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Home My WebLink About11/12/1991 TENTATIVE AGENDA SHAKOPEE CITY COUNCIL MEETING AS A COMMITTEE OF THE WHOLE TUESDAY, NOVEMBER 12 , 1991 IN THE COUNCIL CHAMBERS Mayor Gary Laurent presiding 1] Roll Call at 7: 00 P.M. 2] Letter from Canterbury Downs proposing to the City that the assessment agreement be reviewed and consideration be given to allow Canterbury Downs ' property to be valued at some lower amount by the County Assessor for 1992 and beyond. 3] Other business 4] Adjourn Dennis R. Kraft City Administrator Ladbroke Mitl -W. *4;19 Canterbury Downs November 7, 1991 The Honorable Gary Laurent and Shakopee City Council Shakopee, MN 55379 Dear Mayor Laurent and Members of the City Council : The following summarizes certain issues affecting Canterbury Downs and proposes that certain actions be taken by you on behalf of Canterbury Downs in regard to the assessed valuation of the racetrack property for purposes of levying taxes . In this respect, we are requesting that a committee of the whole meeting be scheduled in the near future to discuss these matters further. Background Since opening its doors in 1985, Canterbury Downs has played a major role in the Shakopee community. We feel, and we hope that you agree, that the racetrack has benefitted our community in many ways, such as : * creating a large number of jobs for local citizens; * introducing thousands of tourists to the area; * financing many major improvements in the City through the payment of over $15 million in real estate taxes since 1985 making Canterbury Downs the largest tax payer in the City. When the racetrack was proposed and built in 1985, the owners and the community were very optimistic about its future. As the first and only form of legal wagering available in the state, the attendance projections were phenomenal . On this basis, the owners felt a large facility of the highest quality was appropriate and thus spent approximately $80 million on the facility. At the same time, the City of Shakopee made certain improvements to facilitate the construction, including sewer, water, road improvements and land write down. . These improvements were financed by the City through tax increment bond issues including a $4 .2 million issue which directly benefitted the track. Related to this, the racetrack entered into an assessment agreement with the City. This agreement was viewed as a sign of good faith by the racetrack to the City and set a minimum valuation of $43 .25 million on the racetrack property for purposes of assessing real estate Ladbroke at Canterbury Downs 1100 Canterbury Road, Shakopee, Minnesota 55379 Phone (612) 445-7223 FAX (612) 496-7741 Aer A Ladbroke Group Company Page Two November 7, 1991 taxes . This value was set somewhat arbitrarily as no one would have dreamed what the future was to hold for the racetrack. The assessment agreement fixes the minimum value at $43 . 25 million through 1994 . Declines in attendance and related revenues since 1985 resulted in large losses and ultimately bankruptcy for the original owners of the racetrack. In 1990, Ladbroke Racing Corporation, along with our partners Messrs . Hartman and Tyner purchased the racetrack for approximately $21 million dollars . Although this was a fraction of its original cost, it was a considerable amount of money. Based on generally accepted accounting principles , the purchase price was allocated approximately $16 million to the real estate and $5 million to the other assets acquired such as furniture, fixtures and equipment . Additionally, an MAI certified appraisal done at the date of acquisition, set the real estate value at $19 million (see Exhibit I) . Were it not for the existence of the assessment agreement, the property value would be set by the County Assessor ' s office in the same fashion as other businesses . The $43 , 250 , 000 valuation under the assessment agreement resulted in 1991 real estate taxes of $2 ,476, 584 for the racetrack. To put this into perspective, these taxes are more than double the total amounts paid to the state for parimutuel taxes and are the third largest expense of the racetrack behind salaries and purses (see Exhibit II) . Additionally, based on figures supplied by the City, Canterbury Downs is the single largest taxpayer in the City and pays more than double the taxes of the next largest taxpayer (see Exhibit III) . As you are aware, the downward trend in attendance and related revenues has continued, and even accelerated, since our acquisition of the racetrack. While we were able to make a small profit in 1990, this trend will result in significant losses for 1991 . Our current projections show we will lose approximately $4 million in 1991 and additional amounts in 1992 and beyond. These declines and resultant losses are the direct result of the increased competition for the wagering dollar brought on by the introduction in the past few years of charitable gambling, state lottery, dog racing and most recently, Indian casino gambling . Our ability to continue to operate the racetrack will be greatly impacted by the future level of taxation. Page Three November 7, 1991 Proposal Based on all of the above information, we are proposing to the City that the assessment agreement be reviewed and consideration be given to allow Canterbury Downs ' property to be valued at some lower amount by the County Assessor for 1992 and beyond. This is three years sooner than this would happen under the current terms of the agreement . We have reviewed with the City Finance Director the potential effect this will have on the City' s finances . Due to the high level of taxes paid by Canterbury Downs over the past seven years , a large surplus has been built up by the City. Therefore, even with the significant reduction in the racetrack' s real estate taxes, there would be no need for additional tax assessments from other sources to meet the City' s current obligations . We understand that from a purely legal standpoint, it appears that the City of Shakopee has every right to hold Canterbury Downs to the assessment agreement; therefore we are appealing to you on the basis of fairness . We hope you feel it is in the City' s best interest to help us compete in a market which is changing rapidly and we are hereby asking for your help in this regard. Sincerely, - Richard A. Reichow Chief Financial Officer 4341L : khs Shakopee Public Schools � ,� Shakopee School Board District Office . �_ Janet L.Wendt,Chair 505 S. Holmes Street Suzanne Van Hour,Vice Chair ' Jane Carlson,Clerk Shakopee, Minnesota 55379 Aggie Unze,Treasurer (612) 445-4884 • Fax (612) 445-8446 Thomas Ebner,Director Jessica Geis,Director Director of Administrative Services Bob Techam,Director Ronald E Ward Superintendent Robert J.Ostfund Director of Business Services Robert N.Martin November 11, 1991 Mr. Dennis Kraft City Administrator City Hall 129 1st Avenue East Shakopee, MN 55379 Dear Dennis: I am writing in response to your invitation to have School District representation at a special City Council meeting scheduled for Tuesday, November 12. As you explained to me, the agenda will address the issue of a potential change in the assessed value of Canterbury Downs Race Track. The School Board and administration greatly appreciate the opportunity for input into this matter. The tax revenue implications for the District are significant. My understandings of the issue suggest that the District would lose approximately $150,000 per year in revenue if the suggested change in the assessed value of the track occurred. The loss would be from the taxes collected from TIF property through the school district's referendum and turned over to the District by the City. As I mentioned in our telephone conversation, a previously scheduled meeting makes it very difficult for an appropriate person from the District to attend Tuesday's meeting. However, we would like to express our thoughts to you, Mayor Laurent and the Council. First and foremost, it should be stated that the School District views this matter as a City decision, and stands ready to support and deal with any decision that results from the collective wisdom of the City administration and elected officials. The thought of losing $150,000 per year troubles us greatly. The thought of the race track closing troubles us even more. Not only would we experience an even greater loss of revenue, but the political and emotional costs to the area would be great. Shakopee Public Schools: Forward Together For Our Future ALL SCHOOLS ACCREDITED BY THE AN EQUAL NORTH CP OPPORTUNITY EMPLOYER D. Kraft November 11, 1991 Page 2 The School District clearly understands the difficulty of the City's decision on this matter. Having the necessary facts to make the proper decision is very difficult. We know you will assess the available information and make the decision that best serves the tax base and the economic future of Shakopee. A decision based upon long-term economic interests is the best decision for all of us. The District is confident that the City's action will consider all factors in light of future economic strength and will certainly support your action. Again, the opportunity to comment on this matter is appreciated. Sincerely, 1/ JW Robert if. 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