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Minutes - 01/26/2004 - Committee of the WholeMINUTES OF THE JANUARY 26, 2004 COMMITTEE OF THE WHOLE MEETING OF THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK APPROVED AS WRITTEN BY VILLAGE BOARD ON FEBRUARY 10, 2004. 1. CALL TO ORDER: The Committee of the Whole Meeting of the Village Board of Trustees was called to order by President Quinlan in the Samuel E. Dean Board Room of the Butler Government Center at 7:40 p.m. 2. ROLL CALL: Village Clerk Linda Gonnella called the roll with the following persons PRESENT: President Kevin M. Quinlan, Trustees Stelios Aktipis, John W. Craig, Susan Chase Korin, Elaine Miologos and Asif Yusuf. ABSENT: Trustee George T. Caleel. IN ATTENDANCE: Richard B. Boehm, Village Manager; Jeffrey P Moline, Assistant Village Manager; Darrell J. Langlois, Finance Director; Allen W. Pisarek, Police Chief, Trey VanDyke, Golf Club Manager; Kenneth T. Kubiesa, Village Attorney; Steven Lesnik, Chairman of KemperSports; Steven Skinner, President of KemperSports and J. Tobin Davis, Vice President KemperGolf Management. 3. SPORTS CORE DISCUSSION: President Quinlan announced that the Committee -of- the -Whole meeting is a working session for open discussion among the Village Board members and any resident participants that may wish to give their view points. He indicated that the Oak Brook Bath & Tennis Club is operating with a deficit spending. He stated the Board will be fiscally responsible while maintaining a high quality of life in Oak Brook to address these concerns. The Bath & Tennis Club is a special asset to the Village as visionary Paul Butler took great care in designing the Village that the residents enjoy today. The Board plans to find what are the best solutions to rectify this situation as no decisions have presently be made to address this concern. He announced that KemperSports Management will give a presentation about management companies and their proposal to operate the Oak Brook Bath & Tennis. Toby Davis, Steve Lesnik and Steve Skinner explained their proposal to the Board. Mr. Davis indicated that KemperSports expertise is in specialized asset management for banquets, tennis and swimming. Their firm would develop plans for producing more net operating income for the facility, marketing and budgeting which would eliminate the need to employ business expertise in house. Their vision strategy is to improve the operational and financial performance and to re- COMMITTEE-OF- THE -WHOLE Minutes Page 1 of 6 January 26, 2004 OBB & T 3. brand the Bath & Tennis Club as a top tier municipal sports facility. KemperSports would report directly to the Village Manager, a general manager would be on -site, a controller, director of marketing for polo and each department head would have a manager to be responsible for that which is food and beverage, tennis and swimming. Their management strategies is to change policies, procedures and user rates for the use of the banquet, swim and tennis facilities in order to improve financial results; install platform tennis courts; achieve larger membership base and upgrade operation practices. Mr. Davis proposed five strategies from KemperSports for the Bath & Tennis Club. The strategies include reorganizing the operation of the Sports Core into one business plan and financial statement, change policies, procedures and user rates regarding use of the banquet facility, swim and tennis to improve financial results, achieve a larger membership base, and upgrade the operations practices, customer service and maintenance surrounding the facility and installation of platform tennis courts. To reorganize the operation of the Sports Core into one business plan, he suggested the need to engage in a qualified outside management company that would report directly to the Village Manager, streamline the organizational chart, make the banquet facility more available to non - member users and less restrictive of the usage, increase the dues with the value of the facility and offer a group user pricing with its value, revamp marketing with new website with the Village's new website, produce new marketing materials, target members in neighboring communities and revise membership plan to include other people from the surrounding area, upgrade the operation practices, improve the surrounding grounds of the facility and improve the menu and pricing appropriately, better manage the food and beverage labor costs and to create a regional and national facility with the introduction of platform tennis courts from October through March. Kemper Sports would analyze the costs, prepare a site plan and present the findings to the Village. The business terms include a $100,000 annual fee for KemperSports to operate a turn key operation in which they do all the planning, operations, marketing, merchandising, accounting, budgeting and payroll. All of the employees would work for Kemper Sports. The Village Board would approve their marketing plan, operating and capital budget. Regular meetings with their clients would occur once a month. The inventory management of merchandise would occur with their national director in their home office. A new point of sale system may be necessary. Mr. Skinner then discussed their operation of the Bolingbrook municipal golf and banquet facility. Mr. Lesnik indicated as a management contract they would produce a capital budget for one and five years and an operating budget for one and three years. It is the Village's determination if they wish to accept the operating budget and pricing. In a management contract the Village retains authority throughout the contract. They would survey the key user groups to determine the goals such as a swim team or polo events. They would remain in dialogue with these groups to insure they are on target. COMMITTEE -OF- THE -WHOLE Minutes Page 2 of 6 January 26, 2004 rl 3. President Quinlan asked if they have maintained polo. It was indicated they would research the resources, retain and retrain the existing groups to maintain the polo tradition and improve it where needed. President Quinlan inquired how revenues would be increased for the Bath & Tennis Club facility. Mr. Davis indicated an increase in membership is needed and that the food and beverage management operation needs to be better managed. The cost of goods sold is too high and the labor is higher than needed as they are well above average, even above an ala carte operation. They should be lowered to at least industry averages so at least break even the very first full operating year. Some of the labor may have been from other departments but they determined it appears to be out of line to industry standards and that it could be brought to a break even on the food and beverage operation. Trustee Aktipis inquired if our Village Manager would have input in the hiring of employees. The Village Manager would have acceptance or rejection of the general manager with annual reviews for that position. Also young adults could be hired from our community for pool staff during the summer months of its operation. President Quinlan asked if the Village would have control on the cost function of an event. Mr. Lesnik indicated the Village would have control if they wish to subsidize an event and the management company would be able to provide the Village with the real cost of any event. Trustee Korin requested the length of time is needed for their company to present a business, marketing and budget plan. Approximately thirty days for a plan but input is needed from the Village and the users of the facility. Trustee Korin asked if it is reasonable to expect to operate the polo and soccer fields at a profit or break even. Mr. Lesnik indicated that polo does not appear to be self - liquidating but that the complex of activities should be self sustaining. Trustee Yusuf asked if the Board gave the company a rate structure would they guarantee a minimum profit or cap a downside. Mr. Lesnik indicated it is feasible provided that dialogue occurs, as many municipalities want to maintain a high degree in policies and pricing then a management contract works best. Trustee Aktipis inquired of the management company's vision of the restaurant. Mr. Davis indicated his company would discuss goals, analyze each segment of the business and improve efficient usage in the banquet business for profitability. Trustee Craig asked if the company could improve the revenue stream at the golf course. President Quinlan indicated that this is not being discussed at the present time. Trustee Craig commented that golf outings bring in added revenue especially to the food and beverage portion of its operation. COMMITTEE -OF- THE -WHOLE Minutes Page 3 of 6 January 26, 2004 I 3. Village Manager Boehm explained that staff could work on developing improved operations of the Bath & Tennis Club in house if the Board recommends this. President Quinlan does not feel that staff is in a position at this time to determine if this is feasible as the Board had not been asked to investigate changes or implement them. He recommended that staff be given two weeks to evaluate and recommend their solutions if it could be done internally at a lower cost with the same high quality of service or would it be better for KemperSports to develop this. Manager Boehm indicated staff is familiar with marketing companies from the Hotel, Convention and Visitors Committee that may be contacted and they are aware of community group needs and schedule of events. Mr. Lesnik explained that their company has in -house expertise in a merchandise department, food and beverage staff, a human resource department to train personnel and an agronomy staff without the Village having to create staff for this. Trustee Korin suggested that the Village Board must investigate this relatively soon if any effective change is to occur financially for 2004. Trustee Miologos stated that a fee structure needs to be addressed for our residents. President Quinlan suggested that the Village Manager direct it to the Sports Core for recommendations for fee structure to lower the rates for greater resident usage so that it may be discussed at the Village Board tomorrow evening. President Quinlan noted the sales tax increase referendum on the March ballot as one of the biggest challenges of the Village Board is to address the loss of the Bath & Tennis Club's financial losses annually and the decision is now how to proceed. Trustee Aktipis asked if KemperSports could recommend the type of residential fee structure for pool and banquet usage if they would manage the facility. Mr. Lesnik indicated his company would provide this information in a week once they are able to receive information on member usage from the Village. President Quinlan asked for resident comments at this time. Resident William Lindeman congratulated the Board for addressing this issue but voiced a concern for special group usage fees. Joseph Persak commended the Board for this. He asked what the salary cost is for five managers with a seasonal facility. Mr. Lesnik explained that it would be a year around operation with the food and beverage portion. He believes seasonal staff could be given vacation during the winter and staff would be at a lower payroll than presently. Walter Reilly complimented the Board for their efforts. He suggested looking at the synergy cost of the entire Sports Core including the golf course as Trustee Craig stated. He further suggested the Board discuss with residents some of the successes in the past of the Sports Core. COMMITTEE -OF- THE -WHOLE Minutes Page 4 of 6 January 26, 2004 3. William Kenny recommended the Sports Core facility be made to a wide range of people at a better rate. He noted that a number of costs of the Bath & Tennis Club are capital improvements. He suggested that the financial situation of the Sports Core is based on policies of this Village Board and previous boards and should be reviewed. More revenue could be raised if permanent golf tee times were eliminated and discounted golf rates but this should be available as well as a reasonable swim fee. Joan Philip asked for the Village's marketing cost for the Sports Core. Manager Boehm explained that approximately $10,000 had been budgeted plus staff time with a main target for wedding business. She asked if this was an open bid process for this consideration. President Quinlan stated other companies have been contacted. Manager Boehm explained that there are a limited number of companies who would be interested due to the swim, polo and tennis aspect of the Sports Core. Carolyn Link noted the space restrictions of the Bath & Tennis Club as it would only allow approximately 200 people and would that increase revenue. She asked if the company plans to expand the facility. President Quinlan indicated building expansion will not occur and the Bath & Tennis Club will remain a banquet facility with an increase in its marketing plan. Linda Lojewski asked if KemperSports would be involved in the Ravinia style proposal that Trustee Craig has proposed. President Quinlan stated that the proposal for Ravinia West or Oak Brook Meadows would involve some building but the Board is not in a position to give detail answers on such a project. It would be presented to the Village before any change would be made and the public would be given an opportunity to speak to the proposal. She asked if this would go to referendum and if it would intermingle with KemperSports. He explained that it would not have to go to a referendum before the voters and it could intermingle with KemperSports. Trustee Korin reiterated that the Bath & Tennis Club needs to be addressed now by management of how to make it profitable, improve its operation and services to its members. It is not fiscally responsible for the Village Board to continue the Bath & Tennis Club in this manner. Art Philip indicated that the Village should not be in competition with our corporate residents such as our hotels. He stated that the proper function of government in Oak Brook is to service our residents rather than be profit oriented. Trustee Korin explained that the Sports Core directed by the government of this Village, in ordinance form, is operating as an Enterprise Fund. Our own ordinance requires that an Enterprise Fund be self - supporting. The Bath & Tennis Club is not currently self - supporting nor have they been for at least ten years. Each Village Board may make policy decisions, they may direct the management of that facility but there are internal loans for its capital improvements. There are internal loans totally $2,200,000 from the COMMITTEE -OF- THE -WHOLE Minutes Page 5 of 6 January 26, 2004 ril 3. General Fund or Golf Surcharge Fund to the Bath & Tennis Club for capital improvements. The operational results of the facility are resulting in an annual loss of $516,000.00. It is not financially or fiscally responsible of this Village Board to continue to allow such subsidy to occur. President Quinlan stated this subject would be discussed at a future Committee-of-the - Whole meeting or a Village Board meeting. The Board needs to move quickly at the first or second meeting of February so that a financial decision can be made. 4. ADJOURNMENT: Motion by Trustee Craig, seconded by Trustee Aktipis, to adjourn the Committee -of- the -Whole Meeting at 10:00 p.m. VOICE VOTE: Motion carried. ATTEST: h L-Cie c � Linda K. Gonnella, CMC Village Clerk COMMITTEE -OF- THE -WHOLE Minutes e Page 6 of 6 January 26, 2004