April 2021 - Parks & Recreation - 21

facility needs without paying large
capital sums upfront or seeking a
bond issue. Because it is built with
more expensive private capital
rather than tax-exempt bonds and
incorporates the partner's profit
margin, the cost to the city will be
higher than if the city had financed
it. However, the low interest rate
for borrowing money that has prevailed in recent years means the
advantage of tax-exempt bonds is
currently relatively small.
In broad terms, leasebacks can be
classified into two categories: build
and transfer (BT) or build, own and
operate (BOO). In both cases, the
financing of construction is borne
entirely by the private partner and
the facility is leased to the department at a previously negotiated
annual fee. A major advantage of
this approach is that there are no
change orders.
In the BT model, the partner's responsibility ends with the construction of the facility, whereas a BOO
agreement requires the partner not
only to design, build and finance a
facility, but also to operate, maintain and renovate it for the lease
period. The BOO option provides
a guaranteed budget for the length
of the lease, which is an appealing
feature for some cities.
A partnership between the city
of Dublin, Ohio, and the Columbus (Ohio) Chill ice hockey team
owners partially used this approach to develop a $3.3 million
indoor ice rink. The city agreed
to the Chill building and operating the ice arena on an eight-acre
parcel of city land, and in return
leased back 20 percent of the ice
time to the city. The city received
use of a state-of-the-art facility for
its residents and a regional attrac	

tion that lures thousands of ice
hockey fans to the city to attend
tournaments and annual events.

Takeover of Failed
Private Ventures
The takeover of a faltering private
recreation facility may be an opportunity to retain a community
asset that would otherwise be lost.
Taking over facilities, such as golf
courses, ski facilities, softball complexes or ice rinks, is consistent with
the public's image of what a department typically offers and, therefore,
is unlikely to be controversial.
A department may be able to operate a facility that commercially
fails for two reasons. First, the facility would not have to yield a return on equity, however, it could be
operated either as a self-sufficient
entity (without the return on investment) or with a tax subsidy.
Second, it is possible it can be
acquired for substantially less than
the original cost, making annual
debt repayments less onerous. For
example, if a bank forecloses on a
recreation facility, it may take an offer from a city to purchase it at (say)
half of its original cost, so the bank
could recoup some of the outstanding loan amount on the property.
By enabling the facility to continue
operating, the bank would contribute to the community's quality of
life and enhance its image as a good
corporate citizen.

Join the
Spring 2021
Urban Park
Roundtable!
A P R I L 2 9 -3 0 , 2 0 2 1

The Institute for
Urban Parks will
convene urban park
professionals to explore
and develop the " next
practices " in urban park
management. This free,
virtual conference will
include guest speakers
from a variety of urban
park organizations
across North America.

To learn more about the
Urban Park Roundtable and
register for the event, visit
centralparknyc.org/roundtable

John L. Crompton, Ph.D., is a
University Distinguished Professor,
Regents Professor and Presidential
Professor for Teaching Excellence in the
Department of Recreation, Park and
Tourism Sciences at Texas A&M
University and an elected
Councilmember for the City of College
Station (jcrompton@tamu.edu).

PA R K S A N D R E C R E AT I O N .O R G | A P R I L 2 02 1 |

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April 2021 - Parks & Recreation

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