ACTION REQUESTED:
Title
Communication from the City Manager Requesting Approval to Offer a Five-Year CONTRACT, with a Five-Year Mutual Option, to the LST SHIP MEMORIAL FOUNDATION to Relocate the LST 325 to Peoria's RIVER FRONT.
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BACKGROUND: On December 10, 2013, the City Council authorized staff to more formally pursue the relocation of the LST 325, a World War II era naval ship, from its current home in Evansville to a space along the Illinois River in downtown Peoria. In 2004, the LST Ship Memorial Foundation ("LST Foundation," the nonprofit organization that manages the ship) signed a 10-year contract with the City of Evansville, making that city its home port. They are obligated to stay in Evansville through October 2015. However, that same contract mandates that they inform the City of Evansville of their intentions by October 1, 2014. The current Evansville location is less than ideal. It is fairly remote from Evansville's downtown and is not close to any other services or attractions. More information on the LST 325 can be found at www.lstmemorial.org <http://www.lstmemorial.org>.
The LST Foundation has stated that they need an offer from Peoria by this summer in order to properly weigh Peoria vs. Evansville. In late April, the City of Evansville made its pitch to the LST organization to stay, including a promise of better marketing; fixing the road that leads to the current dock; and a promise to relocate them closer to downtown should an existing casino boat ever leave.
In January, the LST Foundation held their winter board meeting in Peoria. During that meeting, the group expressed a strong interest in Peoria. They laid out their criteria for relocating from Evansville to Peoria:
1. Provision of a secure docking facility at no cost to the Foundation.
2. Provision of an office/museum/ticketing facility at no cost.
3. Provision of all utilities at no cost.
4. Permission to sail the ship to other ports for up to 8 weeks each year.
5. Participation from the local Convention and Visitors Bureau.
6. Assistance with moving costs (i.e. moving by land certain office items).
The first five items of their request are identical to what they currently receive from the City of Evansville and have been extended to them in a new offer. It should be noted that the cost of constructing the dock and office space in Evansville in 2004 has been reported as being about $3 million.
The December 2013 staff memo discussed the preferred location as being docked in downtown in front of the River Station building. This location has a number of advantages:
· Its proximity to the Peoria Riverfront Museum and Caterpillar Visitor Center allows for synergy between three museums and joint marketing opportunities.
· It would add another attraction to downtown Peoria that would be within walking distance of nearby restaurants and retail operations.
· It would utilize an unused portion of the River Station building to serve as the ticket office, gift shop and museum.
Since receiving authorization, staff has worked to refine this concept and gather additional information. Staff engaged the services of Midwest Foundation, an engineering firm that specializes in river structures and has assisted the LST 325 dock in Peoria during their two previous visits. Based on feedback from the Foundation members regarding the operations of the ship, Midwest Foundation developed a concept that would dock the ship alongside the seawall near the River Station building. The docking system would rise or fall with the river level, allowing the ship to be accessible in nearly any conditions except the most severe of floods (such as the April 2013 flooding). Images 1 and 2 on the attachment show different perspectives of the ship in this location.
To access the ship, a boat ramp would be cut roughly in line with Liberty Street. The ramp would be wide enough to accommodate both pedestrians and small vehicles. A secure but floating walkway would connect this ramp to the ship. Entering through the bow doors, as opposed to on the deck, will allow for the ship to be open to the public even in severe weather. Images 3 and 4 on the attachment show this system (please note that these are just concept drawings, not finished products).
This location allows a portion of the River Station building to be used as the ship office, gift shop and museum. The southwest section of the building is approximately 2000 square feet, previously used as a banquet and meeting room. Visitors would purchase tickets here (likely a wristband) and then proceed to the ship for a guided tour. The space is too big for just the LST and could serve a number of other uses, such as the Riverfront Visitors Center and/or other retail uses.
FINANCIAL IMPACT: Docking the LST 325 along the Peoria Riverfront brings an additional attraction that will complement the Peoria Riverfront Museum and Caterpillar Visitors Center. It is difficult to predict the annual number of visitors. Staff spoke with Jeff Nilsson, Executive Director of the Historic Naval Ship Association (HNSA), who indicated that success was based on two things: Location and marketing. The LST Foundation has been disappointed in their attendance figures in Evansville. Over the past few years, they have had between 8,000 and 10,000 paid admissions per year (in their earlier years they were more popular, but did not track ticket sales). These years being the end of a 10-year run have much to do with these lower numbers, but the LST Foundation also attributes much of it to their remote location in Evansville. By contrast, a location along the Peoria Riverfront would bring heightened visibility. The Peoria Area Convention and Visitors Bureau has been an excellent partner in this project to date and has already discussed ways to actively market the ship.
While admission to a nonprofit museum is not subject to the City's Amusement Tax, any sales in the gift shop would be subject to sales tax which would create some modest revenue. More than direct revenue, it would be staff's hope that LST 325 visitors will also visit other area attractions, have lunch at a nearby restaurant and purchase merchandise locally. While return on investments is difficult to accurately predict for a museum such as this, the American Alliance of Museums (www.aam-us.org <http://www.aam-us.org>) states that museum travelers spend 63% more than other leisure travelers.
A copy of HNSA's most recent economic impact study is attached. However, the study covers a wide array of ships, from aircraft carriers in destination cities like New York City and San Diego to smaller ships like the LST. Staff contacted personnel at the LST 393 (www.lst393.org <http://www.lst393.org>), a privately owned vessel permanently moored in downtown Muskegon, Michigan. They are only open for tours from May through September and average 7,000 paid tours per year. They host a number of special events such as reunions, outdoor movies on the deck, and private parties. Including special events, the LST 393 estimates that between 30,000 and 40,000 people visit the ship each year. Staff is attempting to reach other similar historic naval vessels to determine their success and will communicate any results in a separate communication.
Regarding cost, staff asked Midwest Foundation to prepare an estimate based on the presented concept. They estimated that the total cost (design, engineering, materials and labor) would be $1,275,000. This is an early estimate that might need adjustment as the plans are fine-tuned. To be conservative, staff is estimating $1,500,000 for the cost of docking the ship. This would include all ramps, pilings, and platforms, as well as making electrical service available shipside.
In addition to the cost of the dock, the City would need to consider the cost of renting the River Station space, making leasehold improvements to that space (including potentially dividing the room and improving the entrance so that it is accessible), and covering the cost of utilities. While the City of Peoria owns the River Station, it has an agreement with Kert Huber that makes him the master tenant. Over the past years, Mr. Huber has kept the building in excellent shape, but has significant past and on-going costs. Mr. Huber has offered a rental price of $12.00 per square foot plus the cost of utilities. This is a reasonable rate given comparable properties. Staff believes that the LST would take about 1200 square feet of the available space, translating into an annual rent of about $24,000. Utilities and other costs for the office portion would be budgeted at $400 per month, or a total of $4,800 per year.
Staff has not yet determined the cost of any leasehold improvements, but would estimate a project total not to exceed $40,000. The main cost is the improvement to the entrance on the southwest side of the building to make it handicapped accessible.
The LST Foundation has also asked for the City to cover the cost of utilities for the ship when docked. In Evansville, utility cost was $31,072.74 for the 12 month period between March 2013 and February 2014. However, the comparison to Evansville is imperfect in that it includes power for all of the significant dock lighting as well as the office space. Given that the proposed Peoria location is already well lit with pedestrian scale lighting, the cost of utilities is likely considerably less. Furthermore, the historically cold winter caused dramatically higher bills in January and February of 2014. (By comparison, the February 2014 bill was $1,800 higher than February 2013.) For the purposes of planning, staff estimates the total cost of ship utilities at $22,000 per year.
Staff has identified a number of potential sources for funding this project:
1. Dock Design and Construction
a. The State of Illinois has a "Tourism Attraction Program" that will pay 50% (up to $1 million) of the capital costs for projects such as this. The application has a rolling deadline. The Peoria Area Convention and Visitors Bureau has pledged their support in submitting an application for $750,000 to this program.
b. City staff has had a very preliminary conversation with staff at Peoria County about the use of public facility sales tax proceeds to help fund this project. Like the Peoria Riverfront Museum, this dock could be considered a public facility and eligible for funding. A good deal of work and conversation is left to be done, but the County could be asked to contribute between $300,000 and $500,000 to this project.
c. The proposed location is within the City's Central Business District TIF District and would be an eligible cost.
d. Corporate and individual donations could also be sought. The site is within the City's Enterprise Zone and donors would be eligible for the "double deduction" if donations were routed through the Designated Zone Organization.
2. Leasehold Improvement: As above, such improvements would be eligible costs within a TIF. The City could also budget a capital expenditure from the general fund.
3. Rent and Utilities: Given the project, these on-going, annual costs could be paid by the Tourism Reserve Fund. Alternately, or in conjunction, the City could budget for these costs through its general fund or seek community contributions.
NEIGHBORHOOD CONCERNS: After the initial concept was discussed at the December City Council meeting, the City Manager's Office received generally positive reaction from individuals who contacted the City. The subject was discussed again at the December 12, 2013 Downtown Advisory Commission meeting, and while no official position was taken, there was general support of the idea. At that meeting, there was one member of the audience who expressed opposition to the project based on his feeling that downtown did not need an additional attraction.
City staff presented the concept at the March 2014 meeting of the Peoria Riverfront Association (PRA). Those in attendance were vocally supportive of the idea. PRA Executive Director Sharon Graham also solicited feedback via email from members not in attendance. Those comments are available upon request. The responses were mostly positive, but did include opposition from the residents of the condominiums in 401 SW Water.
Based on this opposition, staff organized another meeting in April for the residents of this building. There was some initial concern that the LST would block views of the river from the building. Staff showed renderings of the perspective of the ship from the 8th and 3rd floors of 401 SW Water, demonstrating that the ship would be virtually unnoticeable (the 8th floor perspective is Image 5 on the attachment). While those fears were allayed, the consensus of those in attendance was that they supported docking the LST in Peoria but did not support the proposed location. Rather, they wished to see the ship closer to Festival Park (see alternate location above). The opposition was based on two factors:
1. While not ruining the view from their building, the ship would block the view while walking along the river front.
2. There was concern that docking the ship in this location would dissuade a restaurant tenant from leasing the River Station.
Image 6 on the attachment shows a perspective of the ship from the sidewalk in front of the River Station.
While both of these concerns have merit, staff feels that the positives of docking the LST in this location outweigh the negatives. Some river views would be blocked. The ship is about 350' long and for that stretch pedestrians would not be able to see the river. The LST is about twice as long as and 6' taller than the Spirit of Peoria, which also blocks river views. Regarding the River Station, it could be argued that having an attraction like the LST nearby would drive demand for an additional restaurant. When recently asked by the Downtown Advisory Commission for their top priority, the Peoria Riverfront Association identified having year-round visitors to downtown as the most important. Like the Peoria Riverfront Museum and Caterpillar Visitor Center, the LST would be open year round.
IMPACT IF APPROVED: Staff would offer the LST Foundation the location near the River Station, as outlined above, and a five-year contract with a mutual option to extend by another five years. Based on this offer, and if accepted by the LST Foundation, staff would begin to negotiate a contract that would be brought to the City Council for final approval later this summer.
IMPACT IF DENIED: Staff would inform the LST Foundation that Peoria is no longer interested in hosting the LST 325.
ALTERNATIVES: Staff did consider alternate locations, though only locations in and around downtown were investigated. Given the proximity of the shipping channel to the shore, the proposed River Station location is about as far downriver as the ship can be docked. A location just north of downtown, between the McCluggage Bridge and the RiverPlex, was the best alternate. This area was the temporary dock for the LST on its two previous visits to Peoria. While this location is still a possibility, there are a number of factors that make it an inferior option:
1. The LST Ship Memorial Foundation has indicated a preference for the River Station location due to its more central location and proximity to other assets.
2. Midwest Foundation has indicated that a nearly identical docking system would be needed here as near the River Station. Even if moderately less costly, the City would also need to build office/retail space and a small parking lot to accommodate operations and visitors. While this has not been thoroughly studied, staff believes that these additional costs would likely push the total cost well above that of the River Station location. Additionally, Festival Park is in the flood plain, which may make this construction more difficult and costly.
3. Any construction in that area (also called "Festival Park") would impact the spring-summer festivals that have traditionally been programmed there (such as Erin Feis and Soul Fest).
More importantly, while this location is near other downtown assets, it may not benefit those other assets (nor benefit from them) as much. Though only a few blocks away from restaurants, retail and other museums, visitors to the LST would likely need to drive to other locations. Once in their cars, it would be just as easy to drive across the river to East Peoria rather than visit other downtown Peoria businesses.
While the location of the LST has been subject to some public input, it could be part of a larger discussion about the future of the riverfront. While the LST Foundation needs to make its decision later this summer, there may still be time to organize such a planning exercise to gain wider stakeholder input on this and other issues. At the latest, any decision on the LST needs to be made by late July in order to give the Foundation time to consider their alternatives.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL'S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Vibrant Downtown: Riverfront/ Central Business District/ Warehouse District
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Reinvest in neighborhoods.
DEPARTMENT: City Manager's Office