toledo would be needed to determine whether or not it could be relocated.
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Preliminary Convention
Center Study
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Preliminary Convention Center Study
With momentum building for the development of a new arena in downtown, it is important for the community to consider the importance that the convention center plays in the economic life of Toledo, Lucas County and the larger Northwest Ohio market. Gateway comes to these issues having addressed the concerns of the convention center in its initial study for the Lucas County Commissioners regarding the ballpark project in October 1999 and in a report for the City of Toledo regarding the Marina District project in January 2003 (see Exhibit B contained within Exhibit 2 entitled: “Prior Report Excerpts”). In both of those earlier reports it was noted that the issues facing SeaGate are overlooked and put on the back burner whenever a new public building issue gains the spotlight. The Lucas County Commissioners recognize that the new arena project must also serve to bolster the marketability of the convention center and finally deal with the deferred physical plant issues that have long confronted SeaGate. The issues facing the convention center include the development of:
1. A permanent ballroom space; 2. More break out rooms for conference and convention attendees; and 3. Either expand its flat floor exhibition space or have full control of it.
These infrastructure and growth needs of the convention center must be considered in any effort for constructing an arena in downtown Toledo. Rather than addressing each of the three issues separately, we will discuss them collectively because the resolution of one impacts the other two.
SeaGate has 75,000 square feet of flat floor exhibition space which can be divided into three separate areas of 25,000 square feet. The original plan for SeaGate was that when time came for expansion it would build south across Monroe Street onto the surface parking lots it controlled between Superior and St. Clair. This is why the convention center was designed with a “knock out” wall along Monroe and why its main exhibition floor sits fourteen (14) feet above the Monroe Street sidewalk. As originally envisioned, SeaGate would expand its flat floor area over Monroe. That plan was effectively removed from further consideration when the SeaGate board agreed to cede their parking lots to the ballpark project.
Now when SeaGate hosts a convention or conference that needs to have a banquet, they have to remove one of their three 25,000 square feet exhibition areas from service to hold space available for the convention or conference banquet. This necessarily limits their ability to market the full use of their 75,000 square foot flat floor exhibition space. As a consequence it is a challenge for SeaGate to pursue trade shows, conventions and conferences that need 75,000 square feet because such groups so often want to have a banquet.
As a related issue, such events also have need for breakout rooms during conventions and conferences. SeaGate is again limited because the University of Toledo (“UT”) has controlled space for its downtown learning center within the floor plan of the convention center; space that otherwise would be used by SeaGate for breakout rooms. Currently, SeaGate and UT are in discussions regarding the convention center acquiring control of the UT space. The above noted challenges facing SeaGate could be resolved if an arena is attached to the convention center.
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First, many of the events that SeaGate presently hosts such as sporting events and family shows would shift to the attached arena. This would allow SeaGate to dedicate its marketing to events that need flat floor exhibition space such as conventions, trade shows and conferences. Even those conventions that have a general session that needs arena seating can have that event in the arena (one of many examples of the synergy created by connecting the two buildings). SeaGate would be free to fully use its 75,000 square feet of exhibition space which it has never been in a position to do in its almost twenty years of operation.
Second, an arena will have events that will need some banquet operation. If UT and SeaGate do come to an agreement over the space controlled by the University, then SeaGate will have an opportunity to build a permanent banquet facility (currently envisioned on the Jefferson Street side of the convention center). The budget for this planned banquet facility is about $2 million. Such a banquet facility would be a shared amenity for both buildings and could be developed as part of the building program for the arena. With this feature realized, SeaGate would not have to set aside one-third of its exhibition space for events that need a banquet. Conventioneers and conference attendees do not want to leave their convention location for an off site banquet facility. Another example of why the two buildings need to be physically linked.
Additional synergies that could be realized if the two buildings are connected include sharing kitchen and food service facilities, use of the arena floor as additional flat floor exhibition space, and using the arena suites as possible break out rooms for conferences or hospitality suites for trade show exhibitors.
It is an article of faith in the convention business that attendees do not want to travel much beyond their meeting site and hotel. With the convention center and arena attached, Lucas County and Toledo would have a better market position and a competitive advantage over similar markets to pursue more regional and perhaps national trade shows, conferences and conventions. If an arena is built at a distant location and is not connected to SeaGate then it becomes a rival building and this advantage is lost.
Lucas County Arena Action Plan | Page 23 Section 4: Determination of Arena Size
Determination of Arena Size
Lucas County Arena Action Plan | Page 24 Section 4: Determination of Arena Size
Determination of Arena Size
Optimum Fixed and Portable Seating Capacity
As part of their Phase II Market and Financial Feasibility Study for the proposed Lucas County arena, Convention Sports and Leisure (CS&L) performed a Building Program Analysis. This process included a review of arena capacities in comparable markets, a review of suites and premium seating in the Toledo market, interviews with league officials and concert promoters, and a survey of corporate users in the local market.
CS&L recommended that the arena be sized to accommodate approximately 10,000 for concerts in a combination of fixed seats, premium seating, and temporary floor seating. Depending upon the arena’s bowl layout, between 8,000 to 9,000 attendees could be accommodated for basketball and ice hockey events that would meet the attendance demands anticipated by CS&L for those events.
CS&L also recommended that premium seating at the arena should be composed of private suites, loge boxes, and club seating. Private suites would typically include 12 seats overlooking the arena and a private bar and entertainment area, with catering and access to private toilets and a club facility. Loge boxes typically provide wider seats, but unlike suites do not include a private lounge area. However, they typically have access to waiter service, private toilets and the club facility. Club seats provide a wider seat than regular bowl seats, and will typically have access to private toilets and the club facility. All premium seating would have restricted access from the general seating areas and concourse. CS&L’s review of the local market and comparable market demand for premium seating recommends 20 private suites, 20 loge boxes, and 750 club seats. The premium seating is included within the total number of seats recommended for the arena.
The following is a summary of the key findings from the CS&L report:
• Attendance levels at potential tenant sports events (minor-league hockey and Arena Football 2 – af2) were estimated to average fewer than 5,000 fans per game. • Since these tenant events will comprise most of the programming at the arena, it is important to provide a capacity that will meet demand for larger audiences but provide an intimate environment for games drawing a lower attendance. • The concert industry is trending to fewer tours that require a large capacity venue. In mid- sized markets like Lucas County, an arena with a concert capacity of close to 10,000 will be sufficient to attract the great majority of touring acts. • An analysis of recently constructed arenas in comparable markets shows an average of 10,200 fixed seats.
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The complete CS&L “Phase II Market and Financial Feasibility Study” is provided as an Exhibit to the Lucas County Arena Action Plan report. Exhibit 2-1 Comparable Arena Summary
Everett Events Van Andel Mid-America Center Arena Center Rabobank Arena Giant Center
Location Everett, WA Grand Rapids, MI Council Bluffs, IA Bakersfield, CA Hershey, PA Year Opened 2003 1996 2002 1998 2002 MSA Demographics: Population 2,510,700 468,300 748,100 713,600 641,600 Median Household Income (1) $47,600 $47,900 $50,100 $35,000 $48,100 Arena Configuration: Seating Capacity 10,000 12,500 8,500 10,000 10,000 Luxury Suites 20 42 12 24 40 Club Seats 700 1,800 200 1,000 688 Tenants WHL, NIFL AHL, AFL USHL ECHL, af2, NCAA AHL Tenant Events 47 52 39 58 44 Non-Tenant Events 75 72 29 66 118
Verizon Wireless CenturyTel World Arena Germain Arena Arena Center Average
Location Colorado Springs, CO Estero, FL Manchester, NH Bossier City, LA Year Opened 1998 1998 2001 2000 MSA Demographics: Population 552,800 503,100 398,500 380,000 768,500 Median Household Income (1) $52,300 $45,400 $44,300 $37,800 $45,400 Arena Configuration: Seating Capacity 9,000 8,000 11,000 13,200 10,200 Luxury Suites n/a 28 34 16 27 Club Seats 300 n/a 600 n/a 760 Tenants NCAA ECHL, af2, NBDL AHL, af2 CHL, af2 Tenant Events NA 68 43 43 49 Non-Tenant Events NA 82 84 39 71
(1) Median household income has been adjusted to reflect each market's cost of living index.
We recommend that the County consider two alternatives as to the size of the arena project. The first is a fixed seat capacity of 8,000 seats, and the second, a fixed seat capacity of 9,000 seats. Depending upon the final bowl design and seat configuration, an 8,000 fixed-seat arena for hockey events could accommodate between 9,500 and 10,000 attendees for concerts. A 9,000 fixed-seat arena could accommodate between 10,500 and 11,000 for concerts. Either size would accommodate the large majority of touring shows. The difference would be the arena’s ability to meet the few shows or sports events that would sell over 10,000 seats.
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Estimated Size of the Arena
At this time a detailed program of spaces for the arena has not been determined. This program will be developed in detail in a subsequent phase of the arena development after the design team, construction team, and operating team has been chosen.
However, we are recommending that the arena include a private club area providing food and beverage service for the premium seat patrons. Food preparation could be provided within the existing kitchen facilities in the SeaGate Convention Centre. Public access would include a “team” store and a generous one-level concourse with sufficient concessionaire points of sale to accommodate a “sell-out.” Back of the house operations would include at least four locker rooms for at least two of the home team tenants and two visiting teams and sufficient office space for both the arena operator, box office, and the home teams. Other requirements include adequate space to meet load-in and load-out functions, and space for storage and mechanical equipment.
Based on a review of comparable facility sizes and amenities, and using industry averages, we have determined that the program requirements for the 9,000 fixed-seat option could be accommodated within 234,000 gross square feet (26.00 GSF per seat). The 8,000 fixed-seat arena option could be accommodated within 220,000 gross square feet (27.5 GSF per seat). The gross square feet per seat for the 8,000-seat option is higher than for the 9,000-seat option due to the size requirements of many of the “back of the house” operations that will not vary by the number of seats within the arena.
Please note, this would be the total of enclosed space and does not include outside plaza areas, nor the ramps and any outside areas connected with the load-in and load-out functions. The above program does not include any additional space requirements to meet the expansion needs of the SeaGate Convention Centre, nor its need for a dedicated banquet facility.
Recommended Site Based on Arena Program, Site Constraints and Connectivity
As noted in Section 2 of the Action Plan Report the Superior Street site is recommended for its ability to accommodate the program (size) of the arena and for its connectivity to the SeaGate Convention Centre. The Sports Group of RTKL, one of the nation’s largest architectural firms, was asked to provide a preliminary design scheme to test the site’s ability to accommodate the arena program and allow for the proper servicing and operating of the arena. These factors are also known as “load-in and load-out requirements” that are necessary to accommodate shows and concerts.
The preliminary design scheme confirms that the site accommodates an arena as large as 8,750 to 9,000 fixed seats and meets load-in and load-out requirements. It also allows for connections to SeaGate and to the Port Lawrence Garage, and provides the opportunity for pedestrian traffic to flow across the site thereby mitigating the effect of creating a “superblock.”
Please note that the following preliminary design scheme is not meant to suggest that this is the design of the arena, nor has RTKL been selected, nor is it favored in any way to be selected as the architect for the arena. The preliminary design scheme is only provided to confirm that the site can accommodate the arena’s size and operating requirements.
Lucas County Arena Action Plan | Page 27 Toledo Arena Toledo, Ohio June 30, 2006 1/64" = 1'-0" Transverse Section
Event level – 86,000 sqft. Main Concourse level – 115,000 sqft. Club Level – 65,000 sqft. Total = 266,000 sqft
Lower bowl (Gen Admission) – 7,500 seats Club Deck – 850 seats Suites (23) – 400 seats Total – 8,750 Toledo Arena Toledo, Ohio June 30, 2006 1/64" = 1'-0" Event Level Plan TRUCK SERVICING
Toledo Arena GENERAL ADMISSION Toledo, Ohio June 30, 2006 1/64" = 1'-0" Promenade Level Plan
VIP ENTRANCE
GENERAL ADMISSION GENERAL ADMISSION pedestrian promenade Toledo Arena Toledo, Ohio June 29, 2006 1/64" = 1'-0" Club Level Plan Toledo Arena Toledo, Ohio June 30, 2006 1:100 Roof Plan
plaza
pedestrian promenade Section 5: Funding and Financing
Funding and Financing
Lucas County Arena Action Plan | Page 28 Section 5: Funding and Financing
Funding and Financing
Estimated Construction Cost
Our team enlisted the expertise of two national construction firms and our own database of comparable arena construction costs to estimate the cost of constructing the proposed arena for Lucas County. The two construction firms that participated in the estimate were the Washington DC office of Turner Sports and the Cleveland office of Gilbane Building Company. Please note that neither company has been selected to construct the arena, nor is either company favored in any way to be selected.
Without a detailed program and without a design scheme at this time, the estimate for construction costs can only be based on industry experience and comparable per square foot costs. These estimates were then projected for a construction period scheduled to begin in the third quarter of 2007 and adjusted for construction costs in the Toledo area to arrive at an estimated cost of $283.00 per gross square foot. This estimate includes construction management fees and general conditions, but does not include architectural and engineering fees (A/E), furniture, fixtures, and equipment (FF&E) and the Project Fiscal and Management Consultant’s fee.
This cost might be reduced if the food preparation service for the club area and private suites was provided from the existing facilities within SeaGate. In addition, if efficiencies could be achieved through the combined use of heating and cooling capacity of SeaGate, the development budget for the arena could be reduced by not having to provide for a separate boiler and cooling towers within the arena. These savings are noted as an option in the Preliminary Cost Estimate.
Architectural and engineering fees are based on a competitive percent of the hard construction costs. Arenas are complex structures requiring extensive engineering of the bowl and the roof structure and the design of complex mechanical systems to heat and cool the enclosed space. Therefore, it is expected that A/E fees for the arena will be higher than those experienced in the design of Fifth Third Field.
The costs for Furniture, Fixtures, and Equipment can vary widely depending upon the size and complexity of the scoreboard, advertising and signage electronics, and audio and video capabilities. Estimates can also vary to the extent that FF&E costs are shared among the arena owner, the arena operator, and the arena concessionaires. The extent of sharing will be determined through future contract negotiations with the operator and the concessionaires.
Based on FF&E budgets from comparable arenas and discussions with Convention Sports and Leisure (CS&L) and SMG, Inc. (one of the nation’s leading third-party operator of arenas) we have made a preliminary estimate of the costs of a mid-level quality FF&E package for the Lucas County Arena. The FF&E costs for the 9,000-seat option is $4,850,000 and $4,500,000 for the 8,000-seat option. Please note that SMG has not been selected as the arena operator, nor is it favored in any way to be the operator of the arena.
The site acquisition cost for the recommended Superior site is currently estimated by Peter Shawaker of Michael Realty Company at $7,750,000. Michael Realty Company has been
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engaged by the Lucas County Improvement Corporation to aid in the acquisition of a suitable downtown site for the arena. If the County were to select the Water Street site (Option 3) along the waterfront, land acquisition costs could be reduced, but the construction of additional pedestrian bridges connecting the site to SeaGate could cost an estimated$2,500,000 to $3,000,000.
The preliminary estimate for construction costs for the Superior site, including both hard and soft costs, is estimated at $86,561,981 for the 9,000-seat option, and $81,802,970 for the smaller, 8,000-seat option. If efficiencies can be achieved through the combined use of the heating and cooling capacity of SeaGate and if the arena relied upon SeaGate’s food preparation facilities, the cost might be reduced to an estimated $84,611,981 for the 9,000- set option and $79,967,970 for the 8,000-seat option.
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LUCAS COUNTY ARENA
Preliminary Cost Estimate - Size Comparisons
Costs Costs Notes
9,000-Seat 8,000-Seat Alternative Alternative
GSF/Seat 26.0 27.5 Program includes private buffet club and bar
Total GSF 234,000 220,000 Total gross square footage
Construction Cost per Gross $ 283.00 $ 283.00 Construction cost estimate includes all construction Square Foot management fees and general conditions, but does not include FF&E, design fees, and the Project Fiscal and Management Consultant Fee.
Construction Cost $ 66,222,000 $ 62,260,000
Plus: FF&E $ 4,850,000 $ 4,500,000 Includes scoreboard, signage, sound and video, food equipment, and furnishings adjusted per size of arena and quality of FF&E. Plus: Pre-Opening Services $ 300,000 $ 300,000 Estimated fee to be earned by the arena operator in Fee providing pre-opening services for up to 24 months before opening date.
Subtotal $ 71,372,000 $ 67,060,000
Plus: A/E Fees and Project $ 7,439,981 $ 6,992,970 Total architectural and engineering fees based on Fiscal & Management hard construction costs (less CM fees and FF&E). Consultant's Fee
Subtotal $ 78,811,981 $ 74,052,970
Site Acquisition Costs $ 7,750,000 $ 7,750,000 Estimate of Site Acquisition cost for the preferred site
Total $ 86,561,981 $ 81,802,970
Optional Cost Reductions $ (1,950,000) $ (1,835,000) Reduction in cost based on the use of the food preparation facilities of SeaGate and connection to the proposed Downtown central heating and cooling system. Option Total $ 84,611,981 $ 79,967,970
Pro Forma Operations
The projected operating revenue to be generated by the arena is dependent upon the sports teams and programs that are anticipated to be tenants in the arena. The County has had exploratory discussions with both East Coast Hockey League (ECHL) and American Hockey League (AHL)
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franchises. The outcome of whether the hockey franchise will be affiliated with the ECHL or AHL will impact the anticipated net operating income (NOI) in different ways. Therefore we have generated pro forma operating numbers for the following two scenarios:
• An AHL franchise • An ECHL franchise
Events and Attendance
Convention Sports & Leisure (CS&L), as part of their Phase II Market and Financial Feasibility Study, estimated the number and type of events that would occur at the arena and the number of attendees. As noted above the lead tenants could include either an AHL or ECHL hockey team.
CS&L analyzed the expected attendance for an AHL or ECHL hockey franchise. The size of the Lucas County market falls in the mid-range of markets that support both AHL and ECHL teams. AHL teams play in arenas that have an average capacity of 12,000 seats and draw an average of 5,600 fans per game. ECHL teams play in arenas with an average capacity of 8,600 seats and draw an average of 4,300 fans per game. Using a penetration analysis of number of average attendance divided by the size of the markets for the two leagues, CS&L has estimated that an ECHL franchise could attract an average attendance of 4,500 over a 36-game home schedule. An AHL franchise could have an average attendance of 5,000 over a-40 game home schedule.
In addition, the Lucas County market could support a professional indoor football team, possibly a franchise of the Arena Football League’s (AFL) af2 League, or the National Indoor Football League (NIFL) or the United Indoor Football (UIF). The af2 is the more established of the leagues and its teams typically play in markets that average the size of Lucas County and in arenas that average 10,300 seats, close to proposed capacity of the Lucas County Arena. For purposes of this report we have assumed that the arena would attract an af2 franchise as a tenant and we have included that within the report. (See Section 3.0 of the CS&L report in Section 10 – Exhibits.) Professional minor-league basketball has been less successful nationally. The National Basketball Development League (NBDL) established in 2001 by the NBA is one of several leagues. Other leagues include the United States Basketball League (USBL), the American Basketball Association (ABA), the International Basketball League (IBL), and the Continental Basketball Association (CBA)
An ABA franchise played part of its 2005-2006 season at the SeaGate Convention Centre, and the IBL and CBA have shown some interest in the Lucas County market. However, since all the leagues have been expanding and contracting over recent years and it is difficult to determine which will have long-term success, CS&L determined not to include a basketball team as a prospective tenant for their analysis.
For non-tenant events the Lucas County arena would compete well in attracting concerts, family shows, and local and non-tenant sports events. CS&L estimates that the arena could attract 18 concerts annually averaging 6,000 in attendance, and 24 family shows averaging 3,000 in attendance. Family shows would include Disney on Ice, the Circus, Sesame Street Live, Harlem
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Globetrotters, and Stars on Ice. Local sports events could include high school and college sports, and motor sports, and CS&L has assumed an average attendance of 2,000 at these events.
The following is a summary of events and their average and total attendance. CS&L estimates that the arena could hold between 127 and 131 events and attract between 513,000 and 600,000 attendees annually depending upon the two scenarios. Exhibit 3-14 Summary of Event Estimates
Average Annual Event Type Events Attendance Attendance ECHL Tenant Tenant Hockey 36 4,500 162,000 Tenant Football 8 5,500 44,000 Concerts 18 6,000 108,000 Family Shows 24 3,000 72,000 Non-Tenant Sports 21 4,100 87,000 Other Events 20 2,000 40,000
Total - ECHL Tenant 127 513,000
AHL Tenant Tenant Hockey 40 5,000 200,000 Tenant Football 8 5,500 44,000 Concerts 18 6,000 108,000 Family Shows 24 3,000 72,000 Non-Tenant Sports 21 4,100 87,000 Other Events 20 2,000 40,000
Total - AHL Tenant 131 551,000
Revenue and Expenses
After projecting the number and type of events and the estimated attendance, CS&L then employed comparable revenue information from similar markets and facilities to determine the revenue stream that could be generated by the proposed downtown arena. Reasonable assumptions were made as to the lease terms for the tenant teams, revenue sharing, ticket prices, per capita spending on food and merchandise, parking, and advertising revenue.
For a review of the key operating assumptions please see Exhibit B, “Phase II Market and Financial Feasibility Study”, page 59.
CS&L estimated the operating expenses for the arena based on the operations of comparable existing arenas. Operating expenses for the four scenarios would vary based on the number of events and the estimated additional operating expenses for those events. CS&L also consulted with SMG, a leading third-party operator of arenas, to get up to date information on actual arena expenses.
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The following is a chart summarizing the revenue and expenses for the two scenarios. The funding of a capital reserve for major replacements at the arena is below the Net Operating Income (NOI) line. It is estimated that the NOI generated by the arena will range from $702,000 to $795,000 depending upon the scenario. These projections are comparable to the actual operating results of similar arenas in comparable markets. Exhibit 6-4 Estimated Financial Operating Results
ECHL AHL Revenues Rent $755,000 $773,000 Facility Fee 664,000 687,000 Ticket Rebates 275,000 300,000 Premium seating 349,000 451,000 Naming rights (1) 0 0 Food and beverage 815,000 880,000 Parking 293,000 303,000 Advertising 360,000 360,000 Merchandise 141,000 141,000 Other (2) 100,000 100,000 Total revenues $3,752,000 $3,995,000
Expenses Salaries, wages & benefits $1,000,000 $1,050,000 Operations 300,000 300,000 Repairs & maintenance 150,000 175,000 Materials & supplies 150,000 175,000 Insurance 200,000 200,000 Marketing 75,000 75,000 General & administrative 250,000 275,000 Utilities 650,000 675,000 Management Fee 275,000 275,000 Total expenses $3,050,000 $3,200,000
Operating Income (Loss) $702,000 $795,000
Capital Reserve Funding 188,000 200,000
Net Income - After Capital Reserve $514,000 $595,000
(1) Naming Rights revenues have been included as part of construction funding, and are not included in operations (2) Other Revenues include equipment rent, net reimbursed expenses and miscellaneous revenues.
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Sources and Uses of Funds
A review of comparable arenas across the country in similar-sized, non-major league markets show that these facilities have been financed through a combination of public debt and private equity, usually in the form of naming rights, advertising, and premium seat sales. Only rarely have these facilities been financed totally through private debt and capital, and in many cases those facilities that have been financed privately have failed. The combination of public debt and private capital is a model that has worked successfully in most markets, and Lucas County can point to the successful use of this model in the development of Fifth Third Field.
Our team has consulted with bond counsel and investment bankers familiar with the specific legal and financial aspects of financing a public facility, such as the arena, in Ohio and Lucas County. We have determined through our research that the County has the financial capacity to fund the development of the arena. This can be done through a combination of extending the hotel-motel tax and by the early retirement of the debt on the SeaGate Convention Centre. The extension of the hotel-motel tax will require a change in the statutes that we have outlined in a memo from Ernie Demanelis of Squire, Sanders & Dempsey LLP, who has acted as bond counsel for the County on previous financing. (See Section 10 – Exhibit C) We estimate that the revenue derived from these two components would support total financing of $43,700,000 on a 30-year term at current interest rates. This estimate has been provided by Timothy Offtermatt of the Cleveland office of the investment banking firm of A.G. Edwards & Sons, Inc., who is familiar with the requirements of Lucas County and has arranged previous bond offerings for the County.
Other public components of the arena funding would come as grants. The State of Ohio Cultural Facilities Commission typically provides 15% of the total development costs of a facility as a grant. Based on a total estimated development cost of approximately $81,850,000 the grant from the Commission could be approximately $12,250,000. The arena could also qualify for a grant from the US Department of Transportation to support the creation of bus-related facilities at the arena. We have gotten strong indications from the Toledo Area Regional Transit Authority (“TARTA”) that they would support this effort, similar to the support they provided toward the funding of Fifth Third Field. We have estimated that grant to be $2,000,000 based upon the experience with Fifth Third Field.
Further funding sources for the arena would include financing based upon the projected Net Operating Income of the facility. If the County were to back this financing, the estimated NOI of $702,000 (the lower of the two scenarios) could support financing of approximately $9,900,000 at current interest rates.
Additional funding would come from the private sector in the form of Naming Rights and a Founders Program similar to the funding that was successfully used at Fifth Third Field. A review of comparable arena naming rights agreements in other comparable markets, and the County’s experience five years ago with Fifth Third Field, indicates that $14,000,000 could be reasonably expected to be secured in naming rights and a Founders Program for the arena.
In summary, the total Source of Funds is estimated to be $81,850,000.
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As previously noted earlier in this section under “Estimated Construction Costs,” the preliminary development budget including both hard and soft costs, is estimated at $86,561,981 for the 9,000 fixed-seat option, and $81,802,970 for the smaller, 8,000 fixed-seat option. Based on these total development estimates and the projected total Source of Funds, the 8,000 fixed-seat option could be funded from the identified sources of funds.
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LUCAS COUNTY ARENA
Source of Funds
Source Estimated Funds Notes
1 County Hotel Motel Tax $ 42,500,000 Assumes (1) Hotel/Motel Tax is increased by 2%, (2) City of Toledo and other municipalities contribute their share of tax revenue, (3) Enabling legislation passed by State, (4) Bonds have a term of 30 years
2 Retirement of SeaGate Bonds $ 1,200,000 Estimated benefit of positive arbitrage from prepayment of existing SeaGate bonds 3 State of Ohio - Cultural Facilities $ 12,250,000 State grant of 15% of development cost Commision 4 Private Funding including Naming $ 14,000,000 Naming Rights for the combined SeaGate Convention Centre and New Rights and Founders Program Arena. Assumes payment as a capital contribution. Similar program to the one successfully used in the development of Fifth Third Field. May be higher based on inflation increase over the last five years and the multi-use nature of the facility.
5 TARTA $ 2,000,000 Federal transportation grant (Based on grant received for Fifth Third Field) 6 Revenue Bonds $ 9,900,000 For this computation an NOI of $702,000 was assumed; the lower of the two operating scenarios.
TOTAL $ 81,850,000
Use of Funds
Source Estimated Use Notes
1 Arena Construction Cost $ 62,260,000 Assumptions (1) 8,000 fixed-seats at 27.5 gross square feet per seat for a total of 220,000 gross square feet, (2) Program includes 20 suites, 750 premium seats, and a private club, (3) construction costs estimated for 3rdQ 2007 start, and (4) construction cost estimated at $283 per gross square foot, includes all CM fees and general conditions, but does not include FF&E, design fees, and consultant fee.
2 FF&E (Furniture, Fixtures, and $ 4,500,000 Includes scoreboard, signage, sound and video, food equipment, and Equipment) furnishings. 3 A-E Fees $ 3,804,086 Fee calculated on hard construction costs, not including FF&E 4 Operator - Pre-Opening Services $ 300,000 Fee to Operator for providing pre-opening management and promotion services over a 24-month period before opening 5 Project Fiscal and Management $ 3,188,884 Based on executed agreement with Lucas County Consultant Fee 6 Site Acquisition $ 7,750,000 Preliminary estimate for the acquisition of the preferred site including options 7 Rounding $ 47,030
TOTAL $ 81,850,000
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Economic Impact for Lucas County
“I've come loaded with statistics, for I've noticed that a man can't prove anything without statistics.”- Mark Twain
Analyzing the true economic impact of any project is a challenge. One of the most compelling of these challenges is trying to define what “economic impact” means to a community. Some will argue that the impact should be measured by the increased spending attributed to the project; others point out that the economic impact should be measured by the number of jobs and new payroll associated with the project. Yet others maintain that the economic impact should be measured by the value in revitalizing a neighborhood to create an environment to encourage new private investment in the areas adjacent to the project or in the operating income produced by the facility.
The reality, however, is that each of these items are integral elements of the measure of the economic impact of this project. Other elements that should be considered and that will be included in this section are:
• The “capture” of revenue streams that currently leave the community- eliminating leakage. • The value of the new jobs and payroll attributed to the “construction” of the new facility. • The economic and social value of a “resource anchor” to the community as a whole. • The impact of marketing of the entertainment Trifecta of an Arena, Stadium and Conference Center all within walking distance of each other.
This section will include a detailed review and summary of the Phase II Market and Financial Feasibility Study Related to a New Multi-Purpose Arena completed by our sub-consultants Convention, Sports, and Leisure (CS & L), a review of similar studies summarizing the impact of comparable facilities, and interviews with community leaders and public sector staffers from communities with multi-purpose arenas. This section will serve to strengthen the economic analysis completed in the CS & L report and to provide further support for the facility. Additionally this section will provide recommendations to maximize the economic spin-off that may be realized with this project.
Summary Results of the CS & L Study
The CS & L study commissioned by our team to provide an updated analysis of market and financial feasibility related to a new arena in downtown Toledo as well as an assessment of the potential impacts of such arena on the entire Toledo market area. The results of this study provide significant support for the development of the proposed arena and supportive information related to the total economic impact of the development on the County.
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For purposes of this section of our report to the County, we are focusing on four measures of economic impact presented in the CS & L study. These four key measures include: Direct Spending, Total Output, Personal Earnings and Employment. Each of these four items seeks to quantify the impacts specific to the local economy yet is quantified differently. Direct Spending focuses on those dollars that users of the facility (both patrons and tenants) will spend both in and out of the arena. These include rent, tickets, concessions, souvenirs, parking, hotels, food and beverage and other related expenditures. Direct spending also includes those dollars spent on advertising, sponsorships, premium seating, etc.
The Total Output measure represents the total of the direct spending, indirect and induced spending effects generated by the arena. Indirect spending is a sub-measure of the re-spending of those direct spending provided by the facility. An example being the wages earned by a clerk selling the ticket for an event at the arena cashes his or her check and buys a pair of shoes at a nearby store. Induced spending is more difficult to quantify since they represent positive changes in spending related to increases in employment, earnings, and tax collections. Both of these measures are estimated by using multipliers that are dependent on regional characteristics. For the CS & L study the multiplier estimates were generated utilizing the IMPLAN System performing a regional input-output analysis of a variety of industry sectors.
The final two measures are Personal Earnings and Employment levels. These measures include the wages and salaries earned by those individuals associated with the facility and the number of jobs (both full and part-time) that are supported by the Total Output of spending related to the arena.
The following two tables represent the results of the CSL study related to both the “one-time” impact of the construction of the arena and the ongoing operation of the facility. For purposes of this section, the operation impacts include only the estimates provided by CS & L for the facility without the University of Toledo and with both a ECHL Team and if the facility attracted an AHL Team as tenants.
Estimated Economic and Fiscal Impacts - - Construction Direct Spending $ 75,000,000 Total Output $ 131,970,000 Earnings $ 55,705,000 Jobs (full & part-time) 1,400 State Sales Tax $ 2,405,000 County Sale Tax $ 546,000
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Estimated Economic and Fiscal Impacts - -Operations (Arena w/out University) MEASURE ECHL Team AHL Team Direct Spending $ 25,624,000 $ 28,434,000 Total Output $ 42,885,000 $ 47,596,000 Earnings $ 20,073,000 $ 22,294,000 Jobs (full & part-time) 1,500 1,700 State Sales Tax $ 1,059,000 $ 1,173,000 County Sales Tax $ 241,000 $ 267,000 County Lodging $ 57,000 $ 61,000
The results of the CS & L study demonstrate significant gross impacts related to the operations of a new downtown arena that include $25.6 to $28.4 million in direct spending without the University of Toledo. Additionally the report estimates that from 1,500 to 1,700 jobs will be created related to the arena development.
Other Related Studies and Community Interviews
As part of our continued research related to the development of multi-purpose arenas and their economic impact, our staff reviewed several reports and studies focused on the measurement of such impacts. Additionally our team contacted the staff’s of the communities where these facilities are located to discuss both the projected impacts and the current impact of the developed arenas. These “real world” discussions allow us to hear specific comments and to better qualify the assumptions made in determining economic impacts.
Two comparable arenas featured in a report2 prepared by Hemson Consulting Ltd. for the City of Oshawa, Ontario have been included in this summary. These facilities are the John Labatt Centre in London, Ontario and the Van Andel Arena in Grand Rapids, Michigan. We included the review of these facilities to provide further insight to understanding the economic impact on these facilities on their respective communities. The Van Andel Arena was also used by CS & L in their comparable facility analysis.
The John Labatt Centre is located in London, Ontario and was opened in October of 2002. The seating capacity of this arena is 9,000 fixed seats for hockey and 10,000 seats for concerts and a theatre configuration for 2,800 people. The population of the London area is smaller than that of Toledo and Lucas County, counting a population in London of 336,539 residents and overall MSA of approximately 432,451 people.
Significant impacts of the arena outlined in the Hemson report include the following:
• “The JLC has been an important activity centre, and has reportedly generated increased business for downtown food and beverage establishments on event nights.
2Hemson Consulting Ltd., Toronto, Ontario. “Economic Impact of the Proposed Oshawa Sports & Entertainment Facility”. February 25, 2005.
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Other at-grade retail uses, however, have not experienced the same level of economic benefits from the arena.” • “The size and quality of the JLC coupled with promotional efforts has enabled London to attract high profile acts that would otherwise not have come to the city. The previous arena only had a capacity for 3,000 people. This has increased the overall profile of London and introduced a new group of people to the downtown arena.” • “The arena, coupled with the other downtown improvements has increased the overall attractiveness of the city and the downtown area. The view of the downtown area has changed and it is now seen as both a desirable place to live and as a centre for entertainment and specialty retail.”
Other key points outlined in this analysis of the JLC include a 40% increase in the number of downtown residential units being built over the past decade and an amazing streak of 23 sell-outs for the local London Knights of the Ontario Hockey League, a Major Junior “A” Hockey League during the 2004-05 season. This coincided with the Knights winning the OHL Championship.
In a follow-up interview our staff conducted with Kapil Lakhotia, Manager of Research & Business Development at the London Economic Development Corporation, several key impacts were discussed. According to Kapil the arena has definitely improved tourism in the area and brings more people downtown throughout the year. Several new restaurants and bars opened around the arena as soon as it was built and three new apartment towers have been built near the arena as well.
John Winston, General Manager for Tourism London, said considerable development has occurred in the blocks surrounding the arena and 90% of those establishments are “packed” on nights that there are events at the arena. He said that the facility is now averaging 240 days of use per year, 40 of which are tied to the hockey team, and that the downtown occupancy rate is now averaging 75%. He pointed out that the building was well designed and that traffic runs very smoothly so that there is easy in/out access to events. John said highlighting the use of the arena are 5 events planned to continue or be hosted in 2007. It is expected that these 5 events will collectively create an economic spin-off of $35 million. These events are the Canadian Skating Championships, Canadian Curling Women’s Championship, the Canadian Junior Hockey Championship, the World under-17 Hockey Championship and the World Synchronized Skating Championship.
The Van Andel Arena is located in Grand Rapids, Michigan and opened in the fall of 1996. This 12,000 seat arena has traditionally been ranked as one of the most successful mid-size venues (10,000 to 15,000 seats) in the United States. Despite a MSA of only 468,300 people, the Van Andel has averaged over 1 million visitors PER YEAR since the facility opened.
The Hemson study points out “The Van Andel Arena as had a direct impact on the surrounding properties in the old warehouse district. One year after the opening of the arena, it was estimated that developers invested about $10 million in food and beverage establishments nearby. New
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office space and residential units have been built in the building spaces above the ground-floor restaurants in the warehouse buildings.”
The Hemson also identifies several other public initiatives that have contributed to the success of the Van Andel and the revitalization of downtown Grand Rapids. These include the following:
• Dedicated percentage of the property tax being diverted to a Downtown Improvement Fund (approximately $3 million per year). • Infrastructure improvements to streets, and water and sewer facilities • Approval of the Interurban Transit Partnership and associated millage (dedicated revenue stream for transit service). • $22 million investment in a new transit center. • New parks and streetscape improvements in the downtown area.
The Van Andel story is similar to Toledo in as much as the new downtown arena replaced a civic auditorium built in the 1930’s that had a capacity of approximately 3,500 people. The arena is home to the Detroit Red Wings AHL affiliate and also an arena football league team. It is apparent that the revitalization of downtown Grand Rapids has been a huge success with the Van Andel Arena serving as a key contributor.
Other interviews conducted with community representatives from cities home to mid-size arenas, have generated similar information to what was reported for the JLC and Van Andel. One such arena is the Mid-America Center in Council Bluffs, Iowa.
The Mid-America Center is an 8,500 seat arena located in a Metropolitan Statistical Area of just less than 750,000 people. In discussions with City staffers, there is significant new investment occurring around the arena. While it is impossible to attribute all of the new development to the arena, the City is quick to point out the successful new investment occurring nearby. Two large retail areas have been built up since the arena opened. One of these retail centers attracted a Bass Pro in 2005. Staff suggested a significant element of Bass Pro’s decision to locate in Council Bluffs, was related to the location near the arena. The City also reported that the sales in the convention center hotel are strong and that a Marriott Springhill Suites will soon be breaking ground on a new hotel. The Marriott is also considering adding an indoor water park to their project.
What is consistent in all of the arenas that have been included in this review is the positive impact that a sports franchise and other sporting events have on the local community. All of the communities interviewed discussed the non-tangible, non-financial impact on the cities in which the sports facilities were located. This concept is echoed by other seeking to measure the impacts of similar facilities. “The greatest benefits may not derive from measurable economic activities attributed to the financial success of the team” and “that a better image attracts more tourists,
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businesses, and residents”3 are comments attributed to Matthew Peters in considering the intangible benefits of hosting a professional sports franchise.
Similarly, Arthur Johnson and Allen Sack affirmed “people also believe sports facilities lead to community pride and solidarity.”4
In an article published in the Journal of Urban Affairs and authored by Ziona Austrian and Mark S. Rosentraub of Cleveland State University, the concept of looking back at the impact of sports and entertainment as a center point of the revitalization of downtown areas was considered. The focus of the article looked to the policy employed by Cleveland, Indianapolis, Cincinnati and Columbus to use the development of sports and entertainment facilities as the center point to economic development efforts in the downtown area. The premise of the article was not if overall economic activity increased or decreased, but whether the success and vitality of a downtown area was enhanced or sustained by the presence of these facilities.
The study demonstrated that “The focus on sports and tourism-related industries did appear to create a set of connections or excitement within downtown areas that stemmed the outflow of jobs to more suburban locations.”5
Included in this assertion, however, were important elements that the authors considered in their assessment of this policy decision. These include: avoiding public financing programs that lead to excessive profits for team owners, a caution against the use of regressive financing systems and having a partnership with existing firms to maintain their locations in downtown areas.
Another important factor that the authors discuss in this article and that has been discussed in relation to the development of a new arena in Toledo is the concept of “highest and best” use of the proposed location. This important factor considers the economic impact of the development of a facility on a more valuable site or on a site that may not have appropriate adjacent uses. Several sites along or adjacent to the Maumee River have been considered for this facility including the “Fiberglass Tower”. It has been argued during the process of identifying specific sites that these particular land areas are too valuable and that an arena may not be the highest and best use. The demolition of the Fiberglass Tower would result in the City losing an important and highly visible office tower. It would be highly unlikely, given today’s market and trends, that another multi- story office building would be developed in the City in the foreseeable future. Other redevelopment options for the tower would preserve the big city feel of the office building and maintain this office opportunity at an affordable cost. The other sites considered were waterfront areas that are considered a highly desirable commodity for private investment. These locations
3 Peters, Matthew. “Rising to the Challenge: Realizing the Intangible Benefits to a Professional Sports Franchise.” Tennessee’s Business, 1996, 7 (No. 1-2): 5-8. 4 Johnson, Arthur T. and Sack, Allen. “Assessing the Value of Sports Facilities: The Importance of Non Economic Factors.” Economic Development Quarterly, November 1996, 10 (No. 4): 369-381. 5 Rosentraub, Mark S. and Austrian, Ziona. “Cities, Sports, and Economic Change: A Retrospective Assessment”. Journal of Urban Affairs, Volume 24, (No. 5): 549-563.
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are adjacent to areas including residential neighborhoods which will be impacted by increased traffic and would effectively block sight lines of the River from these neighborhoods.
Rosentraub and Austrian argue that particular attention should be paid when the public sector is considering investing public funds on a facility that takes prime ground out of the private market. It is for this reason that many communities incorporate the development of such sports and entertainment facilities as part of an overall revitalization plan for downtown areas.
“There is also the very real concern that the commitment of substantial levels of public resources (tax dollars as well as land) precludes other development options that would generate far more robust returns. In Cleveland, for example, building a new stadium on the lakefront has been repeatedly criticized in terms of the opportunity costs of such a use of valuable land.”6
Summary and Suggestions
The economic impact of the development of successful sports and entertainment facilities is well documented and, in most instances, provide a strong argument for such arenas. These impacts, however, are directly related to the performance of these arenas. For this reason it is imperative that the decision to move forward on such developments be well-planned, be realistic, and be well funded.
It is also important to understand that the development of such facilities provide an impact to the community that stretches far past the direct and indirect economic benefits of jobs, wages, sales, and investment. This concept encourages the public sector to include the positive impact of the development of these facilities. This impact is significant and has been confirmed by discussions with community representatives and in discussions with residents and visitors to these venues.
A sample of other positive impacts that are significant, yet difficult to calculate, include providing affordable and diverse entertainment alternatives for families and residents of Lucas County; increases in visibility, exposure, and the reputation of Toledo and Lucas County; creating new avenues for advertising, promotion and exposure for Lucas County businesses, increases in private sector investment and growth in new business, expanded business and other business activities that are generally associated with similar developments; and a sense of community pride related to having a state-of-the-art facility that is assessable to all residents.
Another important aspect of economic impact of having such a facility in Lucas County includes opportunities to slow-down, minimize and begin eliminating the leakage of entertainment dollars to markets outside of Toledo. We acknowledge that there are certainly dollars spent within the City on entertainment which may be “reallocated” to a new facility. These dollars are not necessarily new to the City or County but rather are dollars that residents are “choosing” to spend
6 Rosentraub, Mark S. and Austrian, Ziona. “Cities, Sports, and Economic Change: A Retrospective Assessment”. Journal of Urban Affairs, Volume 24, (No. 5): 549-563.
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at the new arena. What must be realized, however, is that those dollars that are currently being spent “outside” Toledo and Lucas County could be kept in the local economy if a facility suitable for such events were developed.
Industry leaders estimate that 95% of attendees to a sports and entertainment arena typically travel approximately 50 miles or less to attend a sporting event, concert or other show. In Toledo, because there are no similar facilities of the size and scope that is being proposed for Lucas County, there is virtually no competition for arena events. Subsequently, those dollars being spent on similar entertainment performances are currently being spent OUTSIDE of Lucas County. The current Toledo MSA is approximately 640,000 residents. This MSA includes an 11 county area. If you look at a drive time of approximately 1 hour, this population area increases to nearly 1 million people. Also located within this market “drive-time” are several universities such as the University of Toledo, Bowling Green State University, and the University of Findlay.
It is certainly a safe assumption that residents from areas such as Findlay, which is not included in the MSA, would rather spend their entertainment dollars on the shorter trip to Toledo than having to travel to Detroit, Michigan or Columbus, Ohio.
It has never been assumed that an arena in Toledo will try and capture market share from residents of Detroit, Cleveland or Columbus. Instead, it is important for Lucas County and the City of Toledo to create an opportunity for those dollars CURRENTLY being spent in those larger markets to stay in the local economy.
In summary there are significant economic impacts that positively affect the community in which similar sports and entertainment venues are developed. These impacts include direct investment and spending related to the construction and operation of the facility; new and increased job opportunities associated with the construction, development, operation and activities related to the facility; and in increased private investment in adjacent and nearby properties. There are also other impacts that are positive for the County and should also be included in the decision whether or not to move forward. These impacts include: opportunities to strengthen the local economy and limit leakage of dollars outside the County; offer new entertainment choices to area residents that are close to home; increased exposure and improved reputation of the City and County to will attract and keep residents, students, and visitors to the area; and a positive change to the overall community pride and spirit.
We also believe that the development of an arena must have strong marketing, programming and management to take advantage of these potential impacts. We also suggest that the development of the arena include a focus on the following items:
• Maximize the scope and usage of the facility. The arena should be used as many days of the year as possible for a wide variety of events. • The new facility should be incorporated with a broader strategy. For Lucas County and the City of Toledo, this should focus on the marketing of the entertainment “Trifecta” created with the adjacency of the Seagate Center and Fifth Third Field. The County
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should work closely with the City and with downtown businesses and residents to develop a specific strategy to incorporate these facilities with a revitalization or “reactivation” of the downtown. • The integration of the new arena with the surrounding areas. Proper planning and coordination should be followed to ensure the arena “fits” into the proposed neighborhood. The use of existing and nearby parking areas can prevent the facility from being isolated from the neighborhood. • The coordinated pursuit of new investment opportunities associated with the development of this facility. The County and City should develop and market specific tools to enhance the private opportunities for downtown Toledo. • The promotion of the new arena to help increase civic pride and community image. As pointed out in this report, the development of a new sports and entertainment facility can help raise the outward profile and image of the community and increase the amount of civic pride of having such an arena. The arena can have a significant impact to the city in its ability to encourage new residential growth, new business development, and to help keep and attract the best and brightest minds to the area.
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Governance Plan
Lucas County Arena Action Plan | Page 47 Section 6: Governance Plan
Governance Plan
Lucas County through its Board of Commissioners has taken the lead in the project to develop an Arena and expand and improve the SeaGate Convention Centre. This is appropriate for a variety of reasons. While the facilities will physically be located in downtown Toledo, they are regional assets, so it makes sense for the County to exert leadership. The city of Toledo is constrained by its Charter from having the flexibility necessary to bring the project to fruition. Moreover, the County has recent experience in the development of a similar facility with the successful completion of Fifth Third Field.
However, to be in the lead role does not necessarily imply that the County should directly own and operate the new and renovated facilities. To the contrary, it is our recommendation that the County should exercise this authority in an indirect manner. Specifically, we suggest that a new, not-for-profit corporation be created to design, build, own and operate the proposed new arena and the renovated SeaGate Convention Centre. This entity will be incorporated pursuant to ORC section 307.696 (F) and act on behalf of the County to develop and operate the facilities.
This recommendation flows from several considerations. First and foremost, there is a significant complexity to the arena and convention center business. The operating functions are essentially proprietary and need more flexibility than county governance can easily accommodate. These facilities inherently have multiple constituencies who can be better accommodated in the corporate form rather than in the governmental / political system. Another consideration is the fact that we are not starting this project with a completely new format [“clean slate” could imply that there was something wrong or questionable about the current form]: keeping a certain degree of separation between governmental functions and the business of conventions has been relatively successful in the existing convention center structure. It therefore makes sense to follow this practice. Moreover, the commissioners and their staff should not be distracted from their core responsibilities within county government, by the short-term requirements of designing and building the facilities, or the long-term effort involved in operating and maintaining them. Finally, developing the private revenue stream necessary to make a new arena a success may be facilitated by a corporate, rather than a governmental structure.
While we strongly recommend the not-for-profit corporate model, we do so believing that the public, through the County, will be able to maintain appropriate oversight and supervision. This will come primarily through the Board of Trustees to be appointed by the Commissioners. This entity will be responsible for the day-to-day governance of the project and the ultimate operation of the facilities. We believe that this board should be relatively small, perhaps nine (9) members. It should be diverse and take advantage of the business skills of the local community. Care should be taken to avoid conflicts of interest between the board members and vendors, tenants, and other interested parties. Certainly the expertise of citizens who serve the SeaGate Convention Centre should be tapped in definable ways. The term of trustees should be fixed at no less than three (3) years and trustees should be eligible for reappointment for two (2) to three (3) terms. The corporation should apply for exemption from Federal income taxes pursuit to IRC section 501 (c) as an entity taking the place of and operating in the stead of government.
We further recommend that once this entity is created it should merge with the existing SeaGate Convention Centre CVB and be the surviving entity in that merger. It will, as a consequence,
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assume all of the assets and liabilities of the SeaGate Organization. A straight statutory merger is probably the appropriate vehicle.
Once this re-organization has been accomplished, the new Lucas County Arena and Convention Center Corporation should enter into an Agreement with the County and other governmental or quasi governmental entities to undertake the development of the Arena and the expansion and improvement of SeaGate Center. This agreement shall spell out the assistance and support that the County will provide for the Project including availability of financing. The Agreement will provide that the Lucas County Arena and Convention Center Corporation will assume the County’s responsibilities under the contract with the Project Fiscal and Management Consultant. It will also assume the Options or Purchase Agreements, if any, that the County has caused to be executed for the acquisition of real property for the Arena site. The Agreement will also spell out how the corporation is to be initially funded.
The Corporation will undertake to execute this Action Plan as approved by the County Commissioners.
In order for this governance structure to be viable, Ohio law will have to be amended to authorize funding and other aspects of the Plan. Attached as Exhibit C is a brief summary of the changes to existing law that will need to be accomplished. It will be the corporation’s responsibility, with support with the county, city and state officials to obtain the necessary changes to state law. The Project Fiscal and Management Consultant, together with counsel, shall assist the corporation in moving forward with this plan.
It is contemplated that the corporation will engage the architect and engineering team, the construction manager and other construction entities as well as the manager or operator of the new and renovated facilities. The corporation will enter into the principle leases and set guidelines for the operators other activities. Once construction of the facilities is complete, the corporation will be the Owner, until or unless the facilities revert to the County as a consequence of the financing of the project.
The Project Fiscal and Management Consultant is prepared to assist in the development of the corporation as soon as this plan is approved by the Commissioners.
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Project Delivery Process and Project Timeline
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Project Delivery Process and Project Timeline
Required Project Expertise
Arenas are complicated projects requiring expertise in design and engineering, construction, and operations. The operational expertise is essential not only during the operational phase after the project is brought on line, but during pre-development when design, engineering and equipment decisions are made that have a direct impact on the efficient and profitable operation of the facility.
The development of an arena requires the integration of various disciplines similar to those assembled for the successful development of Fifth Third Field. However, there are essential differences between the two facilities that put further demands on the development team of an arena. Specifically, an arena is an enclosed building requiring detailed engineering of the roof spanning system, the design of the bowl and enclosed concourses, the design specification of high capacity heating/cooling systems and life safety systems, and the integration of “state-of-the art” audio, visual, stage, and broadcasting equipment.
In addition, an arena requires extensive “back of the house” spaces to service the demands of storage, equipment, and the efficient load-in and load-out of touring events. The multi-use and multi-tenant requirements of the arena also factor into the design and construction requiring the efficient and speedy change over from a hockey game, to an indoor footbal game, to a concert, or to a trade show.
An arena is not just a building; it is essentially an operating business. The multi-tenant, multi- event nature of the business requires expertise in booking and promoting events, balancing the requirements of multiple tenants, and handling the financial, accounting and ticketing requirements of numerous “clients” and tenants.
Expertise will be required in the following areas:
• Programming • Design • Engineering • Structural • Mechanical • Civil • Acoustical • Construction management • Furniture, fixtures, and equipment (FF&E) • Specifications and selection • Pricing and procurement • Pre-opening services • Design and operations • Promotion • Event booking and policies • Operating policies
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• Staffing • Sale of contractually obligated income (COI) • Naming rights • Advertising • Suite sales • Premium seat sales • Tenant lease negotiation
Three critical sets of professionals must be engaged in order to physically develop the Project. The Owner will need to engage architectural and engineering services, construction management services and operational management services. In addition, other consultants or specialists may be engaged to assist in obtaining the furniture, fixtures and equipment (FF&E) and contractually obligated income (COI). With regard to the latter two sets of issues, however, the Project Fiscal and Management Consultant (Project Team) together with the selected architects, construction manager and operator should be able to perform the services needed.
Project Delivery Process
In addition to selecting appropriate professionals, the Owner must also determine how to best achieve the actual construction work. There are many different methods or “delivery systems” for undertaking actual construction. Unfortunately, there are also significant constraints imposed by Ohio law. Prior to actually engaging the professional team, it would be preferable to come to a conclusion about the delivery system to be employed.
The Project Team engaged Project Management Consultants, LLC (PMC) to assist us in the analysis of appropriate delivery mechanisms. The analysis performed was done in the context of the existing statutory framework that governs public construction projects in Ohio. In addition, we explored the possibility of a statutory change, which would allow different methods of construction delivery, including a system known as “design build”. Attached to this report as Exhibit D is a copy of the Memorandum from PMC, which discusses both today’s permissible approaches, and what might be feasible if the law were to change.
While it is a certainty that we will need legislative action from the General Assembly in order to fund the Arena Project, we are skeptical that such action can be taken in a timely fashion to enable us to contemplate flexible delivery methods for construction. In order to move this project forward we believe that it would be advantageous to adopt a delivery mechanism, which utilizes the existing statutory framework rather than speculating on legislative action. This will avoid additional political challenges in the General Assembly that seeking to change contracting law would require, and would certainly be in keeping with the methodologies familiar to the contractor community locally. If authorizing legislation should pass the General Assembly enabling the use of design build systems, or others, we could reevaluate our decision at that time.
Consequently, after careful consideration we recommend that the Owner proceed as follows: 1) issue a request for qualifications (RFQ) for architectural and engineering services; and 2) issue a second request for qualification for construction management services whereby the CM would not only act as the Owner’s agent in estimating, scheduling and managing the construction, but
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would be “at risk” by virtue of providing a Guaranteed Maximum Price (GMP) contract to the Owner, as a “financial accommodation”. This methodology worked well in the case of Fifth Third Field, which was delivered on time and on budget for the County.
We further recommend that these two RFQ’s be submitted to interested parties essentially simultaneously. It is beneficial in complex projects such as this that the CM be engaged at the same time as the architect and engineering team (A&E) in order to maximize cooperation and expedite information flow.
The following format would generate competition and ensure a process that will be in accordance with legal constraints. We will draft the RFQ Documents for review by County staff and legal counsel. We will also generate a list of architects and contractors (locally and nationally) to whom the RFQ’s should be delivered. The process will include a public advertising in order to capture interested architects and contractors not previously identified. We will assist the Owner in all of the logistics including developing a selection committee, which will review the responses to the RFQ, interview finalists, and then make a recommendation to the Owner.
It is advisable in projects such as this to have a reasonably broad based selection committee so that interested parties and the public are represented in the process. It is important to develop this “ownership”. Ultimately, of course, final selection of the A&E team and the CM is the Owner’s responsibility. We generally recommend that selection committees rank the finalists in order of priority, rather than making a singular recommendation. This provides flexibility in the contracting process.
Once the recommendations are accepted we would assist the Owner in developing the contracts with the A&E team and the CM. In the case of the architects, this should be a fairly straightforward process. The CM contract will be more complex due to the GMP feature. The contract documents need to be very specific concerning scope of work within the GMP. The GMP will itself be a fixed amount which includes the CM’s fee and reimbursables, the aggregate amount of all trade contracts and a predetermined contingency. The contract also needs to spell out the authority the Owner will give to the construction manager so that the CM has effective control over all trade contractors. This is delicate in light of statutory constraints imposed on public contractors by state law. It will most likely be the case that the CM’s contracts will be done in phases with the actual GMP being locked in after significant design work has been accomplished.
As previously noted, this system has worked effectively in the Lucas County market. While complicated, we are familiar with this mechanism and are confident that it can be successful. [The old statement might seem a bit too much like sales puffery -we have a high degree of confidence that this will be successful.]
We further recommend that a third RFQ be developed and issued in order to select an Operator for the arena. It is extremely valuable to the project if the operator fully participates in the programming phases of the design work. Thus, it is important to have the operator identified and engaged as early as possible. We will draft this RFQ and compile a list of potential operators for review by the Owner. Again, public advertising will take place. We will handle the logistics of this task, and also suggest the formation of a selection committee similar to that for the A&E and CM. The membership of this group will also need to be broad based. However, because of the
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inclusion of the SeaGate Convention Centre within the scope of the operator’s work, we recommend a separate group from the A&E / CM selection committee so that we ensure that all of the appropriate stake holders are represented. The process for selection and contracting with the operator will unfold in a similar manner to that described above for the architect and CM.
It is important to note that we need to be extremely careful to ensure that there are no gaps in the Scope of Services which these three groups of professionals are to provide. Moreover, coordination among them will be critical. This is a responsibility which the Project Team will assume.
Project Schedule and Timeline
(Provided on the following page.)
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Section 8: Tenant Selection Process
Tenant Selection Process
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Tenant Selection Process
Targeted Tenants
The presence of one or more stable and successful sports franchises as tenants is a key to the long-term financial success of an arena. Tenant franchises provide a consistent schedule of events and a contractual source of rental income.
Minor League Hockey
The Lucas County arena would be a likely home for minor league hockey, and more specifically for a franchise of either the American Hockey League (AHL) or East Coast Hockey League (ECHL). The size of the Lucas County market falls into the mid-range of markets for the existing franchises of both leagues. CS&L estimates that an AHL franchise in the arena would attract an average of 5,000 fans per games and an ECHL franchise would attract an average of 4,500 fans per game. These estimates are based on the average attendance for all franchises within each league and the average market penetration (attendance divided by market population) in those markets.
Lucas County has proven to be a strong market for minor-league hockey with a successful track record of fan attendance for the ECHL franchise, Toledo Storm. The Storm management has indicated strong interest in relocating to the proposed Lucas County arena. In addition, the AHL franchise, Syracuse Crunch, an affiliate of the Columbus Blue Jackets of the NHL, has also shown interest in relocating to the Lucas County arena.
An ECHL or AHL franchise could be a strong tenant for the arena and we recommend, as the County goes ahead on the arena project, that the County begin discussions with both franchises.
Professional Indoor Football
Arena football franchises as tenants have been a viable option in mid-sized markets and mid-sized arenas. Most notably the Arena Football League (AFL) and especially it’s smaller market league, Arena Football 2 (af2), the National Indoor Football League (NIFL) and United Indoor Football (UIF) have franchises in markets and facilities similar to Lucas County. Each of the three leagues has expressed interest in the Lucas County market.
CS&L notes that the af2 has experienced more stable operations over the last several years and higher attendance than the NIFL or the UIF. With the uncertainty surrounding the current plans for a NIFL franchise and the interest indicated by af2 to have a franchise in the Toledo market, we have assumed that the downtown arena could be the home of an af2 team. Lucas County falls into the mid-range of markets that support an af2 franchise and the average capacity of af2 arenas is 10,300 seats. Based on comparative penetration
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numbers, CS&L estimates that an af2 franchise would attract an average of 5,500 fans per game on a typical 8-game home schedule.
As noted in Section 5, Funding and Financing, we have developed two scenarios that vary based on the number and type of tenants.
• An AHL franchise with an af2 franchise • An ECHL franchise with an af2 franchise
Each scenario assumes that an af2 indoor football franchise would be the second sports tenant in the arena. We do not recommend any more than three sports tenants due to the demands on scheduling at the arena. It is most important to leave more than enough dates open for concerts, family shows, tournaments, and trade shows, all of which can provide substantial revenue for the arena. For further detail please see Section 10, Exhibit B “Market and Financial Feasibility Study.”
Selection Criteria
In determining the selection of sports tenants for the arena the County should focus on the league’s financial strength, longevity, promotion, and historical attendance in comparable markets. The County should also focus on the individual franchise and the financial strength of the ownership group, as well as its longevity, promotional capabilities and historical attendance.
The County should also consider the ability to obtain league approval to purchase a targeted hockey team similar to the model of the ownership structure of the Toledo Mud Hens. The leagues agreement to such a purchase should be a prerequisite for choosing the franchise and league affiliation.
General Lease Terms
Lease terms for sports tenants vary widely based on the financial requirements of the facility, the requirements of the leagues, and the specific needs of the team franchise. However, as a quick overview, lease negotiations tend to focus on the following issues:
• Rental payments • Flat payment per event • Percent of ticket sales • Scheduling priority • Payment of facility improvements • Locker room • Office facilities • Training facilities • Private suites • Arena services • Signage rights • Group and individual ticket sales
Lucas County Arena Action Plan | Page 57 Section 8: Tenant Selection Process
• Promotion • Revenue sharing • Temporary and program advertising • Scoreboard signage • Ticket revenue • Merchandise sales • Sponsorship sales • Broadcast rights • Suite and premium seat sales • Concession sales
Lucas County Arena Action Plan | Page 58 Section 9: Next Steps
Next Steps
Lucas County Arena Action Plan | Page 59 Section 9: Next Steps
Next Steps
This Action Plan is intended to provide a starting point to foster discussion and forge consensus on the core issues necessary to deliver a downtown Toledo arena for the citizens of Lucas County.
Adoption of the plan by the County Commissioners will trigger the next phase of the development of the arena which includes:
• Launching an aggressive public involvement process that gives the community an opportunity to comment on the plan;
• Developing a governance and funding model which will be executed by the County in collaboration with the Project Fiscal and Management Consulting team of Gateway Consultants Group, Pizzuti Solutions, and Garfield Traub Development LLC.
• Planning for the design, construction and operation of the arena by the County in collaboration with the consulting team.
All of these tasks are anticipated to be accomplished by the consulting team within a five-month period and fall within the four areas noted below.
Immediate:
Public Involvement • Schedule a series of public meetings to summarize the plan and then gather input including, but not limited to, discussions of the recommended downtown sites. • Activate a Business Advisory Group to assist the County Commissioners on key financial, operational and community issues, including the sale of naming rights, suites and club seats. • Brief community leaders – including elected officials of jurisdictions throughout Lucas County – on details of the Action Plan, and gather input and advice regarding the next phase.
As information becomes available from the public involvement phase:
Governance and Funding • Provide support in the passage of the required enabling legislation for the project funding • Oversee the formation of the new not-for-profit entity to serve as the owner of the arena • Coordinate the development of the funding model for the Arena
Team Selection • Write and issue the RFPs (Requests for Proposal) for the selection of the design team, construction team, and operating team for the arena
Lucas County Arena Action Plan | Page 60 Section 9: Next Steps
• Oversee the selection process of the team members • Oversee the negotiation of contracts with the team members
Preliminary Design Schemes (Upon completion of the public involvement) • Oversee the development of the design program (capacity, spaces, functions, and initial specification of FF&E) • Oversee the development and selection of the initial design scheme • Lead and coordinate efforts to provide ongoing construction cost estimates to validate the project budget • Refine the proposed operating budget for the arena
Lucas County Arena Action Plan | Page 61