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Home My WebLink AboutIII A. VIRGINIA AQUARIUM UPDATE 3.26.24Virginia Aquarium Update Monica D. Croskey, Assistant City Manager March 26, 2024 2 THE EXPLORATION •The City has been on a deliberate path of evaluating how best to position the Virginia Aquarium to meet its mission while remaining realistic about the City’s financial obligations, myriad of capital infrastructure needs, and taxpayer affordability •Council has been requesting and leveraging quantitative and qualitative data to inform discussions 3 Timeline Qualitative and Quantitative Data Gathering - Highlights January 10, 2023 Aquarium Director presentation to Council master plan (expansion and renovation) April 18, 2023 Aquarium Director budget presentation to Council Council requested information on alternative ownership models Spring 2023 Council requested information on reduced scope for capital project August 15, 2023 CMO presentation on reduced scope and alternative ownership models Council requested: further explore market/alternative ownership models, gauge community sentiment, and meet with Foundation September 2023 Leadership met with Foundation Third-party administered statistically significant random-sample survey Issued RFI November 14, 2023 CMO closed session debrief November 17, 2023 Staff met with Foundation December 2023 VAQ employee town halls Media response/release including survey results February 2024 Onsite visits with RFI Responders March 2024 Onsite visits debriefs with firm and Foundation Chair March 29, 2024 City Council closed session debrief *City Manager and Foundation Chair had meetings beyond meetings captured here 4 Recap: Existing Partnership Model Highlights City of Virginia Beach •Pay for, own, operate and maintain the Virginia Aquarium (including its buildings and grounds) as a City department Foundation •Purchase and own the Virginia Aquarium’s animal population and exhibits •Raise money through fundraising to support operations, capital investment, the stranded animal response program, conservation, and scientific research efforts •Fund and run Virginia Aquarium educational programs 5 Recap The Situation •VAQ key assets at end of useful life •Documented through public briefings and media that exhibits have been intermittently down over the past couple of years + Aquarium needs capital investments Addressing the Situation •Status quo - unsustainable •Reduced scope $50M - $75M •Original $200M - $300M renovation and expansion •Alternative partnership model 6 Addressing the Situation: Status Quo •City currently subsidizes the Aquarium ~$7.4M each year •City currently allocates $2M a year for capital investment at the Aquarium •Aquarium has capital needs •Funding anything over $2M a year requires Council to cut/reduce other capital projects, decide to not invest in other priorities, or increase revenue 7 Addressing the Situation: $50M - $75M $5M - $7.5M more in annual debt service payments •Creates new spaces for the animals •City would need to address what happens to existing aging infrastructure •Foundation’s fundraising efforts may reduce amount needed in debt •Anything over current funding level requires Council to cut/reduce other capital projects, decide to not invest in other priorities, or increase revenue 8 Addressing the Situation: $200M - $300M $20M - $30M more in annual debt service payments •Creates parking deck, new spaces, and addresses existing aging infrastructure •Foundation’s fundraising efforts may reduce amount needed in debt •Anything over current funding level requires Council to cut/reduce other capital projects, decide to not invest in other priorities, or increase revenue 9 Addressing the Situation: Broader City Scan City’s debt metrics and capacity shared with Virginia Beach City Public Schools 10 Recap The Situation •VAQ assets end of useful life •Documented through public briefings and media that exhibits have been intermittently down over the past couple of years + Aquarium needs capital investments Addressing the Situation •Status quo - unsustainable •Reduced scope $50M - $75M •Original $200M - $300M renovation and expansion •Alternative partnership model Alternative Partnership Models Research 11 12 Reviewed partnership models for 32 of 57 U.S. aquariums accredited by the Association of Zoos & Aquariums and 13 accredited zoos Nonprofit & Govt Operates* (VAQ model), 18% Nonprofit Operates & Govt Owns, 29% Nonprofit Standalone, 20% Nonprofit & Private Entity, 7% Private Entity, 27% 13 Observations: Changes in Model Used •Center of Aquatic Sciences at Adventure Aquarium: Private Entity “acquired Adventure Aquarium.” •Sacramento Zoo: In 1997, as City funding continued to decrease, the Sacramento Zoological Society took over financial and daily management of the zoo from the City of Sacramento. •Birmingham Zoo: “With so many financial demands on the city taking precedence and no leadership when it was needed most, the Zoo lost accreditation by the Association of Zoos & Aquariums. In 1999 Mayor Richard Arrington led the way for the privatization of the Zoo, recruiting strong community leaders to serve as the first Board of Directors of a new organization, Birmingham Zoo, Inc. (BZI). The new organization established a transitional funding package with contributions from four government entities to support BZI during its first five years of operation. BZI is now in its nineteenth fiscal year as a private, non-profit organization.” •Seattle Aquarium: “Opened in 1977, the Seattle Aquarium was owned and operated by the City of Seattle Department of Parks and Recreation until 2010, when the nonprofit Seattle Aquarium Society assumed its management—a model used by most leading zoos and aquariums across the country.” •Atlanta Zoo: “In 1984, a series of highly publicized events revealed deteriorating conditions at the Zoo, prompting Parade magazine to label the institution as one of the top 10 worst in the nation. A subsequent investigation lost the Zoo its accreditation, and an outraged public demanded that the facility be closed. Mayor Andrew Young assembled an emergency crisis team. New governance followed in 1985, with the Zoo’s privatization and the creation of the nonprofit Atlanta Fulton County Zoo, Inc.” Alternative Partnership Models Virginia Beach 14 Broader Awareness: Media Coverage 15 Balanced Media Coverage December 14, 2023, WAVY 16 “Currently, Virginia Beach taxpayers are subsidizing the aquarium to the tune of almost $8 million a year…” “But who other than the city could possibly write the check? The city manager’s office is now tasked with trying to figure that out.” “After looking at 32 of 57 U.S. aquariums accredited by the Association of Zoos & Aquariums and 13 accredited zoos, the city manager’s office found only eight have the model Virginia Beach has, in which the nonprofit supports the mission and philanthropic fundraising while the government owns and operates the facility.” “We are in the process right now of reworking our plans for a scaled-back approach for the aquarium,” said Daniel Peterson, said Daniel Peterson, current chair of the foundation…” “Peterson…said the foundation would consider a privatization of the aquarium, saying it would be “foolish for us not to consider all potential options.”” “When it comes to his largest concern right now? It’s time.” Peterson said, “If I have an exhibit that is going to fail in two years and it’s going to take two years to build. I don’t have the luxury of waiting 6, 12, 18 months for the city to go through this exercise they are conducting and nothing comes of it.” 17 Employees + Foundation •Employees •How would employment be impacted if City transitions to new model •What happens to stranding response program if City transitions to new model •When can they expect a decision to be made and communicated •Foundation •Reduced scope $50M - $75M •Animal welfare, exhibits conditions •Timing matters, desire for clarity 18 Community •Every method of scientific inquiry is subject to limitations and choosing among research methods inherently involves trade-offs1 •Unlike focus groups, interviews, etc., one of the trade-offs with survey research is data that are produced likely lack details or depth on the topic being investigated1 •However, unlike focus groups, interviews, etc. representative sample surveys document that a perception is widespread enough to be observable in the general population and allow researchers to explore whether certain perceptions vary by people’s attributes1 •Surveys are an efficient way to collect information about a large group of people 1Penny S. Visser, Jon A. Krosnick, and Paul J. Lavrakas, “Survey Research.” In Harry T. Reis and Charles M. Judd (Eds.) Handbo ok of Research Methods in Social Psychology. New York: Cambridge University Press, 2002. 19 Community •Third-party administered survey •Random-sample, statistically valid •Demographically representative sample •+/- 4.4% margin of error at the 95% confidence level Very Supportive to Neutral $200M - $300M investment 77% 3rd party operator 72% 3rd party owner 61% •Roads •Stormwater/flooding •School buildings Ranked as higher infrastructure priorities Alternative Partnership Models Market Interest 20 Market Interest - RFI •Issued RFI in September •A. Organization Profile 1.Company Name 2.Company Address 3.Brief company history and experience in the field 4.Company point of contact for RFI Response (Name, Title, Phone, Email) •B. Statement of interest to operate, lease, and/or purchase the Aquarium •C. List of zoos, aquarium, and/or entertainment attractions within Company’s portfolio 1.If a zoo or aquarium is within the Company’s current portfolio, please provide information on the operational and ownership model used for each zoo and/or aquarium. •D. Statement indicating willingness to demonstrate the organization’s financial stability and financial capability to operate, lease and/or purchase the Aquarium upon request under mutually agreeable terms •Non-binding •Three firms expressed interest, two submitted formal responses 21 22 Market Interest: Expressed Interest •Expressed interest •Currently learning more about the company --- •Experience operating local government-owned aquarium •St. Louis Aquarium •Children’s Aquarium Dallas 23 Market Interest: RFI Responders 24 Market Interest: Ripley Entertainment •Part of The Jim Pattinson Group •2nd largest privately-owned company in Canada •More than 49,000 employees •Ripley Entertainment •Owns, operates, and franchises over 100 attractions under 12 brands in 10 countries •Over 14 million guests each year 25 Market Interest: Ripley Entertainment •Aquariums: •Myrtle Beach, SC •Gatlinburg, TN •Toronto, Ontario, Canada •Aquarium of the Smokies (Gatlinburg, TN) since 2017 has been ranked by USA Today 10 Best Readers’ Choice as best or second-best aquarium in North America •“Our mission is to provide a top quality, world class aquatic life facility that will foster environmental education, conservation, and research, while simultaneously providing entertainment for visitors of all ages. As a Green Power Participant, we are proud supporters of locally generated, renewable resources.” 26 Market Interest: Ripley Entertainment •Aquariums: •Myrtle Beach, SC •Gatlinburg, TN •Toronto, Ontario, Canada •Aquarium of the Smokies (Gatlinburg, TN) since 2017 has been ranked by USA Today 10 Best Readers’ Choice as best or second-best aquarium in North America •“Our mission is to provide a top quality, world class aquatic life facility that will foster environmental education, conservation, and research, while simultaneously providing entertainment for visitors of all ages. As a Green Power Participant, we are proud supporters of locally generated, renewable resources.” Ripley Entertainment Year opened/acquired first Aquarium 1997 # Aquariums in portfolio 3 # AZA-accredited 3 Aquarium size range – gallons of water 1.1M – 1.6M Experience w/ acquisitions No Experience w/ govt Yes Experience w/ foundations No, but expressed openness to it Marine Science Center Yes Stranding and rescue operations No 27 Market Interest: Herschend Enterprises •Founded by Jack and Pete Herschend in 1950’s •Private, family-owned •Largest family-owned themed attractions organization in U.S. •More than 11,000 employees •Herschend Enterprises •Creates, develops, and operates 26 entertainment properties across North America •Over 14 million guests each year 28 Market Interest: Herschend Enterprises •Aquariums: •Newport, KY (Cincinnati region) •Camden, NJ (Philadelphia region) •Vancouver, Canada •Newport Aquarium and Camden Aquarium continuously listed in the USA Today Top 10 Best Aquariums by popular vote •“Herschend is committed to its vision of Bringing Families Closer Together® and its mission of Creating Memories Worth Repeating® by producing wholesome, immersive family entrainment experiences. It is our preference to maintain and preserve the core values and operations of all our companies while infusing our culture of Leading with Love®.” 29 Market Interest: Herschend Enterprises •Aquariums: •Newport, KY (Cincinnati region) •Camden, NJ (Philadelphia region) •Vancouver, Canada •Newport Aquarium and Camden Aquarium continuously listed in the USA Today Top 10 Best Aquariums by popular vote •“Herschend is committed to its vision of Bringing Families Closer Together® and its mission of Creating Memories Worth Repeating® by producing wholesome, immersive family entertainment experiences. It is our preference to maintain and preserve the core values and operations of all our companies while infusing our culture of Leading with Love®.” Herschend Enterprises Year opened/acquired first Aquarium 2008 # Aquariums in portfolio 3 # AZA-accredited 3 Aquarium size range – gallons of water 1M – 2.5M Experience w/ acquisitions Yes Experience w/ govt Yes Experience w/ foundations Yes Marine Science Center Yes, partnership with non-profit Stranding and rescue operations Yes, one of largest mammal rescue ops in world, partnership with non-profit Alternative Partnership Models Responders Site Visits 30 31 THE EXPLORATION: Sustainable Future •The City has been on a deliberate path of evaluating how best to position the Virginia Aquarium to meet its mission while remaining realistic about the City’s financial obligations, myriad of capital infrastructure needs, and taxpayer affordability. •Council has been requesting and leveraging quantitative and qualitative data to inform discussions. •Status quo - unsustainable •Reduced scope $50M - $75M •Original $200M - $300M renovation and expansion •Alternative partnership model Potential Path Forward Considerations Status quo: Continue Current Funding •Continuation of ~$7.4M subsidy •Major key assets are at end of useful life •Inevitable near-term need of emergency repairs and/or decommissioning exhibits •Concerns about condition of key assets and timeframe not addressed •Doesn’t require establishing new partnership Increase investment: Original Scope •Requires CIP reductions, decision to not invest in other priorities, and/or increase revenue, $20M - $30M more in annual debt service (Foundation fundraising could decrease amount) •Projected increase in economic impact and increased visits •Addresses aging infrastructure while also providing new exhibits and features •Doesn’t require establishing new partnership Increase investment: Reduced Scope •Requires CIP reductions, decision to not invest in other priorities, and/or increase revenue, $5M - $7.5M more in annual debt service (Foundation fundraising could decrease amount) •Doesn’t completely address what happens to existing aging infrastructure •Doesn’t require establishing new partnership Alternative Partnership: RFP •Structured deadlines and timelines, less flexible •Likely takes longer → may unfavorably impact operations, staffing, market interest •Commitments on paper to be acknowledged •Reduces taxpayer obligation for funding an asset where a proven private market exists •Requires establishing new partnership •Owners’ Representative Alternative Partnership: Competitive Direct Negotiations •Opportunity for agile deadlines – could go faster or slower •Nimble allowing for engagement and understanding of stakeholders’ priorities and interests •Reduces taxpayer obligation for funding an asset where a proven private market exists •Requires establishing new partnership •Owners’ Representative 32 33 •Current subsidy + avoids $5M - $30M in additional annual debt service •Most accredited aquariums and zoos not owned + operated by gov’t •Roads, flooding/stormwater, school buildings ranked as higher priorities → preserves debt capacity •Reduces taxpayer obligation where a proven private market exists •Successful transitions have occurred with private entities preserving stranding programs, research, and educational efforts •Top accredited aquarium companies have expressed interest in partnering with Foundation and City For consideration: Continue pursuing alternative partnership model through competitive direct negotiations. •Status quo - unsustainable •Reduced scope $50M - $75M •Original $200M - $300M renovation and expansion Council Discussion + Direction Alternatives to Consider