The Vadnais Heights City Council responded after an audit raised serious concerns.
The Vadnais Heights City Council on Wednesday fired the company that managed the financially beleaguered Vadnais Sports Center, just days after city staff members recommended an in-depth investigation to determine if money was misappropriated and collect information that might be needed if the city is sued.
Council members voted 5-0 to immediately terminate Sports Facility Development and Management Group and its CEO, Mark Bigelbach, even though the company is under contract through Dec. 31. The council also approved hiring an interim manager to oversee the arena until a new management company can be hired.
The impetus for the council's action was a recent city-ordered audit that raised major concerns over a lack of documentation in advertising, user contracts and financial transactions.
"Through the consideration of these findings, led by this audit, my recommendation is that we consider terminating the management company at this time," said City Administrator Gerry Urban. "We need to correct things and move forward."
Council members say they have pressed Bigelbach for months to get answers about the arena's poor performance and problems mentioned in the audit, to no avail.
Bigelbach disputed the audit's findings and said that it is riddled with mistakes. He also said that the city has misapplied terms of the management agreement.
"I suggest the city review this before they move forward," Bigelbach told the council as he delivered a stack of documents, including receipts, checks and other records, to support his claim. "A forensic audit would prove what I have been saying all along."
As the overseer of the center at 1490 E. County Road E, Vadnais Heights is obligated to pay for any shortfalls. So far it has taken three loans totaling $830,100 to help the debt-ridden arena make bond payments and pay its bills. But the city hasn't decided if it will continue to fill the gap. The council must make that decision by Sept. 2.
Failure to do so could trigger lawsuits from bondholders. If the city decides to bail out the arena, property owners could see a 30 percent increase in their tax levy.
City staff members consulted the state auditor's office before it recommended a full investigation. In an Aug. 8 memo to council members, staff members listed several objectives, including quantifying the amount of misappropriated funds, aiding in the recovery of them and fulfilling "a fiduciary duty to city taxpayers and VSC bondholders."
"We made a difficult decision tonight," Mayor Marc Johannsen said at Wednesday's meeting. To the citizens he said, "We will work diligently to make sure you are protected."
Tim Harlow • 651-925-5039 Twitter: @timstrib