On 21 March 2023, City Council requested staff provide information regarding holding a referendum on the question of investing in the future of SandVenture. After legal review, it was determined that absent a need or specific legislative authorization, there isn't any justification for the expenditure of public funds for a referendum. Generally, cities require statutory authorization to expend public funds. There is none here.

As it stands, SandVenture has outlived its useful life. The pool liner leaks, the piping supplying water is 50 years old and had a major leak last season (which upon inspection revealed the pipes are in very poor condition). The building is also in a condition verging on unsafe.

SandVenture currently is only open 3 months of the year. As it is configured, it is not a 4-season attraction which has an impact on the yearly budget of the department - especially if we have a rainy summer. Expenses currently exceed revenues by 40-50% depending upon the year.

The Park and Recreation Department has been under monthly council scrutiny since the construction of the Community Center and Ice Arena with continued discussions on the need of the department to increase revenues and decrease expenses. It has done exceptional work in that area, as the Ice Areana consistently has had revenues exceed expenses (to where it is subsidizing programs), and the Community Center continues to close the gap (absent impact of COVID).

Transforming SandVenture from 3-month facility to a year-round operation, coupled with a partnership with a known and beloved local restaurant has the ability to flip its current large operational subsidy while providing even more amenities to our residents. The City of Chaska has used this model to great aplomb in the construction and operation of their Curling Center (with an event center space) and partnership with the Crooked Pint Ale House.

Even with the very conservative revenue projections with the new facility, the impact to the average property taxpayer is minimal if we used our Local Projects Fund and internal borrowing as outlined on the 21st. The current estimate for the average property owner is $5.80 - less than a fast-food sandwich - but we can look at other options that will lessen the impact even more. These include adjusting repayment terms on the internal loan or rent charges from what was presented on the 21st, abate property taxes from the vendor and use them to offset construction costs, or reviewing revenue projections including raising of fees for use of the facility.

There are four options available to the City Council:

1) Do essentially nothing other than the normal coat of paint and cleaning routinely done prior to the season. This will mean the facility may or may not make it one more year of safe operation and ultimately will lead to option #4 by default.

2) Approve advertisement for bids for essentially replicating the current structure (which includes just the pool as constructed now and building as constructed now) which will limit its use to approximately 3 months out of the year and guarantee continued major property taxpayer subsidy each year. The cost of construction for this option is estimated at approximately $4 million. 

3) Approve advertisement for bids for the project as designed to upgrade it to a 12-month facility with partnership with an outside entity to provide a unique food service experience. This would give the city an improved amenity while also providing year-long revenue stream opportunities. The estimated cost of construction for this option is approximately $7 million. 

4) Plan for the decommissioning of the facility and convert the property to another use suitable for the park. This would eliminate the large yearly subsidy and be of direct financial benefit to property taxpayers although at a cost of the public value received from the public's use. There would be undetermined costs for demolition and cleanup of the site and costs associated with whatever is established in its place. 

Staff recommends Option #3.

If Option #3 is not selected, and council continues to be concerned with the levy impact of the facility, option #4 would be the next recommended option.

Once bids are accepted, a clearer picture of the costs of the facility will occur. 

Estimated impact of each option is outlined above. The recommended Option #3 would have an impact of approximately $128,500 on the property tax levy without any of the revenue adjustments noted above. 

Current non-COVID annual subsidy for the facility has been from approximately $285,000 (2017) to approximately $225,000 (2022), but it has been as low as $140,965 when we had great weather (2018 and 2021).