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Dubuque Ice and Recreation, Inc._Arena ConstructionMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Ice Arena Construction DATE: March 12, 2010 respectfully recommend that the City of Dubuque contribute $90,000. Dubuque bittri AII•America City I 2007 The Dubuque Ice & Recreation Center (DICE) project to build a 3,000 seat ice arena at a total cost of $7,687,605 on Schmitt Island to be home for youth hockey, community ice events and a new United States Hockey League (USHL) has encountered some unexpected cost overruns. DICE has worked with the architects and the builder through a value engineering process and reduced the overruns to $360,000. There are five parties involved with this project. Those parties are DICE, who raised the money to fund the project, Northern Lights Hockey that is investing $5 million to bring a USHL hockey team to Dubuque, the Dubuque Racing Association (DRA) who contributed several hundred thousand dollars to the facility, Dubuque Youth Hockey and the City of Dubuque. The City of Dubuque provided the land, a $50,000 donation and is improving the McAleece Recreation Complex parking lot. The City will own the ice arena, but it will be operated by DICE through a lease. DICE and Northern Lights have each agreed to pay 25 %, or $90,000 of the overrun. The Dubuque Racing Association Executive Committee is recommending at the March 16 Board of Directors meeting that the DRA contribute $90,000. In addition, through the value engineering process, a stairway that was designed to be on the exterior of the building was moved to the interior of the building for a savings of $60,000. I have a significant concern with this design change. This interior stair will now take up approximately 200 square foot of mezzanine space that was going to be used for overflow concession space during peak periods, for a special event area and for concession storage. It is in the City's best interest that the revenue potential of the facility be maximized so that DICE and Northern Lights are financially successful. Since the City will be the owner of the facility, the City must also think of the facility's revenue generating capabilities and versatility after the current lease period. Budget Director Jennifer Larson has identified a $168,000 transfer that can be made into the general fund for capital projects from the Kerper Boulevard Tax Increment Financing District as a reimbursement for previous expenses. I respectfully recommend Mayor and City Council approval of a $150,000 contribution to the completion of the City -owned ice arena project. Mic ael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Bob Woodward Brad Kwong, Managing Partner, Northern Lights Hockey, LLC Brian Southwood, Assistant General Manager, Mystique Casino Jesus Aviles, President and CEO, Mystique Casino Mike Van Milligen City Manager The City of Dubuque March 11, 2010 Dear Mike: This is to confirm that Northern Lights Hockey, LLC will contribute an additional funding amount of $90,000 as its portion of the $360,000 cost overrun of the Mystique Ice Center development project. This additional contribution will be made conditional upon receipt of the appropriate .revisions and /or addendum to the Ice Usage and Development Agreements that will reflect the various deal elements that have been agreed to in our correspondence with the DICE group, the DRA and the City. We are eager to continue moving forward with this project in anticipation of an exciting season in Dubuque next year and hope our contribution towards this is helpful. Thank you Mike. Sincerely, Brad Kwong Managing Partner Northern Lights Hockey, LLC March 12, 2010 Mr. Mike Van Milligen City Manager City of Dubuque, Iowa 50 West 13th Street Dubuque, Iowa 52001 Dear Mike: DUBUQUE I CE COMMUNITY RECREATION PO Box 1816 • Dubuque, Iowa 52004 -1816 With this letter I want to bring you up to speed on the construction status of the exciting new community project, the Mystique Ice Arena project. Construction of the arena is on schedule and we continue to plan to be open in mid- to late- August, 2010. The foundation is complete, the main supports and trusses are up, and roofmg should begin next week. As part of the discussion and negotiation process when the arena was expanded from about 40,000 square to about 66,000 square feet, the architect firm; Larrison and Associates, in conjunction with the builder, Epic Construction, solicited estimates of the additional expense to construct the larger building from suppliers and subcontractors. The resulting $6.6 million estimate was used to negotiate and agree to the investment by all parties, including DICE, the USHL team ownership, now known as Northern Lights Hockey, LLC and the Dubuque Racing Association. The intent was to have a "fixed price contract" after all final bids were received in the late fall of last year. During the final bidding process, nearly all components came in under the estimated value. Indeed, 36 out of about 40 major construction elements came in at, or below, the budgeted amount. Unfortunately, the other four have come in significantly above the budgeted amounts. These large - scale elements include mechanicals (HVAC, plumbing and electrical) as well as masonry. Through the "value engineering" process (taking out items that are unnecessary, purely aesthetic or over - engineered) we've been able to reduce the over - budget bid amounts to about $360,000. To reduce further would significantly affect the users in terms of functionality. The low and medium impact value engineering changes agreed to so far include, but are not limited to, such items as electrical load capacity, lighting type, restroom fixture features, unnecessary air- handling units, and type of base fill under the foundation slab. In addition, bringing an exterior stairwell inside the building shell is also part of the process. During the last 30 days, after making all of these cuts to the project (totaling over $500,000), all parties have agree that is far preferable to look for additional funding than to make cuts that go "to the bone" and significantly affect the building usability, quality and long -term prospects for users and revenue. These undesirable cuts include removing locker rooms, significantly lower seating and other very noticeable and painful changes. To that end, all four parties (DICE, Northern Lights Hockey, the DRA and City) have discussed splitting the difference equally, $90,000 per group. To date the DICE board has unanimously voted to be personally responsible for its portion of the difference while it conducts additional fundraising . Similarly, Northern Lights Hockey has made the same commitment. This week the Dubuque Racing Association is considering the request, based upon a positive recommendation from its Executive Committee. With this letter we request that the Dubuque City Council also contribute $90,000 to the total. We believe this will finally complete the funding and bidding process, allowing us to finalize the construction contract and sign a fixed- priced contract with the architect and builder. Under those terms, any additional overage will be the responsibility of the builder, not the development group. Thank you for your previous and on -going support of this wonderful project. We look forward to cutting the ribbon late this summer on a first -class facility that the children and families of Dubuque will enjoy for generations. Sincerely yours, ff Bob Woodward III President Dubuque Community Ice and Recreation Center, Inc. Cit $160 , 0001.00 DICE $901000.00 DRA $901000.00 Northern $903000.00 D a to rul /0 L ' Da 1, d m 1 y/ 11 j ji jjq �ii Mlb G IE ew e r/4 pio MA► 8 o' R Dubu I:A 5001 19 /04 Ir v Dated NOR THERN LIGHTS Y L LC, SUCCESSOR TO BATTLEFIELD U U , LL Brad ate M anag ing eo` �, Approximate B,ui'ldin� Size: 62,;340 s.,f. Main Level' 28,,965 s.f. Concourse L,eve' Approximate value:i $6i.276 mi;llion (excludin owner-supplied items, de!s,i' costs and e like Zamboini, etc.:).