CCP 07-15-1996 - Laserfiche WebLink

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.. . . . Summary I The agreement among parties calls for revenue guarantees for a total of 2,080 hours from -. each of five parties~ These guarantees provide a threshold revenue level of $1,300.000 annually. Net debt service on the bonds is expected to range from $556,000 to $632,000 annually. Operating expenses are estimated to be $759,000. The result of these assumptions . at the lowest annual debt service cost is as follows: Operating Revenue $1,300,000 . less Debt Service (556,000) Available for Operations $744,000 less Operating Expenses 759.000 . Surplus/(Deficit) ($15,000) In addition to covering annual debt service and operating expenses, it is prudent to accumulate I reserves for the payment of debt service and/or operations in the event of a business downturn. Also, reserves for capital replacement must be provided. The operations assumed I herein do not provide for accumulation of reserves. The options for strengthening the cash flow include increasing the hourly charges, increasing the demand for ice time and the hours rented. or further refining the operating budget. . Estimating Annual Exposure e. There are a number of scenarios which present the potential for financial risk to the guarantors. They are on a spectrum of events that range from a lower than anticipated financial performance for the arena to a closure of the facility for some unforeseen reason. . Appendix VII attempts to illustrate the financial exposure at these two ends of the spectrum. Proiect Underoerformance. Project underperformance can be caused by either operating . costs exceeding budget expectations or revenues falling short of anticipated levels. The first section of Appendix VII illustrates assumptions reflective of poor project performance. The first assumption incorporated is that expenses are underestimated by 15%. It should be noted that the budget referenced here exceeds the NSC estimate by over $76,000. The use agreement . calls for MASC to underwrite any overage of actual expenses against budgeted expenses once the board approves a budget. We would assume that if serious deficiencies appear in the budget, MASC and NSC would address them in subsequent years' budgets and that the . MASC guarantee can not be seen as a long-term source of funding for unexpected budget levels. A 15% variance in budgeted expenditures equates to just under $114,000. Revenue underperformance could result from either too high an assumed rental rate or . inability to book the required rental hours. A level of comfort has been expressed that $125/hour will be a standard rental level by fall, 1997, therefore Appendix VII makes assumptions regarding the usage levels assumed for the full 10,400 hours of guaranteed time. Columbia users and girls' sports assumptions are assumed to vary by up to 15%. This I acknowledges that the will be there, but at a lower level than anticipated. Local association ice time is assumed to either be committed through pre-sale or made available to MASC for . expansion of its tournament scheduling during the hockey months. Additional usage of this time could be to supply overflow ice time to associations that were not included in the polling sample. An assumed slippage percentage of 25% is applied to figure skating and 50% to open skating. short track speed skating, and camps. No loss has been assigned to MASC e. tournaments because of a presumed negligible risk of slippage or to indoor soccer or seasonal hockey because of MASC's expressed willingness to contract in advance for those hours. DRAFT REPORT 5/30/96 Page 1 3 . --------