Minneapolis Park & Recreation Board

Resolution
2018-131

Resolution Modifying Resolution 2017-187 that Approved the Use of General Fund Excess Fund Balance for Specific One-Time Purpose of Funding a Short-Term Loan Guaranty Reserve Fund for the Wirth Adventure and Welcome Center at Theodore Wirth Regional Park by Removing “Short-Term” and Setting Certain Conditions

Information

Department:Support Services GroupSponsors:
Category:AppropriationsProjects:No Project

Attachments

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Item Discussion

Whereas, The Minneapolis Park & Recreation Board is the steward of Minneapolis Parks;

 

Whereas, The MPRB maintains a General Fund Balance sufficient to fund all cash flows of the MPRB, to provide for financial reserves for unanticipated expenditures of a non-recurring nature, revenue shortfalls, and/or emergency needs;

 

Whereas, The MPRB financial management policy requires that the General Fund maintain a fund balance of five percent of the annual adopted expenditure appropriation;

 

Whereas, The MPRB estimates the December 31, 2017 fund balance to be $5,706,618 or 7.4%, $1,875,943 in excess of the financial policy requirement;

 

Whereas, The Superintendent identified essential one-time activities that are not included in General Fund operating budget since they are one-time in nature;

 

Whereas, The Superintendent recommends this one-time activity totaling $200,000 be financed through use of the General Fund excess fund balance

 

  1. Create a Reserve Fund for the purpose of the MPRB

executing a loan guaranty of a third-party

loan to Loppet Foundation for

construction financing of the Wirth Adventure and

Welcome Center                                                                                                         $200,000;

 

Whereas, The Loppet Foundation is in negotiation with Bremer Bank on a loan in the amount up to $750,000 to be used to complete the construction of the Wirth Adventure Welcome Center (“AWC”) provided that the Loppet secures up to $800,000 in loan guarantees from third parties;

 

Whereas, The Minneapolis Community Planning and Economic Development agency (“CPED”) has agreed to a $200,000 guaranty or loan, the Minneapolis Parks Foundation has agreed to a $100,000 guaranty and David Dayton has agreed to a $300,000 guaranty for the Bremer Bank loan; and

 

Whereas, This resolution is supported by the MPRB 2007-2020 Comprehensive Plan, which envisions “Dynamic parks that shape city character and meet diverse community needs;”

 

RESOLVED, That the Board of Commissioners amend Resolution 2017-187 that approved the use of $200,000 of general fund excess fund balance for specific one-time purpose of funding a short-term loan guaranty reserve fund for the Wirth Adventure and Welcome Center at Theodore Wirth Regional Park by removing “short-term” if sufficient collateral and/or guarantees can be obtained from other respective agencies or individuals;

 

RESOLVED, The $200,000 MPRB guaranty will be used only for construction costs associated with the AWC, and provided that the funds from the Bremer Bank loan be deposited in the construction escrow account for the AWC; that the MPRB be advised of any changes to the terms of the Bremer Bank loan; that Bremer Bank advise the MPRB of any calls on the guarantees of the loan; and that Bremer Bank call on the guarantees shall be in proportion to the amount of the guarantees each guarantor makes or that the guarantors execute an agreement that, in case the guarantees are called on by Bremer, would allow the guarantors to collect from each other proportionate to the amount of the guarantees each guarantor makes;

 

RESOLVED, That the Board of Commissioners direct the Superintendent to create a Reserve Fund, with the use of the $200,000, for the purpose of the MPRB executing a loan guaranty of a third-party loan to the Loppet Foundation to facilitate construction financing of the Wirth Adventure and Welcome Center if sufficient collateral and/or guarantees can be obtained from other respective agencies or individuals provided all guarantors agree to participate proportionally in any call of their guarantees; and

 

RESOLVED, That the President of the Board and Secretary to the Board are authorized to take all necessary administrative actions to implement this resolution.

 

Body

BACKGROUND

 

This action considers amending an existing resolution that established a short-term Loan Guaranty Fund in the amount of $200,000 by removing the “short-term” from the resolution.  The action will assist the Loppet Foundation in securing a loan needed to complete construction on The Trailhead (formerly referred to as the Silent Sports Center or Adventure and Welcome Center (AWC)).

The Minneapolis Park and Recreation Board (MPRB) has in place an Agreement with the Loppet Foundation to design and construct a Silent Sport Center area and Welcome Center building, titles that have been consolidated for understandability as The Trailhead in Theodore Wirth Regional Park. The design and construction is directed by the concept plan approved by the Board of Commissioners in 2012.

When considering the site and building improvements in this area, the total project is a $10,216,000. The public funding sources cover portions of the site work and account for $3.25 million of the total and the remainder of $6,966,000 is funded through the Loppet Foundation. Through its fundraising campaign the Loppet Foundation has collected $5,110,000. The Foundation has financing pending that will cover an additional $1,076,000, leaving a gap of $750,000. The Loppet Foundation, through its operating budget, has the capacity to amortize a loan in this amount and has banks willing to make a loan in this amount, but the Loppet Foundation does not have sufficient collateral to induce a third-party lender to fund the entire amount. Instead, the Foundation has been working on a guaranty structure that would allow a bank to make a loan to the Foundation. That structure would spread the risk of the guaranties out over a number of persons and entities:

       Minneapolis Parks Foundation - $100,000

       David Dayton - $300,000

       Minneapolis Park & Recreation Board - $200,000

       City of Minneapolis - $200,000 (Note that the City may decide to make a direct loan instead of a guaranty. This would reduce the loan amount at issue here to $550,000.)

 

While the final terms and conditions of the proposed loan need to be negotiated with the selected lender, the guaranty will align with the following general principles:

  1. No advance of funds needed from Guarantors – Lender would fund loan

 

  1. No monthly payments from Guarantors – Loppet would amortize loan

 

 

  1. Loppet would offer additional Loan Covenants to Lender and to Guarantors to assure that operating surpluses would continue to be sufficient to amortize the loan:  these Loan Covenants could include, but not be limited to lockbox collection of revenue; covenants to maintain liquidity ratios; right and ability of Lender and or Guarantors to require Loppet Foundation to charge “additional fees for their services and programs” when operating surpluses are not viewed as sufficient to continue to amortize the Loan; submission to Lender and Guarantors of financial statements in a format and with a frequency sufficient for Lender and Guarantors to monitor and mitigate their risk; and any other such Loan Covenants that the Lender and or Guarantors deem reasonable and necessary to facilitate the proposed Loan

 

  1. Lender would take all reasonable steps possible to work with Loppet Foundation to facilitate repayment of the loan before any request would be made for Guarantors to advance any funds pursuant to their respective Guaranty

 

  1. Each Guarantor’s liability would be strictly limited to the face amount of their respective guaranty – in no event whatsoever could a Guarantor be required to advance any amount beyond their initial guaranty amount

 

  1. Any additional standard and reasonable terms that the Lender may require, provided such terms do not compromise the spirit and or intent of this proposed loan guaranty structure

 

Sound financial management principles require that sufficient funds be retained by the MPRB to provide a stable financial base. The MPRB maintains a fund balance sufficient to fund all cash flows of the MPRB, to provide for financial reserves for unanticipated expenditures of a non-recurring nature, revenue shortfalls, and/or emergency needs.  The MPRB financial management policy requires that the General Fund maintain a fund balance of five percent of the annual adopted expenditure appropriation.  A fund balance larger than this minimum may also be maintained for future purposes and the use of those funds should not be relied upon for on-going operational needs. The December 31, 2017 fund balance is estimated to be at 7.4% or $5,706,618, $1,875,943 in excess of the 5% requirement.

 

 

 

 

 

Recommendation For Funding Through Use of General Fund Excess Fund Balance

Division

Explanation

Amount

General Fund - Estimated Fund Balance, December 31, 2017

$5,706,618

   Fund Balance requirement (5% of adopted expenditure appropriation)

$3,830,675

Fund Balance in Excess of Requirement

$1,875,943

Superintendent’s Office

Create a Reserve Fund for the purpose of The MPRB executing a Loan Guaranty of a third-party loan to Loppet Foundation to facilitate approval of construction financing of the Wirth Adventure and Welcome Center

($200,000)

Estimated Remaining Fund Balance in Excess of Requirement

$1,675,943

 

 

 

 

 

RECOMMENDATION

Staff recommends that the Board of Commissioners modify Resolution 2017-187 that approved the use of general fund excess fund balance for specific one-time purpose of funding a short-term loan guaranty reserve fund for the Wirth Adventure and Welcome Center at Theodore Wirth Regional Park by removing “short-term and setting current conditions.

This action is supported by the following vision and goal statements in the MPRB 2007-2020 Comprehensive Plan.

Vision Theme 3:              Dynamic parks that shape city character and meet diverse community needs.

Goal:              Financially independent and sustainable parks prosper.

 

Meeting History

Feb 21, 2018 5:10 PM  Administration & Finance Committee Committee Meeting
RESULT:ADOPTED [UNANIMOUS]
MOVER:Steffanie Musich, Vice Chair, Commissioner District 5
AYES:Jono Cowgill, Steffanie Musich, Londel French, Chris Meyer, LaTrisha Vetaw
Mar 7, 2018 5:00 PM  Minneapolis Park and Recreation Board Regular Meeting
RESULT:ADOPTED [UNANIMOUS]
MOVER:Jono Cowgill, Commissioner District 4
SECONDER:LaTrisha Vetaw, Commissioner At Large
AYES:Brad Bourn, AK Hassan, Meg Forney, Londel French, LaTrisha Vetaw, Chris Meyer, Kale Severson, Jono Cowgill, Steffanie Musich