01-0369R

RESOLUTION OF INTENT TO ENTER INTO AN AGREEMENT WITH THE RBC FOR FOND DU LAC BAND OF LAKE SUPERIOR CHIPPEWA TO ALLOW ONE HOUR OF FREE PARKING TO PATRONS OF THE FOND-DU-LUTH CASINO IN EXCHANGE FOR AN EXPANSION COMMITMENT.

BY COUNCILOR HOGG:

        RESOLVED, that the Duluth City Council hereby manifests its intent to enter into an agreement with the reservation business committee of the Fond du Lac Band of Lake Superior Chippewa to allow customers of the Fond-du-Luth Casino to have one hour of free parking in the adjacent, city-owned parking ramp in exchange for the committee's commitment to expand slot machine gaming at the casino.



STATEMENT OF PURPOSE:  The purpose of this resolution is to express the council's intent to approve an agreement with the reservation business committee of the Fond du Lac Band of Lake Superior Chippewa (the "band") to provide one-hour free parking to patrons of the Fond-du-Luth Casino (the "casino") in exchange for the band's commitment to expand its slot machine gaming operations at the casino.

Under the present agreements with the band, patrons of the casino can park in the adjacent, city-owned casino parking ramp at the same rate and under the same terms that are available to the general public; the ramp has become a net revenue-generating facility for the city and the net revenues from the parking operation go to the city's general fund.

In addition, the city receives 19 percent of all net revenues from slot machine operations at the casino. These net revenues, which totaled almost $5 million for the year 2000, are deposited in the community investment trust fund (the "CITF") pursuant to Section 54 (E) of the Charter and are being currently used to fund the SIP program.

The band also operates the Black Bear Casino south of Cloquet. At that facility, they are able to offer unlimited free parking to their patrons and, in addition can keep all of the profits that are generated by that operation.

Historically, the band has had bingo operations at both facilities. They are now considering eliminating bingo at one of the facilities and expanding their slot machine operations in the vacated space. If slot machines are installed at the casino, about 200 additional machines could be added. Based on experience, these additional machines would be expected to produce additional revenues to the city in the neighborhood of $1 million per year.

In order to induce the band to expand at the casino rather than at Black Bear and to better attract patrons to the casino, the band is requesting that the city agree to provide one hour of free parking to patrons of the casino on a validation basis. It is the city's best estimate that such a validation program would result in a reduction of parking revenues of about $125,000 per year. After the validation program, this would leave a net gain in revenues to the city of about $875,000 per year.

This proposal from the band, coming when it does, is fortuitous for the city, DEDA and the Old Downtown. The area known as "Old Downtown," consisting of that part of the Downtown tax increment development district (TIF District No. 2) east of Lake Avenue, was shown in the district TIF plan as an arts and entertainment area but its redevelopment has lagged behind that of the rest of Downtown. Unfortunately, the state legislature has now mandated that, as of April 1, 2001, all TIF revenues generated by the district can only be used to pay principal and interest on outstanding tax increment obligations of the district, leaving the city and DEDA with no revenues to continue redevelop Old Downtown.

These factors have resulted in a proposed plan which would protect current revenues to the CITF and leave its contribution to the SIP program untouched, would make the general fund whole for lost parking revenues but would allow new revenues to be used to complete the redevelopment of Old Downtown.

Under this plan, the city would enter into an agreement with the band to provide one hour of free parking, on a validation basis, to patrons of the casino in exchange for the and's commitment to perform their expansion of slot machines at the casino and to pay the city its portion of revenues as provided for in the existing agreement. The city would pay all revenues generated from the casino agreement into the city's CIT fund as required by the Charter but it would commit to reimburse the general fund for revenues lost as a result of the free parking program from the increased revenues generated by the additional slot machines. The city would then create a special fund entitled the "Old Downtown development fund" into which it would commit to pay the remainder of the additional revenue from the new slot machines for a period of five years. This revenue would be dedicated to funding the redevelopment of Old Downtown.

These commitments would need to be approved by the council by a 7/9th vote. At the end of five years, this additional cash flow would remain in the CIT fund.

Based on current projections, the plan set forth above would allow the SIP program to be completed over its 25 year term with full funding. It would also make it possible for the city and DEDA to finish the implementation of the original TIF plan for the Downtown which was "short circuited" by the legislatively-mandated requirements which will prevent us from using new tax increments generated in the downtown for that purpose by providing another funding source to complete the redevelopment of Old Downtown.