Occupancy and Prepared Food and Beverage Taxes and
Occupancy and Prepared Food and Beverage Taxes and Interlocal Agreements Review Board of Commissioners June 13, 2016 1
Background v v Authorizing legislation approved in 1991; amended in 1995 Tax levies 6% on occupancy stays; 1% on prepared food and beverage v v Revenues in 1995 = $12. 4 million Revenues in 2015 = $47. 7 million Revenues must be used for projects supporting arts, cultural, sports or convention Original Interlocal Agreement between City of Raleigh and Wake County in 1991; Revised in 1995 v There have been 19 Amendments to the Revised Interlocal Agreement 2
Purpose of Review • Per 19 th Amendment • Review Financial Models • • Current Projections and Forecast Review PNC Capital Plan Review Convention Center Capital Plan Inclusive of stakeholders 3
Process in Review Phase I • Conduct review • Consider changes • City/County Manager make recommendations to governing Boards (20 th Amendment) – June Phase II • Consider opportunities for expansions or new projects (21 st Amendment) – Begin Summer 4
Process in Review • • • March 30 - Educational Session April 14 - Reviewed Capital Maintenance Plans for PNC Arena and Raleigh Convention Center April 28 - Reviewed key elements of funding models May 12 – Presented strawman with proposed modifications to models May 26 – Based on feedback, reviewed revised strawman
Strawman - In Summary • • Jointly developed and presented by City of Raleigh and Wake County Proposed modifications continue previous commitments, support ongoing needs and identify future capacity similar to or greater than baseline models
Proposed Modifications Key Principles • More realistic revenue assumptions in short term; remain most conservative in long term; established minimum fund balances to provide for contingencies • Prioritize maintenance for existing facilities included in the enabling legislation • No change to 85% / 15% allocation percentages
Strawman – Major Facilities Model Revenues Model Section Current Consideration R 1: Occupancy Revenues Growth 3% 1. 5% 2017 2. 4% 2018 through 2021 3. 3% thereafter R 2: Food & Beverage 5% 1. 6% through 2021 2. 5% thereafter Basis For modeling purposes be less conservative in short-term; county to update projections annually based on current information as part of budget For modeling purposes be less conservative in short-term • Revenue projections shall be set: at realistic and attainable levels, sufficiently conservative to avoid shortfalls, yet accurate enough to avoid a pattern of under stating capacity. • Short-term assumptions to be revisited annually to account for current market and economic conditions.
Strawman – Major Facilities Model Revenues Model Section R 3: Interest Revenues R 4: NSF (insufficient funds) Charges R 5: 2 for 1 Transfer from Convention Center Model Current Consideration Basis 0% No change Is not used in the projection, actuals are recorded with each fiscal year and increase or reduce fund balance. For each $1 spent on Convention Center Operations beyond agreed amounts, County receives $2 from the Convention Center Model 2 for 1 Reimbursement eliminated and replaced with separate provisions affecting County and Convention Center See related changes in County Model Row 3 b and Convention Center Model – New Column G
Strawman – Major Facilities Model Section 1: Admin and Holdbacks: Uses of Funds Model Section Current Consideration 1 a. Administration and Collection 3% of Occupancy and Prepared Food Revenues Fix at FY 16 level of $1. 4 million for future modeling 1 b. City of Raleigh Holdback $680, 000 No change 1 c. Greater Raleigh Convention & Visitors Bureau 22% occupancy + $675, 000 F&B No change 1 d. Town of Cary Hold Harmless 5% occupancy No change 1 e. Centennial Authority Operations 7% occupancy and F&B - after other deductions No change 1 f. Five County Stadium Debt service completed in FY 16 No change Basis Uncouple Administrative Fee from revenue projections. Evaluate at next review to establish amount of annual increase on fee itself Obligation completed
Strawman – Major Facilities Model Section 1: Admin and Holdbacks: Uses of Funds Model Section 1 g. PNC Debt Service Current Consideration Basis $5, 200, 000 annually through FY 20 - Debt service completed in FY 20 with no future commitments beyond FY 20 N/A No change Any potential changes would be considered under Phase II of review Move current commitments from Section 3 through 2021 1 i. City of Raleigh Discretionary Dollars $1, 000 No change Align facility maintenance for projects in the enabling legislation to Sections 1 and 2; no proposed changed to current PILOT expiration date of FY 2022 Provides support to Performing Arts Center operations 1 j. Wake County Discretionary Dollars $1, 000 No change 1 h. PNC Maintenance Currently supports Marbles/IMAX and Five County Stadium Maintenance
Strawman – Major Facilities Model Section 2: 85% Distribution Model Section Distribution to Convention Center Model Current Total Revenues less Section 1 Holdbacks Consideration No change in calculation but recommended changes to Section 1 impacts distributable amounts Basis / Questions
Strawman – Major Facilities Model Section 3: 15% Distribution Model Section 3 a. 15% Competitive Projects Cary Sports Facilities NC Museum of Art NC Museum of Natural Sciences (Green Square) St. Augustine Track Whitewater 3 b. Reserve for Competitive Projects Current Consideration Basis Various funding commitments Remove Whitewater Current projects funded as currently planned – Whitewater should come forward in future process with new plan/proposal if funding is desired. N/A Commit $2 million annually for competitive process led by Wake County to support smaller capital projects Provides funding to assist municipalities and other community partners with investments consistent with enabling legislation to support Wake residents and visitors and replaces capacity previously provided by 2 for 1 provision; maximum of $1. 5 million per project and no more than 35% from County
Strawman – Major Facilities Model Section 3: 15% Distribution Model Section Current 3 c. Fund Balance Minimum Guideline None 3 d. Cumulative Excess Fund Balance (Capacity) N/A Consideration Minimum fund balances of 50% of subsequent years 15% project commitments (Section 3) Amount above Fund Balance Minimum Guideline (Row 3 c) Basis With more realistic revenue projection, fund balance minimum should be established to provide for a margin of error Will provide indication of capacity available for future uses
Strawman – Convention Center Model New Column Old Column A – Fiscal Year B – 85% Uncommitted Funds / Annual Revenues B – 100% Uncommitted Fund C – 85% Uncommitted Funds C- Variable Rate Debt D – Funds Not Put into Convention Center E – Variable Rate Debt D- Fixed Rate Debt F – Fixed Rate Debt Current Assumption Revised Assumption Row Label No Change Duplicate amount from County Model, same amounts as Current Column H 85% of funds deducted from 100% of funds Delete Debt service amounts for variable rate debt No Change Debt service amounts for fixed rate debt No Change, other than Column Label Delete Basis Column not needed as it is duplicative from County model Column not needed as it is not included in any calculations
Strawman – Convention Center Model New Column Old Column E—Total Debt Service G – Net Debt Service H – Annual Revenues F – Net Annual Revenues After Debt Service I – Annual Surplus / Deficit G – RCC Operating Subsidy J -- Other Expenses to be Paid K – Debt Service from $121 M… Current Assumption Total Debt Service for Convention Center Duplicate amount from Column C Difference between Annual Revenues and Convention Center Debt Service 3% increase annually Revised Assumption Basis Delete, Replaced by New Column B Column not needed as duplicate of New Column B New Column Label No Change, other than Column Label 5% increase annually; Column Label changed and retitled Delete Due to elimination of 2 for 1 provision, increase annual subsidy to ensure adequate coverage for RCC operations Column not used in current modeling; funding capacity for expansion previously transferred to fund Balance
Strawman – Convention Center Model New Column H – Business Developmen t Fund Old Column L – Additional Cap Expenditure M Business Development Fund I – RCC Capital Maintenance Plan N -- Capital Plan J – PAC Capital Maintenance N/A Current Assumption Revised Assumption Basis Delete Column not used in current modeling $450, 000 through 2025 $600, 000 beginning in FY 2017 through 2028; Revise column label No Change, other than Column Label Increased annually by $150 K and extends 3 additional years (funds restricted to business development at RCC) $500, 000 annually for ongoing maintenance of the Performing Arts Center Align facility maintenance for projects in the enabling legislation to Sections 1 and 2; Core component of Convention Center Complex with significant capital maintenance needs; first year funding to be used to update maintenance plan Funding for Convention Center Capital Maintenance Plan N/A
Strawman – Convention Center Model New Column Old Column K – COR Discretional Operating Withdrawals P – COR Discretionary Withdrawals L – Transfer to County Major Facilities M- Other Model Adjustments Q – Transfer to County Major Facilities R – True Up for Debt Service Fund Current Assumption For each $1 spent on Convention Center Operations beyond agreed amounts, County receives $2 from the Convention Center Model Amounts for 2 for 1 distribution and PNC Capital Acceleration Revised Assumption Basis Allow for COR to annually withdraw up to $1, 000 from the CC Model’s fund balance for use in the CC Operating Fund should the projected Operating fund Balance drop below a minimum level equal to 50% of the current year’s operating expense budget. After FY 15, amounts are only for PNC Capital Acceleration Replaces 2 for 1 provision with an emergency withdrawal authority allowing, in times of unanticipated business fluctuation, up to a $1 m transfer within the CC Model to allow maintenance of a minimum fund balance level No Change Column purpose not used in current modeling; combine history of it and former column L in newly labeled column M Elimination of 2 for 1 provision
Strawman – Convention Center Model New Column Old Column N- Interest Income O – Interest Income O– Ending Fund Balance S – Ending Fund Balance P – Fiscal Year T – Fiscal Year Current Assumption Projected interest income on fund balance Resulting Fund Balance after accounting for all revenue and expenditure projections Row Label Revised Assumption No Change, other than Column Label Footnote to state, “Column O – subject to conditions of the 18 th Amendment” No Change Basis
Next Steps • Phase I – • • • Received feedback from Board of Commissioners and Raleigh City Council Prepare 20 th Amendment to the ILA for consideration by elected bodies in July Phase II – • Begin late Summer 2016
Questions? 21
- Slides: 21