FINANCIAL FEASIBILITY STUDY-DOWNTOWN BOAT SLIPS - 2006
Financial Feasibility
Study
Downtown Boat Slips
Prepared by City of Clearwater, Finance Department - Margaret Simmons
Introduction
The City began exploring the possibility of constructing boat slips at the downtown
bayfront in 2003. This effort was regenerated in early 2006 when the Council directed
staff to refocus its efforts on downtown boat slips. The Finance Department assumed the
responsibility for overseeing the evaluation of the financial aspects of this project,
including a market study, review of the construction cost estimates, and an evaluation of
the estimated operating revenues and expenses.
A request for qualifications was issued in March 2006 that resulted in the hiring of
Applied Technology & Management, Inc. (A TM). A TM is a Florida Corporation that
includes a dedicated Marina and Waterfront Development Division. This division
includes expertise in economic, engineering, and operational issues related to boat slips.
A TM was hired to perform the following tasks:
. Complete a market analysis to determine the proper mix of boat slips, the occupancy
levels that could be expected, and the appropriate rates to charge;
. Review construction cost estimates provided by Wade Trim to determine
reasonableness and completeness;
. Review operational costs provided by the City to determine reasonableness and
completeness; and
. Prepare a 20-year financial feasibility study to determine if the boat slips will be self
supporting based upon expected occupancy, acceptable slips rental rates, debt service
on construction costs, and estimated operational costs.
A TM prepared a document including all of the above requirements. This report
summarizes the information derived from their studies and well as other financial
information related to determining the financial feasibility of the downtown boat slips.
1
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Market Study
A TM conducted the Market Study from May-June 2006. The conclusion, on page 33 of
the Market Study is positive for development of a boat slip facility in downtown
Clearwater.
Based upon the study, the optimum slip length mix for the 129 estimated slips is listed in
FIGURE 1. The mix of slips might need to be adjusted to maximize the number of slips
within the constraints of the site.
FIGURE 1
Matrix of Boat SIiQs
-
Slip Size Number - %
30 13 10%
40 26 20%
45 32 25%
50 45 35%
55 13 10%
129 100%
The current City of Clearwater Marina reserves 10% of the slips for transient use.
Revenue generated from a transient slip generates approximately twice the revenue as
compared to a slip rented on a monthly basis (in addition to greater fuel sales). In the
financial feasibility study, we assumed that 10% of the fixed slips are reserved for
transient use and that all of the side tie moorings (560 linear feet of interior side tie
moorings and 1,142 of exterior side tie moorings) will be available for transient use.
Construction Costs
Wade Trim estimated the construction costs for the boat slip project including all related
upland improvements that would be required in order to obtain a building permit. Those
costs are identified in FIGURE 2 on the following page.
2
FIGURE 2
Estimated Construction Cost
Clearwater Downtown Boat Slips
2006 Estimated 2007 Estimated 2008 Estimated
Construction Construction Construction
Cost Category Cost Cost Cost
Boat SliD Imorovements
Dock System Installation $3,798,000 $4,063,860 $4,348,330
Piling and Pile Driving $1,900,000 $2,033,000 $2,175,310
Plumbing System $431,660 $461,876 $494,208
Electrical System $825,458 $883,240 $945,067
Security System $60,000 $64,200 $68,694
Rip Rap Existing Seawall $285,000 $304,950 $326,297
SUB TOTAL $7,300,118 $7,811,126 $8,357,906
Uoland Imorovements
Parking Lot Improvements $67,000 $71 ,690 $76,708
Restrooms/Showers/Dock $215,000 $230,050 $246,154
Master Office
Utilities
Electrical $402,000 $430,140 $460,250
Water, Sewer, Fire $149,000 $159,430 $170,590
SUB TOTAL $833,000 $891,310 $953,702
Other Related Costs
Performance Bond $166,600 $178,262 $190,740
Preparation of Design Criteria
Package & Selection of Design -
Build Entity $30,000 $32,1 00 $34,347
SUB TOTAL $196,600 $210,362 $225,08;
TOTAL PRIOR TO CONTINGENCY 8,329,718 $8,912,798 $9,536,695
ContinQencv (15%) 1,249,458 $1,336,920 $1,430,504
Estimated Total Construction Cost 9,579,176 $10,249,718 $10,967,199
A 7% annual inflation factor was used to get from 2006 estimated costs to 2008
construction year costs.
A TM reviewed these cost estimates and developed their own estimate of 2008
construction costs of $10,911,257. For the purposes of the financial feasibility study, $11
million was used as the cost of construction.
3
20 Year Financial Feasibility Study
Assumptions:
Following are the major assumptions used in preparing the 20 year financial feasibility
study:
Construction costs: $11 million
Bond: Tax exempt, level debt service for 20 years with 1 year capitalized interest at
current rates + 1 % (5-6%)
Number of Slips:
117 fixed slips (recreational/annual)
12 fixed slips (transient)
90% occupied 1 st year
100% thereafter
61.2% occupied
(70% received due to discounts)
61.2% occupied
(70% received due to discounts)
30% occupied (wave/weather issues)
(70% received due to discounts)
560 feet linear interior side tie moorings
1,142 linear feet exterior side tie moorings
2008 Rates:
Recreational/Annual - $12.50/ft./month increasing $.25/ft./month every 2 years
Transient/daily - $1.85/ft./day increasing $.05 every year
Fuel Sales Revenue: Fuel mark up $.32/gallon
Recreational - 50 gallons/slip/month
Transient - 50 gallons/stay (average stay of 3 days)
Inflation Factors: Personnel Costs 4.2%, all others 3%
All costs were developed assuming only the incremental costs needed to operate this
facility. Since the City already owns and operates a marina, many of the overhead costs
are already incorporated into the existing marina's operations. Examples are the fuel
dock, supervision, and clerical staff. Marina and Finance staff developed the costs used
in this study based upon the costs currently experienced in operating our existing Marina.
We have assumed that the exterior of the boat slips (wave attenuators) will be able to be
used for side tie transient slips. If we are unable to use this area due to it's proximity to
the boating channel, the annual revenues will decrease by an average of approximately
$240,000/year.
We have assumed the financing for this project will be a revenue bond pledging public
service tax as the repayment guarantee. We will be paying debt service from the net
revenues of the boat slips, however, if these revenues are insufficient, the payment must
be paid from public service tax receipts. Public service taxes are revenue of the City's
General Fund. Since both this bond issue and the bond issue to fund a portion of the
Beach Walk project both pledge public service taxes, the timing of these two projects
might enable us to issue one bond funding both projects together. This would be a more
efficient funding method, reducing costs for both projects.
4
Economic Results:
The Economic Analysis prepared by ATM shows an annual cash flow deficit after debt
service payments ranging from approximately ($270,000) to ($400,000). The average
deficit is approximately ($310,000). After the final debt service payment is made, the
annual positive cash flow should exceed $600,000. See FIGURE 3 for details of
operations.
Year
1 2009
2 2010
3 2011
4 2012
5 2013
6 2014
7 2015
8 2016
9 2017
10 2018
11 2019
12 2020
13 2021
14 2022
15 2023
16 2024
17 2025
18 2026
19 2027
20 2028
Total
Revenues
1,335,473
1 ,452,980
1,468,163
1,499,221
1,514,534
1,545,725
1,561,175
1 ,592,507
1 ,608,103
1,639,586
1 ,655,336
1 ,686,978
1,702,892
1,734,703
1,750,791
1,782,781
1,799,054
1,831,234
1,847,703
1,880,084
Funding Solutions:
FIGURE 3
Downtown Boat Slips
Results of Ogerations
Operating
EXQenses
610,031
704,510
732,747
756,129
781,185
806,205
832,958
859,738
888,315
916,986
947,524
978,227
1,010,871
1,043,758
1,078,668
1,113,903
1,151,247
1,189,006
1,228,968
1,269,441
Net Cash
Income
725,442
748,470
735,416
743,092
733,349
739,520
728,217
732,769
719,788
722,600
707,812
708,751
692,021
690,945
672,123
668,878
647,807
642,228
618,735
610,643
Debt Costs
1,019,432
1,020,182
1,019,932
1,018,682
1,021,432
1,017,932
1,018,432
1,022,682
1,020,432
1,021,932
1,021,932
1,020,432
1,021,574
1,020,920
1,017,595
1,021,695
1,018,500
1,022,200
1,017,600
Net
Cash Flow
(293,990)
(271 ,712)
(284,516)
(275,590)
(288,083)
(278,412)
(290,215)
(289,913)
(300,644)
(299,332)
(314,120)
(311,681 )
(329,553)
(329,975)
(345,472)
(352,817)
(370,693)
(379,972)
(398,865)
610,643
In order to provide options for improving the economic results, a menu of funding
solutions is provided in FIGURE 4, with further explanation provided following the
menu.
5
FIGURE 4
Downtown Boat Slips - City of Clearwater
Financial Feasibility
Menu of Funding Solutions
Annual
I Impact
Annual Deficit From ATM Feasibility Study - 20 Year Bonds (310,000)
Adjustment for 25 year bonds 125,000
Annual Deficit With 25 Year Bonds (185,000)
Additional Adjustment for 30 year bonds 58,000
Annual Deficit With 30 Year Bonds (127,000)
I (ATM) (Adjusted) (Adjusted)
I 20 year 25 year 30 year
~ -
Annual Deficit Per Above Schedule (310,000) (185,000) (127,000)
1 Grants per $1 million - Federal/State/County 93,000 81,000 76,000
2 Pay approximately $1 million, from Penny for 93,000 81,000 76,000
Pinellas to cover Upland Improvements
3 Pay portion of boat slip construction 93,000 81,000 76,000
from Special Development Fund RE, Penny
for Pinellas or other reserves.
Per $1 million
4 Forgive Payment in Lieu of Taxes 90,000 90,000 90,000
(ranges from $73,451 - $101,624)
5 Raise rates at Beach Marina to Offset Deficit 30,000 30,000 30,000
Per 10% increase above what's needed for Beach
Marina
6 Annual Subsidy from General Fund per $100,000 100,000 100,000 100,000
We have assumed a 20-year bond issue when preparing the economic analysis. Staff
recommends paying the bonds over 20 years, however, the City could elect a longer
6
. '.
payment schedule. This would result in reducing the annual debt payment and therefore
reducing the annual deficit. I have shown on this menu, the effects of a 25 or 30-year
bond on the operating results.
Other options presented in the menu:
1. Grants could be obtained or funding partners could be identified. This could
include Federal, State, County or other partners. This reduction in the deficit
would be per $1 million of funding obtained. This would reduce the amount to be
borrowed.
2. Approximately $1 million of the identified costs are for upland improvements.
Funding these costs from Penny for Pinellas as part of Coachman Park
Improvements would reduce the amount to be borrowed.
3. We could pay a portion of the costs of boat slip construction from other existing
funds. There is currently available approximately $3.8 million in undesignated
retained earnings in the Special Development Fund, $4.5 million in General Fund
retained earnings, and $7 million in Penny for Pinellas (or $6 million if $1 million
used in #2 above). This would be per $1 million in funding provided. This would
reduce the amount to be borrowed.
4. Forgive the payment in lieu of taxes. Currently the Marine and Aviation Fund
pays 5.5% of prior year gross revenues to the General Fund. The Council could
eliminate this requirement for the new boat slips.
5. Rates at the existing Marina could be raised to offset the deficit at the new boat
slips. Current rates are $4.58/ft./month for residents and $6.86/ft./month for non-
residents. For each 10% increase an additional $30,000 of revenue would be
received. See FIGURE 5 for rates.
FIGURE 5
Slip Rent Increases
Existing Marina
(Bates p"'~r ftl.!Jl.2!l!!'!)
Increase ~ Resident ~ Non Resident
Current $ 4.58 $ 7.55
10% 5.04 8.31
20% 5.50 9.06
30% 5.95 9.82
40% 6.41 10.57
50% 6.87 11.33
60% 7.33 12.08
70% 7.79 12.84
80% 8.24 13.59
90% 8.70 14.35
100% 9.16 15.10
7
.' .
6. The City could provide an annual subsidy from the General Fund to support the
downtown boat slips until such time as the slips are self-supporting.
Closing
By working jointly with ATM, staff has analyzed the expected results of operations and
has provided options for the financing of the construction and operation of the downtown
boat slips.
8
Clearwater Downtown Boat Slips
Summary Sheet
. 2003 Feasibility Study
o Preliminary assessment of site and permitting requirements.
o 138 concrete floating slips.
o Identify need for market study and cost/revenue analysis.
. 2006 Proj eet goals
o Preliminary design- slip layout (129 slips), wind and wave study,
utility demand and availability, upland improvements (parking,
landscaping, restrooms, showers, dock master office), provide for
large yacht perimeter docking, day/event docking and ferry pick up.
o Market, cost, revenue analysis.
o Proposed slips mix
30
40
45
50
55
11%
25%
16%
37%
11%
Total 129 100lYo
o Selection of dock type and construction material (floating concrete).
o City, Pinellas County, State and Federal permits and approvals.
o Estimated 2008 construction cost.
_J>'~{.~~~~;,_o~jJ~"t]o'$~,~~~~~~=,_c~~~r~,::="~.;
8,357,906
953,702
225,087
1,430,504
o Estimated schedule, design, permitting and construction:
· December 2006-2009
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~
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