Call the meeting of the Committee of the Whole to order. We'll Tom Tom will you call the roll D. Bird E bird Doyle Manny Moody Perez ports Schultz Stefan Devin Akron, Devin Akron, Vanderwillig, Wongamon, Warner, and Weninger. 15. Sorry, Dennis. 15 present. We also need the redevelopment authority. Mike, thank you. We need approval of the minutes of the previous meeting of the Committee of the Whole. It's been moved and seconded to approve the minutes of the Committee of the Whole. All those in favor signify by saying aye. Chair votes aye. Opposed? Motion carried. Can we all please rise for the Pledge of Allegiance, please? Paulette, will you lead us? Thank you. Just for people that are watching or people that are in the audience. This is a joint meeting between both the redevelopment authority and the Common Counsel's Committee of the Whole. That's why we needed to take both roll calls. We'll start the meeting off this evening with a presentation from the people from Great Lakes and Mayor Schwem, if you'd like to introduce the people for us. Thank you, Terry. First of all, I don't know. Is this on? No, it is. Can you hear? Okay. First of all, I don't know if you know Ann Comer. She's from Corals and Brady's. She's with us this evening. Obviously, you know, steamically in our city attorney, Solomon Van Akron, Tom Holton, and Paulette Enders. We do have two gentlemen here from Great Lakes, Tom Sather and Mark Vicaro, and they will give us a presentation on the Blue Harbor development. So gentlemen, if you'd like to step up here and bring whatever boards or you have with you. So, if you want to set up or if we have to move some of this around, let us know. These pretty pictures, as you can see, are pictures of what we envision will come alive and come true on the shorefront and are a culmination of really now as we were come up, what's that? As we were driving up here, we were reminding ourselves how long this process has been. All large developments mature slowly, as much as you'd like to think that they go quickly. They take time. We began working on this when Tom, last June. And to give you a little background, when we started, we had envisioned a single resort, if you will, of a total of how many units? About 160 to 180 units. And as things evolved, we really, the project itself has evolved into what we think is an optimal-sized project. And I wanted Tom to give us just a two or three minute nuts-and-bolts tour of what we're proposing to build here, because it's impressive in its scope and scale and vision. So, Tom. Thanks, Mark. The Blue Harbor Resort and Conference Center that we're proposing to develop down in the South Pier district, like Mark said, has evolved over the months. And we've tried, through economic modeling, through architectural studies, input from the city staff, from designers to craft, the project that we thought would best suit the needs of the district and would work best economically as well. Early on in the process, we were contacted and asked if we would take an interest in looking at this project. The goal being to get a first-class full-service year-round resort on the lakefront in Sheboygan that could attract both conference business and family business as a year-round basis. Our company, the Great Lakes Companies, is in both the hotel and resort businesses. Currently, we have 12 commercial hotels and a number of resorts. A resort that you may be familiar with is Great Wolf Lodge Resort in Wisconsin Dells, which is one of the properties that we own. And based on our family resort experience and also our corporate resort experience, we took a look at this project to see what the opportunities might be. The first thing we looked at was the site itself and what might be appropriate for this site. If any of you that know Great Wolf Lodge know that it's a great big log cabin. And clearly that was not the right type of project for a beachfront, beautiful beachfront location like this. So we looked around at other possibilities and got design cues from other famous beach resorts that all kind of center around the same turn-of-the-century Victorian beach resort theme, as you can see illustrated in these drawings. We've taken some visual cues from properties such as the Hotel del Coronado in San Diego, the Grand Floridian Resort in Walt Disney World, and other types of projects that are already proven successful formulas that are famous, that are successful, and whose looks have stood the test of time. And along those lines, we've crafted what we believe is the best project for this site. The components include, and if you have a handout, hopefully they'll help illustrate that for you. I can't recall if there's a site map in there or not, but the overall project consists of about slightly less than 17 acres along the waterfront down in the South Pier district, with the beachfront remaining in the public trust and open to the public, and several access points available to that beachfront from the inside part of the project. On this end of the project, as you see up in the north end, is what is referred to as the Convention Center or the city-owned project. What is proposed right now is a complete facility with a convention center and a first-class sit-down restaurant of approximately 37,800 square feet, with a maximum events capacity in the convention center of approximately 1,000 people. Early in the process, we had started out with a smaller general concept for this plan. It will elaborate on later. And as we really got to understand the marketplace and the needs of the marketplace, we've let this project grow a little bit to accommodate a broader base of meetings in corporate and leisure business. The center part of the project, as shown here, is a 183-suite, all-suite family resort that will include two themed restaurants, one a more family-style restaurant, the other a barn grill type restaurant, both of which are heavily themed. There are some illustrations in the back of the handout that you have, some concept drawings, that start to illustrate the vision that we have for these spaces as highly-themed entertaining spaces. The lobby, as you can see in this color board up here, this conceptual color board, is a soaring three-and-a-half-story atrium lobby, similar to what we've put in our other family resorts, our Great Wolf Family Resorts, that creates not only a tremendous first impression of the property, but through a bunch of glass on the back end, opens up the views to the lake and the beach beyond, and also serves as the living room to the facility. This is an area that we anticipate people spending a lot of time in as they do in our other resorts. Beyond that, we have incorporated, so we have on this end of the building, we really have the more corporate end of the facility. It's going to bring in the conventions, it's going to bring in the trade shows. The housing for all the guests, of course, is in the middle. Also inside this facility, in addition to the two restaurants, are some retail space, and we are also intending at this point to have a spa in the facility as well. On this end of the property is the indoor water park and Family Entertainment Center component. The indoor water park that we have scheduled for this part of the project is 33,000 square feet for the water park itself, which is modeled closely after a very popular resort we've built, Great Bear Lodge in Sundusky, Ohio, it's been very successful. It features all the big elements that you'd expect to find in a successful indoor water park, including tube slides, body slides, lazy river, indoor pools, hot tubs, kitty slides, geysers. And the central feature is a million-dollar four-story tall interactive treehouse with dozens of interactive devices. This space will also be, not just a playground, but will also be heavily themed. If you look at the far illustration down here, you see a concept drawing for some of the theming of one of the play elements that will be in the park. We've done enough of these parks now that we feel like we're getting pretty good at it, and this park has turned out very nice, and we're really excited to expand on the nautical theme that we're carrying throughout the resort and throughout the convention center and taking it to the water park and playing it up a little bit even more for the fun of the kids. One thing you should note in the water park is really taking the historical elements of Lake Michigan and bringing that into the water park itself. The history is so important, the history of Lake Michigan, and being on the lakefront really affords us an opportunity that we've never had before and won't ever have again probably. So bringing some of those elements into the water park facility is what Disney calls edutainment. It's entertainment and education. There's going to be a lot of history weaved throughout the project. When you're in the restaurant, you're going to feel and see and hear a sense of history. The same thing when you're in the water park. I think that's real important to make us something different than what's been created in Wisconsin Dells where there are now candidly 18 hotels that have some sort of a water park feature. We need to set ourselves apart from that. We've worked very hard over the last 12 months to create something that is truly unique. It's never been done before and it's going to be very hard for anybody ever to do it again. That's what we want. We want a unique project that really stands the test of time. We realize for the city this is kind of a once-in-a-lifetime opportunity. It is for us as well. And I think you're going to see that with the storyline that we bring into once you walk into the doors and through the project itself. Just quickly to wrap up on the rest of the scope of the project. Also incorporated within the indoor water park and family entertainment complex is a small gift shop. There will be food and beverage facilities. There will also be a large video game arcade and also in addition to that a play area where they can set up birthday parties, family reunions, other children's oriented activities. The last component down on the south end of the project here as shown is a complex of 64 resort condominium units that are set up in four-unit buildings whose character and architecture reflects the same style as the Grand Resort but is set up into more of a village type setting. The intent for this project is that these, like many places in Lake Geneva, Dore County and Wisconsin-Dells, will be sold to individual unit owners when they are not using their units. They can put them back into the rental pool to help offset the cost of ownership and also to provide additional lodging for water park and convention guests. We have worked real hard at putting this project together and really think that this is something that is going to be not just spectacular by Wisconsin standards but spectacular by anybody's standards, that this will be truly a world-class resort. We're very excited about this project and are very interested in getting it to move forward. Mark, if you want to take over. Thank you. This is really a partnership between us and the city. When we're done, we will invest a total of about $68 million, I believe, including all of the condominiums and the resort itself. The scope has increased in size since we started. The cities, in fact, let's put up this chart right here. I want to get a little bit into the financial element of the project. We had prepared something, in fact, in large print because I think it really says it all in terms of what our contribution is and what the city's contribution is. We've worked real hard with the city and the city has done an excellent job, if you will, putting the developers' money where their mouth is. I give them a lot of credit. When we started out, the thought was, well, the developers taking the lead risk here. The developers, the pioneer, you're the first project to go in here. The first project, arguably, is always the riskiest. Once you've, I think of helicopters, it's a little scary. The first project is really the pioneering one, the one that takes the risk. When we first met up with the city, the city had indicated, we have an investment already in this island and that investment or this peninsula and that investment is growing. By 2005, the city will have invested about $6 million into the peninsula in land cost, in infrastructure, environmental remediation, et cetera, et cetera. And the hope was that with your development developer speaking to us, we're hopeful that the tax production that you produce will cover the cost that you require to make this project happen. To the extent that there's anything left over, that's a good day for us. We utilize about 40% of the total land area on the peninsula. Our project's about, what, 16, 17 acres. I think the total net area of the peninsula is about 41 acres. So of the city's $6 million invested, if our project could produce any part of that or on the best-case scenario, our proportionate share of that, then we would be not only the lead project, the pioneering project, but one that makes our fair share contribution to the peninsula and the investment that the city's made. As we've gone through months and months, literally months of negotiation with the city, working with the finance people and the development people, I think they have worked out a scenario with the developer that is, in fact, very favorable to the city. If you look at, and I just wanted to illustrate this in very simple means, as our project is built out, we will produce taxes in two different areas. Real estate, incremental taxes, and hotel taxes. And what we've done is taking the built-out project as proposed and the taxes that are projected from that based on valuations and in rate and occupancy projections from our appraiser, our third-party appraiser that our lender is relying on, we produce over the next 25 years about $52 million in taxes. The amount of monies that we are guaranteeing out of that total is about $41 million. Now, that's over 25 years and we said, okay, what's the present value of that using 6.5% cost of capital? And even on the portion that we're guaranteeing, it's in excess of $20 million. So where the financial model stands today is that, out of the $12.5 million that the city is loaning to the project for really two components. One is the city-owned convention center and the second is the balance of site infrastructure and other related costs. We're producing not only enough taxes to cover all of those costs, but we are guaranteeing an amount in excess of that on a present value basis equal to $8 million, at least. So what started out really from the city's perspective is potentially a lost leader to get some development momentum on the island. It's turned out to be potentially a bonanza. And I congratulate the city for that. We have Tom and myself have four other shareholders and we've been doing the heavy lifting on this project when we brought the other shareholders in and said, well, here's the deal and here's our part of it and here's what we're guaranteeing. They said, oh, my God, what are you guys doing? And we said, look, we all believe in the project. We know our capabilities as it relates to building something and operating it successfully. A guarantee is a guarantee. Hopefully nobody ever has to realize on that. So we're comfortable. We put our money where our mouth is, but we're comfortable at the end of the day. We're all going to win from this. So that gives you a little backdrop on the financial modeling. Of course, there's 200 little details and definitions that go into this. I think our development agreement between ourselves and the city is now 70 or 80 pages long. There's a lot of detail behind the detail. But the overall picture is a real successful financial partnership that puts the city first, if you will, in the development first, which is really where it ought to be. That's kind of the, you know, the round discussion of the project as it stands currently. We've emphasized to ourselves and to the city really time at this point is of the essence. It's taken a long time to get here. We've had a lot of work to do. The city's had a lot of work to do. We all feel that there's a drop dead date. Drop dead date is the world event next year, the PGA tournament. And that is in August. We have been successful building and opening our resorts to date such that they open slightly before summer. Summer, we know we're going to be very full and you want to get these things off with momentum and a wind at your back. So our goal is really to be open by June 1 of next year. It's a very aggressive schedule, one we think we can accomplish. We really can't afford to miss a beat. That'll give our staff some warm up time. June, July, and August will be fabulous months for the resort. And then catering to the PGA is something that's just a once in a lifetime opportunity for all of us. We really envision the ABC cameras, if you will, flying down the coast from the golf course and flying over the resort in the downtown of Sheboygan. It's going to be one of those memorable things that I think put Sheboygan on the map permanently in terms of a tourism city in addition to everything else. So we see that as really our drop dead timeline that everything has been built and backed into. So we're very excited. We're ready to get started. And a lot of work has gone into bringing us to this point. But we're at a point where I think all that has transpired has been to really improve the project to something that has world-class potential. And that's why we're here. So thank you. I think what we'll do now, first of all, I'll open it. Why don't you leave them up for a while I'd like to open it up to the floor of the council first, just if you have any questions on the presentation they gave. After they're done, we'll have the staff go through some of the high points and some of the information on the actual agreement. On the actual agreement. But does anybody have any questions on anything that they talked about? And like I said, let's keep it at this point to what their discussion was prior to. Then we'll get into the agreement and we'll get into the other things and I will open it up to the audience in the back also after we get through this. Alderman. Thank you, Mr. Chairman. You mentioned $68 million investment. Is that your investment or the city and your investment together? Okay, thank you. What are going to be the hotel room rental rates? Okay, and the condominiums are going to be $2.50. $2.50? Okay, thank you. Yes, thank you, Mr. Chairman. In your revenue projections in the original, you had $36 million, $4.47, $7.17, and that was based on the 75% estimate of the revenue, room tax revenue projected by the U.S. Realty. I see that you've upped that by 10% in terms of the guarantee. Could you explain how that changed where that came from? The first, as I'm sure you can realize, is a project like this develops. It starts out as an idea, becomes a little more real every day. And what we did is got preliminary numbers from the consultants based on a project concept. Since that time, if my memory serves me correctly, the project's gotten slightly bigger. It's gotten a little bit more upscale. The convention center's gotten a little bit bigger and it's gotten a little bit more active and it's gotten a little bit more active and it's gotten a little bit more active business into there. And another factor was originally with the condominiums, the unit mix was half two bedrooms and half three bedroom units. And now it's half two bedrooms and half four bedroom units. So the scope changed a little bit, elevating the top-line revenues for the project. And thus, really, what happened is the U.S. Realty consultants went back in as the scope changed and the increase went up as well. And the city asked us, they said, well, okay, the scope change is going up. You believe in your project more every day. In fact, the projections are going up. Are you willing to back those projections? And in a week moment, we said, sure, why not? And all of a sudden, we were guaranteeing another four million dollars and we couldn't take a step back then. So here we are. The U.S. Realty, that is a third-party proprietary firm that's not related to the city or to your organization. No. No, something, in fact, who hired them? The city or the SDC? Yeah. And then our banks subsequently hired them. All right. Any other questions from Alderman Perez? Thank you, Mr. Chairman. Mr. Seder, in the press, I believe a few weeks ago, you were quoted as saying that it was your position that the convention center did not make any money and that's why your group did not want to invest in it. That it was a city's insistence in having it. Has your position changed that convention centers don't make money? I don't believe our position has changed. Typically, it seems that most of the convention centers that get built nowadays are built either by cities exclusively or with a lot of their help. Because as a standalone basis, they're not usually very profitable. We're not experts on standalone convention centers by any means. But we do know that meeting space drives occupancy and drives rate. It helps make the hotel part of the project work. What will happen as a practical matter with this facility is that it has capacity to serve events that are far bigger than can be accommodated in our hotel. And very routinely, they'll be filling up hotel rooms all over the city. I don't believe that as a private developer, you could build a standalone convention center and probably make a very good return on investment. As a follow-up question, I noticed we were just handed a sheet here that says convention center now the size has been increased, the capacity has been increased. I'm just curious if it doesn't make any money, and now we're making it larger, is that more money sitting part of it? What role did you play in this market research that says now we need a bigger one? This is a good question, actually. We started out very early in the process in our discussions with the city, and there was a desire by the city to have a convention center, because those facilities did not exist presently. And they felt that there was a need for that. At the initial time when we were programming this project, I don't think anybody really knew exactly what size would best suit the market and best suit the demands. A notion was set forth that maybe a facility that could host 600 people would be appropriate. It's a starting point that sounded reasonable to all the parties involved, and backing into the square footage required for that, we guesstimated probably about 20,000 square feet in the convention center end and thought a good fine dining restaurant could be accommodated with about 7,500 square feet. So we had a scope of project of about 27,500 square feet. As the project became more real, and we got market research feedback from people like U.S. Realty Consultants, our marketing department or operations department went out, did their call-arounds, visited area facilities, started talking to demand generators for this type of business, they were getting feedback that made them believe that what they really wanted was a bigger facility. I know that there were comments made by a number of people that even the largest facilities in American Club were not big enough for some of the functions that certain people wanted to hold. Also that it would be really too small of a venue for boat shows, car shows, things of that nature, and a lot of statewide conventions. And as our feasibility people really dug into this, they came back to us and said, incrementally, is it that much more expensive to add this capacity? And the answer was really no, because the incremental square footage you add is the cheapest square footage in the project. And as we modeled with it, it just seemed that from the perspective of the resort needing, you know, rooms to come in, and being able to drive demand through that facility to accommodate the needs of the city and to get all this tax base and all the tourist business and corporate business coming through the community, that that extra step to be able to accommodate that added increment of business seemed to be a good investment. And that's really where we came up with that. Anything else, Alderman Press? Alderman Winniger. Do you have banquet rooms? You have a convention. You need most conventions have banquet at night. We do. That's a good question. The way the facility is laid out, and I'm sure that there are places here in the city that drafts can be looked at as far as the layout, but there is a very large shared kitchen and prep area in between the seating area for the fine dining restaurant and the convention center itself. So they will have full dining services offered by the operator of the restaurant. The convention center, I wish we had an illustration of that with us right now, but consists of really three areas. One is back of the house where all the food is prepared, where all the offices are and such. The other is a large pre-function space overlooking the lake with lake views where they can have guest registration cocktails, things like that. And then the main conference center is a slightly more than 10,000 square foot room that is divisible through movable partitions into combinations that up to as many as seven separate rooms. And one thing on the financial, because your question was an excellent one, kind of the financial return, if you will, on the convention center. Madison, we live in Madison. We got to see the whole dynamic of the story that ultimately led to the building of the Frank Lloyd Wright Center. And it's a beautiful facility, but it really came in backwards, and there was something to learn from that, and I think something to compare us to. It took 40 years to get approved, believe it or not. And after they finally got it approved, they spent $60 million on this convention center. Now it's fabulous, but it's $60 million fabulous. And after they got done with it, they learned that a convention center on its own can't fully realize its potential unless it has an attached hotel. So after they built this convention center, they had to lure in the Marcus Corporation to build what is a fabulous hotel, a Hilton Hotel. But in order to get Marcus in, they gave Marcus incentives of $33 million. None of that went to the convention center. All of it went to the hotel just so they could have a convention center and a hotel to be able to market together. So by the time they were done, they'd spent over $90 million to promote their convention center. So I think in terms of what we've got here, going from a 600-person convention center to a 1,000-person convention center and having the additional investment that we've made to get it there, really we look at how unique this opportunity is. No, it wasn't designed by Frank Lloyd Wright. On the other hand, it's probably the only convention center of its size that may ever get built on a major body of water in the Midwest. So there is a real unique element to that. And we think with the increment of 400 people, we can cater to not only statewide conventions, but region-wide conventions. We have a full house in that convention center with 1,000 people. This town is going to be buzzing. The hotels are going to be full, the restaurants are going to be full, the downtown, all of the investment that's been made in the retail down there is really going to start to realize its potential. And really, it's a function of bodies. More people in the spin-off economic effects are hard to measure, but you don't want to miss out on them. So as we got deeper involved in this project and realized how unique it is, it did, it began to grow into what we think is really an optimal size for marketing the city and the center. Anything else, Alderman Moody? Thank you. First paragraph in here says, since the inception of Blue Harbor Resort and Condominium, the city has desired the development of a city-owned convention center and fine dining restaurant? The city should also own a fine dining restaurant? It's a component. It requires very little additional investment. Because basically the way I mentioned before that it was set up is that the shared kitchen and all the back-of-the-house facilities are already in place that have to service the convention center. So really all that has to be added to establish a fine dining restaurant is the seating area for a couple hundred people. So perhaps it's 10% of the size of that facility. And what it does, at least in concept, what it does is give people who are patrons of the convention center a place to go and have drinks or have breakout sessions or to have a luncheon before their conference if they don't want to have it. And there's a lot of synergies between that. It's actually very common. We've done that in properties that we have where you have a shared kitchen and restaurant on one side convention center. And the thought of having a fine dining restaurant is to further enhance the quality and the credibility and the prestige of the South Pier district. I believe that was the thinking. A question about the amount we are guaranteeing, is that money that you put in escrow, a certain amount of money you put in escrow every year? Benny, those type of questions, I think Steve's going to be able to answer in a few minutes because he'll tell you there are some things that are in escrow. There are some things that are guaranteed from the company. There are some other guarantees. I think those type of financial questions probably would be answered if we allow Steve to go through the... On the restaurant, let's make it clear, the city's not getting in the restaurant business. The city will own the building and somebody else will lease both the convention center and the restaurant will be leased to a third party that will run it. The city's not going to be flipping hamburgers as an alderman on Thursdays. Alderman Manning. Thank you. I'd like to have some commentary directed to the resorts that you have built and completed with their economic performance vis-à-vis the market projections. We've just opened our third resort along the same brand that we started in Wisconsin Dells, Great Wolf Lodge of Wisconsin Dells. Our second resort was Great Bear Lodge of Sandusky, Ohio, and then recognizing that building a brand implies one name, not two, we went back to Great Wolf Lodge and in fact have trademarked that name in all 50 states. We've just opened our third Great Wolf Lodge in Traverse City, Ohio. In fact, only two weeks ago, I'm sorry, Michigan, and our fourth one in Kansas City, Missouri will open in about three months, Kansas City, Kansas. Sandusky was really the first one that we built from scratch. I would say it opened a year ago from last March and has functioned ahead of projections since literally the day it opened. We're getting some phenomenal early returns out of Traverse City where we measure how we think we're going to do against our benchmark or our pro forma is looking at Sandusky when we opened, how many reservations did we have on the books? I think in Sandusky we had, how many was it, 10,000? 10,000, yeah, 1.1 million. We're now opening our second resort with approximately twice that in the bank and already operating ahead of schedule. So in terms of pro forma projections, we're pretty good at exceeding them so far. We've got a good track record. Is that the same company that did this? Market analysis and projections as... U.S. Realty Consultants. Yeah, good question it is. Anything else? Alderman? Alderman Vandewil. Thank you, Mr. Chairman. We're going on about the Convention Center and the restaurant. Basically what you're saying is you think it's a good investment, but you can't get the money to invest in it, so you want us to. I'm sorry. Basically what you're saying is you think the convention center and the restaurant are everything there is a good investment that you would like to invest in it, but you can't get the funds to do it, so you want us to do it. Yeah, it's probably a bit more complicated than that. Tom, you wrestled with the modeling more. Yeah, really on a standalone basis, the convention center just as a standalone operating business, like most convention centers, if not all, does not, on a standalone basis, generate enough profit to attract outside investment just to pay for it on a standalone basis. As a component of a greater overall project, it's very important and it drives business into the hotel. But the convention center, like most, like the one in Madison, is something that is seen as very positive for the community, very positive for businesses in the community. And that's part of the reason why we're here tonight is because the project does need some help in providing features like that to help the resort work. And in this case, the city is taking, you know, $8.2 million on the convention center to build the city-owned convention center, which in turn will be leased back to Blue Harbor. Anything else, Alderman Benwood? No answer. Anything else from anybody on the Alderman press? Sorry. Thank you, Mr. Chairman. I have another question and I'm not asking for specifics because I believe that'll be discussed later. But you say you have about 13 of these other developments. 13? 12 hotels and three now approaching four resorts, yes. And in the past, how many municipalities have gone to this extent as far as providing monetary incentives with you? And are you aware of any other municipalities doing it with other developments? Sure. I think in the past, with our Great Wolf Lodge resorts, we actually minimize the amount of meeting space. They are wholly family resorts. And on that basis, our economics stand on their own we have not in the past, with one exception I'll talk about in a second, required any subsidy, if you will, or loan monies from a community. In Kansas City, Kansas, in fact, we were granted star bonds of $8 million to incent us to go into that development. They were trying to create a whole zone that they wanted to attract. It was not that much of a dissimilar development from this in that the city created what we hope will become a tourism zone and then to get somebody to make a lead investment incented them with star bonds, which acts very similarly as the type of bonds we're talking about, where the hotel tax, and in fact, in that case, the sales tax and the real estate taxes, go to pay back those star bonds. But we've never looked at a development that has such a large convention center component. So I would just say to everybody that I don't know that there's a convention center that's been built in the last probably 15 years in the United States that hasn't either been wholly built and owned by a city or substantially built by a city, and usually with a lot of additional incentive that goes into the hotel development itself. Madison being, I think, in the end of the day an outrageous example, which is it's the nature of how it works. Another thing that's different in this project from other ones that we've done is when we have done our resort projects, we've gone to established resort communities that already have millions of family visitors and vacation travelers passing through them, Wisconsin Dells, Traverse City, Michigan, Zandusky, Ohio, Williamsburg, Niagara Falls. The one exception to this so far has been when we were not choosing the market, when the market chose us, when Kansas City, Kansas said we would like you to come here and we will help you because we understand you need some help to make your numbers work. Very similar to this situation where we were approached saying would you consider doing a project in Sheboygan? At first we didn't know how to respond because it's not known as a recreation destination the same way Niagara Falls is or Williamsburg is or the Dells is. So that's also factored into this. The average rate that we talked about earlier for this project which is 180 something is substantially lower than we're currently realizing in our other resorts. And part of that is because of the unproven nature of the community as a resort destination but we've proven to ourselves that we can create resort travel. And also the fact that convention business does not generate the same type of room rates as leisure business does. So they'll be lower rates. Anything else? Alderman Schultz. Thank you Mr. Chairman. Do you folks feel your project can be successful without the conference center or does that have to be a part of it? I think absolutely has to be a part of it because without that now we're just a family resort if you will in what is currently a non-family tourism destination. I mean Sheboygan is what it is but it's not Wisconsin Dells as it relates to kind of the hearts and minds of families and same thing with Traverse City. So we really think we need both components. We need the business traveler and the convention traveler to come to us on Tuesday, Wednesday and Monday nights. And we know we can accommodate the families on Friday and Saturday nights but we just can't make those a resort of this caliber and quality work on two or three nights a week. We need to fill in. So we've got a kind of nice barbell balance if you will between the family and the convention here. We also recognize that the convention center business does come at a price. It's a very competitive business and while we have projected $180 plus average daily rates we're not going to get that from our convention center business. If we get over $100 to $110 we'll probably be lucky. So we're going to have to blend that against Friday and Saturday business where you get rates in the strong $200 plus and that's really kind of the barbell of the more consistent convention lower price business against the weekend and tourism season fills that we'll get from the families. Thank you. Anything else? Alderman Warner. Thank you Mr. Chairman. Part of what you just said basically answered what I was thinking part of what you just said when you mentioned room rates would be somewhat lower and I can see where a convention center you would want that a lot of companies when they send their people out they don't want to pay maximum rates but the money that those people spend when they come into that convention center room hotel a lot of them go by themselves some may share a room but you're still going to have 600 people looking for rooms elsewhere in the community and those people go out to eat all over they go out to the bars, they go to the malls they do shopping here I think the overspill is tremendous and I think you do need a convention center in a situation like this and I don't think it's unique I've been at the KI Center McCormick Place, Milwaukee and their convention centers where it's all you make it throughout the community and around the community from the people going to the convention so thank you Mr. Chairman well first of all I was excited from this project from the start a little worried when I read our draft here very excited about what you're presenting here and I certainly hope it works I think what you say is true cities have to provide convention centers just the way the market goes but I want everybody to understand where the city gets prior to the return on this convention center is actually closing down the armory we get what 30 or 35 days of free use of this to take place of events that are currently at the armory and the city will be in a hole if you approve this and then decide to keep the armory open hand armory is a nice building but it's sucking a lot of money out of the city and that's part of the return on this convention center is actually closing the armory so I just want the public to understand that and all of them understand that because if you vote for this and then don't vote to close the armory you're not following what the project's intended for thank you and another comment that I would like to bring up again is that the city-owned convention center is being paid for 100% by taxes that are generated by the project that the resort project that if the resort project never happens there is no convention center it's not as if it's just a check being written out of the general fund it is a project the project we're fortunate in that this type of product generates so much in real estate taxes and so much in bed taxes that they do generate the opportunities to fund projects like this convention center anything else? Alderman press thank you Mr. Chairman one more final question I guess I'm going to spin it off of Alderman Schulz and I have a little puzzle here we're saying that the convention center is being proposed to be built because the city wants it and we're saying that Great Lakes feels that it doesn't make any money so Great Lakes didn't want to build it but I understand the whole picture now I've also heard that it's very critical that if we eliminate that portion of the development plan then you guys don't want it so if it's critical why does the city have to own it and lease it back to you for a dollar a year for 99 years why won't you just ask for the money why wouldn't you want to build it as part of your package as part of your package that you're investing because the numbers don't work the convention center requires capital to build it and our capital requires return to investors and cost of debt as a standalone business that I tried to communicate before the cost of developing as a standalone business does not operate does not generate enough return as a business the resort however needs the rooms that are generated by that facility to be financially feasible so without the convention center the resort doesn't work without the resort there's no money to build the convention center they're really so closely married that you can't have either without the other but together they work great I don't know if they answered your question yes thank you and I think Steve will get into indirectly the resort is paying for the hotel even though the city is putting up the money up front questions from the alderman I guess before I move on any questions Mike from any of your group because again it's a joint venture let's please limit it to anything about the project we'll get into the development agreement portion and some of the financing portions from Steve but if somebody has a question about any of the boards or questions of these gentlemen about what it's going to look like or anything the resort will be three and a half stories high the areas the public courier areas are three stories high they're ramped up actually to provide better views at the lobby level and then the wings are four stories high Mike can you move up to the mic can you move up to the mic without killing yourself thank you that was work hopefully my question is a little easier than that just in regards to the movement of people from the interstate to the lake front and I believe I've heard in previous presentations that you've typically built these resorts on a major interstate so the first part of my question is you know how do you anticipate doing that and then once you move these people down to the lake front have you studied the infrastructure and the infrastructure that we have currently does it adequately meet your needs and are you comfortable with that we are comfortable with that we realize that as you said our resorts typically are on high visibility locations we also realize that most of the people who stay with us come from a long ways away we are a destination we're not a drive by demand destination when people come to one of our resorts they make their mind up before they get in the car so what we're doing is focusing more on the marketing end of this and the merchandising end of this and getting the consumers aware that the product exists for the budget for the project accordingly another nice thing even though resorts like this you know generates a lot of economic activity they are relatively low trip generators for traffic and the city has a pretty decent infrastructure as far as we can tell I'm getting into here this resort is far less traffic intensive than a fast food facility then retail in places that have a lot of traffic in and out during the day commonly when we've built resorts in other communities it's very common to do traffic studies and the general result has been that the communities that they do have traffic problems are glad of resorts coming in because it has a comparatively low impact on their traffic situation great thank you how many people do you plan to employ to staff this project what our experience has been in our past resorts has been that we've had approximately one employee per guest unit one being full time one being half time and based on the scope of this project which is 240 some odd units we would typically expect about 240 employees however because of the city project with the convention center in the restaurant it'll be higher than that staff a complete service restaurant banquet operations I don't know number I'm sure operation staff could get that but it'll be access of 300 any other questions from the redevelopment authority okay I think what we'll do now is if we can move the boards to the side but I appreciate if you'd keep them up if we could just you know slide them to the sides of the room we'll have the staff here now go through some of the actual agreement and explain a little bit how some of this is going to work and what our next steps are and where we'll go from here so I guess Steve first they need to point out that as mentioned over a week ago now that the copy of the contract that was handed out at the last council meeting was a draft and there have been changes to that draft and there will be more changes to that draft and we're not prepared tonight to present you with the revised draft we're hopeful that at the next council meeting on Wednesday that we'll be able to hand out a revised draft with the hope that we'll go over that revised draft on next Monday as a committee the whole I think it'd be more fruitful to go over more of the specific items once we have that revised draft because there have been a number of changes but I think it would be helpful tonight to go over kind of a general overview general outline of what's in the current the draft that was presented to you as well as what will carry forward into future drafts because the basic kernel of the project has not really changed significantly in since we started meeting I think back last July or August we've had a couple prior meetings with the council one of which we had kind of a project overview and closed session and the Alderman and I think the redevelopment authority was in on that meeting as well really the project overview is pretty consistent with where we still are some of the details a lot of the details have changed as Tom and Mark from Great Lakes have indicated the project has evolved and continues to evolve there's twists and turns there's issues that come up and we're still addressing some of these most recent one with the increased proposed increased size of the conference center convention center and the request for the city to provide more investment into the project that's new since the last draft of the agreement but in essence the agreement itself we anticipate basically the same format as what you had and I'll go over that format with you touched on this at the council meeting but I'll go in more time with it if as I go along the council or the redevelopment authority has questions feel free to ask if what I'm covering you don't want to hear if you want to hear other things let me know unfortunately we don't have a good draft for you to look at tonight but that's the nature of this project again I'm hopeful that we will later on this week and that we can discuss a better draft at the next meeting next Monday but the basic overview of the document is that there's a project overview in the first section that describes basically what Mark and Tom described as the project is three major components the resort site which contains the hotel which is 180 rooms or suites there's the condominium component which is 64 units broken up to four unit buildings two story buildings and there's the convention center restaurant component that in concept will retain be retained in city ownership now all of the land on the rice coal peninsula is owned by the redevelopment authority currently and the concept is that we won't sell any of the land on the redevelopment on the peninsula that will enter into ground leases for that property so the concept here is 99 year ground lease to the developer for the hotel portion and the condominium site portion and that the city and or redevelopment authority would maintain ownership of the convention center portion of the site Steve just one quick question came to mind on the other side of the river the riverfront area things like that we have the same type of arrangement where the city has retained the property underneath all the buildings and we have land leases with all those same developers in the same way where the city has kept control of the actual properties so it's consistent with what we've done all throughout that development the riverfront on the other side of Sheboygan river is owned by the redevelopment authority as well some parcels owned by the city the Livesey parcels owned by the redevelopment authority and leased on the ground leases most of those are 85 year ground leases these are proposed to be a 99 year ground lease the same basic concept and the concept has been over the years that this riverfront property is very valuable to the city and in the long run we feel it's in the city's best interest to maintain ownership over that property so that while it may be a perception more than reality the city will have more control over the site long term all in present those leases that the city has on the other side of the river you said they're about 85 years is that for a dollar a year too? no, most of them are for the equivalent of the taxes on the land and I would say average like $1200 a year and none of those other than the harbor winds generate room taxes thank you I'm on a record of course objecting to the 99 year lease I also know I'm not going to get that change so I guess I have to live with it I guess one of the problems I have originally I've been on a council for 6 years now I started out with 5 years on the property all the times it was proposed that we buy this land and then we would sell the land to get back some of our cost now maybe the economics of this development doesn't allow that but I guess I have a problem that that was made without council's approval because certainly I thought we were going to be selling land even if we gave way to land we wouldn't be getting property tax on it I wouldn't have a problem with a dollar a year lease to get the project going for a certain number of years I just have a problem with it being a dollar a year for 99 years once this gets out of the TIFT district then whatever property tax we get now it gets shared with the schools and the county and so on I realize it's probably too late to do anything about it but I certainly would have liked to have seen the lease once the TIFT district has expired produce more money than a dollar a year and I think the council should have been informed up front when that decision was made that we were going to lease the land instead of selling it and that's what I wanted to say about that Thank you Mr. Chairman I guess one of the things I think the 99 year lease doesn't bother me in the least for a lease I look at a lot of things we do but most of the places where we have long term leases at a dollar per year are places that provide no tax revenue to the city at all kiddies camp at a dollar a year literacy council at a dollar a year blue line association at a dollar a year for land lease spoilage and childcare center spoilage and county conservation at Maywood spoilage and outboard club dollar a year but they don't pay any taxes this development will be paying taxes on the building and the properties will be paying taxes on the building will be paying taxes on the building will be paying taxes on the building will be paying taxes on the building $100 million and I think that makes up the difference quite handsomely and it also ensures that the city in the future 99 years from now if this building should fall apart and need to be replaced still owns the land it's on the city still has control of what goes there and I like having that option so I've been talking to people everywhere ask and maybe you can clarify this for them what is the redevelopment authority who are they and what the heck is a TIF district there's an awful lot of people out there that don't know and maybe you could just give us a simple explanation for the people listening on television. Sure alderman longerman redevelopment authority is a separate legal and political law created by the city council for the purpose of urban renewal and redevelopment the statutes allow for either two different types of agencies redevelopment authorities are have been around longer and that's what the city has had a redevelopment authority I don't know how far back it goes probably at least 20 years I'm sure longer than that before my time the statutes provided more recently for community development authorities CDAs as opposed to RDAs which are kind of a combination of what the city has currently with the redevelopment authority and the housing authority which we have as a separate organization under a CDA you can have housing authority and under one agency the city has two we have a separate housing authority which owns buildings and rents facilities to low and moderate income tenants the statutory purpose of the redevelopment authority is just that its jurisdiction is redevelopment of blighted areas within a city the statutes provide that once you have a redevelopment authority the jurisdiction for redevelopment goes to the redevelopment authority and is taken from the city council so it's really the redevelopment authority that has jurisdiction over redevelopment projects now saying that that's legally the case as a practical matter the redevelopment authority has its source of revenues and funding from the city and the city council so the city council statutorily has to approve redevelopment authority projects and funding for redevelopment authority projects so the council still maintains the purse strings if you will for redevelopment authority developments was there another? Tiff districts Tiff is Tiff is tax incremental financing and most states have some mechanism for Tiff districts some states call them port districts but what they are is a mechanism in which a community city or village can put money into a project within a defined boundary and as an incentive for doing that for a period of time recoup all the incremental taxes that are generated by projects that develop within that tax incremental district typically when you don't have a Tiff district property owner receives a tax bill that the taxes that are paid go some to the city city gets roughly 25% of the taxes some go to the school district some go to the county some go to the lake shore technical district or the technical district in the community when you have a Tiff district during that statutory period of time that the Tiff district is in effect all the incremental taxes from development incremental taxes I mean those the increase in the tax base from after the creation of the district all those taxes go just to the city during a window statutory window of time to help recoup the city's infrastructure expenses that goes into the tax incremental district to try to generate the development so it's really a financing mechanism for communities to help them rehab areas and and get development in this case this part of Tiff district 6 which includes the marina some of other parts of downtown and it's not a new Tiff district it's not being created just for this project and it's one of the obstacles we're facing here is this Tiff district has been in place for some time and it's life expectancy is due to expire in 2018 so we don't have a very long period typically you have 23 to 27 years in which to recoup your investment in a Tiff district here we're down to about 15 years left in the district so investment by the city currently and the rice peninsula isn't able to be recouped for as long a time as if we were to have a new Tiff district we are out of capacity so we couldn't create a new Tiff district couldn't dissolve this and create a new one because we're out of capacity we did get legislative help a couple years ago which extended the city's ability the time frame in which to expend project costs or project dollars in a Tiff district that can be recouped until 2004 so we've got that period of time in which to expend our public dollars that get recouped in the Tiff I'd also say we're working on legislation a possible legislative change to try to see if we can't get the Tiff district in this case extended from the 2018 date out four or five more years but that's definitely not a sure thing and we're not banking on that in this project thank you very much it's just two points that an awful lot of people were confused about and really don't understand and I thank you for your explanation I would say there are as the Great Lakes folks indicated there are two components of our ability our investment, the city's investment in this project one is through tax incremental financing increments the property tax is generated the other is through the room tax as you know we've recently increased the city room tax to 8% the proposal here is to capture the entire room tax generated from this project to pay for the convention center and restaurant and public parking area and so forth for this project so we're not basing everything just on the property tax but also the room tax the statutes allow use of room tax for convention centers okay getting back to the agreement mentioned the project overview gives somewhat of a summary of the project the second section is a definition section that has defines all the terms in the agreement that are defined terms third section is the commitments it basically says that the resort LLC that is the entity that Great Lakes companies proposes to create that will develop and operate the resort will construct furnish and equip the resort project and the convention center project and the condominium LLC this will be a separate single asset limited liability company that people in the Great Lakes companies will set up at its cost and expense will construct furnish and equip the condominium project and the city at its cost and expense will construct and install the public improvements the authority at its cost and expense that's the redevelopment authority will make the authority alone that's what's referred to as the 11.2 million dollar loan in your version of the agreement and as you heard the proposal is to up that by a million dollars to roughly 12.2 million now with the expanded convention center thank you Mr. Chairman Steve would you please explain again for the public what an LLC really is what is an LLC how does that LLC play what role does it play underneath the Great Lakes I understand that it will be created by Great Lakes for a single purpose live underneath them an LLC is the type of company that statutes allow for and have been very popular since the statutes were amended maybe 10 years ago to allow for limited liability companies and that's exactly what they are they're companies that can be created that limit the liability of that entity to that entity basically it's intended that these will be single asset companies that will have as their asset either the condominium project and the benefit to that creation of a limited liability company for the the principles or the members as they're called is that it limits their personal liability and the liability is limited to that corporate entity thank you well a little liability companies are a very common thing to put real estate in nowadays that's a common practice in reading this document I also was under the impression that they're also giving personal guarantees so if there would be a default they also have some liability where it's just a limited liability company without the guarantees there wouldn't be it's a common practice to put the building in a limited liability company and operating business probably in a corporation or an S-corporation and then separate the two so if the business goes bad it doesn't cause the building to go with it but the fact that there's personal guarantees is what makes me happy about this a limited liability company this house only needs to kind of hang and dry I appreciate you doing your homework you've read a lot I got a lot of questions is what he said is there any good truth in the fact that there's some personal backup yes and maybe we can turn to that part of the agreement the guarantee portion again the draft you've got and I don't have that draft right in front of me but I've got well now I do I think it's on page 25 of the copy you've got paragraph 11 all this language isn't necessarily cast in stone yet there's there may be some changes in here but basically the concept is that the the guarantors will guarantee the monetary obligations under the reimbursement agreement now I've since we've skipped paragraph 11 we've skipped over the reimbursement agreement and I wasn't able from this vantage point to see the numbers in that chart that Great Lakes folks have put up but that is a later version of what you had as the attachment to the document that had the two components of the reimbursement payments there's a real estate tax component and a room tax component the exhibit that was attached to the version you've got I believe to come to a total reimbursement payment that's an annual payment that Great Lakes company and the developer the resort LLC is required to make currently we're talking about on every October first starting in 2005 I think payment start in 2005 an annual payment that they guarantee that they will make and that guaranteed payment they get credit for the room tax is generated and the real estate tax is generated but if they come up short that's got to come out of their pocket now how do we guarantee that if they come up short that they've got it in their pocket to pay that's where we've got these guarantees under paragraph 11 and there's there's various levels there's as Alderman Ports mentioned there's personal guarantees of of individuals in Great Lakes company there's a guarantee of great by Great Lakes company ink there is a reserve fund that is $500,000 and that's that will be made up by the room tax is generated in 2004 whatever those might be plus whatever it takes to reach half a million dollars so that reserve fund will be half a million dollars that Great Lakes will come up with currently they've been talking with the Friends of Sheboygan with the their hope that the Friends of Sheboygan will assist Great Lakes in coming up with the balance of that $500,000 reserve fund but that's that's another level of a pot of money that will be set aside in the event of inability to make the payments under the reimbursement agreement then there's also a what's it called a guarantee deposit of $1 million that will be put up by the developer held in escrow in the event that there's default in under the reimbursement schedule so there's various levels of guarantees here in addition and I don't think it's in the guarantee section it's in the condominium section there's provision for setting aside an escrow fund of a million dollars for the condominium development now originally the condominiums and this goes back early on in the project condominiums we're going to be part of the resort project and basically one project as it evolved the developer is getting having separate lenders for the resort project and the condominium project and their lenders are placing a pre-sale requirement on the condominiums that they have to pre-sell the condominiums so that they can get enough money to build or so they'll get a loan for twice that to build the for every unit they pre-sell they'll get two units so the developer also is going to finance the condominiums through a public security sale they're treating these the condominium units basically as an investment vehicle as Tom and Mark mentioned they're going to be owned by an owner but they're going to limit to maximum of 60 days a year that the owner can use them as their own the rest of the time they've got to be in the hotel pool and will be generating room taxes and income to the resort just like hotel rooms so they're marketing them as investment vehicles because of that they've got to go through a number of public securities that is going to delay their ability to finance the condominium component the condominiums aren't likely going to start at the same time as the resort and are kind of on a different track the issue is the developer says they're going to build 64 condominiums what happens if they don't sell that many we've tried to address that in the condominium section by providing for a million dollar escrow that would basically be there until that's in section 40 of your agreements on page 56 and the mechanisms for the condominium development and the phasing have changed somewhat since your draft but concepts still the same be an escrow amount put in place up front by the developer that once they get 32 units built will be paid back to the developer at roughly 132nd of the million per additional condominium built and if if they don't build condominiums that money goes back to the city and redevelopment authority and but does count towards their reimbursement payments if they don't make payments so that's another level of protection on the condominium side the did we need a again different LLCs that's why we have two different million dollar agreements to back those up so they each cover their own LLC let me fix it somewhat the main thing is for a different purpose I guess it's insurance that the condominiums get built as I read this document they had many questions and as I read further a lot of them were answered to me to sign a good document that it answers questions but these guarantees I found quite interesting the half a million dollar guarantee is actually being funded with the room tax dollars it's like us giving the money for the guarantee when I read that I thought I didn't think I liked that idea so much and also maybe re-read the document to see what else I didn't like I didn't pick up when I first read the million dollar guarantee on the other project that wasn't an issue to me but going back and re-reading it after looking at we're funding the one guarantee with room tax dollars which is city money the condominium guarantee is holding five dollars a loan and putting in a guarantee fund and then if they don't build it we get 164th for each time so again it appears to me that the guarantee money is being put up by the city that doesn't sit well with me maybe I'm missing something there also in the guarantees if they're short on the property tax or the room tax guarantee in year one, two, three or four or whatever they have to come up with it but if there's an excess in future years they get paid back their guarantee and that again didn't make much sense to me they're supposed to be guaranteeing that the project is going to produce 41 million of assessed value and if they don't hit it at the start I don't understand why they should be paid back out of future profits also my biggest concerns the half a million dollar guarantee funded by our room tax is really what set me off on this document as I said in the beginning it was for this project I'm excited about it now but I felt like they were trying to pull the roll over my eyes by giving a guarantee that's funded with our money maybe somebody can explain the logic of that to me why are the 2004 room tax dollars being deposited in a fund as a guarantee versus using to pay off debt or something else which would seem more logical to me and I just don't see the other other thing and that I maybe just don't get it but maybe really wonder about the whole project when we have so-called guarantees but the city is putting the money in for the guarantees well unfortunately Rich Gephardt's not here tonight he could perhaps address some of these issues but the reserve fund the $500,000 that's been the discussions that would be comprised of the room tax generated in 2004 if any and I guess the issue is the project has to be up and running to generate room tax and it's really an unknown as to what that amount will be the financing has been structured so that the developer wouldn't have to make any payments on the guaranteed payment until 2005 so it was felt that whatever room taxes were generated could be put in a fund to help cover in the event that there was a shortage later on also the balance of the $500,000 would come out you know whatever the room tax comes up short of $500,000 and it probably will come up short of $500,000 in 2004 will be made up by the developer and the developer through the friends of Sheboygan would make up the balance of that I don't know if anybody else in the staff wants to address that I just wanted to say one thing is that that first million is cash from the developer and then the second the second cash guarantee is that $500,000 and that's a room tax with the friend so that million dollars is in place first and if I think in our discussions the million dollars they're putting up a million dollars cash at the time of closing so prior up front that was changed that was changed that was one thing that was insisted upon was that it was at closing correct? yes okay so there is a million dollars up front of their money first in the first level I believe is that what you were saying? there's then the contact you're working on correct and then the second backup is the half a million of the room tax and I think the thought there was because our loans don't kick until 2006 that we have to start payment it was better to put some of that money away for the rainy day type of funding in case we run into a problem getting off things immediately okay but the TIF we have to put money into this TIF amount money's coming from TIF on which we're gonna aspire it's I don't know 2006 or whatever so we have to put in money to fund the TIF when it's short and we got up to 500,000 of our own money seeing this account which when the TIF aspires everything goes right we get the money we start money I guess to me instead of having that reserve account I'd rather have the whatever the room tax is being used to pay off the TIF debts and I just don't understand the logic of the reserve account funding it with our own money come to the finance committee on Monday and argue with Rich over that but he felt it was more important you know the state got into a problem by not having a rainy day fund looking at to make as much insurances that this project's not gonna be put on the burden on the taxpayers backs from this project was to fund these things with as many safety nets as possible to try to eliminate any any future problems if they were to arise I believe but that's one thing that will be discussed you know the actual financing numbers will be discussed at finance committee next Monday so we can come back with the actual $2,272.32 type numbers right now we're talking in generalities but that was the concept anyways was to put money away for that and then also room tax dollars can only be used for tourism promotion and development so it doesn't necessarily mean that those excess room tax dollars can go towards paying off other debt that makes sense to me that's a good reason then but when it inspires that room tax dollars goes to the city and how does that apply then if you read the agreement at the end of 2016 or whenever the date is the $500,000 is touched the friends get back their portion and the city gets back their portion of the room tax dollars does that follow I believe the room tax will go on forever but you'll still have to be within the state statutes of how you use that room tax at a later date once the convention center is paid off so when that fund inspires we'll be restricted on what we can use that room tax for just like we are now and room taxes can only be used for celebrations for tourism and tourism convention and promotion so you will be those dollars even though we've paid off the convention center we'll still be coming in but they will be restricted under state law okay thank you I don't know who was next Alderman Eberg yes I think it was Jim I guess just for clarification the $1,000,000 letter of credit guarantees the TIF increment then there's a $5,000,000 and change a five year loan that basically we provide in terms of aimed over a bond that's paid back in five years the crest that I have also is how long are we out bonding for the convention center because where is our money coming from Alderman Eberg I'm not sure what you're talking about the five year repayment that the the concept is as it currently is it would all be treated as a redevelopment authority loan the $11.2 or the $12.2 million and it's the repayment schedule for that would be based on would be that chart, that table payments through I think 2028 and you know portions of that the TIF component would be paid off in 2018 and the room tax component would go longer originally weren't we looking at a short term loan for about five years to be paid back wasn't that one of the original I think you're talking about the mechanism that the city uses to borrow the funds that's really a rich question as to how we structure the financing to loan the developer the $11.2 or the $12.2 but that's that's a different question than repayment by the developer of $11.2 or $12.2 we issue short term bans before we go out for the bonding and then roll that over in order to cover the cost of the interest in the things the convention center though that five million or four point whatever million the convention center is actually going to be will be driven by the room tax dollars not the TIF dollars true but still we go out and bond for that money we bond for that money right be a 20 year or do we have any I guess I'd like to have some sense of I think we're not we're not hung up I think we're still going out with a 20 year because we're bonding it all together so it's going to be a 20 but we're not in the same I don't think we're in the same because the TIF ends in 2018 the tax doesn't and in 2018 so you could extend the bonding for the convention center longer than that but the dollars that are being going to be generated actually do take care of that in that same amount of time and the guarantees that they're guaranteeing on those dollars will pay off those loans under the original concept I believe if that's your question did we confuse you now and that's all of them in order thank you Mr. Chairman I actually received the answer to my question already so I don't need to proceed with that one and that well I turned you off and that involved a half a million dollars that room tax would cover for 2004 and that'd be my understanding they would have to actually generate that much room tax in seven months basically from June 1st to the end of the year and if they didn't they would put the balance so a factor in there so whatever it's not the city clear on the questions okay getting back to the document on section 4 ownership as said before the concept is redevelopment authority would own the land and would lease the component portions city would own the public improvements going out there the streets so forth the next several sections of the agreement discuss in the terms and conditions that would be in the the sub-agreements to the development agreement and those are paragraph 5 that deals with the resort ground lease paragraph 6 I believe deals with the condominium ground lease paragraph 7 you're talking about infrastructure what is the infrastructure going to cost us turn that over to Tom Holt right now we're still working on the numbers and going through the final design about the promenade we're looking at two to two and a half million dollars for along the whole river and we're looking at about four and a half million for streets sewers sidewalks, street lighting, trees along the river that metal we put up all along how much did that cost us that was 1.7 million for the seawall through a no interest loan and also the demolition is $300,000 the demolition remediation work that's going on down there the beach work for that eco trail at beach restoration will be 1.5 million is that in the grant about 160,000 the balance is borrowed this year under capital improvements or will be we're not even brought last year it was brought last year thank you thank you Mr. Chairman just to follow up question on that I've got a question on the ownership again, keep in mind the budget shortfalls they're waiting for us where's all that money coming from for the infrastructure coming out of the TIF itself being paid for through the increment generated in the TIF and for the street utilities and promenade is through the room tax generation that's been factored into the whole package there yes I may just go back a little bit on the ownership here page 10 towards the bottom of the fourth line each individual purchaser will receive the percentage interest that means they're going to be tax free property each individual owner of each condo is that what it means please sorry it means what each individual purchaser will receive the percentage interest in the ground lease which means that if Terry buys a condo he doesn't have to pay taxes on the property either no that's not true the lease holders will have to pay property taxes they will that's one of the advantages of the redevelopment authority when the redevelopment authority leases land for redevelopment the the lessee pays taxes just as though it were a real estate owned it's different from when the city leases land there's it's not taxable because the city isn't taxed but the statutes allow the redevelopment authority allow taxes to pass through to the lessee of a ground lease so all these ground leases will be taxed that's where the tax revenues are being generated from for this project is these leases based on the value of the improvements and the land value on the conference center us leasing it back to them there will be some payment in this type of a manner for that to I think this is maybe more an assessor question but my understanding is is the water park the resort the conference center the restaurant it's looked at as one project it's first assessed on the cost approach and then assessed on the income approach so the income that's generated in that conference center impacts the tax that they pay on the resort and Maria is shaking her head yes in the back so you must have hit it right on the head so they will be paying some taxes even on the one dollar lease it sounds like a one dollar lease we are able to generate taxes from that it's not just one dollar we have to get somebody to say up here Alderman Ports thank you let's follow up on Alderman Perez's questions as they said in their presentation their guarantees cover the cost of the city loans it doesn't cover the infrastructure they said best case scenario would be that they would cover their share of infrastructure cost which is roughly one third of the profit that's best case scenario infrastructure costs that you refer to are not built into this but they are projecting greater accessible values than the minimum guarantees which would help to pay for that but they're not in this project maybe I'm misunderstanding this condominium lease what my view of it is they're going to be taxed on the value of the condominium building they're not going to be taxed on the value of the land and then that's one of the problems they have with the condominiums is you have a dollar lease for the land you got 64 condominiums I mean she's condominium over her pain about one half cents for the land every year now if I'm misunderstanding that let me know because I pay tax on my building my house and I pay tax on my land and my house systems I figured it out my success at $35,000 I pay $1,000 $35 a year on my land and they're paying a penny and a half each condominium owner or less I'm totally misunderstanding something I understand that they're going to pay on the building but the one half cents per condominium unit doesn't seem fair to me and that's one there's two a dollar a year lease is one on the hotel and one on the condominiums and clarify to me if I'm wrong on that but that's the way I see it well I don't know if Marie could clarify that but I think they would be taxed also on the value of the land I mean it's going to be land and building even though the underlying ground lease may only be a buck the value of that is going to be more than what we're talking about the condominium so there will be a tax increment on the Marie could you come up to the microphone don't take the route that Mike Glypham took the market value is based on the land plus the improvement whatever a property would sell for so the assessment would be both for land and in the improvement on the land you can't sell the land they would sell the unit that would include the interest in the land so that would be the market value and a part of that market value would be attributed to the land in assessing property you look at the cost and you look at the income do you use the higher the two or the lower the two we use the best market value there are different approaches one is the cost approach one is the income which is generally used just for income producing properties such as a hotel and then we take a look at all the approaches and come up with the best one that is indicative of the value how do you determine what's the best according to Statute the market value is basically what a property would sell for so take a look at as we use comparable properties and then take a look at all approaches and come up with the best one so in regards to how much money they stick in this property first year you have an assessment and then if they don't fill their rooms or if they cut their room rates severely to fill their rooms that's going to impact the assessment well it's my understanding that there's a guaranteed payment right but I mean the numbers they present are nice results above that guaranteed payment that depends on them actually being able to sell their rooms or renting their rooms for the dollars they're hoping to get otherwise they'll end up below the guarantee right the assessment could be different than the guaranteed payment because the assessment we have to base it on market value and with the information that we have but the guarantee is something that they have negotiated okay Tom let's have one clarification Alderman Perez's question on the project I look at the whole peninsula as the project when Rich does his projections on the cash flow of the project we're talking about the infrastructure and the whole peninsula that's where the two and a half million for the promenade and the four and a half for the streets that's for the entire peninsula not just the 17 acres and Rich takes that into account and he's running his projections on that TIF and that whole area down there if that's any clear or not so some of that cost is added to this project based on how much of the area of the overall peninsula and the overall like say if this project takes up half of the peninsula half of those costs would be contributed to this something similar to that okay thank you okay got lots of red lights Alderman Wongerman thank you Mr. Chairman I have two questions one for Mr. Holton I've been asked by several people will John Q. Lunch bucket and his friends have access to the south pier for fishing and before during and after construction and the second one is for the chair but we'll get to that access along Fishman's Road temporarily ultimately the access will be through that main road that parallels the river and you have that circular parking that will be the new parking area for fishing with hopefully down the road we have plans for fish cleaning station restrooms facilities out there so it'll be improved access when the project is completed being the south pier project and I believe there's a green space area of part type to the corner if you look on the map on the wall up on that top is all public access for again for fishing fireworks type displays and park area in that outside of their facility up to the south northeast second question will the chair entertain a motion for a five minute break why don't we take a five minute break and we'll get right back 100% of the parking lot or just the portions of the convention center and what will that cost us we're paying for that portion as it relates to the conference center restaurant which is roughly half that lot and I believe it was in the neighborhood of 600 or 700,000 dollars don't look at me we don't have a solid cost for that half the parking lot but it's been split between half being through the convention center and half being through the resort yes and just another portion of a question of course this money which we would be loaning which is now up to what 12,600,000 somewhere between 11,5 and 12,2 somewhere there this is loan to them interest free is that correct the document says it's interest free but it's it's not your typical loan where there's a a promissory note as far as payments it's to be repaid pursuant to the reimbursement schedule which the numbers show exceed quite a bit the original loan amount over time so you know we're not just getting back 11.2 million dollars or 12,2 whatever the number is we're getting back significantly more than that in the reimbursement payments then say for instance this company would fold within 12 years what is our guarantees that we will still be continuing to get or more or less money back this again is probably best a rich kepphart question but general concepts with the with the reserve fund and the guarantee deposit of roughly a million and a half dollars we're figuring that let's say the project folded and shut down completely and so there was no room tax generated issue would be whether we could collect the real estate tax let's assume we couldn't for the sake of argument there'd be a million and a half dollars which would cover us on the reimbursement schedule for about 18 months the total shutdown of our income coming in and no other payments by guarantors or anything the likelihood is that we've got banks involved here as far as the resort lending goes and banks involved in the condominium the thought process is that likely the bank would bring in another operator or developer because it would be financially advantageous to the bank to do that to get the facility up and running again within a year or 18 months so that the income stream is being generated again and the taxes are being generated that's kind of the thought process behind the stop cap of the guarantee deposit reserve fund so then if the financial institutions that give the loans more or less place leans on facilities would we also be part of those leans we're agreeing in this agreement to subordinate our interest in the resort site and the condominium site to the mortgage of the lenders of the project and the condominium project so we'll be in second position to the lenders there I've got more questions for leasing the convention center of course we would lease this to them will they pay us to manage it then more or less and what will we lease it to them for do we have any ideas yet on to section seven the convention center operating agreement the way the document currently is is for the life of this agreement which the term of this agreement it's probably 24 years ending the end of 2028 that during that period that the resort LLC the convention center under an operating agreement without paying lease payments to the city or the authority but at the end of that period maybe you have the page and your copy it's on page 15 it provides for renewal options to extend the convention center operating agreement for five years each for 15 option periods the concept behind that is if all those options were exercised that's the 99 year lease term but those options there would be the resort LLC would be required to make an annual payment to the city each year during those extension periods in an amount that we don't know yet it would be determined at that time in good faith and reasonably the parties negotiating that figure and in the event that the parties are unable to agree on the amount of compensation for those extension periods an arbitration panel from the American arbitration association would render a decision as to what the lease payment would be during each of those periods so no lease payments currently on the operating agreement for the convention center but on the renewals there will be a payment as yet undefined as to what that is but the hope is that after a period of time we'll have some idea of what's being generated by the convention center really don't know what that is right now by the time we get to 2028 hopefully we'll have a better idea of what a reasonable figure would be I've just one more yet and this will end it for me at least for now the contract it does say that the city would use the convention center at no cost and of course general public if they would lease it would pay whatever the going rate is of course for us using it at no cost we would still be charged for using the facility for setup for cleaning equipment rental and what else I mean that's really not free anymore is it yes right exactly unless it was some city functions or whatever then we'd have to work something out with the to use the tables I'm guessing you're saying a table cost and things like that that may be associated but there wouldn't be an actual $200 a day rental fee besides that we wouldn't be charged that okay thank you Alderman Schultz thank you Mr. Chairman the first question is if the city is going to own the conference center and the developer manage it and no lease payments being made the property taxes what becomes how is do we get any property tax off that facility I think that's what Marie was trying to explain to us 15 minutes ago where she was addressing the condos though this is the conference center we're going to take a look at the whole going to take a look at the income that is generated and the income that would be generated from the conference center would be reported by the hotel and be considered as part of the value so in essence it will be part of the total value yes and thus taxable when we take a look at the value we take a look at the income approach and the cost approach and the market approach is this you basically use the income approach and you look at all the income that's generated and base the value on that that's one method evaluation you take a look at the income and expenses and base your value on that I mean there's there's more to the formula than that but those are the basic ingredients so the short answer is we will be receiving some tax off of the income that's generated through them running the conference center that's correct Mr. Chairman we seem to be asking a lot of questions I guess I'd like to go into this right now I started out by saying how can a late person such as myself possibly determine if a 62 page document has every contingency covered many terms appear to be repeated more than once for the LLC's and projects terms such as developer resort LLC condominium LLC resort project condominium project convention project with the same language referenced for all we have to trust the experts representing the city in a contract at this magnitude and I guess the question for Ann the question that I have was what was the role of Quarles and Brady in assembling this contract Quarles and Brady has a pretty prestigious law firm I guess I'm surprised and appreciative of the fact that we had Quarles and Brady were they part of the negotiations or were the advisory or you know what was your role yes we yes we were part of the negotiations representing the city I think we were pretty much all of the meetings that the city group had with the Great Lakes representatives we did draft the document with input from everybody all of the parties to the document okay and then the question I have to everybody involved in assembling the contract individually and as a group does this limit the risk to the city absolutely as much as possible I'm sure you feel it does but the question needs to be asked to hear your response if there are any concerns on your part either individually or as a group with the contract is everybody thoroughly comfortable with it why don't you start why don't it be nice to get somebody outside of the city's interest and to get start I think in answer to your question there are no safe havens there are going to be risks in any development you have whether it's this development or any other development there's always going to be some element of risk to the city with the development I think that the and I in negotiating this document took work very hard very hard to minimize the risk to the city did we get everything we wanted no you never do it in a negotiation it's just not possible it's the nature of the beast that there is give and take and so you have to give on some points and you get on some points I mean it's just the way it goes but I think we did our very best as I said to minimize the risk to the city whether we accomplish that whether the benefits of the development and versus the risk that's a judgment call and I think a policy decision that you're ultimately going to be called upon to make taking into account everything you know about the history of the city and the site and the people involved could you maybe just elaborate on some of that risk to the city I think some of you have pointed out some of the risk what happens if Alderman Bowman said what happens if the developer goes out of business and the hotel goes dark there's a risk there what happens if all of the guarantee money is used it's the kind of risk that you're asking questions about I mean I think you're recognizing yes that you know you can't have everything tied up in a neat little package the questions you're asking are questions about is there risk here is there not risk there and I think you're spotting the issues where there may be some risk but I you know I don't know that I can see those any better than you can in that regard okay thank you another one has an economic analysis been done by an economist we seem to have a lot of expert financial people but would an economist present a different viewpoint and I know Paula being an economic coming from economic development area and I think the representatives from Great Lakes mentioned that SDC had a market and feasibility study prepared and the project cash flowed based on the amount of hotel rooms condominiums and the conference center in the water park and that's what the city looked at I think it was back in September and decided at that point to continue moving ahead there's been an update to that study which I think you have some of the numbers in front of you that actually showed that with the shift that they made in the amount of rooms and the condos and with the market being basically the same for hotels that they even increased that room tax revenue and the developer by four million and the developer standing behind them and so that's the extra guarantee they're giving is on that four million and this was an outside firm outside of the cities in Great Lakes this was somebody hired just for that reason and that's why I believe it was Mark that made comment to my question that could the facility be successful without the conference center they're all somewhat linked that one can't survive without the other okay there's safeguards in place to eliminate the potential for a city subsidy to the conference center you know there's guarantees in here for some of the other aspects of it but is there a possibility that a subsidy would be required for the conference center and are there guarantees to avoid that nothing in the agreement currently that would provide for any additional monies put in by the city or the redevelopment authority into the project so you know I'm not sure if you're asking Alderman Schultz whether 10 years from now if the developer comes back and says geez you know this isn't cash flowing we need more money whether that's some scenario that's possible that they could do I suppose they could it's not contemplated in the agreement that we're putting in the money up front and that's all the money we're putting into it you mentioned 10 years what about 2 years could they come back in 2 years and say that they can't they could come back at any time and say anything I suppose and you know we could say no we're not going to put any more money into it the whole idea of going through all this is to try to address all the issues up front and all the contingencies up front and to address them up front and I don't contemplate the developer coming back to the city or the city saying you know we're going to put more money into the project but could that happen I suppose it could and then up to you but I don't see that happening that's one of the risks that Ann mentioned okay thank you it does the agreement our exposure is capped as far as our investment if developer starts constructing the project costs twice as much as they thought our investment is limited to the 11-2 or the 12-2 it doesn't incrementally go up or anything if there's cost overruns thank you thank you Alderman Schultz Alderman Manning thank you very simple question proposed initial prices for the two bedroom and four bedroom condos hearing those we'll have a sense of what the tax income would be from those properties and secondarily we'd have a sense of how quickly they might be selling gentlemen either one of you can answer please initial price for the condos two and four bedroom so let's say we accomplish 275 on average over the 64 units and I think you guys mark the market on your assessment if there's a sale at that amount call and assess value is that how you establish it initially we also consider the assessment and the distribution one here also okay so I think it's pretty formulaic as to what happens after a sale happens 275 quality average 2% that's 55 under the year in taxes that are produced from the condos secondly in terms of the timing of the sale it's always hard to predict but we've got a pretty good guess we've already a lot of interest in the condominiums the condo units in Wisconsin Dell's developers have been building them like crazy why because people have been buying them like crazy we think that having all of the unique elements the water park the quality of the resort we're going to build and the lakefront combined if they can sell very very quickly I think we can sell equally quickly in fact it's our goal to sell condominium units before the end of the summer if you can imagine that and to sell them off of what are good good plans that's certainly not what we've called for in the agreement we have penalties and protections built in for the city but that's not what we believe is reality all in the present thank you Mr. Chairman my question pertains to the risk issue here and there right now we seem to be thinking more in terms of pretty pictures and all the benefits there was a full page add in the paper explaining all the benefits of the program of the project I would want us to give this project more than casual consideration of all the risks that are involved and we've talked about a few but is there a way and maybe this is a rich question for somebody to put together all the risks that have been discussed and we haven't brought up but professionals have discussed people that we have hired to look into this that you have discussed that we can be exposed to those risks too and understand them I think Rich will address a lot Rich is going to address the financial questions and answers at the finance committee and then bring it back to a committee of the whole correct? another committee of the whole and we can address those exact risks that you're talking about a week from now we'll go through the actual financial things with Rich of what it would lay out there's risk of doing this I don't think it's a casual risk we're not looking at it casually we're spending a few million dollars here but there's a risk to not do it too and I think we've got to look at the amount of money we spent already on South Pier and what we're going to have to pay so I think we've got to ask all those questions if we wait and piecemeal it together over the next few years what would that look like and I think you've got to have all that information and compare all those projects to make a good decision I think we need to do that in the next couple weeks I understand all that and I agree with you I guess what I'm saying is I'd like to have benefits, risk weigh them together, let's take a look at it I mean if we're able to put all the benefits together in a list we should be able to put all the risks together on the list on the finance committee that can be done over the next committee of the whole and we're looking at it I mean these are risks that our professional people our employees have talked about that perhaps we haven't touched on and I think we should be privy to and we should get due consideration I agree we'll continue to do that I'm sure anything else, Alderman Pritz? Alderman Moody Thank you Mr. Chairman Great Lakes will have to answer on our page 52 in our draft paragraph 23 about local residents being able to use the water park it says the agreement shall contain a provision permitting the residents of the city of Sheboygan and their guests and the guests of all other hotels and hotels bed and breakfast located in the city of Sheboygan they have the right to use the water park for a fee now is that going to be I assume during off peak times and as the resort gets more popular would the local residents eventually be squeezed out of that ability? Our best guess at this time based on our programming and past experiences has been that we believe that the park will have some additional capacity even on full house nights when all the rooms are rented time of course will actually prove that out and then as far as a use rate we would just do whatever is customary and reasonable it's in our best interest to allow as many people into the park as we can as long as it is safe for all the patrons I don't think that answers your question Just residents of the city and their guests and people staying at local other motels and bed and breakfast but not someone who lives in Sheboygan Falls or Plymouth who wants to drive in is that what you're saying? My understanding and perhaps the attorneys can correct me on interpretation my understanding is that we are agreeing that it is a requirement of Great Lakes to provide access to those people but it does not legally preclude us from letting people from other communities Okay Thank you Any other questions Alderman? No that's fine Okay we got two more Alderman then we'll open up to the floor in the back everybody's been pretty patient back there I appreciate that Alderman Parts I have three questions left First of all a statement on the risk the real risk is that you build it and nobody comes you know we're going to really rely on them to market it Chamber of Commerce to market it it's a pretty exciting project people should at least come in the beginning maybe they won't come a second time that's a separate issue but I think Sheboygan is a nice place I think people want to come here and so hopefully I'm right in the way I think as I said I have three questions left the first one is on page 29 paragraph H this one I just didn't understand why it was there it talks about honor before 30 days prior to resort closing the resort LLC shall have entered into a guarantee maximum price construction contractor and it goes on and on is this an alpha we sign this contract and then they get their final cost and a set of 68 million is 88 million and they just walk away or what is the purpose of this provision I just didn't understand it I think the I think the reason that provision is in there is to make sure it's exactly what you're saying is to make sure that the projections as to what the costs of the project are going to be are accurate in terms of what it's really going to cost to build the project and although every effort is being made to accurately project the cost until the construction contract is entered into you won't know for sure whether those projections are actually right on the money and so we want to make sure before we close and commit to putting the city's money into the transaction that all of the costs are accounted for and that we know what the total cost of the project is going to be actual cost to the project or at least you know I guess I have a question here what about costs over overruns I just I think I understand the purpose of this you say okay this is our guarantee maximum price $68 million and my time $1 billion and it's $76 million is there is my understanding that if it costs $76 million that's their problem and it's not the city's but I guess I want to be clear on that that's right any cost overruns Great Lakes has agreed that they will pay for any cost overruns but I think we thought that it would be prudent for us to know at least at the start of the project that the numbers were all within the range that we thought they were going to come in at we didn't want to find out that in fact the estimates were 25% off or something and we start off you know having cost overruns so to speak before we even put the first shovel into the ground so I think at the starting point we wanted to have the costs as firm as we could have them realizing that there may be cost overruns and then in fact has agreed that they will pay those cost overruns Okay then all of them before you go on with your next question you know general concept here is sign the development agreement that doesn't necessarily mean the project is going to happen there's a lot of contingencies in here that both sides have to satisfy before it's go ahead time one of them is if they find that their costs are out of sight that they didn't project they can walk away similarly there's a lot of things where we can walk away if the numbers don't work out if we're not satisfied with the plans there's all sorts of outs prior to actually closing the deal that you know that are common in all redevelopment projects is you know you're constantly getting more information as you go along at some point you say yes it's a go or no it's not but that could still happen you know it's still possible based on if one of these contingencies isn't met and the other side isn't willing to wave them the concept is that either party can walk away at that point and it's been a great exercise and you spent your dollars hoping it would work out but it doesn't you know that's just one of the realities of this but it's hoped that once all those contingencies are satisfied or waived then you've got to go with the project well essentially then they're prepared to spend with our money and they're my 68 million on the project it comes in at 76 they can say we don't want to do it or we want to form really more from the city or we're walking away so that's basically what I'm understanding okay um page 51 paragraph 21 uh cost savings, cost overruns there it talks about cost overruns we don't uh have to chip in on that but it talks about cost savings 50 percent for the which is to be shared with the city 50 percent and resort LLC 50 percent this is the only reference of the cost savings and I wonder the projection is 68 million and a million for 64 there's 4 million of savings how does the city get their 2 million theoretically as the money is dispersed if in fact the estimate is 68 million and it comes in at 64 million there will be 2 million of the city's money that have gone out the door theoretically because the loans will not be fully dispersed because all of the money won't have been needed for the to take care of the cost savings okay now it's been a while since I read that but that's that's how it would I hope would work it's been a while since I read that that provision if they weren't going to build the condominiums right away or they couldn't get the financing the condominiums and I'm going by memory now they were going to get the 11.4 where it is and a million I was going to go in a reserve fund and they get the 10.4 right up front so there isn't 2 million that's not going to be held back also and again I'm going by memory I thought if the bank threw in the 12 million we would throw in our full 11 million so it would be wrong because it's been a well over a week since I read this document but I don't see where that's built into it this 2 million is going to be held back to the final cost I liked this paragraph 21 that we're going to have the future sender the savings but I couldn't figure out in the document how that was going to happen your answer scene is reasonable I don't remember the document reading that way it doesn't because it's how it would work I think is a practical matter the general contractor would just not submit let's say it came in with your using your example we had 4 million dollars that was not needed to be spent the general contractor just wouldn't submit a bill for that last 4 million and so the money would never go out the door it's not an escrow that would be held back for example the same as the other one you referred to for the condominiums well in construction contracts generally there's a 10% full back bills that would be paid I think we're just talking about cost savings if the project cost less then everybody thought it was going to cost no realistically that never happens this one a lot of city was going to get there 50% because I couldn't see it in the document and then the last question on page 56 paragraph 40 says the city wants the condominium closing to occur simultaneously with the resort closing but the developer has a form to see that it does not yet have a firm commitment for our finance for the condominium project has this changed or is that still an issue I mean they're talking to you they want the condominium sold in the first year do you now have the financing for the condominium project I think very shortly the term sheet probably an M&I bank which says based on a presale ratio of 50% if you build 16 units you get 8 of them if you get it we give you the funding for 16 I think we'll have a term sheet to that effect within the next several weeks it won't be hard to accomplish I don't see that as problematic so given your prior statement it doesn't look like there's going to be a huge delay in building these condoms we really don't think so thank you I said only one more thank you Mr. Chairman this was touched on I just want to clarify if something goes horribly wrong it's unexpected cost let's say you come to us you're saying Tom says we need $4.2 million that will be determined at the time where they'll come from or do we have an idea who will pay that money of unexpected cost I think it's going to be dependent upon where that unexpected cost comes from if it's an unexpected cost and they're building I know where it's going to come from you're talking about we have an overall project a project cost in excess of what we anticipate say $4 million too much Great Lakes has agreed that any cost overruns will be paid by Great Lakes and typically how that would work is that during the course of the project both the city and the construction lender will be watching the cost that there is enough money to complete the project and if all of a sudden more is needed than the balance of the two loans the principal balance of the two loans the lender would typically look at Great Lakes and say you've got to give us the amount of the cost overruns before we disperse any more of our loan funds that's typically how it would work and that would happen as construction goes and that would be the cost that we would expect and that would be the cost that we would expect and that would be the cost that we would expect typically the lender and the city will look at that and make sure that what's been paid for up to the point in time of the draw request has been paid for that the work's been done question relating to the increased capacity of the convention center we increased the capacity by 40% what does that do for our parking situation given you've got one person, one car that typically comes to conventions and I see the director smiling that's an issue that still needs to be addressed and it will be addressed during the planning process through the precise implementation plan and Great Lakes still has to go through that process I think on Wednesday night the zoning will be completed passed by the county council and then the next step is this precise implementation plan which addresses the parking issues we need to discuss that we haven't discussed that one other question you said one $250,000 on the price tag probably for people to do that hopefully that seems to be somewhat of a sticker shot if you could develop give us an idea of who might typically be investing in that because we're talking about a different kind of investor that's a passive investor that's looking to basically buy something over time I guess what cohort do you see out there that would be would find a project like this attractive and some potential advantages to someone to invest in a project like this almost all of the buyers will probably come from Chicago, Milwaukee maybe some from Fox River Valley that's where they all come that's where they come from in the Dells that's where they come from in Door County and to have a lakefront setting for somebody who's coming from Lake Forest Illinois at this type of price tag is relatively speaking a great value so that just as you say it's a different buyer profile I'm going to leave that back Mike on let's open up questions to the group in the back if you've listened patiently if you'd come to the Mike and give us your name and address just for the record James Boren 1526 Noel Crest Drive in Sheboygan we have a clarification on a question that Alderman Schultz asked from listening from before I understand that the convention center and restaurant are going to be about 30 some thousand square feet of the development and my concern is with the problems that we possibly are facing with the city with the shared revenue next year and the year after I think it's very important that we get as much property taxes or fees out of this development including the convention center and restaurant now Alderman Schultz or a city attorney mentioned that there's a possibility that we will be getting some property taxes out of the convention center but is that in the agreement and my idea would be that you should have something definite in the agreement that you're at least going to cover the fire protection the police protection and the snow removal whether that conference center makes any money or not on my commercial property over on Michigan Avenue I get a property tax bill every year the 20th of December whether I make any money or not I think Marie Ellis has addressed that the tax revenues are going to be based on this income producing property and typically income producing properties the taxes property tax is going to be based on the income approach in the as opposed to market approach or cost approach except in the early years when the cost approach should be used because there's no income yet but the income to the resort operator derived from the convention center and the restaurant will be factored into the value of the property which will get factored into the property tax value I still think the city should have a protection to at least cover city services that are being provided down there in light of the possible shared revenue loss and I think that could you have a right to negotiate that with any developer that comes into Sheboygan for payments in lieu of taxes to be in the agreement and that also protects the other businesses that are already down there you've got a lot of restaurants and bars down there that own property that are paying property tax every year and if this convention center and restaurant are not paying property taxes or even fees for city services you put them at a competitive disadvantage the developers require to make reimbursement payments based on the schedule whether there's property taxes there if there aren't property taxes there to cover those that's the developers cost they've got to make those payments whether there's any room taxes or property taxes generated so we will be getting revenue from the developer irrespective now if the thing goes dark and shuts down and the developer is gone we've got guaranteed amounts but and other than that we got hopefully a bank that will get some other developer in there but you know we will be getting payments to cover our debt whether or not the property taxes are there or the room taxes are there or not under that guaranteed reimbursement amount well it's my understanding that the developer will lease that to a third party to run the restaurant and the convention center is that right well somebody should be at least responsible for the city services that are being provided down there that's my thought and I think that should be in the agreement and I think it should be in writing that at least at a minimum you're going to get that whether that convention center or restaurant makes any money or not because it's over 30,000 square feet of that development that's the only problem I have with that's the only question I had otherwise I think the people that have worked on this job and I think we have to protect ourselves to at least get minimum fees for city services thank you thank you is it related to this last question quickly the convention center is owned by the city we don't get any taxes on the armory now either it's a city owned building the taxes that we end up deriving from the convention center even being there is when we had conventions we sell rooms we get some tax on the room it also increases the overall profit of the hotel which if it's founded on income it increases the property taxes that way but the convention center is a city owned property he did allude to one thing though that I had a question about which I pretty much knew I knew the answer is we're building a convention center and they get it rent free that we get 30 days use we're also now including the restaurant in there and it's my assumption that they're running out the restaurant and they're getting all the rent from the restaurant instead of the city getting any rent from the restaurant and maybe that would address part of his concerns if instead of them getting all the rent or you know that the city got part of that rent but isn't when they bring in income and he gets to tax it well that's part of it but I mean because if they don't rent it out they probably aren't bringing in income no problem with the convention center not being on the tax rolls but we do have a restaurant there that really could be part of the hotel instead of the convention center and then be on the tax rolls versus being part of the convention center and not being on the tax rolls okay welcome back to the chambers and give us your name and address good evening I am Richard W. Susha 15 North Point Drive in Sheboygan and a former city employee well here I am tonight in the flesh and not in the newspaper and not in the letter to the editor and first to comment I think it's interesting to note that while the local development group and friends of Sheboygan are aggressively pushing this project never once do they talk about the 11 million dollar police project I think the construction of both of those at this time are fiscally irresponsible now to the South Pier project it's a risk as everybody acknowledges therefore I think we have to really leverage more private money to city money I've reviewed this lengthy document and apparently now it's outdated already and I find safeguards in it on both sides but there are still some questions and I guess I won't get some of these answered tonight and I won't be asking specifically for some of these questions to be answered but I would like to see a dollar total for all public works improvements Xivity in my agreement was blank I have no idea what those dollars are if we're talking 2 million, 5 million, 10 million does it include and they're showing it the bridge from the river walk to the new development does it include that does it include costs for the roundabout change I don't know and maybe the alderman know but I don't see it in my Xivity at all and why should the developers reserve fund partly be funded by the room tax revenues that was answered I don't agree but that was answered and what I'd like to know is what the occupancy rate that they're using for projecting these revenues the new chart that came up tonight the guaranteed room tax went up from a million one to about a million nine $800,000 increase from a week or two ago and I have no idea where that figure is coming from and I don't understand why the condo owners can't have occupancy for more than 60 days a year now that's not the same agreement that and this sounds more like a timeshare arrangement than it does where you can live down there 10 12 months a year if you so see fit now in there it says that the city if they want to build the amusement park which I assume is the water park if they want to do it before three years that's at the city's cost I guess I would like that to be clarified and if the interest rate that we are going to go out and borrow is about hopefully 3 4 5% guessing now I don't know what the rates would be there good but assume a 4% and I read where our total indebtedness is going to go from about 45 million to 68 million dollars with these two projects that's a huge jump at least as reported in the Sheboygan press and now we propose to lend the developer 11 12 million dollars at a 0% interest rate that to me is a real sticking point we are not a lending institution and a bank wouldn't consider that arrangement and neither should the city and besides you are using property tax revenues plus the room taxes according to the last sheet to guarantee the revenues that's still 0% that's still 0% this is a risky project a good project but risky and I'm not against it but can we afford it that TIFF 6 will still be short 20 million dollars if all this happens 20 million dollars we will still be short in valuation and I remind you that this marina was built using a marina development agreement projections of a million dollars coming in from the marina operator we've never realized that million dollars and now we are putting this new project in with the marina project and hopefully we can help bail out the marina project down the way that's why this south pier development project must be factual not just projections and I say we cannot rely on the words trust us and I commend the SDC for gathering 2 million dollars for that marina project and for stepping forward on this project but there are too many unanswered questions for us to be jumping into this in the next couple weeks thank you okay anybody else from the gallery going going gone I'm Gary Dullmas 1901 South A Street in Sheboygan I'm here representing the SDC and the friends of Sheboygan I've spoken to you people before is first of all this is also this question which you asked of your council is this a good project is there a risk are you behind it I will tell you right now that you asked the Sheboygan Development Corporation and the friends of Sheboygan are behind it I appreciate what Mr. Susha said we have looked at this we've talked with great lakes for well over a year you've had Rich Gephart your finance director you've had the attorney you've had Tom Holton you've had your mayor you've had Anne from coils and Brady you've had bond council sit down with great lakes and negotiate a deal you had some of the finest minds working on this project it was not taken lightly yes there is some risk I don't know of anything in the business world where there is no risk I would like to open my doors tomorrow morning but I also know if I'm going to stay in business I'm going to have to take some risk we talked about to look at the overall project we can't forget that I think we do have to look at the overall benefits of the project yes you have to consider the risk but you have to consider the overall benefits of the project you have 300 plus jobs boy I think when Kohler company lays off 175 people to say we could have 300 new jobs is phenomenal I think that if we can have construction work go on in this city when we got general contractors and we got carpenters and we have people that aren't working is phenomenal I don't know how we'd ever get a convention center I can tell you that the friends of Sheboygan and the SDC would love to see a convention center if we can get a convention center it's paid for by a room tax dollars which falls in the legal statutes why wouldn't we get a convention center retail spin-off it's tremendous it's tremendous what kind of retail spin-off we can get off of a project like this other hotel usage they should be elated Great Lakes has got what 183 rooms 64 condos so is that 200 in some odd rooms not everybody's going to stay there other hotels are going to benefit from this also the other thing we got a 52 million dollar tax base we got a room tax that's going to pay for these things also I'd ask you and I encourage you to look at the document when you get the revised document there's guarantees in there when we looked at the document when the city looked at the document your negotiating team they made Great Lakes come to the table not once, not twice, not three times they just kept bringing them back Ann's one tough negotiator she brought on another million dollars just recently on the table as far as guarantees if we were go back one year ago and look at the rice cold property you had a bunch of oil tanks on it you had a bunch of storage tanks you had some dumpy buildings bunch of empty beer bottles if you turn around and look at those pictures that's what it could be it could be a world-class facility we've looked at this real close we've asked our financial people from the SDC from the Friends of Sheboygan to l