$26.5 million Vadnais Sports Center is a costly boondoggle

After financial projections woefully missed the mark, the promised success of the Vadnais Sports Center never materialized.

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The Vadnais Sports Center in Vadnais Heights, Friday, August 16, 2013 ] GLEN STUBBE * gstubbe@startribune.com

Vadnais Sports Center — beset by problems and just put on the market at a fraction of its $26.5 million cost — had every chance to succeed instead of becoming a costly boondoggle, current and former mayors of Vadnais Heights say.

Mayor Marc Johannsen, as a former City Council member, and former Mayor Susan Banovetz were deeply involved in the sports center’s planning and construction before its descent into financial trouble. The city walked away from it last year, leaving the bondholders who paid for it at risk of losing much of their investment.

“I know this is in litigation, but I will just say this: Some people were determined to see it fail from the time it was just a mere idea,” said Banovetz, who as mayor from 1997 to 2011 led several major building projects in the city.

“There were [city staffers] working actively behind the scenes who put a lot of energy into seeing this fail who should have been using that energy to see it succeed,” she said.

Why those staff members would undermine the project is unclear, she added, but it’s clear to her they had personal agendas. “This could have been a success,” she said.

Based on the numbers, it should have worked, said Johannsen, who took over as mayor in 2011 and has been on the City Council since 1995. “We took a lot of time and effort and spent hundreds of hours vetting the numbers and going over them with our consultants. … Nobody told us, ‘Don’t do this deal,’ ” he said.

At least one expert, however, had warned city officials that the attendance and revenue numbers were overly optimistic — a prediction that proved prescient.

The sports center with its distinctive white-bubble dome — the second-tallest in the Twin Cities — was to become Vadnais Heights’ signature piece, a destination for thousands and another engine for economic growth.

With bondholders funding it under a financial arrangement unlike that used for any other community sports arena in the state, it wasn’t supposed to cost the city’s taxpayers a dime.

Johannsen said he is convinced the three-year-old sports center can still be a success in private hands. User statistics have improved this year, he added: “I think the sports center will work itself out.”

Johannsen said the key revenue and attendance numbers that the city relied upon came from Community Facilities Partners and the firm later hired to manage the sports center, Sports Facility Development and Management Group, run by former Vadnais Heights City Council Member Mark Bigelbach. Bigelbach is suing the city over his subsequent dismissal.

At the request of city officials, Mark Erickson, an analyst with the National Sports Center Foundation, did what he called a “cursory review” and warned them in late 2009 that the financial data on which the plans were based were “unsupported and incomplete,” and that revenues were significantly overstated while expenses were understated.

Erickson said no other Minnesota city has financed their local arenas the way Vadnais Heights did.

It was also unusual in that no down payment was made by the city, he said.

The foundation operates the National Sports Center in Blaine, the world’s largest amateur sports complex, which is self-supporting and recognized for its expertise in arena planning.

It was not involved in the Vadnais Sports Center planning, which it could have done at no cost through the Minnesota Amateur Sports Commission.

An irresistible plan

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  • Despite its half-off asking price, the mayor said the three-year-old sports center could succeed privately.

  • Timeline

    March 2010: After a couple of years of discussion and debate, the Vadnais Heights City Council approves plans for the $26.5 million Vadnais Sports Center on 16 acres at the corner of Hwy. 61 and County Road E. It includes a 100,000-square-foot arena with two ice sheets, and similar-sized domed field. The city will issue revenue bonds, in four issues over 30 years, with debt to be repaid by the estimated $2.3 million in annual revenues from the 1.3 million expected visitors and participants, naming rights and concession sales. The nonprofit Community Facility Partners (CFP) of Deephaven will own the sports center, with the city acting as “master leaseholder.”

    November 2010: Vadnais Sports Center opens.

    December 2010: The same huge snowstorm that deflates the Metrodome in downtown Minneapolis topples the dome at Vadnais Sports Center, disrupting operations.

    August 2011: In the first sign of trouble, the city loans CFP $127,000 after revenue comes up short for a scheduled bond payment. City officials downplay the loan as a “cash-flow problem,” but two more loans totaling more than $830,000 will be made in following months.

    November 2011: A private audit finds “significant deficiencies in internal control over financial reporting” and sloppy record-keeping at the sports center. The first year’s revenues were about $1.5 million, $763,000 below projections.

    August 2012: After a city audit called for an investigation of the sports center’s bookkeeping and cited a lack of proper spending documentation, the City Council terminated the center’s manager, Sports Facility Development and Management Group, and its CEO, Mark Bigelbach. Bigelbach, who later sues the city, calls the audit a “witch hunt.” The city also votes to cancel its lease and end financial support for the sports center.

    September 2012: The city pays a stiff penalty for halting its subsidies for the debt service payments when Moody’s Investors Service and Standard & Poor’s lowers its bond ratings from AA to junk.

    August 2013: CFP puts the sports center up for sale at $13 million, about half its construction cost; bondholders would receive whatever proceeds are left after fees and expenses are paid to the trustee, U.S. Bank, along with the commission of the real estate broker.

    Jim Anderson

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