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Minneapolis Convention Center Debt

Minneapolis Convention Center Debt

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Published by Tim Nelson

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Published by: Tim Nelson on Nov 16, 2011
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CityofMinneapolis2011BudgetFinancialPlanConventionCenterSpecialRevenueFundBackground
TheConventionCenterspecialrevenuefundaccountsforthemaintenanceandoperationoftheCity-ownedConventionCenterandtherelatedsalestaxactivities.TheConventionCenterwascreatedtofosterandgenerateeconomicgrowthandvitalitybyprovidingfacilitiesandservicesforconventions,tradeshows,exhibits,meetings,cultural,religious,andsportingevents-allofwhichbenefitandshowcasetheCity,themetropolitanregion,andtheStateofMinnesota.ThefundalsosupportsanoperatingtransfertoMeetMinneapolis,anindependent,non-profitorganizationcontractedbytheCityofMinneapolistomarketMinneapolisandtheTwinCitiesasaconventionandtouristdestination.
HistoricalFinancialPerformance
Thefiscalyear-end2009fundbalancefortheConventionCenterSpecialRevenueFundwas$48.6million,anincreaseof$318,000from2008.Localsalestaxes(outlinedinthetablebelow)supporttheConventionCenterwithapproximately$55millioncollectedin2009.Duetoeconomicconditionsandconsumerspendinghabits,the2009localtaxrevenuewas$5millionlessthan2008whichwas$4.4millionunderbudget.Approximately$10millionwastransferredtotheparkingfundtocovercostsforConventionCenterrelatedparkingramps,anincreaseof$100,000overthe2008transfer.Comparativeamountscollected:LocalSalesTaxes(inmillions)2007200820090.5%CitywideSalestax3.0%EntertainmentTax3.0%DowntownRestaurantTax3.0%DowntownLiquorTax3.0%LodgingTax
*
$29.5$29.5$26.5$9.9$9.6$9.1$10.3$10.8$9.9
$3.8
$3.9
$3.8
$6.6$6.6$5.7TotalTaxCollection$60.1$60.4$55.0
LodgingTaxwasreducedto2.625%effective
07/01/2009
TheCitydepositsallofitslocaltaxproceeds
(i.e.,
salestax,entertainmenttax,foodtax,liquortax,andlodgingtax)intheConventionCenterSpecialRevenueFund.Allthetaxproceeds,withtheexceptionoftheentertainmenttax,areConventionCenterrelatedandareusedprimarilytofundthedebtrelatedtotheconstructionoftheConventionCenterandrelatedfacilities,aswellastofundtheoperatingdeficit.Theentertainmenttax,establishedin1969,isarevenuesourceforthegeneralfundtooffsetadditionalcostsassociatedwithCity-wideentertainmentactivities.Aportionofthetax($1.5millionin2010)isredirectedtotheArenaReserveFundtofullycreditthefundforentertainmenttaxproceedsgeneratedfromTargetCenteractivities,asrequiredbytheTargetCenterarenafinanceplan.TheentertainmenttaxisreconciledattheendoftheyeartotheactualentertainmenttaxtheTargetCenterreceived.TheentertainmenttaxisdepositedintotheConventionCenterSpecialRevenueFundbecauseitispledgedtodebtserviceonoutstandingConventionCenterbondsintheeventotherpledgedrevenuesourcesareinsufficient.
CityofMinneapolis-FinancialPlans
140
2011CouncilAdoptedBudget
 
Withthenewstatesalestaxincreaseof0.375%effectiveJuly1,2009thelodgingtaxwasreducedfrom3%to2.625%.ThelawprovidesthatwhenthegeneralsalestaxrateiscombinedwithanyothertaxesonlodgingwithintheCityofMinneapolis,thetotaltaxamountmaynotexceed13%.FundsaretransferredannuallytotheConventionCenterreservefundformajorrepairorsignificantimprovementstotheConventionCenterfacility.Duetotheageofthebuilding,itisanticipatedthattheamountofthistransferwillincreaseinfutureyearsasspecificneedsareidentified.In2009,nearly$1.2millionwastransferredtothereservefundbringingthebalanceto$5.9million.OperatingrevenuesaregenerateddirectlyfromtheConventionCenteroperatingactivities.ExhibitspacerentalisthelargestsourceofrevenuefortheConventionCenter.Alsoincludedinoperatingrevenuesareequipment,andspacerentaloftheTallmadgeBuilding.Chargesforservicesareearnedinsupportofspacerentandconsistprimarilyofutilityandlaborservicesandrampparking.Commissionsalesfromfoodandbeverageaccountformostoftheothermiscellaneousoperatingrevenue.In2009,totaloperatingrevenuewas$13.4million,whichwas$2.2millionlowerthan2008and$1.6millionlowerthanthe2009budget.
2011Budget
Revenues
The2011revenuesfortheConventionCenterhavebeenadjustedtoreflecttheactualhistoricalreceipts.Totaloperatingrevenuein2011isexpectedtoincreaseapproximately$700,000from$13.5millionprojectedin2010tonearly$14.2million.TheConventionCenteranticipatesamodestincreasein2011operatingrevenuesastheeconomyslowlyrecovers.MeetMinneapolissalesandmarkinginitiativesincludeafocusontheauditoriumandcontinuedeffortsofbringinglocalbusinessintotheConventionCenterviathe"MeetinMinneapolis"campaign.Theconventionandmeetingindustrycontinuestofacesignificantchallengesincontrollingcostsascentersdiscountheavilytoremaincompetitive.MeetMinneapolisislockingin2010salescontractsearlierthaninpreviousyears,butthereisconcernabouttheamountoftentativespacetheConventionCenterisholdingforpublicshowsandlargenationalconventions.Inaddition,therehasbeenanoticeabledeclineintheuseofsomeexclusiveservices,whichhasforcedtheConventionCentertoreevaluateitsservice-------@ffe~i~§sfer,fceleva~e¥
8r;,d
v~lloJe.Mevi~§If0fcWa~El,tisG~itiGaltoic::Jer;]tif¥lients
wbG
use,a
full_rangeofancillaryservices,includingfoodandbeverage.ThrougheffortstopromotetheConventionCenter'sancillaryservicesviaMeetMinneapolisinitiatives(likepromotionalsalescallstocurrentclientstopromotetheConventionCenter'sservicesandtargetinglocalfoodandbeverageevents),theConventionCenterishopefulthatstrategicmarketingcombinedwithastrongereconomywillgenerateincreasedrevenues.
CityofMinneapolis-FinancialPlans141201.1CouncilAdoptedBudget
 
ConventionCenterFund-Revenue
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Years(2008-2014)
ConventionCenterSpecialRevenueFundPredictedRevenueGrowth
Tax
TypeCurrentGrowthAssumption
201.1-2014
0.5%
Sales
-8.7%2011,2.5%2012~20143.0%EntertainmentTax-3.9%2011,3.0%2012-20142.625%LodgingTax-4.3%2011,3.0%2012-20143.0%
Other
Tax-0.2%2011,3.0%2012-2014
----------I""·onventloneenterRevenue~--------~:ale"Sandetherl'axes----------
Lodging
10%
Operatingrevenue
19%
Liquor
7%
Salesandotherusetaxes
81%
Sales
47%
Restaurant
17%19%
CityofMinneapolis-FinancialPlans
142
2011CouncilAdoptedBudget

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