HomeMy WebLinkAbout06-05-2012 Council Economic Development CommitteeAGENDA
City Council Economic Development Committee
Tuesday, June 5, 2012
8:00 a.m.
Helling Conference Room
City Hall
1. Call to Order
2. Consider approval of minutes from the May 22, 2012 Economic
Development Committee meeting
3. Consider recommendation for continued Englert funding in FY 14
Budget and intent to fund in FY 15 and 16. Annual Report presented by
Andre Perry, Executive Director.
4. Consider a recommendation for a funding request. from Prairie Lights
5. Staff time
6. Committee time
7. Other business
EDC May 22, 2012 1
PRELIMINARY
MINUTES
CITY COUNCIL ECONOMIC
DEVELOPMENT COMMITTEE
MAY 22, 2012
HELLING CONFERENCE
ROOM, 8:00 A.M.
Members Present:
Matt Hayek, Susan Mims, Michelle Payne
Staff Present:
Wendy Ford, Jeff Davidson, Adam Bentley, Geoff Fruin, Tracy
Hightshoe, Tom Markus
Others Present:
Nancy Quellhorst (Chamber), Chad Wiltz
RECOMMENDATIONS TO COUNCIL:
Payne moved to recommend approval of the CDBG Economic Development Loan
to IBLITZ Boxing & Fitness Club as recommended by staff.
Hayek seconded the motion.
Motion carried 3-0.
CALL MEETING TO ORDER:
The meeting was called to order by Chairperson Mims at 8:02 A.M
WELCOME AND INTRODUCTIONS:
Chairperson Mims welcomed everyone and asked that those present introduce
themselves. She then noted that while they wait for the arrival of the applicant from the
IBLITZ Boxing and Fitness Club to arrive, they would skip ahead in the agenda.
REVIEW AND DISCUSSION OF IOWA CITY'S URBAN RENEWAL AREAS:
Ford addressed the Members, noting the table of information that staff has been working
on to bring all of the urban renewal data together. She reviewed the map with Members,
pointing out the various urban renewal areas throughout the city. Ford gave a brief
history of the various areas, beginning with the City -University Project, noting the
amendments made to the original plan. Continuing through the table, Ford spoke briefly
about the Scott Six Industrial Park and Northgate Corporate Park projects. Davidson
noted the success of the Sycamore and First Avenue area, especially for the Sycamore
Mall's TIF. The Lower Muscatine, Highway 6, and the Industrial Park Road TIF areas
have not utilized their TIF district status for any projects.
Hayek asked questions of staff regarding the renewal areas. He questioned whether
staff should be marketing those areas with no activity to see if there is any interest in
expansion by any existing companies. Ford stated that in their corporate outreach
program as staff and elected officials visit with company leadership, they make sure to
cover the various ways the City can help.
CONSIDER REQUEST FOR CDBG ECONOMIC DEVELOPMENT LOAN FOR IBLITZ
BOXING & FITNESS CLUB LLC, A TITLE BOXING CLUB FRANCHISEE:
Hightshoe introduced that Chad Wiltz, the applicant and briefly explained the business of
Title Boxing & Fitness Club franchise and how Mr. Wiltz and his company IBLITZ LLC
EDC May 22, 2012 2
has purchased the franchise rights for this business. Wiltz is working with Cedar Rapids
Bank & Trust for his business loans. Staff is recommending a $35,000 loan at 1 %
interest, according to Hightshoe.
Hightshoe continued, noting that Title Boxing will be located in the Sycamore Mall, and is
targeting both professionals and stay-at-home moms. There are three owners of IBLITZ,
and they will be hiring a general manager and sales associates to work the fitness club.
Hightshoe briefly explained some of the requirements for obtaining CDBG loans, and
how things such as hiring employees must be handled.
Members then asked questions of the applicant regarding the business. He explained
how the fitness center idea and name came about. Wiltz explained that he and the other
two owners went through an entire vetting and training process to secure the franchise.
He added that they have not yet signed a lease with the Sycamore Mall but should have
this completed in the next few weeks as they wrap up details.
The discussion continued, with the applicant noting that it took them some time to find
the right space, as they need a substantial amount of square footage. The Sycamore
Mall space is perfect, with higher ceilings and plenty of parking. Wiltz explained how the
Mall is working with them to tailor the space to their business.
Hayek stated that he is supportive of the request, although he believes that the proposal
is a bit light on job creation. The other Members noted their support, as well.
Payne moved to recommend approval of the CDBG Economic Development Loan
to IBLITZ Boxing & Fitness Club as recommended by staff.
Hayek seconded the motion.
Motion carried 3-0.
CONSIDER APPROVAL OF MINUTES FROM APRIL 10, 2012, ECONOMIC
DEVELOPMENT COMMITTEE MEETING:
Hayek moved to approve the minutes from the April 10, 2012, Economic
Development Committee meeting as submitted.
Payne seconded the motion.
Motion carried 3-0.
STAFF TIME:
Davidson noted that they are close to choosing a preferred developer for the Court -Linn
project. He added that there have been others to show interest, as well. Mims asked if
choosing the preferred developer would lock the City into any timeframes, and Davidson
stated that it would not, that it would help to focus the project. Members asked
questions of Davidson, agreeing that this project is crucial to development in the area.
Davidson continued, noting that the Riverfront Crossings master plan is almost
completed. He also touched briefly on the delayed College -Gilbert projects.
EDC May 22, 2012 3
Davidson noted a request received from Southgate Development for consideration of an
urban renewal area in the Crossings area west of Camp Cardinal Road. Also noted by
Davidson was that Hampton Hotel has applied for their building permit for the Riverside
Drive location.
Ford spoke briefly to Members about the TIF legislation changes awaiting the
Governor's signature and how these will impact staff. She noted that one area of
substantial change will be in the annual reporting. A job that formerly took a few days by
one person may now require a team of people, more time, and Council approval. Ford
continued, noting ways the legislation will affect the detail required in urban renewal area
plans and that every project undertaken will be required to be amended into the plan if it
isn't already included. Those amendments will require the same legislative process as
establishing the urban renewal areas did, minus the step of planning and zoning
commission review.
Ford also reminded Members of their next meeting: June 5, 2012
Markus asked Davidson to speak to Members about the Sycamore Mall and its status.
Davidson noted that they have been in discussions with management and have been
focusing on things like the Mall's new logo and planned signage changes, as well as
some operational changes. He also gave some history on the early-2000s and changes
that occurred at the Mall at that time. Members briefly discussed the various projects
that will improve this area over the next few construction seasons.
None.
ADJOURNMENT:
Payne moved to adjourn the meeting at A.M.
Hayek seconded the motion.
Motion carried 3-0.
EDC May 22, 2012 4
Council Economic Development Committee
ATTENDANCE RECORD
2012
TERM
N
W
W
A
M
NAME
EXP.
N
N
N
�J
W
W
O
O
N
Michelle
01/02/14
X
X
X
X
X
X
Payne
Matt
01/02/13
X
X
X
O/
X
X
Hayek
E
Susan
01/02/13
X
X
X
X
X
X
Mims
Key:
X = Present
O = Absent
O/E = Absent/Excused
r
CITY OF IOWA CITY
.'A k MEMORANDUM
Date: May 30, 2012
To: City Council Economic Development Committee
From: Wendy Ford
Re: Agenda Item #3 -- Recommendation for continued Englert funding in FY14 Budget
and intent to fund in FY15 and 16; and Englert Theatre Annual Report.
In December of 2008, the City Council Economic Development Committee approved a proposal
from the Englert Theatre for a three year annual funding request of $50,000 for fiscal years
2010, 2011 and 2012 to be reviewed annually before disbursements are made.
Last June, along with the Englert's annual report prior to disbursement of the July, 2011
(FY2012) funding, the Englert requested continued City funding for July 2012 (FY13), July, 2013
(FY14), and July, 2014 (FY15). The Economic Development Committee voted to recommend
continued support of the Englert for FY13 and intent to continue funding for the two years
following, with an annual report prior to each year's distribution.
Recommendation of continued funding for the Englert requires an annual report to the EDC on
several performance measures. The following report by Englert Executive Director, Andre Perry
addresses these items and shows operational performance improvement in the Englert's
mission to be a cultural and economic driver for our community.
The Englert staff and Board of Directors are requesting your recommendation to Council that
$50,000 be included in the FY14 budget and that you recommend intent to continue funding the
Englert at that level in FY15 and FY16 for ongoing operations and critical capital expenses.
Recommendation:
Staff recommends support of this proposal with this justification:
• The Englert continues to provide entertainment alternatives for the entire community,
and especially for those under 21;
• A strong theater generates downtown visitors who frequent restaurants, shops and other
entertainment venues.
• Competition for the theater -going public is increasing with the Coralville Center for the
Performing Arts;
• Competition for rental customers, such as the Division of Performing Arts, is also having
an impact with the addition of the Coralville Center;
Please be prepared to discuss the Englert's request for a renewed funding commitment. If you
have any questions, feel free to call.
it f
June 5, 2011
To the Economic Development Committee:
CAU
310.M2653
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www.ei,Wert.urR
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221 C WabuiKlun Si_ luw 01. IA 52240
CONNECT
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Thank you for your continued support of the Englert Theatre. This Annual Report
outlines our organization's continued progress and growth in 2011 and in the first quarter
of 2012. The report includes information such as our current financial statement,
demonstration of increasing profitability, ticket sales reports, community partnerships,
Englert event analysis, donor relations, and future plans for the theater.
Over the last year the Englert Theatre has experienced positive growth. The
organization's operations have charted a better course towards financial stability and the
theater's offerings as a cultural landmark in Downtown Iowa City have been diverse, far-
reaching in appeal, and artistically impressive. Among our most significant
accomplishments of 2011 was the Capital Campaign which led to the Englert Civic
Theatre, Inc. possessing 100% ownership of the property.
As we look to the future of our partnership with the City of Iowa City we request
approval of financial support for current fiscal year from the city pending the Economic
Development Committee's assessment of our progress. Furthermore we ask that the City
of Iowa City renews its commitment of $50,000 each year for fiscal years 2014, 2015,
and 2016. Continued financial support will supplement the Englert Theatre's day-to-day
operations. The City's support should also be considered as an investment in Iowa City's
cultural vitality. The Englert's ongoing programming brings a welcome energy to
downtown Iowa City and encourages considerable consumer spending with over 50,000
attendees each year.
As always, we are very appreciative of the City of Iowa City's support and attention to
Englert-related issues. We hope this support will continue into the future. We remain
committed to growing the cultural cache of Iowa City for a wide range of residents and
visitors.
Sincerely,
Andre Perry
Executive Director,
The Englert Theatre
Table of Contents
Current Financial Report
if. Debt/Cash Flow Projection
III. Three Year Financial Report
IV. Attendance Report
V. Ticket Purchase Demographics
VI. Englert Theatre in the Greater Marketplace
VII. Donor Relations
V11I. Englert Theatre Future Plans
I. Current Financial Report
Below, please find the Englert Civic Theatre, Inc. consolidated profit and loss statement
ending April 30, 2012 reflecting four months of financial performance.
April YTD financial performance has exceeded budget by $9,329 and prior year by
$4,111.
April YTD financial performance has been driven by strong Englert Events programming
margin contribution and better than anticipated Rentals.
PROFIT/LOSS STATEMENT
Income
AprActual
Apr Budget
Last Apr
Apr YTD Actual
Apr YTD Budget
Last Apr YTD
Fundraising/Grants
$9,044
$8,000
$6,149
$29,807
$41,750
548,733
Englert Events
15,980
17,610
53,194
159,768
149,098
199,446
Rental Events
22,882
9,164
14,421
73,289
60,501
75,364
Other
2,018
4,271
4,142
14,255
10,942
11,488
Total Income
$49,924
$39,045
$77,906
$277,118
$262,291
$334,031
Expenses
Administration
$3,617
$4,789
$4,864
$21,062
$20,092
$20,684
Marketing
1,799
3,375
3,056
1S,334
$13,500
$12,278
Building
4,521
4,073
3,781
27,194
22,917
23,898
Fundraising Expenses
492
75
152
2,183
300
494
Personnel
31,710
26,807
25,835
120,153
109,448
104,486
Englert Events
10,451
13,948
35,706
33,243
98,808
136,303
Rental Events
901
275
461
3,693
1,904
2,181
Nan-Operating(interest)
2,129
2,073
1,588
8,398
8,292
6,457
Total Expenses
555,618
$55,415
$75,443
$231,259
$275,261
$312,732
Operating Profit/(Loss)
t- 1
'i"31/0;
$2,464
: 1_t]
;ii i iP,
$21,249
2011 Capital Campaign
$1,000
$1,000
$0
$29,500
$29,000
$0
Profit/(Loss)
,d ')
i,370;
$2,464
$25,359
$16,030
$21,249
Programming Margin$
$5,530
$3,662
$17,498
$76,525
$50,290
$62,143
Programming Margin%
35%
21%
33%
48%
34%
31%
U- 2012 Debt/Cash Flow Projection
The Englert purchased the remaining equity position from its Limited Partner, Cityscape
for $230,341 in July, 2011. Cityscape was an early partner involved with the purchase of
historic preservation tax credits. This equity purchase was financed by local lenders and
a 2011 capital campaign. The Englert building is currently 100% owned by the non-
profit, Englert Civic Theatre, Inc. Furthermore, a no longer needed, complicated legal
structure designed to take advantage of the historic tax credits including two for -profit
subsidiaries and a Limited Partnership have been dissolved. The non-profit, Englert Civic
Theater, Inc. remains as the sole legal entity effective January 1, 2012.
The below chart reflects the Englert's current debt position and cash reserve projections
set aside to support future debt principal payments.
600,000
500,000
- -- --
400,000
$365,901 twenty-five yearmortgage,
$127,500 f'Neyearnute
300,000
20D,000
100,000
Jan Act Feb Act Mar Act Apr Act May Fat Jun Fcst Jul Fcst Aucftst Sep Fat Octl` t Nov Rst Dec Fest
11111111111[asb Debt
III. Three Year Financial Report with 2012 Budget
Key historic financial drivers have included substantially improved theater utilization,
better programming margins, and reduced spending. 2011's capital campaign generated
$254,001 in cash and future pledges to support ongoing building debt and spending.
2009 Actual
2010 Actual
2011 Actual
2012 Budget
Income
Total Development Income
$ 175,431
$ 151,990
$ 155,554
$ 193,850
Other Income
26,993
31,378
32,310
32,323
Rentals
150,999
145,985
194,068
150,037
Englert Series
446,350
489,686
518,073
513,546
Total Income
$ 799,774
$ 819,039
$ 900,005
$ 999,756
Expenses
Administration
$ 60,332 $
83,303 $
121,661 $
99,443
Building
74,599
66,230
77,299
77,375
Fundraising
3,283
3,322
8,298
4,500
Non -Operating
42,206
45,005
21,532
24,875
Personnel
293,780
285,374
311,107
328,699
Rentals
1,601
5,427
6,794
4,501
Englert Series
397,320
337,682
320,257
341,960
Total Expenses
$ 873,121 $
826,343 $
866,947 $
881,353
Operating Profit/(Loss)
$ (73,347) $
(7,304) $
33,058 $
8,403
2011 Capital Campaign $ - $ - $ 69,153 $ 66,716
Profit/(Loss) $ (73,347) $ (7,304) $ 102,211 $ 75,119
IV. Attendance Report —Current Statistics and Recent History
2012 Attendance (as of May 21)
Englert Presents/Co-Presents Tickets Sold: 8502
Englert Presents/Co-Presents, Free/Non-Ticketed Events: 1105
Rental Attendees (both ticketed and free events): 9311
Total: 18,918 (as of 5-21-2012) — end of the year projection: 52,690
2011 Attendance
Englert Presents/Co-Presents Tickets Sold: 20,792
Englert Presents/Co-Presents, Free/Non-Ticketed Events: 3,748
Rental Attendees (both ticketed and free events): 27,077
Total: 51,617
2010 Attendance
Englert Presents/Co-Presents Tickets Sold: 17,622
Englert Presents/Co-Presents, Free/Non-Ticketed Events: 1,478
Rental Attendees (both ticketed and free events): 26,813
Total: 45,913
2009 Attendance
Tickets Sold: 9877
Non -ticketed attendees (lectures and other rentals): 20,420
Total: 30,297
V. Ticket Purchase Deutographies 2011-2012:
These figures are gathered from on-line credit card sales and phone order sales. They
only tell part (-75%) of the story of customers who have come to the Englert. Other
methods of purchasing tickets are not accounted for in this review. These figures show a
strong base of support for Englert events from the immediate community. While the non -
Johnson County numbers have dipped slightly, the Out -of -State numbers have increased.
Englert Theatre Customers 2012 (through Suring 2012
Total Johnson County: 68%
lowa City. 5G'%
-Coralville: 711-,
--North Libert),: 3°0
-Other John so❑Couuty 7!
Total Non -Johnson County: 24%
-Cedar P.ahids%hrferinn: 74'
-Other lower. I7°io
Out -of -State: 8%
Englert Theatre Customers 2011
Total Johnson County: 68%
down C:it": """
-Coralailla: P"
-North Liberty: P
-01110 1 jol Inson Count�': Y'
Total Non -Johnson County: 26%
-CedarR,ilmk lmiun:7V,',
-other Iowa: 19%
Out -of -State: 6%
Enelert Theatre Customers 2010
Total Johnson County:63%
d wvk' tatA': [Iq°ro
-(.,iil lii\%l ire: can.
-North LlbcrtV: °u
-Othcr.Iohn�on Colllo' >""
Total Non -Johnson Cotmty: 30%
-Cedar Rapids; LlaI ion: q''o
-Other burg. , 1 %
Out -of -State: 7%
VL Donor Relations
Community Sponsors
The Bnglert continues to receive significant support and contributions fi-om several
community partners in the form of ongoing pledges to our 2011 Capital Campaign
amounting to $137,500. Those partners include:
ACT
Hills Bank and Trust Company
Integrated DNA 'Technologies
MidWestOne Bank
Rockwell Collins
University of Iowa Community Credit Union
West Music
Other Sponsors Include:
Hands Jewelers
MC Ginsberg
Mediacom
Moen Group
New Pioneer Co-op
Zephyr
friends Qf the Englert
Precisely 485 households, consisting mostly of 2 or individuals are currently Friends of
The rnglert as of 5-31-2012 (Note: -in -May 2011, there werejust over200 households)
I/olunteers: Over 220 active Volunteers
VH. Englert Theatre in the Greater Marketplace
Englert programming and development in recent years has positioned the theater on
relatively equal ground to other theaters, performing art spaces, and concert venues in the
Midwest. In some instances, the Englert's event schedule exceeds the quality of events of
other theaters in competitor markets. It is important to note that the theaters, performing
arts spaces, and other venues we compete with often have larger capacities (1000+) or
exist in cities with populations (1 million or higher) larger than Iowa City (60,000 pop.)
Despite these possible limitations the Englert has the potential to further rival the
programming found in other markets, thus making Iowa City a more desirable location
for current residents, potential new residents, and other Iowans seeking a venue for
cultural events.
Competitor Markets for Arts Programming in the Midwest
CitV Population
Chicago, IL 2,800,000
(Sample venues: The Metro, Goodman Theatre, Vic Theatre)
Minneapolis / St. Paul (Twin Cities), MN 2,800,000
(Sample venues: The Orpheum, First Avenue / 7ai St. Entry)
Omaha, NE 400,000
(Sample venues: Orpheum Theatre, the Slowdown)
Champaign -Urbana, IL 200,000
(Sample venues: Krannert Center, Canopy Club)
Des Moines, IA 200,000
(Sample venues: Hoyt -Sherman, People's)
Madison, WI 200,000
(Sample venues: Majestic Theatre, Overture Center)
Sioux Falls, SD 150,000
(Sample venues: Washington Pavillion)
Lawrence, KS 100,000
(Sample venues: Granada, Bottleneck, Lawrence Arts)
Columbia, MO 100,000
(Sample venues: Blue Note, Missouri Theatre)
VIII. Future Plans
Centennial Celebration — Fall 2012
This fall the theater will celebrate its 100`" year in downtown Iowa City with a series of
Centennial Celebration programming including artists like Kronos Quartet, Rosanne
Cash, Marilynne Robinson, and a community -focused initiative called the Iowa City
Song Project. The Centennial Celebration program will highlight the theater's history as
well as its developing role as a cultural foundation in Iowa City. The Centennial events
will also continue an initiative launched during our 991h Anniversary Celebration to
increase our donor base which will further solidify the theater's financial stability in
future years.
Programming Vision
An ongoing effort of the theater is to sharpen our programming initiative. Diverse
programming remains a key goal: we will ensure there are events aimed at attracting the
various demographics in our community. In the past year we have offered a wide variety
of programming including: children's shows, plays and musicals, readings, lectures,
music performances, film series, and on-stage/intimate shows. We have showcased both
local and national talent. We continue to work closely with the University of Iowa,
hosting shows from the Division of Performing Arts and Hancher as well as
strengthening ties with the Office of Student Life.
Changing Cultural Landsea1)e of the Corridor
We continue to adapt to the changing landscape of the Corridor. We have lost significant
rental revenue (-30K) to the Coralville Performing Arts Center (City Circle, West Music,
Division of Performing Arts, Hancher, etc...) We have sought to fill these gaps by
increasing our programming effort which includes pursuing new programs (National
Theatre broadcasts, screening more independent films), expanding our offerings (more
summer events), and solidifying new partnerships within the community (Midnight
Movie Series with Campus Activities Board and Bijou).
r
�_.r�.®I, CITY OF IOWA CITY
MEMORANDUM
To: City Council Economic Development Committee
From: Wendy Ford, Economic Development Coordinator
Date: May 29, 2012
Re: Agenda Item #4 — Consider a recommendation for a funding request from
Prairie Lights
Introduction
Prairie Lights is a 33 year -old downtown Iowa City anchor business applying for City
funding to aid in an achieving a sustainable business model in the era of the e-book and
online competition. The privately owned company seeks $35,000 in assistance from the
City's Economic Development Fund to implement three strategies. The implementation
will further diversify their revenue stream and strengthen a part of the business that has
begun to perform very well for the store.
History/Background
Prairie Lights is a downtown Iowa City destination and a "must" stop for book lovers
from around the nation. In 2008, USA Today featured it as one of ten "Destination
Bookstores" in the United States, suggesting that the book store alone is reason enough
for a visit to Iowa City, In 2010, when President Obama visited the store, it was featured
on the front page of the New York Times.
It is the superior customer service delivered by its 15 full time and 18 part time
employees that sets Prairie Lights apart. The staff is hands on, resourceful and double
as ambassadors in our UNESCO City of Literature. However, while Prairie Lights enjoys
the notoriety of being a destination anchor in downtown Iowa City, due in large part to
its customer service, notoriety alone isn't enough for the business to thrive. Book stores,
independent and otherwise, are struggling for their share of today's multi -media, tech -
savvy book buying market and are implementing a range of strategies to remain viable.
Prairie Lights has begun to invest in other strategies:
The Times Club cafe
In the winter of 2010, the owners bought espresso machines and other coffee
equipment in order to take over operations from former concessionaire of the cafe so
that those sales could contribute to the bottom line. (The Java House had simply
operated the business as a customer draw for Prairie Lights, but Prairie Lights realized
no profits from sales.) The cafe was renamed "The Times Club" and the menu changed
to include pastries, wine and savories; a strategy that would allow a new revenue
stream to make up for losses in book sales. While The Times Club cafe business is
doing quite well, its potential is only partially realized. Owners desire to expand the
May 31, 2012
Page 2
physical size of the cafe and add more menu options, including a small catering
component.
The e-book market
In today's book market, e-books now comprise 20% of book sales nationwide and that
number will continue to rise. To gain a foothold in the e-book market, Prairie Lights
partnered with Google Editions in the winter of 2010 and now sells e-books that are
compatible with most e-reading devices. Sales in that category could be much stronger.
Prairie Lights' strategy to increase e-book sales is to highlight it in the store with a
special sales kiosk where staff can teach customers how easy it is to purchase and
download books to their devices, and to do an interactive ad campaign targeted to their
main customer base. Whether the partnership is with Google Editions or the American
Book Association's new e-book sales portal, Prairie Lights will be in the market. This
strategy has proven effective for Village Books in Bellingham, WA, where e-book sales
now gross $2,000/month.
Gift and toy category additions to inventory
To capitalize on the fact that Prairie Lights remains a destination store, a third strategy
is to add two categories of merchandise to the offerings at Prairie Lights. Recognizing
that buyers of books are often buying books as gifts, owners have begun to expand the
gift and toy categories and have rearranged a portion of the main sales floor to
accommodate the new section. Much of the gift section will be book related and of a
quality found in museum stores. The toy section will feature educational games, board
games and prestigious brand children's toys. With $10,000 of inventory, the store can
expect a $20,000 bump in sales.
Prairie Lights Proposed Solution
Prairie Lights seeks $35,000 in City funding to meet the changing demands of the book -
buying public. Their plan is to:
• further embrace the a -book market by building a special sales counter and
devoting a sales person to assist customers; and
• build on the successful cafe revenue stream by devoting more space to it and
adding tables and chairs;
• modify their display areas and diversify inventory to include a new section of gifts
and toys.
They feel the results of these changes will make up for the downturn in traditional book
sales while allowing Prairie Lights to remain a successful downtown anchor store.
Adding menu items in the expanded Times Club will increase sales in that portion of the
business. Adding two new targeted categories of merchandise will offer more choice for
gift buying customers and adding a special e-book kiosk and staff person to assist will
boost e-book sales through PrairieLights.com.
May 31, 2012
Page 3
Prairie Lights has requested financial assistance from the City for the following costs:
Build E-book and Gift & Toy sections
Kiosk, display cases, computer...............................................................................$6,800
Gift and toy inventory ............................................................................................$10,000
Year one of new part time employee ....................... ...............................................
10,000
Expand Times Club Cafe
Flooring, furniture, electric ................................ ......................................................
$5,700
Advertisingcampaign .......... ............................................................
.......................... 2,500
TOTAL $35,000
Financial Analysis
Consultants from the National Development Council (NDC) conducted a review of
Prairie Lights financial records, confirming that, like most booksellers nationwide, Prairie
Lights' business is flat. While NDC agreed that diversifying to include more cafe sales,
and increased e-book, gift and toy sales was a strategy that might mitigate sluggish
book sales, they were unclear as to the expected results of the diversification.
In a financial review it is customary to use a quality indicator checklist as another test of
merit. If most of the indicators are good or neutral, the company is likely to be doing
things right. Most of the indicators are ratios measuring such things as how quickly the
business pays its bills, the cost of goods sold to sales, or the average time inventory
stays in the store, and operating profit to sales, etc. The indicators are derived from an
analysis of the balance sheet and the profit and loss statements and give a sense of
how efficient and well -run the business is.
On 14 of 17 indicators, Prairie Lights shows good or neutral results. Three indicate
caution. Because these indicators are the results of past business and cannot account
for strategic decisions going forward, they will not be reflective of the changes Prairie
Lights plans to make until after a year of operations with those changes.
Overall, the positive quality indicators outweigh the negatives 4 to 1. One important
indicator to point out is the financial commitment of the company's officers in the store.
Prairie Lights' owners currently have $169,000 of their own money on loan to the store,
and classified as subordinated debt. This is also sometimes referred to as "skin in the
game." This is the last debt in line for repayment and is a good measure of the owner's
commitment to the business.
Optional Solution and Staff Recommendation
Staff recommends granting assistance to Prairie Lights from the City's Economic
Development Assistance fund (1000-457100-448079). We want to make sure that the
measures Prairie Lights takes are strategically the best for the money and appropriately
May 31, 2012
Page 4
funded, so we recommend a three -stepped approach including funding and strategic
planning to ensure their success.
Step One
Pursue a greater presence in the E-book market and expand the Times Club cafe.
• Build E-book sales kiosk in the store.................................................................$6,800
• Hire part time employee to staff it......................................................................10,000
• Enhance the Times Club cafe with tables,
floor space and electric supply upgrades ............... ......................... .................... 5,700
Step Two
Engage the services of a business consultant specializing in business strategy to:
1. Determine the best marketing approach to build e-book sales.
2. Determine the necessary extent of gift and toy market expansion,
and how to merchandise it.
3. Determine if the change in business model is appropriate and if
revenue sources from other business model changes may be possible.
• Complete as soon as possible using any of several sources: .................. up to 5,000
• Maureen Collins -Williams' recommendations through
the UNI Regional Business Center, including Mike Wagner,
White Rabbit Solutions or Maureen Snyder,
MKS -Marketing Knowledge Solutions
• Rob Rowenhorst's University of Iowa Advertising
Strategies Class (class project which would be complete
in late September)
• Faculty connection at the University of Iowa
Economic Development Assistance grant (subtotal) $27,500
Step two includes funding for business strategy assistance which Prairie Lights had not
included in their initial request but which staff feels is imperative and should be a
requirement for receiving public funding in this case.
Step Three
Upon completion of the consultants' work, and depending on the results, Prairie Lights
may also apply for a low interest loan (1%) of up to $15,000, depending on the need
determined in the strategic planning. Repayment of the loan may be deferred for up to
12 months.
Staff is recommending this three step approach beginning with a $27,500 grant to
facilitate immediate changes in the e-book sales counter and the Times Club cafe, while
getting some much -needed business strategy consulting. The strategic planning will
help ensure that further investment in inventory of new categories is the appropriate
investment and it will also provide the basis for a marketing plan to incorporate the
May 31, 2012
Page 5
changes and maximize results. The further investment may or may not include up to an
additional $15,000 as a low interest loan to be repaid within 5 years.
The recommendation can provide Prairie Lights access to potentially more funding than
initially requested to ensure that the business strategies it employs are capitalized
appropriately. We feel underfunding well -conceived strategic business changes would
be detrimental to assisting Prairie Lights make every effort to reposition themselves as a
thriving independent book store.
Justification
The following points synthesize why the City should support Prairie Lights.
• Assisting Prairie Lights is consistent with adopted Economic Development policies in
that it helps retain an existing business and encourages spin-off business
operations. Further, it will increase economic activity and add another part time
position in downtown Iowa City.
• The recommendation is also consistent with the City Council Strategic Plan of
encouraging development downtown, because it facilitates private investment
through partnerships on strategic properties. Prairie Lights is a strategic property in
downtown Iowa City.
• Prairie Lights is a valued employer and vital piece of the downtown and Iowa City
economies, providing 15 full-time and 18 part-time jobs.
• Prairie Lights is a busy hub for the community, hosting readings which routinely
attract tens to hundreds of people in person and thousands by radio.
• The Times Club cafe, now a Prairie Lights business contributing to the store's
bottom line, is strategic for the store and the community. The Times Club also
doubles as a community meeting place and alternative co -working venue.
• Prairie Lights sources its coffee from a local business, Stumptown Coffee, and
obtains pastries from Deluxe Bakery, located in east Iowa City.
• Prairie Lights is also a contributor to the community. In the last three years they
have staged in-store fundraising events for the Animal Shelter, the Iowa City Shelter
House, the Friends of Hickory Hill, and the Iowa City Book Festival. For the past 15
years, Prairie Lights has done a fundraiser for the Iowa City Public Library each
November. The next event will be May 31, when the store hosts a fundraiser for
Shelter House when a book about the writers of Shelter House goes on sale. A
portion of the proceeds will go to the Shelter.
Jan Weismiller will attend your meeting on June 5 to answer questions. Please feel free
to call me in advance if you need any additional information.
cc: Tom Markus, City Manager
Jeff Davidson, Director Planning and Community Development
Tracy Hightshoe, Associate Planner