SPECIAL JOINT MEETING
OF THE COUNCIL AND COMMUNITY CLUBS OF THE CITY OF NOVI
MONDAY, JULY 19, 1999, AT 6:00 PM
ACTIVITIES ROOM-NOVI CIVIC CENTER-45175 W. TEN MILE ROAD
Mayor McLallen called the meeting to order at 6:07 p.m.
ROLL CALL Mayor McLallen, Mayor ProTem Crawford, Council
COUNCIL: Members DeRoche, Kramer, Lorenzo (arrived at 7:14 p.m.), Mutch (arrived at 7:15 p.m.), Schmid
ROLL CALL Members Flynn (absent/excused), Herbert (absent), Jaussi, Kenney (absent/excused),
COMMUNITY CLUBS: MacDonald, Russell, and Senter, Ward
Others in Attendance: Bob Shaw, Dan Davis, Dennis Watson, Tonni Bartholomew
Mr. Rick Pantaleo came before Council with concerns about the Childrenís World facility on Ten Mile Road. He also spoke on behalf of his wife, Nancy, the Cilello family and three other residents unable to attend. He referred to a letter addressed to the Council from Mr. Pham of the Planning and Community Development Department, outlining problems of the location of the dumpster. Mr. Pantlaleo commented the residents have been asking for assistance with the problem for four weeks. The residents were not sent a copy of the letter or given any information regarding the dumpster problem from Mr. Pham since July 8, 1999.
Mr. Pantaleo commented Childrenís World is progressing quickly to obtain their certificate of occupancy. The dumpster is placed approximately 45 feet from the lot lines, which does not violate the distance ordinance; it does violate two other city ordinances. There will be odor generated with the dumpster. He requested the situation be placed on the July 26th Council meeting agenda. Mayor McLallen commented the petitionerís item maybe added to the agenda for the next Council meeting because there is no background on the issue tonight.
Ms. Michelle Bononi has concerns about how the ice arena facility has been operated and the business practice of the city. She commented this is not the time to finger point or lay blame. She expects more from Council than discussion during the meeting.
PURPOSE OF SPECIAL MEETING: Joint meeting between the City Council and Community Clubs of Novi for the purpose of Ice Arena Discussion.
Mayor McLallen commented the Council is trying to review the issues that have been raised concerning the Ice Arena. The goal of the meeting is to develop a plan to resolve problems that have been identified and to hear recommendations. A letter from Mr. Seyler dated July 7,1999 and documents from Mr. Davis are the focus of the meeting.
Mr. Davis commented upon notification of the Cityís Intent of Termination, Mr. Seyler followed up with a correspondence addressing a variety of issues. Mr. Davis noted his response letter was to extract out sections and respond to the history of the project.
Mayor McLallen commented Mr. Seylerís letter would be addressed in stages. The first section to be discussed regarded the Building Authority and what he felt was a time lag in the creation of the arena, which was different, than he originally projected. However, while that maybe true because the City did change the way the project was funded, he had ample time to change plans to accommodate the new finance mechanism. Council chose the finance mechanism because there was approximately $200,000 a year interest differential. The Bond Council recommended this direction. Mr. Davis commented by recommendation from the Bond Council, a review was done on the potential of a revenue bond as proposed by Mr. Seyler. This bond is sold through the state of Michigan via the Michigan Strategic Fund. In theory this concept of funding probably would have taken place, but the building was going to be owned by the City of Novi and leased out for operation. It is a situation where bonds cannot be sold because there is no collateral. The Council made the decision to go through the Building Authority after receiving all the information.
Mr. Watson commented the notion of going with the revenue bonds is a method of financing. It was a proposal that came from Mr. Seyler in his capacity in helping with development of the Ice Arena. Based on Mr. Seylerís advice, the City spent a lot of time and energy pursuing this type of financing only to find out that would cost the Ice Arena considerable extra amount of dollars in interest per year.
Member Lorenzo asked if the City went with the revenue bonds as opposed to going through the Building Authority, would the full faith and credit of the City been pledged? Mr. Watson commented the way Mr. Seyler proposed the situation, the full faith and credit of the City would not have been pledged and that is the reason why the bonds would entail considerable interest. The revenue that would come from the Ice Arena would back the bonds. The bond market would feel less secure.
Member Lorenzo asked if the project failed who would be responsible for the deficit? Mr. Watson said it would depend on what City Council wanted to happen in the event of failure. If City Council wanted to keep the Ice Arena in operation, they would do something similar to what is happening currently with the deficit, if the City or Community Clubs did not want to pay the bonds, then the arena would fail. Member Mutch said the bonds could be sold and never advance. It might never have gotten to this point if the advice of Council had been to go a different route because the bonds would not sell. Then Council would not have to deal with whether a full faith credit was behind it.
Member Schmid said he is angry about the position of the Ice Arena and would like to comment on some of the actions taken or not taken concerning the arena. He asked Mr. Davis when he first met Mr. Seyler and when this project was first spoken about. Mr. Davis said it basically started in 1992 with an Ice Arena Implementation Committee under the Parks and Recreation Commission. The following year the solicitation of proposals was sent out for companies to build and/or operate an ice arena facility. The City received 5 or 6 proposals varying in ranges and services. The proposal Mr. Seyler provided included the seeking of revenue bonds, the City would provide the land, the revenue bonds would be sold through a Michigan Strategic Fund initiative and the operations of the facility would be under a management contract. After a review by the Implementation Committee, it was recommended to pursue this avenue and was authorized by Council. That is what was done until they reached the point to ask their bond counsel, City Council at the time, and administration to see if this was possible. They felt that the feasibility studies justified that there was a need for such a facility and the best way to implement the type of building they sought. This is where the change in financing took place.
Member Schmid said that in 1993 we knew Mr. Seyler, his capabilities, personality and background running ice arenas. It is amazing that nobody thought of checking if the Revenue Bonds would be the way to go with this project until the very last instant. It seemed to Member Schmid that the City Attorneys, Finance Department, City Council, Parks and Recreation Department or someone should have realized that Revenue Bonds would not work. Member Schmid said he thought the bonds would work but the interest payment would have been higher because the facility would be built. However, he agreed that the ultimate course was correct but caused a substantial delay.
Mr. Davis said many things were occurring at that time. There was a change in Council. Council wanted to see what the outcome of the Farmington Hills Ice Arena Bond Proposal was. Which created a delay of five or six months.
Member Schmid was more interested in the five to eight month delay. We could have known about the Revenue Bonds four years ago. Member Schmid said he was one of several people who should have realized that the Revenue Bonds were not the way to go.
Member DeRoche thought Mr. Seyler had the right idea by going with Revenue Bonds and we should have continued with them. Mr. Seyler was probably doing us a service by saying that was what he wanted. He asked if any red flags went up when he said the city is going to give you the land and build you the road for free and we are going to allow you to use our credit rating. He thought it was significant that someone with an excellent credit rating, that owned the land and got the road free and clear could not build a facility with bonds and make it work. What occurred when that happened?
Mr. Davis said about that same time the sight was not secured. The issue of zoning of the Eight Mile and Beck location was still under consideration by Council as a potential sight. As far as Revenue Bonds we were looking at delivering a facility to the community that would not require taxation to the community but would be paid by the users of the facility. When we were looking at a favorable interest rate vs. a higher interest rate because of the Revenue Bonds, we still felt it could be done without kicking into the full faith and credit of the City to underwrite that cost. Mr. Davis said they wanted the operations of the facility to pay for that but at a reduced rate. He said it was a flag of caution saying how could this be done more efficiently.
Mr. Shaw said in late 1992 or early 1993 they did sit down with Mr. Neiman and discuss the various financing options for the rink. Revenue Bonds were discussed as well as the direction we took eventually. When the proposals for the Revenue Bonds were received the various options were discussed and we selected to pursue the Revenue Bond at that time. After the successful sale of the Bonds by Monroe to build their ice rink, Mr. Neiman came back and explained how much money could be saved. We decided it was the right way to go because of the savings. Both options had been looked at for a long time until financially it was very clear which way to go.
Member Schmid said wasnít it determined that if Revenue Bonds were sold there probably would not be enough money to pay off the debt.
Mr. Shaw said it made it a lot simpler to pay off the bill. It would also give us a better chance of paying for the rink with the limited G.O. Bonds.
Mayor McLallen said there were two financing options on this project from its beginning in 1992 through the decision that Council made to choose the G.O. Bond as a way of financing. At the time the financing decision was made, the consensus of Council was that it was the most economic form to utilize. The allegation by Mr. Seyler is that this changed his entire business plan and set it back by a year. Mayor McLallen asked if Mr. Seyler had been hired at that time?
Mr. Davis said Mr. Seyler was involved with the process from the time it was recommended by Council to negotiate with him under a development agreement back in 1993. He was involved with the whole process.
Mayor McLallen asked if he had proposed any type of different business plan, did he note this new type of funding up to that point? Did the change in the communities financing mechanism cause that individual to go back and change his business plan to reflect the difference?
Mr. Davis said he brought excerpts from his business plan for Councilís review tonight and it was updated in December of 1996. It was used as the basis of establishing part of the Economic and Feasibility Study that we requested and was reviewed by Plante Moran. All the information that was in the business plan was basically followed. What changed between December of 1996 through the actual construction period, was that some information was updated to reflect the one-year change in demographics of the community, etc. One of the items that he mentioned and talked about was market saturation. It is in that business plan and feasibility study he called out back in 1996 that there would be a need for ice services in our area based on the demographic information that was current at the time. That included, within the executive summary of his business plan, the soon to be built Farmington Hills facility and the West Bloomfield facility. It also included the Novi facility too. We were still well within what Mr. Seyler felt under his feasibility study, the market needed of ice arena surfaces for this area.
Member Schmid said the primary reason he wanted this meeting was a direct result of what is happening with Mr. Seylerís letter. He needed to know what was accurate and true.
Mr. Davis said as Mr. Neimanís letter states we were reviewing with Council in January of 1997. His recollection was that the articles for the Building Authority came before Council in March of 1997. Mr. Davis said he was accurate from the standpoint that it was in the fall when the Building Authority established the G.M.P. Council said that the financing would run through the Building Authority. April through September of 1997, the Building Authority members were involved in the discussions of the contract with Mr. Seyler and the Rudolph/Libbe Company. The Rudolph/Libbe Company were the general contractors for the project. The discussions were to settle into an actual design build agreement and G.M.P. price for the project. The process took four to five months and addressed a variety of issues that the Building Authority was concerned about and wanted addressed before the contract was signed.
Member Schmid so there was a downfall of $600,000.
Mr. Davis said it changed dramatically but I disagree with that because we established a G.M.P. of $6,998,000. There were some items within that needed to be addressed concerning winter conditions during construction, what the fee would be for architect and engineering services and contractors fees. That was changed and modified by the Building Authority.
Member Schmid said the 1996 document cannot be relied on or pertinent for what is being done in 1997, 98 and 99.
Mr. Davis said in December of 1996 we moved forward and were dealing with this within a six months time period. The Building Authority was established and approved in March 1997 and the G.M.P. was established in August of 1997. Also, within their calculations or projections those actually stand three to four years. He had his first, second and third year lease periods and projections that were attributed to all those calculations and a part of the feasibility study. Within the 1996 document there was projections for three or four yearís worth of time periods of operation.
Member Schmid suggested that things happened in those few years and maybe we should be looking in another direction.
Member DeRoche didnít think the letter was a sufficient defense for Mr. Seyler. He said the items used to terminate Mr. Seylerís contract were not addressed in the letter. Member DeRoche reiterated what Mr. Davis said about the contents of the letter, that it was accurate regarding the Building Authorityís decision to renegotiate caused the time lapse. Also, that the end result after negotiation was at least as expensive or possibly more expensive because of the time of the year it was being built.
So is that paragraph generally accurate?
Mr. Davis said, again, there was a five month time frame in which renegotiations took place. If we had a G.M.P. established earlier, we would not have broken ground until May or June. We were still looking at an eleven-month construction period. That would have put us into potential opening the following year around May of 1998. Which is not a good time to open a facility because youíre at the very end of the hockey season and coming into your weakest part of the rental year. It wasnít necessarily an issue that we lost a lot of revenue because of that five months because we would have locked ourselves into having the facility done in May which is the weakest point of the ice use schedule.
Member DeRoche understood but was asking if it was accurate that there was this delay. Mr. Davis said absolutely.
Mr. Shaw said there was another factor involved. Center Ice Feasibility Study was in December of 1996. It was based upon an opening 1997-98 season. This indicated that he was looking for a very short time period for construction. He had been saying six months for construction. When it came time, very late in the negotiation process with the Building Authority, the six months became eleven months. Up until the late spring of 1997 we were looking at a six month construction period and then Rudolph/Libbe told us it was going to be eleven months. So it wasnít the only delay that was created by the Building Authority, but also that the construction schedule was extended by the contractor five months.
Member Lorenzo asked if there was any other consideration or negotiation with any other management firm?
Mr. Davis said that strictly on a management basis, there was not. In 1993 when we took the RFPís we had sought five or six proposals. We were looking for what was the most inclusive type of proposal to take us through design, development and management. Basically, that is what Mr. Seylers proposal did and that is why he was selected.
Member Lorenzo said even though this particular person didnít have any experience in successfully managing an ice arena, you still didnít search for a candidate who was more competent, more experienced and more successful in managing an ice arena?
Mr. Davis said in the beginning we were looking for a full package. When the financing changed, that changed things, obviously, from the financing standpoint. So, when we did backgrounds on him we did do due diligence. He did run an outdoor dome covered ice arena facility for the City of Detroit. What he had laid out to us in his proposal is that he would be hiring people with experience. We had the right to accept or reject his recommendation for an on site general manager for the facility to insure that we would have someone that had experience.
Member Lorenzo said what most concerned her was the letter and the allegations. One of the things that concerned her about the letter was the correspondence from February 16th and March 16, 1998 to Mr. Davis. She asked why the letters were never forwarded to City Council? It was mentioned that they had been forwarded to the Community Clubs. She said from her perspective he was changing business plans in those letters. One indication said that the Board reviewed the contents and took no further action on those letters.
Mr. Davis said the February and March 16th letter came to him as the Administrative Representative to the Community Clubs. Member Lorenzo asked if those letters were forwarded to Mr. Kriewall? Mr. Davis said they were not. They were management issues of the ice arena and forwarded out to the appropriate board, which was the Community Clubs Board, which was appointed by Council, for their review and follow up. They did look at those letters and the main issue that Mr. Seyler spoke about was the follow up to the registration that took place on February 8th conducted by the Novi Youth Hockey Association. It was their first inaugural season of registration and the sign up far exceeded the expected 1,000 kids. Mr. Seyler had concerns about the initiation program that the heavy influx of kids registered being of the younger age groups. We could accommodate them this year. His main focus and concern was what would happen in subsequent years of operation. When the Board looked at it they said they were aware of the problem and it was something they would address on an annual basis as it came up when ice allocation needs were discussed at the Board level. Members of the Board said if we need to adjust how we assign ice, especially during the initiation program, when they give out single ice surfaces per team, perhaps we need to double up. If they need to go to another arena and buy ice that is an alternative.
Regarding the March 16th letter and its reference to the impact on the initial budget is roughly regarding the ice allocation. Originally Mr. Seyler indicated that he wanted 78 hours allocated per week. When it was brought forth that the amount of registrations received by the Board actually allocated 92 hours. The 92 hours included high school hockey. This was done back in February and March of 1998. Mr. Seyler, within his business plan, talked about going up over 100 hours in ice allocation for youth hockey. It is within the range and it is a matter of keeping a balanced program within the facility with close to 1,000 kids registered. We already had a demonstrated need for providing ice surface allocation for youth hockey. Then the fee for the program was discussed. In the business plan it calls for $160.00 an hour.
Member Lorenzo thought it said in Mr. Seylerís business plan that whatever the market would bear was the rate. If other communities are selling their ice time for $200 an hour and people are buying it then that is what the City of Novi needs to do as well.
Mr. Davis said the Board did do a comparison survey of other facilities to see what ice rental fees were going for at that time. We felt that what was being sold at other arenas, Farmington Hills, Compuware, Southfield, Plymouth, etc., and again, the projection was set up for 1998 for $99.00. We went to the second year rate. The first year was listed at $150 or $155. It was already established as the rate for 1998-99. It was already moved up to accommodate for inflationary increases. Basically, the Board said we did a survey of what other facilities are charging and looked back at the business plan and said yes absolutely, could we get $200 and hour. Probably, if you sold to individual ice sales. The Board wanted to follow what was projected in the original business plan and that was the $160 and hour for the time frame of 5 to 10 PM.
Member Lorenzo said out of fairness to Mr. Seyler on this issue, Administration said they saw this as a change in or adjustment in his business plan some time between February 1996 to March of 1998. Member Lorenzo stated she stands by the Council decision to terminate Mr. Seylerís contract. She didnít think Mr. Seyler had the experience to successfully run the operation and thought he proved that in the past year. Based on this and other operational deficiencies, that he did not have the qualifications and experience to run this facility.
Member Lorenzoís greatest concern was that they hired a management company to manage this facility and then we had a group of very dedicated but inexperienced volunteers second-guessing the management company. She did not understand that. She went back to the business plan and both sets of business plans, Mr. Seyler expressed it was his strong suggestion that we do not have inexperienced volunteers managing or co-managing this facility. Member Lorenzo said this falls squarely on the shoulders of Council because they approved the contract and gave the volunteers latitude. Her question was who decided to give Community Clubs, the latitude to co-manage this facility. Who wrote this contract?
Mr. Davis said the management contract was a document that was put together by Community Club Sports, the City Attorneys Office, Administration and Mr. Seyler and finally approved by Council. He did not believe that we were co-managing the facility. He felt they were over seeing the management of the facility as a supervisory board much like Council.
Mr. Davis said Council appointed a diverse group of residents in the community who have a variety of background experiences from attorneys, figure skating, facility management, etc. These people brought all those skills to the table. They would bring recommendations to the board and they were reviewed with full due diligence. Some things were accepted and some things were not.
Member Lorenzo said she admired the dedication and efforts of the volunteers but felt that they were not experienced in managing a rink.
Member Crawford asked if the option would be that Community Clubs did nothing?
Member Lorenzo said she wanted a management firm with expertise and give Council this information in black and white. She did not know what other advisory role they could play, but certainly not to the degree that they have been involved. She said it would be her vote that Community Clubs be given a much smaller scope of advisory activities if not disbanded totally.
Mr. Shaw said to clarify the issues on page 86 of the feasibility study the rates used for this study were $165 per hour for 1998-99 which are exactly the rates that were used. On page 102 in the business plan there is Senior Hockey that begins at 10 PM. The letter didnít do anything. He was trying to say that there could be problems in the future. We were not overriding him we simply said letís stick with the plan that he proposed. He said 76 hours when we had people in last week talking about efficient arena operations. They both told us that youth hockey should have about 90 hours per week and that would be their plan as professional managers. His plan, limiting it to 74, was not an effective plan. Mr. Shaw thought that Community Clubs, by not overruling him, was sticking to good management practices.
Mr. Shaw said Community Clubs has been trying to get them to manage the arena properly. They have not been fulfilling the obligations that we felt they should be fulfilling. He said they had been trying to give them direction when they were not able to improve the arena financially.
Mr. Ward said the direction of Community Clubs as originally designed by Mr. Seyler, was embodied in a number of documents. Principally, as a result of the financing changes, the status of Community Clubs changed from a much more active managing entity to an advisory board. We have allowed him to manage and expressed our concerns when we felt uncomfortable. In every instance we have been sitting back as successful business people analyzing what he has been doing and offering our suggestions. Mr. Ward said they were very interested to see the new manager. A woman who had experience managing a facility in Westland and a background in figure skating was hired to manage the arena. There was an enormous amount of time put in by volunteer people long in advance of the opening of the facility to create a youth hockey program.
Mr. Ward concluded that at no time would they have thought to look at themselves as being co-managers. We did not have managerial authority. We expressed our concerns and thought those concerns may have resulted in the decisions that Council made. In reviewing Mr. Seylers letter, it was noted that a number of concerns that were expressed to him were not addressed. Mr. Ward said he put more weight on the promises that were unfulfilled regarding spring and summer programming and a continued lack of adult hockey sales. Also, there were problems with an instructor who was being boarded at the facility who had a lack of the appropriate credentials to work in this Country. Mr. Ward felt these were significant concerns and thought they were a part of Councilís decision making process. Mr. Seyler never addressed them.
Mayor McLallen said we have a fair understanding of how we got where we are. The question now is where are we going and how are we going to improve the destination. The destination is to continue to have an excellent skating facility owned by this community and managed in the black. We obviously have some concerns with the chain of authority. After a years experience, we have a beautiful building that needs some upgrading and we have learned what we do not want. Perhaps we can leave here tonight with a game plan of what that this group feels it can do to take the Arena from where it is today into the black and providing a recreational amenity for the community.
Member DeRoche said he would like to see it as a privately owned facility. He has expressed his desire to have businesses owned by business people, making money. There are many things in this community where the city loses money to provide services to the residents. This is done all the time, especially in the Parks and Recreation Department, and it is perfectly acceptable. This is not one of those things. He wanted to walk away with confidence that the Community Clubs and the Council is on board with the concept that the most important thing is that the arena starts making money. The facility needs to start running like a business, bringing in revenues, bringing in the activities it needs to be sustainable. This will cause problems in the future if this trend continues because this is not an asset that anyone wanted to be paying for or subsidizing.
Mayor McLallen suggested Council ask the members of Community Clubs what their plan is?
Mr. Davis said following the notice of termination with Center Ice Management there is a short time to go out and look for a new management company. We are in the process of doing that now. Last week the sub-committee of Community Clubs interviewed four management companies to come in and seek proposals to operate the facility. The goal is to narrow them down to two, and then bring them two companies back in for follow up interviews with additional information including business practices, business references, financial data, principles of the companies and how they propose to run the facility. They have all been provided our history and they know what is going on with the facility. They know what the budget projections are and what the deficit is. They have a very clear understanding of the picture. The sub-committee, based on the interviews and if theyíre comfortable, will bring a recommendation to Council for their review. An interview can be set up for Council, or whatever Council desires as a means to select a new management company. Mr. Davis said they share the same concerns as Council and it will be our goal to provide a recommendation.
Mr. Ward said they had spent about four hours interviewing the four people. It was fairly easy to separate the four into two. He said two looked very professional and promising.. He said there might be one or two other management proposals to be made. Time is of the essence and we have made it clear that we will meet when ever necessary so we can make a recommendation to Council. He said their goals have always been the same and that is to pay the bills and have balanced programs.
Member Kramer asked if they had received any proposals from people who have interviewed with concrete action steps?
Mr. Davis said he would like to see more information from the two candidates. It was his understanding that there were more people who wanted to make a proposal. They have been advised that time is of the essence. It was their hope to have a recommendation for Council before the next meeting.
Member Kramer asked if they were bringing forth concrete action plans or analysis that says if we do A we can expect B?
Mr. Davis said they have been given our financials. They have given us proposals regarding their fees and costs.
Member Kramer asked if they had been reduced to writing yet and if not were they close?
Mr. Davis said they are close. He said they have sent out a supplemental request for information. We want the information by this Wednesday. This information includes financial backgrounds of the company, the principles involved, references, business plans and projections. During the meeting they discussed in detail what has happened and what they believe are the issues. Mr. Shaw said they talked about the hours of ice allocation for youth hockey. The response we got back said 92 hours for youth hockey is not uncommon or unworkable. It is just a matter of pro-family marketing and promotion.
Mayor McLallen asked how is the marketing and promotion of this facility? Did that play in the non-success? What are the things that are truly attributable to the deficit?
Mr. Davis said one of the biggest things was adult hockey or the lack thereof. It was originally budgeted with revenue projections of $275,000 but he did not think it got over $75,000. The Board inquired from Mr. Seyler what he was doing about it. We kept asking what he had done and were told thereís no interest, we do not have anybody, we have one group, etc. Basically, there was a lack of promotion and marketing for that specific program.
Mayor McLallen asked if the past management group presented an annual marketing plan that showed who, what and where their target was.
Mr. Davis did not think it was done on a very consistent or long term range. It was done on a program by program basis.
Mr. MacDonald said Mr. Seyler felt the facility was new and everybody was going to come to Novi. He said he personally told Mr. Seyler numerous times that that was not going to happen. Mr. MacDonald felt it was a lack of experience by Mr. Seyler.
Mayor McLallen asked if the identified weakness in the previous management was a lack of coordinated promotion? Perhaps in this new management contract we want to be sure they have a very coordinated marketing program.
Mr. MacDonald said they also have groups that are already playing in their other facilities so they will market it through the other facilities.
Mayor McLallen said it is really hard to believe a community of people would front people that are not sure where this facility is. If you are marketing to a larger area they definitely do not know where it is. This is something that needs to be strengthened with whoever you talk to. There better be a very strong marketing program. We are in a competitive curve with other facilities and we need to answer why people should come to Novi.
Mr. Ward said the two proposals that they looked at most favorably were both strong programmed marketing oriented organizations. He would expect the same of any additional proposals submitted. Conversely, the two proposals that didnít fare well did not have strong marketing experience.
Member Lorenzo asked if he offered the adult hockey program was offered between 9 PM to 12 AM hours as Mr. Seyler suggested?
Mr. Jaussi said Mr. Seyler, in his letter, takes particular exception to the whole Novi Youth Hockey program. Mr. Jaussi said he was intimately involved from the start first as a Chairman of the Youth Hockey Committee, of Community Clubs. However, City Council suggested that hockey would be best as an independent organization. In the fall of 1997 when the rink was becoming a reality they worked very hard to design a program that would first and foremost serve the citizen of Novi. As the program was defined they needed to get the word out to Novi residents and to the hockey community. It was decided to have an open house to answer questions, explain the programs offered to all ages and abilities. The open house was February 8th. The response was overwhelming. He said they received 1,200 checks from people who wanted into the Novi program. Our position was we had to see what the interest was, how many Novi residents were interested and than take this information back to Community Clubs for their deliberation on how big a program we could accommodate. Some 60% of the 1,200 were Novi residents whose full faith and credit was backing this facility. The option was to cap the program at 600-650. However the door would be slammed on Novi residents and that is inappropriate. That decision would have to be made by City Council. Community Clubs decided for the first year because, at the time, there was no figure skating or adult hockey to allocate the necessary 92 hours to satisfy the needs of Youth Hockey and with no commitments for future years. The Board was confident that in future years we would always welcome Novi residents into the program and, if needed, supplement the 92 hours with the purchase of ice from other arenas. As far as the subsidy of $160 per hour, we went to the Community Clubs group before February 8th and asked for a cost for people inquiring about playing hockey in Novi. The Community Clubs Board referred back to the business plan, which was competitive with Farmington Hills at $155 per hour and decided $160 per hour was fine. That is what was printed and presented at the open house.
The open house was a success because a lot of time, energy, effort and marketing went into it. They took advantage of the three production services. Volunteers at no cost did all this. He wished they had time to do the same thing in the figure skating community but we do not know anything about figure skating.
Member Lorenzo stated she thought it unfair to expect this group to do those sorts of things. She felt it was unfair to place this burden on volunteers. We need to get a managerial person to do all those things.
Member Lorenzo thought it was admirable they wanted to cater to Novi residents. However, as Mr. DeRoche pointed out, we have to switch gears if we want to be successful. This is a business venture and the bottom line is going to be dollars. She said whether it is Novi, Plymouth or Canton residents who ever is going to pay the money is who we need to let in the door. She said we need a firm commitment that above all and anything else this facility is to make money.
Mr. Ward said they were never in a position where they had to make choices between Novi and non-Novi.
Member Lorenzo asked about suburban hockey. She said several springs leagues have inquired about ice time and were advised that ice would be sold at the going rate after our school programs were reserved.
Mr. Jaussi saw no conflict at all and thought the youth hockey community and members of Community Clubs are all for charging a rate that provides a return and everyone is happy to pay. There has been a complete lack of marketing, promotion and development of these other programs. That is where the deficit comes from.
Member Lorenzo asked about spring programs.
Mr. Jaussi said there are no spring programs.
Member Lorenzo asked whose spring programs were being referred to?
Mr. Jaussi said Center Ice Management but they are non-existent.
Mr. Ward said there was none and that the revenue was not there.
Member Lorenzo stated Mr. Davis, in the January 14, 1999 minutes, alluded to a subsidized rate for youth hockey.
Mr. Jaussi said Mr. Seyler alluded to that and in no way was youth hockey subsidized. The youth hockey rate was $160 last year. The Board has voted a $190 rate, at the recommendation of the management company, for the upcoming season.
Member Lorenzo said she is referring to the minutes under the review of the agreement with the hockey association for logo merchandise, which she understood, was another short fall.
Mr. Ward asked if she was talking about what was not sold through the pro shop.
Member Lorenzo said Mr. Ward stated that the lost revenues would not be recouped. So there was some lost revenues.
Mr. Jaussi said the pro shop was not open when the rink opened.
Mr. Ward said there were hundreds of kids that were ready to start as brand new hockey skaters when the rink opened up.
Mr. Jaussi said Mr. Seyler had a booth at the open house
and he told everyone that there would be packages of equipment available for
purchase when the rink opened.
Mr. Ward said the equipment wasnít there and that was the revenue they would never recoup.
Member Lorenzo quoted Mr. Davis, "the hockey association has to understand that the reason the arena can subsidize the rate of ice time prices to the association". She assumed that is the Novi Youth Hockey Association.
Mr. Davis said he was referring to the overview of the entire arena operations. In such that we need to generate revenue from a variety of sources. If we do not generate those revenues from the pro shop, from the concession, etc. then the cost of ice would have to go up. If we meet those obligations or projections then we do not have to worry. If we did not meet them, then we would have to look at revenue increases in other areas.
Member Lorenzo said you did not say what is the most the market will bear on this and then charge those prices.
Mr. Davis said in January 1999 when we were looking at new fiscal year calculations.
Member Lorenzo said she was referring to the onset. The whole mind set behind opening day of the arena or when you are scheduling people to start signing up you did not go into it with how much will the market bear.
Mr. Davis said they followed a budget that was prepared by Mr. Seyler for the Community Clubs Board for the fiscal year and within that budget was revenue and expenses. Basically, the reality is that the revenues were not sufficiently generated in a variety of areas including the pro shop, concessions and adult hockey.
Mr. Ward said there has been no subsidy of any program. We have looked at the business plan and there did not need to be a higher charge given the projection. It should be very clear that subsidies were never asked for or sought and if they were they would not have been given. He said most of us who sit on Community Clubs are business people who run our own businesses and it would be very hard for us not to think about the bottom line.
Member Mutch said every step of the way even before Community Clubs was involved, even before the majority of Council was involved Mr. Seyler was there. Mr. Seyler had a plan and all we did was make sure that they accepted his plan. We are at the point where we do not have confidence in his ability to manage and have outlined specific reasons why we no longer want him to have that responsibility. As we move forward, I hope that we are not thinking of significantly changing the role of Community Clubs. She said when Community Clubs was originally discussed they were to be much more involved. Community Clubs was established partly because it gave the Council seven people with business experience, hockey experience etc. to establish participation and solicit input from. She felt that Council was the group of inexperienced volunteers and the Community Club members are far more experienced as a group than any Council from 1992 to 1999. She thought Council had been well served by Community Clubs. They have taken on a burden in marketing because they had to because the Management Company failed to deliver on their contractual obligation.
Member Mutch stated if Council is moving forward with the idea that Community Clubs be out of the picture she would battle that. She felt it would be throwing away valuable experience.
Member Mutch said regarding making money we have to remember that the arena is owned and financed by the residents of this community.
Mr. Shaw said one of the reasons they are here is to act as the buffer between the citizens and the City Council. In many cities the Council is subjected to an ongoing battle that occurs between hockey players, residents versus non-residents, travel versus house, figure skating, all of the ice allocation debates and etc. Mr. Shaw said we take care of these issues for you and if we do not there would be routine conflicts at City Council meetings.
Member Lorenzo thought it was Councilís responsibility. We are the ones accountable to the citizens and to the budget.
Mayor McLallen requested that everyone remember that the goal is an excellent facility, soundly managed and in the black. How are we going to rectify past problems to get there?
Member Schmid wanted to discuss marketing because he felt it was very important.
Mr. Shaw said the question has come up about marketing and promotions. One of the reasons the Management Company was brought on line before the rink opened was to get programs together and assembled and to start to promote the rink. We repeatedly asked what they were doing and every now and then we might see a flyer, which was poorly done, and we would comment on it and make recommendations and suggestions as a Board and individually. We would ask about things such as adult hockey and be told that there was no interest. We would ask what are you doing to promote it but we would never see anything happening. In February we formed sub-committees. Community Clubs was trying to become more involved in the management operations to give them more input because they were not delivering what we expected. One of those committees was a finance and marketing committee. We sat down with them and gave them of ideas of how to market the rink and to this day I do not think we have seen anything. As an example, if you have looked at the Novi News this last month three out of four issues have contained articles on various programs. There was one article about programs at the Suburban Training Academy, which is the privately run rink in Farmington Hills, and they ran it as a news story not an advertisement. They have done that two other times including front page coverage in the sports sections. The Novi News apparently is willing to promote programs but we have not seen anything in months about activities at the Novi Ice Rink.
Mr. Jaussi said the Novi News was very gracious to Youth Hockey. Every press release we submitted they published, they called and embellished it making the article even nicer than we thought.
Mr. Shaw said the Novi News has been very willing to do things. We have not had one thing about the Novi Ice Arena submitted by management. It is managementís job to submit these things and this is an indication of how much marketing promotion has gone on. Those of us who are involved with hockey get hockey magazines and newspapers and we rarely see anything in those newspapers. He said even the free stuff that is available to him has been absolutely non-existent. We go to rinks, see flyers that have programs all over the place but there is never anything about Novi. The marketing and promotion has been atrocious in his opinion.
Member Schmid asked how long the rink has been open. Mr. Davis said eleven months.
Member Schmid said he voted on this project reluctantly but he did it based on all the recommendations and all the guarantees from Community Clubs, etc. and was convinced that this could be a project. He still thinks it should be a project and that in two or three years it will be successful. He is extremely disappointed with the manager that was chosen. It seems to him that someone should have recognized that Mr. Seyler did not have the background to do it.
Member Schmid said he read in Mr. Seylerís letter that the hockey association was allowed to sell advertising on the board. It seemed that as a Community Club member, that from August 1998 until July 1999 we have known there is a problem.
Member Schmid is disturbed that it came to this point when we finally decided we had to go to the management. You people in the Community Club have known for a long time that this was in problem. You keep referring back to the plan but the plan was written in 1996 and things have changed. You have to do something different to get the money back into the system. He asked if there was any validity to allowing seniors ice time at 9 PM at night and is this an adjustment that should have been made? He did have this in his letter and he wondered if we should have taken this action back in February when this was suggested.
Member Schmid said the issue was that we were losing money. Maybe we have to cut the youth down to 60 hours. There is no problem getting youth hockey but you get more money from other ice time whether it is seniors, open skating, etc. He wanted to know why we didnít act sooner or accept some of these ideas.
Mr. Jaussi said one of the things that made it exceptionally frustrating was that all of the numbers were run through the financial department of the City and getting reports and timely information was extremely difficult. He understood that it was the way that the books were set up and suggested that that be looked at. In one of the revised budgets Mr. Seyler had a line item of $5,000 for Dasher Board Advertising. As that line item was there we suggested to Mr. Seyler that the Youth Hockey Program would write a check for $5,000 and assume responsibility for youth advertising. After a conversation on the issue, it was told that the figure skaters wanted a fundraiser to raise money and would take half of the Dasher Board Advertising for $2,500. That way the rink is guaranteed the revenue, there is no expense in going out and marketing the Dasher Boards and so forth. Plus, we thought as a non-profit organization either the hockey or figure skating programs would have a better pitch to the local merchants and business community that they helped support the youth of the community and buy these Dasher Board Advertising. It was the Management Company that set the price for the advertising. The hockey program went out and attempted to sell them. At the same time, we asked for a time frame until October 1st to approach the merchants with our pricing schedule to see if they would be interested. October 1st came and went and what was unsold the rink had the opportunity to sell and they never did. They might have sold one or two Dasher Boards. With the issue of the advertising, the Management Company stated we need to get $5,000 in revenue, whether or not that was appropriate or proper or should have been higher or lower could be argued. At the time there wasnít anything there.
Member Schmid said the Community Clubs membership should have argued it one way or the other.
Mr. Jaussi said they did spend some time deliberating that but the Management Company never said this is the plan we have in place to merchandise and market the Dasher Board.
Member Schmid would like to have a brief discussion about a recommendation that we need more seniors. We need to entice them and maybe give them better hours or at least package something that they could give out.
Mr. Jaussi said to his knowledge in any of the rinks in the immediate area there are no senior leagues that skate earlier then 10 PM. It is generally understood that the youth hockey programs have the earlier hours and even then there will be some older youth teams that will skate 10 PM to 11 PM. There was never any effort to build an adult league so we had no idea whether there was a demand or not. There are other profitable rates that allocate more time to youth hockey that still have viable adult programs and make money.
Member Schmid said Mr. Seyler did ask for more time for senior hockey and the Board didnít give it to him. Mr. MacDonald said that was correct but he had no program.
Mr. Ward said they would have welcomed an opportunity to allocate ice between the youth and adult hockey customers but unfortunately we were never faced with that tough decision. It would have been a difficult decision who we offend by the allocation. Fortunately, his promise did not materialize so we never had to make that allocation or choice. We are still not being asked to make that allocation because there is no adult program.
Member Schmid asked Mr. Ward if he would do it any different than last year.
Mr. Ward said he wished this meeting had been held much earlier. Mr. Seyler came to us with a certain aura or status because of this history he had. We walked into our first meeting after being contacted and interviewed by Council to serve. We walked in and here was Mr. Seyler who had been involved in the program for X period of time, he had the drawings of the arena and we were given a stack of documents and everything was in place. As time went on our comfort level was not what we would have liked but there was a certain assurance that he had a level of support. Mr. Ward said they received their financials later than they would have liked.
Mr. Davis said we opened up in late August 1998 and by the time we started getting the programs flowing and operations going, we really did not get a firm handle on any problems until February. He said they received monthly reports from the Finance Department but there is some lag time there. Mr. Davis said all of the revenues and expenses flow through the City of Novi through our Finance Department. Revenues come in, expenses go out and this is a process that was in place. From the City perspective, to have a comfort level that we would have accountability on all revenue and all expenses would have been desired.
Member Kramer asked if that process was negotiable with the new Management Company? Mr. Ward said it was.
Mr. Davis said when we started to identify the issues of revenues not being met and the tracking of expenditures it was not until February or March that we started to become concerned. He said Council would remember that when the Board came in for the budget process the Board identified the program and started to have the tracking done on a two-week basis from that point on. Mr. Davis said they were getting reports every month after it opened. September and October of 1998 but at the point, there was nothing of any level of discomfort to show us there was an issue. Expenditures were well within the projections. We were in operation for only a couple of months and there was nothing out of line.
Member Schmid asked if he was disappointed, concerned or wished there were better records. If you had reports for August. September, October, November and December what was wrong? Then you made a mistake.
Mr. Ward said they first became aware of a shortfall well into the year. It was almost impossible to do anything particularly in light of the promises of what was going to be happening in the spring and summer. Then it didnít materialize.
Member Schmid asked if it was a fair question to ask why didnít they get this well into this year?
Mr. Davis said it was strictly a thing where the numbers were not generated in the revenue.
Member Schmid asked by whom?
Mr. Davis said in the revenue. One, by Mr. Seyler generating the revenue from his operations and then there is some lag time in our financial process.
Member Schmid said 14 Billion dollars was spent on computers there should not be a whole lot of lag time.
Mr. Davis said as we go through the Warren processes and the information gets put out onto monthly financial sheets there is a lag time of about three weeks. Therefore, it is not a totally accurate or up to date type of report. That is why we did not know where some problems were until February and March.
Member Schmid asked if anything else could be changed?
Mr. Ward said we could get some of these things a little bit earlier. He also felt that the Board needed to be the buffer, with all due respect, with the monumental decisions that the Council is involved in that demand your time and effort. Who should be the travel coach and who should not is one that the Board should legitimately be deciding as your buffer.
Mr. Ward said he still felt comfortable that with proper management this is a feasible, functional and wonderful facility. He wished everyone could have been at the rink to see the Novi versus Northville hockey game. It was wonderful! Ask your kids what it felt like to be on the ice with 1,200 people yelling. That alone does not pay the bills but to be able to pay the bills and be able to provide that kind of a facility for the taxpayers and the citizens is a wonderful thing. I wish you could all have been there to hear and see that event.
Member DeRoche said he appreciated their acting as a buffer for Council but was very confident that Council could debate a logo on a jersey as well as debate a 28.5 million-dollar road bond issue.
Member DeRoche asked about the 40% budget increase.
Mr. Davis said at the time they were looking at a $250,000 deficit projection based on that information available.
Member DeRoche asked if that was with the 40% increase?
Mr. Davis said question is how do we make that up and how are we projecting to take that deficit, roll it into our cost of operations for next year, and adjust our ice rates accordingly to make that up. Obviously, the deficit has grown since then and we still need to look at it. Also, things have changed as far as who the management company is going to be.
Member DeRoche said the point is we were told at that time by you and Les Gibson that the sales would go from a $100,000 a month to $140,000 a month. He was concerned they would say they did not get any reports from the City until spring and summer. We were sold on a budget as a Council in April that the sales were going to be up 40% and there wasnít any concern yet because the reports were not back. How could we be concerned back then? He quoted a letter from Mr. Seyler dated March 16th, "The Board of Directors of Community Clubs has been charged with the difficult job of trying to balance the conflicting needs of providing skating services to the youth of the community and the financial requirement of making the rink a self-sustaining, profit generating investment. As rink manager whose contract causes us to concentrate heavily on the bottom line, we must express our concern over what we see as jeopardy to the financial stability of the program."
Mr. Davis said the two letters that Mr. Seyler generated were February 16th and March 16th of 1998. The letters are over a year old and were written before we opened the door. In addition we had the wall problem or before we started operations and concern about ice sedimentation and so forth. After those letters were generated in April-May of 1998, Mr. Seyler presented to the Board a pre-opening budget to take effect from April 1998 through June 30, 1998. He also presented the fiscal year July 1 through June 30, 1999, which included his financial business plan of operations for the year. The plan took effect in July 1st and did not open until August 24th. We still used his projections for program revenues and the expenses for operation. We followed the budget and reviewed it after a few months of operation, September, October and November, and nothing was alarming at that time. We were getting new hockey revenue, things were slowing down and our expenses were in line with what was projected within the budget. When got into January and February we saw that the revenues were not flowing in according to what was projected. We did not get the $275,000 or the correct percentage of a portion of the calendar year. That is when we started closely monitoring both expenses and revenues. We asked Mr. Seyler how he was going to generate $275,000 in adult hockey, what do you have set up for springtime, summer leagues and clinics and what are you going to do with all these other line items in your budget? We started to adjust the budget based on our estimated yearend numbers.
Member DeRoche said he remembered a $5,000 total income from senior hockey.
Mr. Davis said that was a year to date number that was generated from the fiscal year by Mr. Seyler. He projected $275,000 but at that point he was only at $5,000. We asked him what he was going to do to correct that problem. We asked how he was going to cut expenses or raise revenue to offset those short falls.
Member DeRoche commented this was not a discussion about Mr. Seyler. He was concerned with what we projected for our budget when we approved this $140,000 a month in revenues. It sounded to him that there might have been some more concern for the status of the revenue growth when Council it considered at the time the budget was approved. We could have had something more reasonable at that time.
Mr. Davis said when the budget was presented in April we were getting numbers from Mr. Seyler projecting for this current fiscal year. At that time we were tracking how we were going to end up on June 30th. We knew we would be in a deficit and the question was how much. So, projections of the year end numbers basically transferred into a carry over of expense to this fiscal year. Also, how it translated into our needs for ice rates for the upcoming year and what percentage increases would be. This was how we forecasted and projected based on Mr. Seylerís ability to deliver revenue and how he was going to control expenses.
Mr. MacDonald commented that the spring league was projected much higher than Mr. Seyler delivered.
Mr. Davis said absolutely.
Mayor McLallen commented that a positive step had been taken and the dysfunctional management situation has stopped. We are now trying to hire another management company and make sure we have identified all the pitfalls not repeat them. So far the biggest issues have been communications between the Council, Administration, Community Clubs and the management of the ice arena. There has to be a better way of communicating. This could be with quarterly meetings. She stated we know where we have been and we know where we are going, the question is how we are going to get there.
BREAK AT 8:20 p.m.
Mayor McLallen commented we need an excellent civic amenity that will operate in the black as our goal. The issue is the party that managed the arena is no longer with us.
Mayor McLallen stated we are approaching the beginning of another skating season and financial year. Time is of the essence in hiring a new management firm. She stated Council needed to discuss how to go about hiring this new firm. There have been indications that several firms are under consideration. Whoever this firm is there must be a very strong and consistent marketing plan. It must be able to generate business for the facility and produce the revenues needed. How Council gauges the performance of the management firm is important. There were allegations made that many promises were made, but the performance of the plan on a day to day basis was not. We need to look at how Council is going to better monitor performance and be sure the performance is what has been promised. She didnít know how much communication between the management firm, Community Clubs and Parks and Recreation had occurred but Community Club and the Council had very little communication and that needs to be rectified. A meeting of shorter duration but at least on a quarterly basis is needed.
There was an issue with financial reporting regarding timeliness brought up. The suggestion was to get the proper people to address how it needs to be done.
Lastly, what is the chain of command here? Obviously, Council is at the top of the chain but where does it go from there and how do we interact with one another. Are there enough people or not enough; are the Boards to large or to small? Although this has been an expensive education all is not lost. This is a good facility and we can make it a success without harming the City. We need to learn to act fast and do business differently. Many of the things that happened were because it was a new facility and they should not be repeated again. Are there any issues not on the table that need to be talked about?
Mr. Jaussi said that every time we commented on the lack of things in the pro shop hands would be thrown in the air and they said it all had to go through a procurement procedure through the City of Novi which added weeks if not months to the process. It is a retail shop and people will pay for brand names, tape etc. and with the size of that shop, stuff flies off the shelf.
Mayor McLallen said all things have to go through our purchasing department and there is a lot of lead time needed.
Mr. Davis said that at the start of operations it was new to us. The management company should know procedures, lead time, quote requirements and distributors. The management should know what is needed and purchase it.
Mayor McLallen asked who is doing the ordering for the fall until new management is in place? You are going into the season where you are going to sell a lot of equipment; does anyone have a shopping list?
Mr. Davis said a complete inventory of the facility was taken two weeks ago.
Mr. Jaussi said there is a lot of wheeling and dealing that goes on which is contrary to the way government works. A vender may offer a deaI. If he has 50 extra hockey sticks he may offer them for $10.00 each. If there was a way around standard purchasing it would help the new management run the shop the way every other shop is run.
Mayor McLallen said part of this is because it is funded by G.O. Bonds and asked Mr. Watson if there was a way around it.
Mr. Watson said if someone walks in and says I have 50 sticks at $10 a stick that is below the threshold for having to do formal bids. Even if it wasnít our Charter allows a non-bid situation to occur if the Finance Director decides that it would be of no advantage to the City to bid the purchase out. There are ways to avoid the bid process.
Mr. MacDonald said nobody will come to the City because they know it is a City run hockey sport shop. Why canít it be leased out?
Member Kramer thought that before we sign on the dotted line Community Clubs needs to do a few things. First, the whole operation needs to get lean, mean and competitive. Running it as a City is not going to do it. City government is set up to make sure no mistakes are made, cover all the bases and do all the regulatory stuff to provide efficient services for our citizens. No one ever claimed the City ever did anything on a timely basis and his experience is that we do not do it good.
Member Kramer said we are hiring a company to manage the facility. We need to cut him lose to manage that facility, to be a free enterprise and to run it for a profit. Before we sign on the dotted line we ought to look very carefully at the constraints. We need to see if more constraints, more impediments are needed or if there was to much control over the facility. Hopefully, if competent management companies are being interviewed they will know how to run a business better than the City. There is a reason why there is a public sector and a private sector. The reason why some things are turned over to the private sector is because they do things better. However, we have to have control through audit, monthly reports and review.
Member Kramer said we need to look at efficient management and see what is needed to be changed. He liked the idea of sub-letting the pro shop and the food concession. If there is a legitimate legal constraint then we need to see if we can work around it.
Member Kramer said we need proposals for these revisions so when the new management company is brought in we will have identified the problem areas and can work with them. Maybe this time we held them to close. We need to cut them lose with controls. Let them use their business experience and expertise to do their job and let us have an appropriate management role.
Member DeRoche stated he thought Member Kramer was on the right track. You put in sufficient controls and then pull in the reins any time you need to. He said he wanted to see a competent experienced firm come forward and give them a chance to do it.
Member Mutch stated she would like to see information regarding the leasing of the pro shop and food concession. She thought there was potential to make money. People who have specific experience might make a better go of it than someone trying to do it all. She does not want to see someone coming in with a proposal to City Council saying we would like to have an independent contract with City Council. Then we are back in the middle of trying to make things work without having the direct responsibility the management firm does.
Member Mutch disagreed with the suggestion that Center Ice Management was over controlled. If anything, they were not held accountable enough, soon enough and hard enough. She said she was very happy to have Community Clubs and wanted them to continue doing what they have been doing. She did not think they had mellowed but had picked up the slack when no one else did or we would have been in even worse shape then we are now.
Member Lorenzo said she appreciated that they intervened when they did but felt that they should not have to. If we hire a successful, competent management team we should cut them loose and let them to their managerial work. There would be a role for Community Clubs but she did not think establishing programs, ice time, etc. was it. She said that is what managers do. Team logos, events, etc. perhaps that is where Community Clubs expertise comes in. We need to have managers managing the facility.
Member Mutch thought that Community Clubs was set up to be a board of directors. What makes a Board of Directors of a municipal ice arena different than a Board of Directors of Daimler/Chrysler is that there is another element that goes beyond making money. Any Board of Directors for any company can set up certain perimeters that management must match. She felt it was very appropriate that Community Clubs represent those interests and see to it that the management company keeps community interests in mind as it establishes programs and market the facility and the programs.
Mr. Ward said we have been told by the bond counsel that sub-leasing is a problem. How can we do this recognizing that we have a bond rate and a tax-exempt organization it may well be we can not do it? This is a way of not allowing the lower interest rates to one private entity to compete with an unfair advantage over someone else. This needs to be considered.
Mayor McLallen said there appeared to be a window, according to Mr. Watson, that if strict application of everything had to go to bid, perhaps, it could be flexed somehow. Mr. Watson said he would discuss this with Mr. Neiman.
Member Kramer stated he would accept answers to the questions but will not accept not asking the question. He agreed with Member Mutch the higher priority is financial responsibility and next is providing opportunities for Novi Citizens.
Member Mutch said she was confident that if we have a well-balanced offering of programs that will service this community, it may also be attractive to people outside of this community. She never said it should be exclusive like Camp Dearborn.
Mayor McLallen thanked everyone for attending the meeting. She felt the purpose of the meeting was served.
Mr. Russell thought it had come to the time when Community Clubs and Council realized that the decision made to terminate Mr. Seyler has been long coming. He said he came on Community Clubs years ago and they had hours and hours of meetings and great debate about keeping Mr. Seyler or not. He voted to let Mr. Seyler go before the contract was signed. They worked hard for the community and several people felt Mr. Seyer was not the right person. He felt the biggest problem was marketing.
Mr. Senter commented that the letters Mr. Seyler wrote back in February and March 1998 had a lot of faith put into them. He could point out paragraph after paragraph where statements made that were not true. It is a mistake to believe that just because it is written it is true. As we move forward there are two major impasses Community Clubs has identified. We will see to it that the management company that comes forward will have a better financial reporting system. The financial reports should be done in a business format and state profit and loss on a monthly basis. They should back up whether the revenue is coming in or not. This management company had zero financial reporting to anyone. He said there was a great lack of ability in marketing. It was not that the market was bad there just was none. He thought the new management companies we have looked at would be much stronger.
Mayor McLallen thanked everyone present for being candid. You have helped us put aside heresy and get to the heart of the matter. The game plan for the next two weeks is we expect Community Clubs to recommend a new management firm. The criteria that we agree on is the firm must be a confident firm with a proven track record, strong in marketing with proven performance, and clear timely financial reporting. Also, on our side are the City and Community Clubs need to review the management contract and find that it has realistic controls and accountability in it. There shall be quarterly meetings, no more than an hour, just to be sure there is communication between groups will be much improved.
ADJOURNMENT: There being no further business before the Council and Community Clubs the meeting was adjourned at 9:04 PM
Kathleen S. McLallen Tonni L. Bartholomew
Charlene D. Mc Lean
Approved: August 23, 1999