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Minutes - 07/22/2002 - Committee of the WholeMINUTES OF THE JULY 22, 2002 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 AUGUST 13, 2002. CALL TO ORDER: The Committee -of- the -Whole Meeting of the Village Board of Trustees was called to order by President Bushy in the Samuel E. Dean Board Room of the Village Commons at 7:33 p.m. Village Clerk Linda Gonnella called the roll with the following persons PRESENT: President Karen M. Bushy, Trustees Stelios Aktipis, George T. Caleel, John W. Craig, Susan Korin, Elaine Miologos and Alfred P. Savino. ABSENT: None. IN ATTENDANCE: Michael A. Crotty, Acting Village Manager; Michael J. Meranda, Public Works Director; Bonnie Sartore, Bath & Tennis Club Manager; Trey VanDyke, Golf Club Manager and Sean Creed, Golf Course Superintendent. 2. PRESENTATION TO THE VILLAGE OF OAK BROOK FROM THE CITY OF OAKBROOK TERRACE President Bushy announced that Mayor Mazaika, Oakbrook Terrace, wished to address the Village Board for a presentation of a plaque of appreciation. He offered his city's congratulations for the spirit of intergovernmental cooperation that Oak Brook offered to Oakbrook Terrace toward the development of their new water system. President Bushy also acknowledged the excellent cooperation of the new Mayor of Oakbrook Terrace and Oakbrook Terrace's efforts in developing this new water system. 3. DISCUSSION — SPORTS CORE FINANCIAL REVIEW President Bushy congratulated Bath & Tennis Club Manager Sartore and Golf Club Manager VanDyke for the excellent financial results of the Sports Core. She commented that the financial reports indicated that the food and beverage operations, exclusive of debt service, have already reported a profit of $5,419 whereas during the same period for each of the two preceding years there were operating deficits of approximately $100,000. She acknowledged the difficulty that both operations have experienced as a result of the terrible spring weather and the remaining tasks that needed to be resolved since the recent completion of the expansion. President Bushy added that financial statistics indicate that if there were a shortfall for this financially difficult fiscal year, it would be less than 1% of the Village's budget. COMMITTEE -OF- THE -WHOLE Minutes Page 1 of 10 July 22, 2002 3. She reminded the Board that when the decision was made to upgrade and expand the facilities, the Bath and Tennis Club would be allowed to operate for a full year without any major policy changes in order for the staff and the Board to understand the dynamics of the upgraded building and the financial results that should be expected. She expressed concern for the staff time involved in preparing additional statistics requested by the Board and the continual re- examination of the finances of the Sports Core. She commended the positive direction of the Sports Core. She added that Sports Core staff have provided possible alternative policies for discussion but reminded the Board that the current policies have been in place since the inception of the Sports Core and were part of the reason the referendum was passed. She explained that at the time of the purchase of the Sports Core a significant policy decision had been made to offer Oak Brook organizations a break on room rental fees since it was purchased with tax funds. She concluded indicating that the impending discussion was to determine if the Board wished to make any changes to policies that impacts the Sports Core. Acting Village Manager Crotty explained that the request for this meeting arose from the Special Committee -of- the -Whole Meeting of June 3, 2002 where the Board asked to review the Sports Core financial results. He reported that the Sports Core Fund Operating Results were developed by Finance Director Langlois, Bath & Tennis Club Manager Sartore and Golf Club Manager Van Dyke as reference for the discussion concerning the Sports Core Financial Plan. He indicated that it included possible policy changes that could generate additional revenue to the Sports Core. He added that the suggestions were not necessarily recommendations, but are provided as information to the Board along with the negative impact of each. He emphasized that it was important to ascertain the Board's direction since preparation of the 2003 -2007 Five -year Financial Plan had begun. He specified the additional documents that had been requested to facilitate this discussion. Financial The following information is based on actual results through June 30, 2002. The Board was reminded that June 30 is not even 50% of the year for most programs and as such many factors, most notably weather, may impact any projections made. Bath and Tennis Club Operations: This operating area encompasses most of the "non -golf' recreation activities at the Sports Core (swimming, tennis, polo, open field rental, etc.). Through June 30, 2002 these activities had a net operating deficit of $65,795 as compared to a budgeted deficit of $39,102. The primary cause for this variance is that the number of resident memberships for most categories has actually decreased from 2001 when an increase of 5% in the number of members was assumed in preparation of the 2002 budget. At the present time Finance Director Langlois projects membership revenue to end the year to be under budget by approximately $50,000. COMMITTEE -OF- THE -WHOLE Minutes Page 2 of 10 July 22, 2002 FAI 3. This will pose a challenge during preparation of the 2003 -2007 Five -year Financial Plan in that these increases were assumed in each year of the Plan. Under budget performance is estimated across several other areas which could result in an additional shortfall of $20- $25,000 by year -end. Food and Beverage Operations: The budgeted results for 2002 are based on the May, 2000 Gladry & Pullan study for the first year of operations of the expanded clubhouse facility and thus through June the operating results remain on target. Food and beverage operations (exclusive of debt service) have generated a profit of $5,419 through June, 2002 when at the same time in 2001 and 2000 the operations had operating deficits of $135,929 and $99,101, respectively. The operating results in this area have improved greatly over the prior two years. Golf Club Operations: Through June 30, 2002, this area had an operating surplus of $204,133 as compared to a budgeted surplus of $265,208. The primary cause of this budget variance is the poor spring weather. Director Langlois estimates a budget shortfall of $50,000 to $100,000 by year -end. While on the surface this trend does not appear overly negative, it is important to note that all of the fee increase implemented since 2000 (greens fees, memberships, cart rentals, range fees, etc), which were needed in order to improve overall Sports Core profitability, have not resulted in better operating results. This is due entirely to the weather, which continues to be the major factor in determining profitability at the Sports Core. Entire Sports Core Fund: The entire budget for the Sports Core Fund, which is based generally on a typical weather year, projected a surplus in 2002 of $6,125. The narrow profit margin is caused primarily by the aggressive debt service repayment schedule for the Bath & Tennis Club expansion project (debt service for 2002 - $200,840). With weather being less than typical and due to the factors noted previously it is projected that the Sports Core Fund will fall short of break -even by between $50,000- $150,000 in 2002, depending of course on the weather during the remainder of the year. As a comparison, the shortfall in 2001 (due primarily to the food and beverage operating results) was $225,000. Bath & Tennis Club Policy Changes Bath & Tennis Club Manager Sartore explained potential policy changes with their estimated monetary benefits to the Sports Core Fund as well as the impact the policy would create on the existing or future clientele. COMMITTEE -OF- THE -WHOLE Minutes Page 3 of 10 July 22, 2002 3. They have been prepared in response to the Board's interest in a more aggressive approach to the financial plan for the Sports Core. Eliminate resident membership rates and categorical division for Swim & Tennis - $40,000. Encourage utilization of all elements of facility, reduce costs of tracking types of memberships. This would certainly dissatisfy resident members. Eliminate swim team programs and swim team lesson programs - $25,000. Will eliminate customer satisfaction in program availability for primarily summer swimming. Diminishes the "club" atmosphere. Forces residents to look elsewhere. Remove the tennis courts - $65,000 - $70,000. Discontinue the "tennis" part of the OBB &T. Currently there are 129 program & lesson participants and about 100 adult players. Two- thirds of the children are Oak Brook residents and half of the adults are Oak Brook residents. Would eliminate the only open membership clay courts in area. Eliminate Member events, Club food and B & T concession activities - $20,000. Eliminates a member benefit and amenity that appeals to non - recreational members and seniors who utilize the facility. Eliminate use of Clubhouse facility for charitable member and civic groups whose use does not meet the current established food and beverage minimums - $85,000. Eliminates some 50 charitable, professional member and municipal groups who regularly utilize the Clubhouse. Will change the customer base to virtually all non- residents. Golf Club Policy Changes Golf Club Manager Van Dyke explained several policy changes that may be made at the Oak Brook Golf Club to enhance the overall financial performance of the golf operation and thereby improve the financial performance of the Sports Core as a whole. Manager Van Dyke did not recommend that any of these changes be made at this time. These items are listed as a frame of reference for policy decisions with a monetary benefit. All of these changes would carry a high price in overall customer satisfaction. The golf club has surveyed its customers for several years and has received satisfaction ratings in excess of 94 %. COMMITTEE -OF- THE -WHOLE Minutes Page 4 of 10 July 22, 2002 0 3. The golf club does a wonderful job of balancing the golfing needs of its customers and the financial needs of the Sports Core. That balance is achieved by controlling the current mix of play to be 40 percent member play, 40 percent non - resident non - member play, and 20 percent resident non - member play. Eliminate Memberships — $150,000 - $175,000 Eliminates the club "feel" that permeates the facility. For many of our members this is the only club they may "join." Our loyal customers are very loyal. Severely decreases customer satisfaction for this group of customers. Reduce /eliminate discounted resident rates - $50,000 - $100,000 The owners of the facility would pay the same as /or close to the non - owners. This action will alienate our current resident customers. Non - residents would replace the lost resident rounds of golf. Eliminate permanent tee times - $50,000 Effectively eliminates memberships. Major loss of regular customers. Make riding carts mandatory - $100,000 - $150,000 Changes the character of the game. Will alienate a large segment of our current customer base. The golf cart storage facility would need to be enlarged. Eliminate the option of playing 9 holes - $75,000 - $125,000 Completely changes the nature of our customer base. Eliminates the possibility of developing new players into life long customers. Allow shotgun start golf outings - $25,000 In order to do this the course would need to block other golfers from playing the course 4 -5 hours prior to the shotgun. Those customers would include residents and members. OBGC had 120 non - shotgun start outings in 2001 that did not adversely effect other types of play. Eliminate outreach/development programs (junior program special Olympic athlete programs, parent /child program) - $25,000 It could be argued that facilities that do not pay taxes (income, property, and sales) should be an asset to the larger community. COMMITTEE -OF- THE -WHOLE Minutes Page 5 of 10 July 22, 2002 R, 3. The inherent duty of the facility would be to provide increased, not decreased, access to the facility for groups of golfers that are disadvantaged. Eliminate discounted league play (OB Women's Club 9 & 18 hole, McDonalds)- $25,000 - $50,000 This type of play fulfills the needs of the community. Many of the participants in these leagues allowed (voted for) the facility to be built under the premise that this type of play would be allowed. Trustee Craig noted that there have been adverse conditions which contribute to the progress of the Sports Core. He felt that the 31St Street improvement project has certainly hindered accessibility, but felt that the direction of the Sports Core was certainly on the right track. Trustee Caleel stated that it is the prerogative of the Board to ask for whatever information it felt it needed. He conceded that the Board had agreed to give the Sports Core a full year of operation after all of the construction and road work was complete before it was evaluated to determine if it would become a break even operation. He felt that the options provided by Managers Sartore and Van Dyke indicate the services that are offered to Village residents and organizations. He added that the performance in the first six months has been very good, even with adverse conditions, and was looking forward to positive financial results. He understands the need of staff for the Board to provide direction, but he does not believe that anything should be changed until after the full year of operation is completed. Trustee Savino concurred with Trustees Craig and Caleel and felt that the Sports Core was on the right track, that there were positive numbers and he did not feel that it was time to make any decisions. He also felt that the Sports Core needed the year to determine if the course was going to be successful. He added that the Gladry and Pullan benchmarks that had been set are being met and he did not recommend any changes at this point. Trustee Korin viewed this evening's meeting as a workshop to develop a business plan for the Sports Core. She offered that discussion of a business plan should include aspects of what should be highlighted, identification of responsibility for the plan (staff or a consultant) and how to achieve the goal of the Sports Core to succeed and benefit residents. She also suggested that the Board discusses and determines the type of reports that they require. She felt that the debt service should be included in financial reports. In addition, Trustee Korin felt that she would like to know what type of marketing efforts are being planned to improve the financial aspect of the Sports Core. COMMITTEE -OF- THE -WHOLE Minutes Page 6 of 10 July 22, 2002 a 3. Finance Director Langlois explained that the debt service does affect and burden the Sport Core finances and is included in all budget figures. He added that the Gladry and Pullan Report did not project that the Bath and Tennis Club would cover the debt service for the first two or three years of operation. Director Langlois indicated that these were all aspects of the expansion that were taken into account when the decision was made to go forward with the project. He added that the shortfall that is predicted is due to weather and under - budget members at the Bath & Tennis Club which is also related to weather. Both the Golf Club and Bath & Tennis Club were affected by the weather. Trustee Korin had a different perspective in relation to debt service. Trustee Caleel inquired of the status of the Westchester Park property sale. Manager Crotty stated staff is presently working with the auctioneers to finalize the contract. It may be available for auction in October but that the road project is affecting the auction process. Trustee Savino asked if the golf surcharge could be used for the debt service. Director Langlois stated it is presently being used for flooding restoration and the water irrigation system. Trustee Savino addressed the issue of a business plan for the Sports Core. He commented that he felt the Five -year Financial Plan was a business plan. He and President Bushy provided history that indicated that using outside sources to determine a business plan had not been successful. Suggestions that were made by outside consultants to enhance revenues included expanding the golf course and eliminating all resident functions. Previous Boards did not feel these were in the best interest of Village residents. Trustee Korin stated that a business plan is more comprehensive than a financial plan. She added that it included a financial plan, but also included marketing, defining the audience, different approaches to weddings and large parties, civic organizations and members and private parties. She felt that a qualified consultant could provide guidance if the situation is presented and direction given for a breakeven situation which would pay off the debt service and then become profitable. She felt that previous approaches were different because of the different financial climates. Trustee Miologos suggested that the Board set some overall objectives for the Sports Core and go out to bid to determine what a consultant would charge to provide a business plan and what components it would include. She suggested objectives such as achieving a breakeven budget by 2004, begin debt service payback in 2005 and incorporate the $150,000 maintenance the General Fund gives the Sports Core. She did not feel that civic or community efforts should be diminished, but that a more positive or proactive approach to generating revenues should be considered. COMMITTEE -OF- THE -WHOLE Minutes 0 President Bushy voiced her concern of consultant fees being an additional burden on the Sports Core. Trustee Miologos felt that the Sports Core should be self - sufficient, therefore consultant fees should be paid out of Sports Core funds and it would be money well spent. Trustee Caleel understood what a business plan might do, but felt that he did not want to reduce services and that the Sports Core had not been given the opportunity to establish itself since all of the changes had been made. He stated that a consultant could come in and restate all of the issues that the Board has already pointed out and did not wish to spend the funds when the Board knows what needs to be done. He suggested that the Board waits a year and then, if no improvement has occurred, discusses marketing and consideration of a business plan. Trustee Aktipis concurred that he did not wish to reduce services in order to offset shortfalls, but does share concern about revenues with the current financial climate. He recommended that staff should look at ways to reduce the impact of the $300,000 subsidy until the Bath and Tennis Club has the opportunity to improve their revenues. He suggested extending the amortization of the Sports Core debt service, which would cause less of a burden during the difficult year of flat sales tax revenue. Discussion ensued relative to projections of events, how complicated it is to develop assumptions of the types of events and the revenues they provide. Bath and Tennis Club Manager Sartore explained a number of cost efficient procedures that have proven effective with the new operation. Trustee Caleel noted that the new equipment, though it was expensive, would show cost savings in the future. Trustee Craig noted positive efforts such as the new menu, revenue producing events and advertising of the Wednesday buffet. Manager Sartore explained mailings that have been sent to all residents describing their activities. She announced that she had just received a marketing plan from BVK McDonald. She added that she had spent many hours familiarizing them with the operations. She described the involvement with websites in relation to wedding events and those new resident packets have Sports Core information. Discussion ensued related to how the Wednesday buffet has been advertised. Manager Sartore responded that they had used the OBACI list to reach corporate members and President Bushy noted that based on her discussions, many business people felt the one day a week was difficult to arrange lunch around and suggested that the facility offer lunch daily. Further discussion included suggestions of how to expand the marketing of the Wednesday buffet. Trustee Aktipis further explored the issue of extending debt service. He felt that since the General Fund holding the debt service affects the cash flow that Trustees might feel more comfortable going in a different direction. COMMITTEE -OF- THE -WHOLE Minutes Page 8 of 10 July 22, 2002 A 3. Trustee Caleel suggested that the Village wait to determine what happens within the next six months as this might be used as a fail -safe mechanism if there is a cash flow problem. Discussion ensued relative to charging administrative expenses for the maintenance of the Village -owned land to the Sports Core Fund rather than the General Fund. Differing opinions were expressed as to where these expenses should be charged. President Bushy described the history establishing the purpose of the Village purchasing the Sports Core, which was to preserve the land. Those who use the facilities, i.e. golf, tennis, swimming, etc pay for the added amenities at the Sports Core. Therefore, it had been determined that the cost of maintaining the acreage was the responsibility of the General Fund. Further discussion revolved around revenue versus expenses related to the lease of the fields to team sports. Director Langlois responded that our fees were higher than local park district fees, but that park districts were supported by property taxes. Trustee Korin suggested setting five or six goals to affect a profitable status of the Sports Core. Director Langlois stated that the preparation of the Five -year Financial Plan and the operations plans that support it would bring the Sports Core into a profitable status, however he suggested that this would not happen if the administrative charges to maintain the property were included in the Sports Core budget at least for the next five years until the debt service was paid. Trustee Miologos reiterated what suggestions that had been made for improving the profitability of the Sports Core such as the 2003 objectives for a break even target; a marketing plan for the Bath & Tennis Club to increase bookings, utilization, markets and an aggressive direct marketing plan; tweaking the Gladry report's benchmarks and increasing membership. Trustee Caleel noted that the parameters had been well laid out for staff. Manager Crotty suggested the Board add a 2003 objective pertaining to a marketing plan. Ed Gustafson, 903 St. Stephens Green, commented that residents feel the Sports Core is a marvelous asset that is not found in many communities. He stated that it is important to understand the benefits of the Sports Core, which he believes, go beyond money. He agreed that it should break even, but that with the quality of life in Oak Brook there are other things that matter. He expressed a concern as to what a consultant would have to offer and not to spend a lot of money on marketing plan. He felt the need to remind the Board not to get caught up in just dollars and cents. He agreed that the debt service should be addressed but added that residents are very satisfied with the Bath & Tennis Club and commended the Board for improving it. He suggested that the goal should be to evaluate the real purpose, mission and objectives of the Sports Core for the community. COMMITTEE -OF- THE -WHOLE Minutes Page 9 of 10 July 22, 2002 3. Trustee Caleel concurred with Mr. Gustafson indicating that the Sport Core is an amenity that enhances the Village marketability as an excellent place to live. He stated that he is dedicated to improving and maintaining it. Trustee Savino concurred with Trustees Aktipis and Caleel in the possible change in perspective of debt service. He offered a suggestion that might bring more people into the Sports Core, which was putting a garden into a section of the land. Further positive discussion related to looking into the idea of a garden. 4. ADJOURNMENT: Motion by Trustee Craig, seconded by Trustee Caleel, to adjourn the Committee-of-the - Whole Meeting at 9:35 p.m. VOICE VOTE: Motion carried. ATTEST: Linda . Gonnella, CMC Village Clerk COW072202 COMMITTEE -OF- THE -WHOLE Minutes Page 10 of 10 July 22, 2002 91