Form revised April 10, 2006

FISCAL NOTE FOR CAPITAL PROJECTS ONLY

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Parks and Recreation	John Braden / 386-4334	Dwight Dively / 684-0503

Legislation Title: AN ORDINANCE relating to the Seattle Aquarium; authorizing the loan of funds from the City's Consolidated (Residual) Cash Pool, or its participating funds, to the 2007 Multipurpose LTGO Bond Fund; increasing an appropriation in the 2006 Adopted Budget; amending the Adopted 2006-2011 Capital Improvement Program; and authorizing an agreement with the Seattle Aquarium Society for use and further development of portions of the Aquarium; all by a three-fourths vote of the City Council.

Summary and background of the Legislation:

This legislation provides funding of $6.3 million to allow construction to proceed on a major exhibit and other improvements to the Seattle Aquarium (Aquarium) referred to in the legislation as City Work upon completion of the current structural work on Pier 59 (Aquarium Pier Piling Replacement -- Project K732202) and shifts the responsibility of constructing the City Work from the Seattle Aquarium Society (the Society) to the City.  Additionally, the Bill authorizes the execution of a Concession Agreement with the Society pursuant to which the Society will repay the cost of the City Work.

The Society is in the process of, and has made substantial progress toward, raising $17.1 million for construction of the “Window on Washington Waters” exhibit and other Aquarium improvements, including the City Work, located at the east end of Pier 59, which upon completion, will be given as a gift to the City of Seattle (City).  The Society intends to use the same general contractor for its project that the City is using for the Aquarium Pier Piling Replacement (K732202).  If the City performs the City Work now, the general contractor will be able to achieve certain efficiencies and complete the expansion in time for the peak summer season in 2007.  The Concession Agreement provides a detailed description of the construction work for the entire project to be managed by the City and by the Society.

Under the terms of the Concession Agreement, the Society will pay the City for all costs of constructing and financing the City Work as well as the debt service on bonds that were issued in 2005 to support construction of structural improvements to Pier 59 through a quarterly base rent charge over a ten year term.  As contemplated in the Memorandum of Agreement entered into by the Society and the City in 2005, the Society will have the authority to sublease defined space in the Aquarium for a gift shop and food facilities.  In addition to its base rent charge, SEAS will pay to the City 50% of the surplus it generates each year from the rents it collects from its subtenants.  The City will use this surplus for the operation and maintenance of the Aquarium.  The Society, at its option, can extend the Concession Agreement for two five year terms.

This legislation will allow the Department of Parks and Recreation (DPR) and the Society to move forward with the Aquarium’s exhibit and entry work.  Once this work is completed, the Aquarium attendance is expected to increase 10% to 20% per year.  A delay in the opening of the new facility would result in the need for the City to provide an operating subsidy for the Aquarium, which is not planned in the current operating budget.

Project Name:	Project I.D.	Project Location	Start Date:	End Date
Aquarium Pier 59 Piling Replacement and Aquarium Redevelopment *	K732202	Aquarium	June 2006	July 2007

Notes: *The title is revised per this legislation

· Please check any of the following that apply:

_ _ This legislation creates, funds, or anticipates a new CIP Project.

____ This legislation does not have any financial implications.

__X_ This legislation has financial implications. (Please complete all relevant sections that follow.) 

Appropriations: 

Fund Name and Number	Department	Budget Control Level	2006 Appropriation	2007 Anticipated Appropriation
2007 LTGO Multipurpose Bond Fund (35100)	Parks and Recreation	Seattle Aquarium Projects (K72448)	$6,384,000	$191,520
Park and Recreation Operating Fund (10200)	Parks and Recreation	Debt Service and Contract Obligations (K72440)	$0	$508,776
TOTAL			$6,384,000	$700,296

*See budget book to obtain the appropriate Budget Control Level for your department.

Notes:  The 2006 appropriation includes $6.3 million for capital costs and $84,000 for interest on the interim loan from the Consolidated (Residual) Cash Pool from October 2006 through February 2007 at 3.2%.  The 2007 appropriation in Fund 35100 is the anticipated cost of issuing the bonds (equal to 3% of the principal); the appropriation in Fund 10200 is the debt payment on the 2005 bonds (approximately $180,000 per year) and the 2007 bonds (approximately $329,000 per year in 2007 - please see Exhibit 1.5 of Attachment 2 to the accompanying ordinance for the estimated debt service payment schedule). 

Spending Plan and Future Appropriations for Capital Projects:

Spending Plan and Budget (in $000’s)	2006	2007	2008	2009	2010	2011	Total
Spending Plan (capital costs)	$1,500	$4,800	$0	$0	$0	$0	$6,300
Spending Plan (bond interest and issuance costs)	$84	$192					$276
Spending Plan (debt service)		$509	$509	$509	$859	$1,061	$3,446
Total Spending Plan	$1,584	$5,500	$509	$509	$859	$1,061	$10,022
Current Year Appropriation	$6,384						$6,384
Future Appropriations		$700	$509	$509	$859	$1,061	$3,638

Notes:  The future appropriations shown in 2008 and beyond are for debt service payments on the 2005 and 2007 bonds.  Under the proposed schedule, debt service payments on the 2005 bonds extend through 2025 and debt service payments on the 2007 bonds extend through 2015 (please see Exhibit 1.5 of Attachment 2 to the accompanying ordinance).The 2007 bonds are structured with interest only payments through 2010 with principal payments beginning in 2010 and increasing gradually in the remaining five years until the loan balance is paid in full.

Funding source:

Funding Source (Fund Name and Number, if applicable) (in $000’s)	2006	2007	2008	2009	2010	2011	Total
2007 LTGO Multipurpose Bond Fund (35100)	$6,384	$192					$6,576
Park and Recreation Fund (10200) - 10 years Concession Agreement with the Society - base rent pays debt service for existing $2.4 M debt as well as this new debt.		$509	$509	$509	$859	$1,061	$3,446
TOTAL	$6,384	$700	$509	$509	$859	$1,061	$10,022

Notes: Under the terms of the Concession Agreement authorized in this legislation, the Society will make payments to the City over a ten year period that will cover all principal and interest expense incurred by the City in constructing the City Work authorized by this legislation.  In addition to these expenses, the Society will make payments to the City through the initial term of the Agreement for all principal and interest expenses incurred by the City in 2005 for $2.4 million of expenses related to the structural work on Pier 59.  If after ten years the Society decides not to extend the Concession Agreement, all concession revenues would be collected by the City, and could be used to cover the remaining interest and principal on the 2005 bond issuance.  Pledges to the Society’s $17.1 million capital campaign, which is expected to be completed by June 2007, are expected to be the primary source of repayment, although the Society will have the option of using its share of concession revenue from the new gift shop, café and catering operations.

Bond Financing Required:

Type	Amount (in $000’s)	Assumed Interest Rate	Term	Timing	Expected Annual Debt Service/Payment
Long Term General Obligation Multipurpose Bonds	$6,576	5.0%	10 yrs	Mid 2007	$329k Interest only until year 4; then interest + principal (at increasing amounts for the next 6 years)
TOTAL	$6,576

Uses and Sources for Operation and Maintenance Costs for the Project:

O&M	2006	2007	2008	2009	2010	2011	Total
Uses
Start Up
On-going
Sources (itemize)

Notes:

This legislation provides the capacity to carry out planned improvements more quickly; it does not add additional facilities or operating and maintenance costs.  As the expanded Aquarium is expected to generate revenue, the opening of the new facility in 2007 will prevent substantial operating losses at the Aquarium.

After 5 years of steady growth (from 600,000 to 700,000 visitors/year), the Aquarium projects 10% to 20% more visitors with expansion into the east end of Pier 59 that is scheduled to be completed in mid-2007.  The 2007/2008 proposed budget assumes a 14% increase to 800,000 visitors/year.  Revenue increases (from admissions, membership and concessions) will result from an increased number of visitors and higher fees.  This increase will fund additional operating costs, including staff to serve the customers, maintain the additional space, provide care for the animals and higher utility costs, equipment, and supplies for the expanded operations. Advertising expenses will also increase to promote the expanded facility and realize the potential increased revenue. 

The $7 million 2006 Aquarium expense budget is projected to increase to $8.2 million in 2007 and $9.5 million in 2008 (the first full year of operating the expanded facility).  It is anticipated that this expansion will be fully funded by earned revenue.

Periodic Major Maintenance costs for the project:

Major Maintenance Item	Frequency	Cost	Likely Funding Source
TOTAL

NA  - This legislation changes the funding mechanism for constructing this project; consequently there are no new major maintenance costs associated with this legislation.

Funding sources for replacement of project:  Identify possible and/or recommended method of financing the project replacement costs.
	NA

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact:  NA

Position Title and Department*		Fund Name	Fund Number	Part-Time/ Full Time	2006 Positions	2006 FTE	2007 Positions**	2007 FTE**
	n/a
	TOTAL

Notes:  Staff is growing to support the expanded Aquarium.  In the 2006 budget, 4 FTE were added (2 biologists, 1 educator and 1 Aquarium Engineer).  In 2007, 2.5 more FTE may be proposed (. 5 FTE cashier and 4 half time interpretive staff). These staff changes are not related to this legislation.

· Do positions sunset in the future?  NA

· What is the financial cost of not implementing the legislation: Without this financing, the opening of the “Window on Washington Waters” expansion and the revenue anticipated from the 10% to 20% increase in visitors would be delayed until 2008.  A delay in implementation will also delay some costs associated with the expansion.  However, the costs to operate the existing operations will continue to rise without the benefit of increasing prices, and the number of visitors is likely to decline during the period during which the delay would take place. The Aquarium would likely need an additional $570,000 to $800,000 in General Fund support in 2007-2008 and construction costs could increase by 6% to 10%.

· What are the possible alternatives to the legislation that could achieve the same or similar objectives:  The project could be delayed until private fundraising by the Society is completed.  However, opening the “Window on Washington Waters” exhibit would then be delayed until spring 2008, resulting in greater project costs and operating losses during that period of time.

· Is the legislation subject to public hearing requirements? This legislation is not subject to additional public hearing requirements.  Because this project was authorized to spend more than $5 million of City funds prior to this legislation (see resolution 30096), the City Council Budget Committee held a special public hearing (also known as a “CLEAN” hearing) on this project on November 4, 2004 (see City Clerk File Number 306958).

· Other Issues (including long-term implications of the legislation): NA

Please list attachments to the fiscal note below:

Attachment 1:  Contract Summary