HomeMy WebLinkAboutMinutes - 1980.02.28 - 38676OAKLAND COUNTY PARKS AND RECREATION COMMISSION
SPECIAL MEETING - WHITE LAKE OAKS
February 28, 1980
The meeting was called to order at 2:10 p.m. by Chairman Lewis E. Wint at
the White Lake Oaks Clubhouse.
COMMISSION MEMBERS PRESENT:
Chairman Lewis Wint, Vice Chairman Marjorie Walker, Secretary Velma Austin,
Fred Houghten, Dr. Joseph Montante, Carol Stanley, Richard Wilcox.
COMMISSION MEMBERS ABSENT:
Don Deni, George Kuhn
ALSO PRESENT:
Parks and Recreation
County Executive's Office
Community & Minority Affairs
Management & Budget
Budget Division
Dept. of Public Works
Treasurer's Office
Clerk's Office
County Commissioners
R. Eric Reickel, Manager
Jon J. Kipke, Assistant Manager
Joseph Figa, Chief, Design & Development
Janet Pung, Public Information Officer
Daniel T. Murphy, Executive
Patrick Nowak, Exec. Off - Admin..
William Spinelli, Exec. Off. - Operations
Joan Newby, Director
James Brennan, Director
Jeffrey Pardee, Manager
Milton Handorf, Director
Hugh Dohany, Treasurer
Douglas Williams, Chief Deputy Treasurer
Lynn Allen, Clerk
Richard Elliott, Deputy Clerk
John DiGiovanni
Alexander Perinoff
William T. Patterson
Betty Fortino
Lillian Moffitt
Matt Dunaskiss
Wallace Gabler
Anne Hobart
Robert Gorsline
John McDonald
Dr. G. William Caddell
Chairman Wint stated the meeting had been called to share with the County
Commissioners, information concerning the possible acquisition of the Pine
Knob Recreational Complex.
He welcomed the guests to the meeting and asked for their input following the
presentation.
(continued)
(Special Meeting - White Lake Oaks - February 28, 1980)
PINE KNOB:
Mr. James Brennan presented the Preliminary Study to Determine Feasibility of
Proposed Purchase for the Pine Knob Recreation Complex. (copy attached)
Mr. Reickel distributed and reviewed the Chronology of Events. He explained
that if Pine Knob was acquired through the purchase of general obligation
bonds, the Headlee Amendment required that the purchase be put to the vote
of the people. The earliest this could be accomplished would be the Presi-
dential Primary in May, 1980.
A question and answer session followed the presentation.
Meeting adjourned at 2:55 p.m.
Velma Austin
Secretary
Betty/ uest
Recording Secretary
v
News Release
Oakland County Parks and Recreation Commission
Release date: Janet Pung Contact:
858-5384
2/28/80
OAKLAND COUNTY COMMISSIONERS HEAR REPORT
ON FEASIBILITY OF PINE KNOB PURCHASE
PONTIAC -- The Oakland County Board of Commissioners and Parks and Recreation
Commission met today at an informational meeting at White Lake Oaks Golfcourse to
hear the findings of a preliminary study to determine the financial feasibility of
purchasing the Pine Knob Recreation Complex.
The preliminary feasibility study was prepared by the Oakland County Department
of Management and Budget,and Treasurer's Office, in cooperation with the Oakland
County Parks and Recreation Commission.
The study was requested by the Parks and Recreation Commission in order to
determine a realistic price range for the facility. The study also explored alter-
native methods of financing the purchase price, including revenue bonds and general
obligation bonds, and provided a complete description of the property.
The Parks and Recreation Commission has yet to make its recommendation regarding
the possible acquisition of the 340-acre recreation complex,including the outdoor
music theater, ski lodge and golfcourse.
The Commission was approached by the Pine Knob owners to purchase the facility
last November.
The Equalization Division of the Oakland County Department of Management and
Budget estimates the value of the Pine Knob Complex at $17,095,000 based on an income
approach analysis.
(more)
The income approach to values deals with the present value of projected income
generated as compared to the cost approach which analyzes the actual physical value
of the complex.
The study recommended that a negotiated price range of $17 to $19 million would
be economically feasible taking into consideration the need to reserve the amount
of the first year's interest payment and the cost of capital improvements.
The Management and Budget study also recommends general obligation bonds as the
most appropriate vehicle for financing the proposed purchase.
Since general obligation bonds involve the pledging of the County's full faith
and credit, the Headlee Amendment requires a general referendum of the County electorate.
According to the feasibility study, the potential risk of the purchase would be
substantially reduced with general obligation bonds. This type of financing would
provide commensurate savings in interest expense compared to revenue bonds. In addition,
the 1-1/2 times coverage of the annual bond payment would not be required as with
revenue bonds.
To determine the relationship between revenue and expenses for each component of
the Pine Knob Complex, a detailed financial history was prepared for fiscal years
1976-1978 and estimated revenues and expenses for 1979.
The study also reports the findings of an income analysis prepared by
Ralph I. Lipshaw, a realtor-appraiser commissioned by the Pine Knob Investment Company.
Lipshaw's total estimated value of Pine Knob is $21,300,000.
Since Oakland County Parks and Recreation Commission revenues are limited to a
1/4 mill voted tax levy, combined with fees and charges generated through park
facilities, the Pine Knob Complex, if acquired by Oakland County, would have to be
self-sustaining with revenues covering cost.
(more)
The Management and Budget report indicated that a break even analysis demonstrates
current Pine Knob revenues would support the annual principal and interest payment
on a 30-year, $20 million bond issue representing the total resources available for
acquisition of the facility.
- 30 -
2/28/80
April, 1979
April, 1979
June, 1979
July, 1979
November, 1979
November, 1979
PROPERTIES OFFERED TO OAKLAND COUNTY
PARKS AND RECREATION COMMISSION
DURING 1979
Groehn Property, 93.6 acres, Oakland Township
Chrysler Property in Orion Township
Lakeland Arena, Waterford Township
RAP Property (Resident's Awareness Program)
.82 acres, White Lake Township.
80 acres owned by Lamphere School District
in Madison Heights.
A. P. Ullbrich property - 187 acres in
Avon Township.
November, 1979 Pine Knob
PINE KNOB
Chronology of Events
Actual & Proposed
November 6, 1979 Met with Pine Knob Investment Company at their request. Inquired
whether County would be interested in acquiring Pine Knob (Music
Theater, Ski Area, Golf Course and Mansion.)
November./, 1979 Moved by Mr. Wilcox, supported by Mr. Deni to authorize the Manager
to investigate the offer from Pine Knob Investment Company'as to the
feasibility of purchasing Pine Knob with revenue bonds and report
back to the Commission.
November -January Parks and Recreation staff, County Executive staff and Treasurer's
Office proceed with in-depth study of the financial feasibility
of Pine Knob.
February 6, 1980 Parks and Recreation has closed session to review findings of study
committee as to financial feasibility of Pine Knob.
February 20, 1980 Moved by Mrs. Walker, supported by Mrs. Stanley, that'the Parks and
Recreation Commission seek an appropriate date for an informational
meeting with the Board of Commissioners to inform them of the
Commission's findings pertaining to the financial feasibility of the
Pine Knob recreation complex.
Manager contacted Chairman Gabler's office for a possible meeting
date.
February 21, 1980 Information meeting scheduled for February 28, after County Commis-
sioner's meeting, as confirmed by Chairman Gabler's office.
February 28, .1980 Informational luncheon meeting on Pine Knob at White Lake Oaks
with County Commissioners.
February 29, 1980 Special meeting of Parks and Recreation Commission to discuss possi-
bility of referring to the Board of Commissioner's Planning and
Building Committee to have the issue of Pine Knob put on the May 20,
1980 Pres.i:dential Primary requesting full faith and credit of County
to sell bonds. The Parks and Recreation Commission will schedule a
public hearing for March 17 or 19.
March 6, 1980 Presentation to Planning and Building Committee requesting County
Board of Commissioners to submit to the electors of the County the
question of whether or not the County should borrow, not to exceed
$20 million, and pledge its full faith and credit for the
repayment thereof by making an unlimited tax pledge in support
of its revenue bonds issued to pay all or a part of the cost of
acquiring and improving Pine Knob for Parks and Recreation purposes.
(Refer to other appropriate committees for approval if necessary)
March 17 or 19, Public Hearing Board of County Commissioners' Auditorium, 7:30 p.m..
1980 Called by Parks and Recreation Commission.
(over)
DANIEL To MURPHY
OAKLAND COUNTY EXECUTIVE
OAKLAND COUNTY, MICHIGAN
PINE KNOB RECREATION COMPLEX
PRELIMINARY STUDY TO
DETERMINE FEASIBILITY OF
PROPOSED PURCHASE
Prepared by;
County Executive's Department of Management & Budget
L and the Oakland County Treasurer's Office
in cooperation with the
Oakland County Parks and Recreation Commission
PINE KNOB RECREATION COMPLEX
PRELIMINARY FEASIBILITY STUDY
February 28, 1980
In response to a request by the Oakland County Parks and Recreation
Commission, this preliminary study was undertaken to determine the financial
feasibility of purchasing the Pine Knob Recreation Complex as an addition to
the County Parks System. The objectives of the study are:
- to provide a complete description of the property under consideration,
including both the physical facilities and the contractual arrange-
ments that transfer with the land,
- to recommend a realistic price range that is derived from alternative
valuation methodologies, including appraisal of the physical plant,
capitalization of anticipated income and a break-even analysis incor-
porating amortization of bonds issued to purchase the facility,
- to explore alternative methods of financing the recommended purchase
price, including Revenue Bonds and General Obligation Bonds.
Description of Property
A
The Pine Knob Recreation complex is comprised of three major components:
an outdoor music theater, a ski lodge and ski facilities, and a golf and
country club, 342.6 ± acres, all of which are zoned for commercial -recreational
development. Electric, phone, well water and sewer systems are on the site.
The Pine Knob Music Theater is located on Sashabaw Road at the 1-75 Interchange
in Independence Township. The theater was constructed in 1972, receiving the
National American Institute of Architects Award, and accommodates approximately
10,500 patrons, 5,700 seats are contained in the covered pavilion and the lawn
seats in excess of an additional 4,800 persons. The theater property contains
n
a total of 46.43 ± acres, twelve of which contain the theater and concession
facilities. Twenty-eight acres of parking are provided for the use of the
theater, providing parking for 3500 cars. The four lane access road from
Sashabaw Road as well as the parking lots are all paved and lighted. Three
food and beverage concession buildings are located close to the theater and
are available to those attending the performances. Complementary to the
theater facilities, the Pine Knob Ski Resort restaurant and cocktail lounge
are available for use before and after each show, as is the dining facilities
at the country club which is currently operated as a public restaurant called
the Pine Knob Hamburger Mansion. The facilities are strategically located
within one hour's drive of the center of Southeastern Michigan's major popu-
lation concentration with a potential market population of some five million
people, of which 50,000 pass this site every day.
Purchase of the Music Theater includes all of the rights and obligations
associated with a fifty-five year contract entered into March, 1972 with Pine
Knob -Theater, Inc., a Michigan Corporation and an affiliate of the Nederlander
Theatrical Corporation, the nation's largest buyer - bookers of contemporary
and classical talent which owns or operates sixteen dramatic and music theaters
in ten major American cities, including the Palace in New York, the Fisher
Theater in Detroit, the Greek Theater in Los Angeles, and the Garden State Art
Center in New Jersey. The major tenet of the lease calls for an 80% - 20%
division of profits between the landlord and operator, respectively, with a
minimum annual rental charge of $60,000, payable in $5,000 monthly installments
by the operator to the landlord. in addition, transfer of ownership includes a
fifteen year concession agreement, expiring May 30, 1987, with Ogden Confection
Corporation for the dispensing and sale of all food and beverages, as well as
the operation of the parking lot. The covenants of this agreement provide for
owner commissions equal to 22.5% of the gross receipts from all concession sales
3
and 5% of tobacco products, as well as 50 of the gross receipts of the
parking operation and one-half of net income after direct expenses relating
to the parking lot.
The Ski Area (140.6 ± acres) consists of sixteen ski runs, five chair
lifts, and eight rope tows, including the longest (4,000,ft.) ski hill in
Southeast Michigan. In addition, a ski lodge (33,000 sq. ft.) with a
cafeteria to accommodate 300 skiers, a ski shop and equipment rental are part
of the proposed purchase, as well as a dining room and fireside cocktail
lounge with a capacity of 260 people. The Pine Knob Ski Lodge was originally
conceived in 1961 by a local developer after several trips to Switzerland.
Pine Knob Investment Company purchased the Pine Knob Ski Resort in August of
1971. The subsequent development of the ski resort has taken place in two
stages. The first stage of development concentrated on improving skiing
conditions using the existing area and equipment. During the summer and fall
of 1971, Pine Knob Investment Company upgraded all the facilities including
extensive reshaping of the hills and remodeling of the ski lodge in the areas
of the kitchen, dining room, cocktail lounge, cafeteria and boot room. The
second phase of development at Pine Knob began during the summer months of
1972. In June, 40 additional acres of land lying to the east of the existing
hills were acquired and reshaping of hills began. More than one million yards
of dirt were moved, raising the vertical drop from 170 feet to 290 feet and
three new triple lifts were added. Chair lift capacity has been increased 27 %
from 2,000 skiers moved per hour by the two original chair lifts to 7,400 skiers,
moved per hour with the existing 5 chair lifts. The longest straight run is
now 3,000 feet which offers 4,000 feet of actual skiing. The acquisition and
development of 40 more acres of ski hills has made Pine Knob competitive with
the highly touted ski resorts in northern Michigan.
A
A fifteen year Concession Agreement, expiring May 30, 1987, with Ogden
Confection Corp. for sale of all food, beverages and tobaccos in the Ski
Lodge is also in effect which provides the following owner commissions:
- 17.5% of the gross receipts from all concession sales at the bar and
cocktail lounge, as well as all liquor sales in the Ski Lodge,
- 10% of the gross receipts from all sales in the cafeteria,
- 5% of the gross receipts from all sales in the Dining Room,
- 5% of the gross receipts from the sale of tobacco and tobacco
products in the Ski Lodge.
The Golf and Country Club (155.5 ± acres) is composed of an 18-hole
championship golf course and the Pine Knob Mansion, (15,554 sq. ft.) which
provides clubhouse facilities, including a firelit main dining room with a
capacity of 125 people, two small dining rooms, each accommodating 75 persons,
cocktail lounge, public lounge and piano bar, and separate locker and workout
rooms for men and women. Located at the top of Pine Knob's highest natural
elevation (1,206 feet above sea level), the mansion was completed in 1928 and
recently renovated at a cost of $1.8 million. The interiors are highlighted
with such accents as hand-hewn walnut beams, cathedral ceiling, hand -carved stone
fireplaces, hand -carved oak and walnut doors and trim, and hand -carved stair
railings and screen walls. The 6,800 yard par 72 golf course was designed by
David Krause, landscape architect and former golf professional, and Mr. Leo
Bishop, also a member of the P.G.A. for some twenty-eight years. The undulating
and wooded rough areas, along with its nine water holes, have given the golf
course a reputation of being very challenging. In addition, there is a Halfway
House (2,248 sq. ft.) between the ninth and tenth fairways, which houses a cock-
tail bar and restaurant serving sandwiches and snacks with an outdoor dining area
accommodating up to sixty people. For golfers, swimmers and tennis players,
there are the Pro Shop, a 30' by 80' swimming pool, six outdoor paved and lighted
I
tennis courts and Lake Fleming, a 26-acre sping-fed lake, The golf course
plays around this lake.
Pine Knob, an estate built by Col. Sidney Waldon in 1927, is dominated by
the highest elevations in Southeastern Michigan, varying from 1,010 feet above
sea level to 1,280 feet. The site is surrounded by pine trees, both natural
and transplanted, from which the name "Pine Knob" originated. An engineering
survey of the property by Novak and Fraus Corporation, Consulting Engineers,
concluded that topographical and subsoil characteristics of the site were such
that no unusual construction problems should be encountered in carrying out
future development.
Alternative Valuation Methods and Recommmended Price Ranqe
Several alternative methods of valuation can be utilized to determine a
recommended price range for the purchase of the Pine Knob Recreation Complex,
including the Cost or Summation Approach to Value and Income Approach to Value.
The Cost or Summation Approach to Value is the process whereby the value of im-
proved property is gauged on the basis of the cost to reproduce the structures,
less applicable depreciation, plus the value of the underlying land. The
appraiser must first estimate the cost to reproduce the structure. All com-
ponents of the structure are taken into account. Then the appraiser must
estimate depreciation from all sources, including physical deterioration (curable
and incurable), structural obsolescence (curable and incurable), and economic
obsolescence. Finally, the appraiser must estimate the value.of the underlying
land. The sum of the depreciated value of structural improvements and the value
of the underlying land is the indicated value of the property via the Cost
Approach.
The Income Approach to Value deals with the present value of an anticipated
stream of future earnings. This is measured by the net income which a fully in-
formed purchaser is warranted in assuming the property will produce during its
remaining useful life. After comparison viith investments of similar types and
C
class, this net income is capitalized into a value estimate. The capitaliza-
tion rate or factor expresses the normal return requirement of the typical
prudent buyer and is directly related to the quality and durability of the income
stream. Briefly, it vaires up or down based on the tenants' responsibility and
the length of time during which the income flow is considered reasonably certain.
The above analytical processes have been applied to the subject property by
both Ralph 1. Lipshaw, M.A.Q., A.S.A., S.R.P.A., C.R.A., Realtor -Appraiser com-
missioned by Pine Knob Investment Company, and the Iqualization Division of the
County Executive's Department of Management and Budget (see page 14) with the
following resulting conclusions:
Ralph 1. Equalization
Cost Approach: Lipshaw Division-
Music Theater NA $ 6,705,000
Ski Resort & Restaurant NA 5,650,000
Golf Course Complex S 5,500,000 3,100,000
Total Estimated Value NA, $15,455,000
Income Approach:
Music Theater S13,300,000 $11,500,000
Ski Resort & Restaurant 2,700,000 2,500,000
Golf Course Complex 5,300,000 32095,000
Total Estimated Value $21,300,000 $17,095,000
The primary difference in itotal estimated value results from application of varying
capitalization rates. Mr. Lipshaw utilized a capitalization rate of 11.5% for the
Music Theater, 11% for the Ski Resort, 9.5% for the Restaurant located in the ski
lodge and 10% for the Golf Course Complex, whereas the Equalization Division util-
ized a more conservative capitalization rate of 15% indicating a higher potential.
risk factor attached to future earnings. A change in the capitalization rate of
one percentage point equates to a change in the total estimated value of approxi-
mately $1,000,000.
A further refinement in the foregoing analysis to determine a suitable
The basis of Equalization Division estimate is updated records of costs of
the original facilities currently on file and did not involve a complete
appraisal process.
F
price range for the purchase of the Pine Knob Recreation Complex is employ-
ment of a break-even analysis. Break-even analysis is a formal approach to
financial planning based on established relationships between costs and
revenues. it is a device for determining the point at which total revenue
will just cover total costs, both variable costs and fixed costs including
the annual principal and interest payments on bonds issued to execute the
proposed purchase. This analytical technique has particular relevance to an
organization such as Parks and Recreation whose revenues are limited to a
1 mill voted tax levy and miscellaneous fees and charges because in order for
the Pine Knob Recreation Complex to be self-sustaining, its revenues must cover
> > >
To determine the relationship bet:-:een revenue and expenses for each of the
components of the Pine Knob Recreation Complex, a detailed financial history
has been prepared and exhibited on paces 7 thru 12, including actual revenue
and expenses for fiscal years 1976, 1977 and 1978, as well as estimated amounts
for.1979. The column entitled "1979 Adjusted'' represents estimated revenue and
expenses for the Pine Knob RecreatioP Complex hypothetically under County Manage-
ment, assuming the same number of performances for the Music Theater and the
same number of patrons for the Ski Area that were experienced in 1979, as well
as a like number of rounds that was experienced on the Springfield Oaks Golf
Course (37,000) last year, a facility similar in topography to the Pine Knob
Golf Course. The major financial differences that would result from County
takeover are the staffing changes detailed on page 13, a reduction in property
taxes ($112,336), additional security expense ($90,000), a more accurate re-
flection of depreciation expense and capital outlay ($85,000) and incorporation
of the financial aspects of the Golf Course Operation. The consolidated
Financial Statement appears on Page 6.
G
The Break -Even Analysis for the total complex and each component is based
on 1979 Adjusted Revenue and Expenses which is a conservative portrayal of future
financial prospects as indicated by the following circumstances:
- in 1979, a number of performances at the Music Theater were cancelled
due to unexpected illness of the entertainers, some were rescheduled with
substitutes but the overall attendance was down as reflected in the
occupancy rate; the number of performances and percent occupancy were
greater in both 1977 and 1978,
- the total number of cars parked likewise suffered with 1977 and 1978 at
higher numbers,
- the Ski Area is highly dependent on the weather, but becoming less so
with the advent and acquisition of new snow -making technology; 1979 had
fewer days of operation than either 1977 or 1978 and revenue from ski
passes and rental was down almost 25`/ from 1978 levels,
- net income from food sales at the Pine Knob Mansion is projected at $20,000,
based on projection provided by Parks and Recreation and assumes the primary
source of revenue would be derived from banquets and other private functions,
whereas continued utilization as a public restaurant could produce sub-
stantially greater income.
- the Golf Course is projected to lose $40,000 in its first year of operation
but would be expected to improve in future years.
Before computing the Break -Even Point for the Total Complex (page 1), fixed
costs were adjusted to include a $1,453,000 annual payment (page 5) to retire a
thirty year $20 million bond issue at 67, interest.* The annual bond payment was
distributed to the individual components based on their contribution to total
valuation as indicated by the Equalization Division before computation of their
respective break-even points (pages 2-4).
The volatility of interest rates in the current market could result in a
higher rate at the date of issue; a one percent change G%,ould translate into
a $160,000 change in Fixed Costs.
M
The following conclusions can be reached from review of the Break -Even
Analysis;
- The Break -Even Point for the Total Complex, including the
annual bond payment, is 57,046,654 and 795,000 patrons,
- The level of activity based -on 1979 Adjusted, 061,775 patrons,
would generate $8.5 million in total revenue and 57.9 million
in expenses, leaving 5600,000 for discretionary use by the Parks
and Recreation Commission,
- To reach the Break -Even Point, the 1979 Adjusted activity level
for the Total Complex would have had to decline 17%,
- The Break -Even Point for the Music Theater, including a prorata
share of the annual bond payment, is S-4 million and 474,000
patrons at 60 performances,
- The level of activity based on 1979 Adjusted, 829,775 patrons at
105 performances would generate S7.1 million in revenue and
$6.1 million in expenses, resulting in a net gain of $1.0 million,
- To reach the Break -Even Point, the 1979 Adjusted activity level
for the Music Theater would have had to decline 44`.,,
- The Break -Even Point for the Ski Area, including a prorata share
of the annual bond payment, is S1.3 million and 110,502 patrons,
- The level of activity based on 1979 Adjusted, 95,000 patrons, would
generate $1,138,780 in revenue and $1,273,970 in expenses, resulting
in a $135,190 loss primarily due to the prorata share of the annual
bond payment amounting to S537,610,
- To reach the Break -Even Point, the 1975 Adjusted activity level for
the Ski Area would have had to increase 16%,
- The Break -Even Point for the Go1,` __purse, including a prorata share
of the annual bond payment, is about S700,000 and 101,000 patrons,
- The level of activity based on 1979 ;adjusted, 37,000 patrons, would
generate $256,000 in revenue and $586,004 in expenses, resulting in
a $331,004 loss primarily attributable to the prorata share of the
annual bond payment amounting to $290,600,
- To reach the Break -Even Point, the 1979 Adjusted activity level for
the Golf Course would have had to increase 273%.
- The key component to the ultimate financial success of the proposed
purchase is the Music Theater; the Net Gain of the Music Theater is
sufficient to retire the entire annual bond payments as well as the
first year loss on the Golf Course.
Determination of a realistic price for the purchase of the total Pine
Knob Recreation Complex is dependent upon a multitude of factors, the most
important of which is a price level that most accurately reflects the potential
risks associated with the maintenance of a financially self-sustaining
recreation facility. Since the Break -Even Analysis demonstrates that current
revenues would conservatively support the annual principal and interest pay-
ment on a $20 million bond issue, this amount represents the total resources
available for acquisition of the facility. However, prudent fiscal management
dictates that at least the first year's interest payment on the bonds should
be held in reserve (S1,200,000) in the event of a financially calamitous year
that could result from fire, storm, lack of snow or other acts of God. The
recommended reserve would then be available to ensure uninterrupted retirement
of the outstanding debt obligation. In addition, several capital improvements
must be made to the complex in order to convert it to a publicly owned and
operated recreation facility; these improvements are listed on page 16 and
total over S800,000. By deducting the first year's interest payment and the
cost of capital improvements, as well as allowing for unanticipated judgments
J
that enter into price negotiation, a negotiated price range of $17 million to
$19 million v,ould be economically feasible.
Alternative Methods of Financing
The two major alternatives available to consumate the proposed purchase of
the Pine Knob Recreation Complex are Revenue Bonds and General Obligation Bonds.
Revenue Bonds do not involve the pledging of full faith and credit of the County
Tax base and, therefore, carry a higher risk factor since the sole source of funds
for debt retirement emanate from operation of the facility. The higher potential
risk associated with Revenue Bonds may render them unmarketable in this era of
tight credit or, if marketable, would require a significant interest penalty up-
wards of 2%, translating into over 5320,000 additional annual interest expense.
The resulting interest penalty and the flunicipal Finance Commission requirement to
demonstrate that the source of revenue utilized to retire the bonds generates
sufficient funds to accommodate 1L times the annual principal and interest payment
($2,180,000 vs. the $2,055,000 projected availability) leads to the conclusion that
Revenue Bonds are not the appropriate vehicle for financing the proposed purchase.
Since General Obligation Bonds do involve the pledging of the County's full
faith and credit, the Headlee Amendment requires a general referendum of the County
Electorate. Because the proposed purchase of the Pine Knob Recreation Complex
represents a policy question of significant magnitude, opportunity for voter en-
dorsement or denial may be advisable in any event. It should be noted that the
electorate by voting to "make an unlimited tax pledge of its full faith and credit
for the repayment" of bonds does not in and of its self result in an additional
tax levy; only if the Complex cannot generate sufficient revenues to cover operating
expenses and retire the debt and no other source of funds is available to make the
bond payment and the interest reserve established at the outset is exhausted would
additional taxes be levied to meet the bond obligation. The potential risk of the
proposed venture would be substantially reduced via the use of General Obligation
K
Bonds, with a commensurate savings in interest expense, and the 12 times
coverage of the annual bond payment would not be necessary. Therefore,
General Obligation Bonds would be the most appropriate vehicle for financing
the proposed purchase of the Pine Knob Recreation Complex.
11
PINE KNOB RECREATION COMPLEX
TOTAL COMPLEX
BREAK EVEN A.NALYSIS1
NUMBER OF
VARIABLE
FIXED
TOTAL
TOTAL
NET GAIN
PATRONS
COSTS
COSTS2
COSTS
REVENUE
(LOSS)
750,000
3,920,597
2,886,528
63807,125
6,640,922
(166,203)
800,000
4,181,970
2,886,528
7,068,498
7,083,650
15,1S2
850,000
4,443,344
2,886,528
7,329,872
7,526,379
196,507
900,000
4,704,717
2,886,528
7,591,245
7,969,107
377,862
961,7751
5,027,644
2,886,528
7,914,172
8,516,098
601,926
1,000,000
5,227,463
2,886,528
8,113,991
8,854,563
740,572
1,0S0,000
5,488,836
2.886,S28
8,375,364
9,297,291
921,927
REVENUE AND
EXPENSE
(IN MILLIONS)
12
11
10
g.
8
7
6
5
4
3
2
1
0
400 800 1200 1600
NUMBER OF PATRON'S (IN THOUSANDS)
FIXED COSTS
BE = Rev = 1 _ variable costs
sales
2,886,528
= 1 _ 5,027,644
8,516,098
$7,046,654
W.
I Based on 1979 adjusted
2 Includes $1,453,000 annual payment
to retire $20 million bond
Page 1
PINE KNOB RECREATION COMPLEX
MUSIC
THEATREI
BREAK EVEN
k\'ALYSIS2
NUMBER OF
NUMBER OF
VARIABLE
FIXED
TOTAL
TOTAL
NET GAIN
PERFMIMCES
PATRON'S
COSTS
COSTS 3
COSTS
REVENUE
(LOSS)
SO
39S,130
2,215,525
1,400,596
3,616,121
3,391,104
( 225,017)
60
474,160
2,658,630
1,400,596
4,059,226
4,069,325
10,099
75
592,700
3,323,287
1,400,596
4,723,883
5,086,656
362,773
90
711,240
3,987,945
1,400,596
5,388,S41
6,103,987
715,446
1052
829,775
4,652,602
1,400,S96
6,OS3,198
7,121,318
1,068,120
110
869,290
4,874,154
1,400,S96
6,274,750
7,460,428
1,185,678
115
908,800
5,095,707
1,400,596
6,496,303
7,799,539
1,303,236
120
948,300
5,317,259
1,400.596
6,717,855
8,138,649
1,420,794
REVENUE AND
EXPENSES
(IN MILLIONS)
10
9
8
7
6
5
4
3
2
1
I
200 400 600 800
NUMBER OF PATRONS (IN THOUSANDS)
ible
:s
osts
F = Fixed Costs
F P = Price/Unit
BE = Q = P - V where V = Variable Cost/Unit
1,400,596
67,822 - 44,310
60 Performances = 474,000 Patrons
1 Includes Parking and Food Concession and 80% of Theatre Operations
2 Based on 1979 Adjusted
3 Includes 43° of $1,453,000 annual payment to retire $20 Million Bond Page 2
PINE KNOB RECREATION COMPLEX
SKI AREA
BREAK EVEN ANAYLSISI
WMBER OF
VARIABLE
FIXED
TOTAL
TOTAL
NET GAIN
PATRONS
COSTS
COSTS2
COSTS
REVENUE
(LOSS)
81,000
264,544
963,S72
1,228,116
9 00,551
(257,565)
86,41,00
282,180
963,S72
1,245,752
1,035,255
(210,497)
91,800
299,816
963,572
1,263,388
1,099,958
(163,430)
95,0001
310,398
963,572
1,273,970
1,138,780
(135,190)
102,600
335,089
963,S72
1,298,661
1,229,365
( 69,296)
110,000
359,780
963,572
1,323,352
1,319,950
( 3,402)
113,4.00
370,361
963,572
1,333,933
1,3S8,772
24,839
REirNUE AND
EXPENSE
(IN THOUSANDS)
2000
1800
1600
1400
1200
1-000
800
600
400
200
I
50 100 ISO 200
NUMBER OF PATRONS (IN THOUSANDS)
F = Fixed Costs
F P = Price/Unit
BE = Q = P-V Where V = Variable Costs/Unit
963,572 _
11.9872 - 3.2673
110502 Patrons
I Based on 1979 Adjusted
2 Inciudes 370 of $1,453,000 annual payment to retire $20 Million Bond
ble
s
Page 3
PINE KNOB RECREATION COMPLEX
GOLF COURSE
BREAK EVEN ANALYSIS I
NUMBER OF
VARIABLE
FIXED
TOTAL
TOTAL
NET GAIN
PATRONS
COSTS
COSTS2
COSTS
REVENUE
(LOSS)
20,000
34,943
522,360
S57,303
138,378
(418,925)
25,^.,00
43,678
522,360
566,038
172,973
(393,065)
30,000
S2,414
522,360
574,774
207,568
(367,206)
37,000�
64,644
S22,360
586,004
256,000
(331,004)
40,000
69,885
522,360
592,245
276,757
(315,488)
45,000
78,621
522,360
600,981
311,3S1
(289,630)
50,000
87,3S7
522,360
609,717
34S,946
(263,771)
100,000
174,714
522,360
697,074
691,892
( S,182)
REVENUE AND
EXPENSE
(IN THOUSANDS)
1000
900
'800
700
600
500
400
300
200
100
0
able
:s
:d
:s
30 60 90 120
NUMBER OF PATRONS (IN THOUSANDS)
F = Fixed Costs
F P = Price/Unit
BE = Q = P-V where V = Variable Cost/Unit
= 522,360
6.9189-1.7471
101,000 Patrons
I Based on 1979 Adjusted
2 Includes 200 of $1,453,000 annual payment to retire $20 Million Bond
Page 4
,kMORT I %AT I ON SCHEDULE
GENERAL OBLIGATION BOND
$20 IMILLION 6% INTEREST
30 YEA.RS
TOTAL
YEAR
PAYMENT
INTEREST
PRINCIPAL
BALANCE
Beginning
Balance
-
20,000,000
1981
1,453,000
1,200,000
253,000
19,747,000
1982
1,453,000
1,185,000
268,000
19,479,000
1983
1,453,000
1,169,000
284,000
19,195,000
1984
1,453,000
1,152,000
301,000
18,894,000
1985
1,453,000
1,134,000
319,000
18,575,000
1986
1,453,000
1,115,000
338,000
18,237,000
1987
1,453,000
1,094,000
359,000
17,878,000
1988
1,453,000
1,073,000
380,000
17,498,000
1989
1,453,000
1,050,000
403,000
17,095,000
1990
1,453,000
1,026,000
427,000
16,668,000
1991
1,453,000
1,000,000
453,000
16,215,000
1992
1,453,000
973,000
480,000
15,735,000
1993
1,453,000
944,000
509,000
15,226,000
1994
1,453,000
914,000
539,000
14,687,000
1995
1,453,000
881,000
572,000
14,115,000
1996
1,453,000
847,000
606,000
13,509,000
1997
1,453,000
811,000
642,000
123867,000
1998
1,453,000
772,000
681,000
12,186,000
1999
1,453,000
731,000
722,000
11,464,000
2000
1,453,000
68S,000
765,000
10,699,000
2001
1,453,000
642,000
811,000
9,888,000
2002
1,453,000
593,000
860,000
9,028,000
2003
1,453,000
542,000
911,000
8,117,000
2004
1,453,000
487,000
966,000
7,151,000
2005
1,453,000
429,000
1,024,000
6,127,000
2006
1,453,000
368,000
13085,000
5,042,000
2007
1,453,000
303,000
1,150,000
3,892,000
200S
13453,000
234,000
1,219,000
2,673,000
2009
1,453,000
160,000
1,293,000
1,380,000
1010
1,4633000
83,000
1,380,000
-0-
43,600,000
23,600,000
20,000,000
Page 5
Pine
Knob R( '.a t i on
Complex
Consolidated Financial
Statement-
197'6
1977
1978
1979
1979
Actual
Actual
Actual
Estimated
Adjusted
Music Theater (80%)
Revenue
4,110,514
5,415,352
6,904,792
6,685,452
6,685,452
Fixed Expenses
473,226
562,803
618,523
689,870
660,270
Variable Expenses
3,069,822
4 041,272
4,902,523
4,542,292
4,5422292
Total Operating Expenses
3,543,048
4,604,075
5,5212046
5,232,162
5,202,562
Excess Revenue Over Expenses
567,466
811,277
1,383,746
1 4-53 290
1,482,890
Music Theater Concessions
Food Concession
Parking Concession
Total Revenue
Fixed Expenses
Variable Expenses
Total Direct Expenses
Excess Revenue Over Expenses
Ski Area
Revenue
Fixed Expenses
Variable Expenses
Total Operating Expenses
Excess Revenue Over Expenses
Fixed Expenses
Variable Expenses
Total Operating Expenses
Excess Revenue over Expenses
GRAND TOTAL
Summary
Revenue
-o Fixed Expenses
to Variable Expenses
0 Total Operating Expenses
°N GRAND TOTAL
29,034
33,022
42,924
36,810
38,500
220,199
272,080
301,173
397,366
397,366
249,233
305,102
344,097
434,176
435,866
39,485
49,841
47,969
67,052
115,536
55,133
73,072
92,037
110,310
110,310
94,618
122,913
14o,oM
177,362
225,846
154.615
182.189
204.091
256.814
210.020
1,065,259 1,218,725 1,427,350 1,138,780 1,138,780
427,656
448,607
430,684
428,590
425,962
353,531
398,110
325,985
354,450
310 398
781,187
846,717
756,669
783,040
73 ,360
284,072
372,008
6701681
355,740
402,420
256,000
231 ,76o
64,644
5,425,006 6,939,179 8,676,239 8,258,408 8,516,o98
940,367 1,o61,251 1,097,176 1,185,512 1,433,528
37478,486 4,512,454 5,320,545 5,007,052 5,027,644
4,418,853 5,573,705 6,417,721 -6 1 2 56Li. 6 172
1 oo6 1 3 1,365,474 2,258,518 2,065,844 2,0 ,926
Pine Knob Re.",ation Complex
Musi.. heater
Financial Statement-
1976
1977
1978
1979
1979
Actual
Acttun I
Actual
Estimated
Adjusted
Attendance Data
Number of Performances
94
106
log
105
105
Average Attendance
7,286
8,095
9,026
7,902
7,902
Total Attendance
684,927
858,078
983,897
829,775
829,775
Total Seats (Capacity
10,500) 987,000
1,113,000
1,144,500
1,102,500
1,102,500
Percent Occupancy
69.47.
77.1%
86.0%
75.3%
75.3%
Revenue
Average Ticket Price
7.39
7.75
8.58
9.80
9.80
Gross Ticket Sales
5,063,992
6,647,805
8,437,037
8,129,922
8,129,922
Concession Income
23,228
30,289
34,500
30,800
30,800
Interest Income
15,222
24,938
95,587
99,560
99,560
Other Income
35,700
66,158
63,866
96,533
96,533
Total Revenue
5,138,142
6,769,190
8,630,990
8,356,815
8,356,815
Opercting Expenses
Fixed Expenses:
Supervision Fee
100,000
100,000
100,000
100,000
100,000
New York Office
15,000
15,000
15,000
15,000
15,000
Taxes - General
4-2,207
46,652
46,497
57,LE70
20,470
Insurance
51,088
57,893
61,200
71,316
71,316
Interest Expense
5,346
3,716
3,126
4,578
4,578
Pensions
830
2,708
3,192
3,500
3,500
Professional Services
4,204
9,834
5,551
5,100
5,100
Advertising
158,615
195,292
176,345
253,763
253,763
Vehicle Expense
8,533
9,611
18,517
20,500
20,500
Depreciation & Amortization
23,503
27,232
31,986
33,547
33,547
Office Expense
6,014
8,450
17,444
16,000
161000
Box Office - Fixed
7,523
6,941
1.0,232
9,800
9,8o0
Repairs & Maint. - Fixed
28,963
31,767
30,879
26,930
26,930
Telephone - Fixed
3,318
5,o4o
6,798
7,500
7,500
Payroll - Fixed .
102,291
137,526
184,790
178,000
178,00.0
Payroll Taxes - Fixed _
34,097
45,842
61,597
59,333
59,333
Total Fixed Expenses
591,532
703,504
773,154
862,337
825,337
a
Ln
Variable Expenses:
Stage Show Costs
Royalties & License Fees
Bad Debts
Cleaning Expense,,
Donations
Dues & Subscriptions
Cast Relations
Contract Labor
Postage
Equipment Rental
Theatre Expense
Tickets
Travel & Promotion
Utilities
Box Office - Variable
Repairs & Maint. - Variable
Telephone - Variable
Payroll - Variable
Payroll Taxes - Variable
Total Variable Expenses
Total Operating Expenses
Excess Revenue over Expenses
v
0
Pine Knob Rec•�'tion Complex
Music ,oeater
Financial Statement-;
1976 1977 1978 1979 1979
Actual Actual Actual Estimated Adjusted
3,311,416
e
4,309,553
5,278,842
4,8o6,707
4,806,707
19,505
20,756
25,564
24,600
24,600
319
1,521
1,150
1,500
1,500
22,886
32,077
27,255
32,000
32,000
910
6,175
100
100
100
40
791
312
400
400
33,478
76,493
99,357
95,700
95,700
---
16,265
20,935
21,000
21,000
2,143
13,269
24,o48
23,200
23,200
5,516
6,313
6,895
7,000
7,000
58,759
57,099
34,135
33,000
33,000
16,056
18,624
19,605
19,000
19,000
4,071
4,833
5,000
5,000
5,000
4,24o
8,249
10,941
10,162
10,162
3,762
3,470
5,116
4,900
4,9oo
28,962
31,767
30,879
26,930
26,930
9,952
15,120
20,395
22,500
22,500
306,873
412,577
507,o67
534,000
534,000
8,389
16,638
10,557
10,167
10,167
3,837,277
5,051,590
6,128,153
5,677,866
5,677,866
4.428.809
5.755,o94
6.901,307
6,54o,203
6,503,203
709,333 1 ol4,o96 1,729 683 1 816,612 1,853,612
Me
Music Theater Rental Income
Less: Direct Expenses:
Fixed Costs:
Salaries
Fringe Benefits
Security Expense
Pine Knob Rec,cation Complex
Music Theater Concessions
Financial Statement ::
1976 1977 1978
Actual Actual Actual
(8(r/,) 567,466 811,277 1,383,746
Insurance
Real Estate Tax
Personal Property Tax
Depreciation -Equipment
Total Fixed Costs
Variable Costs:
Traffic Control
Cleaning Expense
Total Variable Cost
Total Direct Expenses
1979
Estimated
1979
Adjusted
1,453,290 1,482,890
---
---
---
---
16,050
---
---
---
___
5,730
---
---
30,000
9,660
12,249
12,117
19,368
19,368
15,956
21,446
20,602
33,296
---
13,869
16,146
15,250
14,388
14,388
---
302000
39,485
49,841
47,969
67,052
115,536
24,613
33,479
36,851
52,666
52,666
30,520
39,593
55,186
57,6LI4
57,644
55,133
73,072
92,037
110,310
110,310
94,618
122,913
14o,oM
177,362
225,846
Net Income from Music Theater
472,848
688,364
1,243,740
1,275,928
1,257,044
Food Concession:
Total Sales
232,282
281,783
343,392
300,489
308,000
Gross Income - 22.5%
52,262
63,311
77,263
67,610
69,300
Less: 10% Royalty Fee
23,228
30,289
34,339
30,800
30,800
Net Income from Food Concession
29,034
33,022
42,924
36,810
38,500
Parking Concession:
Total Cars Parked 224,033
288,179
332,135
275,986
275,986
Gross Income 1.50/Car 336,047
432,406
498,048
413,979
413,979
Operating Expenses 231,697
3202652
393,750
309,213
309,213
Net Profit lo4,350
111,754
1o4,298
104,766
104,766
Parking Commission-507,Gross168,024
216,203
24g,024
206,990
206,990
Profit Sharing-50% Net 52,175
55,877
52.,149
52,383
52,383
Surcharge-.50/Car ---
---
---
137,293
137 993
Net Income from Parking Concession220,199
272,080
301 173
397,3
397,3
r�
Total Net Income from Music
Theater Concessions 722,081
993,466
1,587,837
1,710,104
1, 92,910
-v
CU
(.o
m
Pine Knob Re. ration Complex
Ski Area
Financial Statement*
1976
1977
1978
1979
1979
Actual
Actual
Actual
Estimated
Adjusted
Attendance Data
Days 74
93
98
88
88
Patrons 100,239
122,459
143,073
95,000
95,000
Average Rate/Day 8.75
8.29
8.62
9.81
9.81
Revenue
Ski Passes & Rental
Season Passes
Restaurant Rental
Ski Shop - Net
Operat i.ng Expenses
i'1 xea tin des :
Security Expense
Real Estate Taxes
Depreciation Expense
Vehicle Expense
Advertising & Promotion
Insurance
Offide Expenses
Payroll - Fixed
Fringe Benefits
Repair & Maint.-Fixed
Utilities - Fixed
Telephone - Fixed
Miscellaneous
Capital Outlay
Total Fixed Expenses
Variable Expenses:
Supplies
Equipment Rental
Payroll - Variable
Repair & Maint.-Variable
Utilities - Variable
Telephone -.Variable
Total Variable Expenses
Total Operating Expenses
877,518
1,015,050
1,233,497
932,290
932,290
70,615
81,691
66,369
87,390
87,390
93,100
93,100
93,100
93,100
93,100
24,026
28,884
34,384
26,000
26,000
,.o65,255
1,218,725
1 L427,350
1 ,138,780
1,138,780
30,000
47,419
48,157
50,853
42,o4o
---
17,187
15,299
16,000
16,000
21,000
11,580
18,407
12,536
14,000
7,640
8,413
11,190
25,308
15,000
15,000
71,921
76,136
59,218
6o,000
47,000
7,o44
12,171
12,570
14,000
12,500
137,836
138,175
lo9,46o
120,300
125,922
33,854
20,798
33,818
30,000
34,775
20,5o6
30,797
17,686
17,500
5,375
25,219
35,006
4o,166
43,250
35,750
3,679
1,877
1,471
1,500
1,000
.42,998
40,594
51,598
55,000
55,000
---
---
---
---
35,000
427,656
448,607
430,68LF
428,590
425,962
14,432
6,059
2,483
8,000
8,000
11,347
9,027
2,951
3,000
3,000
179,543
179,984
142,581
156,700
164,023
61,518
92,390
53,059
52,500
25,125
75,656
105,018
12o,498
129,750
107,250
11,035
5,632
4,413
4,500
3,000
353,531
398,110
325�,985
.3542450
310,398
781.187
846,717
756,669
783,o4o
736,360
Excess Revenue Over Expenses 284,072 372,008 670,681 355,7140 402,420
ME
Pine Knob Rec. ation Complex
Golf Course '
Financial Statement.,
1976 1977 1978
Actual Actual Actual
Attendance Data
Number of Rounds
Average Rate/Round
Revenue
Green Fees
Rentals - Golf Carts
Commission - Food Sales
Merchandise Sales - Net
Total Revenue
Operating Expenses
Fixed Expenses:
Payroll -Fixed
Fringe Benefits
Security Expense
Telephone - Fixed
Rubbish Removal
Grounds Maintenance
Utilities - Fixed
Insurance
Laundry & Dry Cleaning
Building Maintenance
Office Supplies
Transportation
Depreciation
Golf Cart Expense
Total Fixed Expenses
Variable Expenses:
Payroll - Variable
Overtime
Equipment Rental
Telephone - Variable
Equipment Repair
Utilities - Variable
1979
Estimated
1979
Adjusted
37,000
4.50
166,500
65,000
20,000
4,500
256,000
72,410
25,850
30,000
500
500
13,500
22,500
13,000
2,000
3,000
1 ,500
4,000
15,000
28.000
231,760
39,744
4,000
200
1,500
8,500
7,500
atian C°mp}ex
F\nanG�al
1911
PGA
\ 9-16
PGA
Cont.)
erases � ns
\JarXable Pubi�Ga Expense
Dues lAaneous
Ge
Un ra gel � C°nf ef A',
, es
-beep1n9
oUsek ls ses
S a; la obr e E/,Perses
�o ai Operate 9 0verderi
enue
N9r19 d
Est ate
191 8
PGA
19� 9
tea
Pd
50
i00
� 9250
400
l000
4q-13
N
Gels Rey 0°1 � Course,
Expenses i Ad Oaks i ne t,nob
e at the Spring ds pr°�ided by P ties
- base on eXperienc unaud. e recur o�ided by third 'pa
and
�t d
°arsehiGh �s baai statements was o{ statements prnd Cier\�jPegister,
on °� the G°, C of these ��nanG` sided thru re�`ew unty Treasurer a
With the eXGept\ far preparation `i ration was pro Corp 0akiand C°
the data source any, 1�owever vCr 09den Con�eGtion
\nvestment C°mp heater,
P i ne \,nob
i.e•' eGr�ation•
Parks and
to
(D
ME
Pine Knob Re '°-:at i on Complex
1979 Adju !d Payroll
Fixed Expenses
Full Time Personnel:
1 Manager of Pine Knob Recreation Complex
1 Ski Area Manager
1 Assistant Manager -Golf & Ski
1 Foreman -Golf & Ski
1 Mechanic -Golf & Ski
1 Electrician -Golf & Ski
1 Typist/Operator
1 Employee Record Specialist
1 Typist (Purchasing)
1 Accountant I
Total Full Time
Fringe Benefits 05 35.7%
Part Time Personnel:
5 Snow Makers
4 Hill Groomers
Total Part Time
Total Fixed Expenses
Variable Expenses:
Part Time Personnel:
Ski Area:
6 Ticket Takers
21 Equipment Renters
7 Park Helpers (Security)
39 Lift Operators
4 Maintenance Helpers
2 Clerks
Golf Course:
6 Cashiers
4 Summer Laborers
5 Parl6 Helpers
Total Variable Expenses
Total Salaries & Fringe Benefits
Personnel:
Full Time
Part Time
Total
Total Annual Music Theater
Expense Expense
Ski Area Golf Course -
Expense Expense
31,500 10,500
10,500
10,500
25,000
25,000
19,440
9,720
9,720
19,440
9,720
9,720
18,900
9,450
9,450
18,900
9,450
9,450
11,370
5,685
5,685
13,350
6,675
6,675
11,370
5,685
5,685
16,600 5,550
5,525
5,525
185,870 16,050
97,410
72,410
66,355
5,730
34,775
25,850
4.50/hr.x8 hrs.x88 days 15,840 15,8L�O
4.50/hr.x8 hrs.x88 days 12,672 12,672
28,512 28,512
280,737 21,780 160,697 98,26o
3.15/hr.x7
hrs.x88
days
11,642
11,642
3.15/hr.x7
hrs.x88
days
40,748
4o,748
4.50/hr.x7
hrs.x88
days
19,404
19,40L�
3.15/hr.x7
hrs.x88
days
75,676
75,676
4.50/hr.x8
hrs.x88
days
12,672
12,672
3.15/hr.x7
hrs.x88
days
3,881
3,881
3.15/hr.x8 hrs.x92 days 13,910 13,910
3.15/hr.x8 hrs.x92 days 9,274 9,274
4.50/hr.x8 hrs.x92 days 16,560 16 560
203,767 164,023 39,7+4
484L504 21 ,780 324,720 138�,004
10
103
113
OAKLAND COUNTY
Inter -Departmental Memo
' om:
To:
Date January 22, 1980
Herman W. Stephens, Manager of the Equalization Division
James M. Brennan, Director of Management and Budget
Subject: Review of Pine Knob Appraisals
Pursuant to your request to review the enclosed appraisals on
Pine_Knob and report back as soon as possible with our opinion,
I am pleased to say that we have completed our review of the
data at hand.
Using the information in our files and the data that was collected
back in 1975 and updating same, it is possible to roughly estimate
the value on a cost approach basis.
Our calculations result in the following values:
Pine Knob Theatre Complex
Land (46.43 ac. +) $ 1,392,900
Improvements, Personal Property
& Miscellaneous _ 5,311,312
Total 6,704,212
Rounded to 6,705,000
Ski Resort & Restaurant
Land (140.67 ac. +) $ 1,050,420
Improvements, Personal Property
& Miscellaneous 4,602,293
Total 5,652,713
Rounded to 5,650,000
Golf Course Complex
Land (155.50 ac. +) $ 1,943,750
Improvements, Personal Property
& Miscellaneous 1,150,275
Total 3,094,025
Rounded to 3,100,000
TOTAL ESTIMATED VALUE BY
COST APPROACH $15,455,000
Page 14
Ralph Lipshaw in his appraisal of the Theatre Complex, Golf Course and
Ski Lodge Complex, concentrated exclusively on the income approach and
in this instance I would have to agree that anyone considering purchasing
the property would definately be looking at the income and cash flow.
The income and expense figures at hand on the theatre (such as they are)
in our opinion, reflect a value of closer to $11,500,000. It is our
opinion that the capitalization rate should include the real estate tax
factor and should incorporate more of a risk factor then indicated. A
capatilization rate of 15% is more realistic and such a rate applied to
an adjusted net income of $1,724,290 produces a value of $11,495,000 for
the theatre. The Ski Complex and Lodge income as adjusted for 1979 by the
county is stated as $376,240 and the net annual income as stated in
Mr. Lipshaw's letter dated November 12, 1979; to the land $188,925, and
$93,100 from the Restaurant for a total of $282,025. Using the county's
adjusted figures of $376,240 and the same capitalization rate as on the
theatre a value of $2,508,266, or $2,500,000 is generated.
By using the $11,495,000 as estimated by the income data on the theatre
and the $2,500,000 valuation projection on the Pine Knob Ski Lodge
operation through the analysis of the income and capitalization process,
a total value of $13,995,000 is achieved. Adding to this total of the
estimated value of the Golf Course operation and improvements a grand
total of $17,095-,000 is arrived at.
Therefore, it is our opinion based on the information on hand and provided
others that the current value of the Pine Knob Properties with encompass
approximately 342.60 acres of land and include the Theatre, Ski Lodge, Slopes,.
Golf Course, Mansion, Swimming Pool and Tennis Courts to fall within a
range of $15,455,000 to $17,095,000.
Page 15
PINE KNOB CAPITAL OUTLAY
Preliminary Estimate
f
1. Entrance drive to golf course
3800 linear feet x 22 feet @ $25 sq. yd.
2. Parking area for 150 cars
350 sq. ft..= 52,500 sq. ft. @ $25 per sq. yd.
3. Maintenance Building
8000 sq. ft. @ $35 per sq. ft.
4. Fencing for entire site
19,200 linear feet of 6 foot cyclone fence
@ $10 linear foot.
TOTAL ESTIMIATED COST
$232,200.
$145,000.
$280,0001.
$192,000.
$849,200.
Page 16