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Even as they watch the meltdown of the financially troubled Vadnais Sports Center, West St. Paul and Savage officials say they have confidence that the management group fired by Vadnais Heights will successfully launch new sports domes for them.
Vadnais Heights council members last week severed the city's ties with the $26 million sports center at 1490 E. County Road E after earlier firing the complex managers, Sports Facility Development and Management Group, led by CEO Mark Bigelbach.
That's the same group hired by both Savage and West St. Paul to manage new sports domes opening this fall. But officials in those cities say that their projects are far smaller -- $4.5 million and $7 million, respectively -- and that their financing plans are more straightforward than those in Vadnais Heights.
"Our projections are far more attainable and do not rely on the sale of property for bond payments," said West St. Paul Mayor John Zanmiller. "Our signed leases today are almost to the point where the facility will break even."
Savage City Manager Barry Stock said, "The Vadnais Heights project is dramatically different than ours. In the Vadnais Heights project, they have two sheets of ice. That is not even close to an apples-to-apples comparison to what we are doing or what West St. Paul is doing."
The smaller domes will have playing fields for soccer and other sports, but no ice.
Vadnais Heights used four different types of bonds to finance the sports center as part of an economic development project, Stock said. "It's not just a sports facility." In Savage, leases for use of the dome are the sole source of revenue to pay off its construction and operating costs.
The Vadnais center opened in November 2010 with two hockey rinks and three turf athletic fields under the state's second-tallest dome. It also boasted frills including electric-powered Zambonis, 12 locker rooms, a high-tech sound system, retail space, community meeting rooms and wireless Internet service. The city also invested $695,000 in three commercial lots on the property, hoping to recoup the money when the lots were sold.
When the arena was approved, Bigelbach and others said more than $2.3 million in annual contracts had been signed, more than enough to pay off the debt incurred to build it. But the facility netted just $1.5 million in the first year.
Officials have been more cautious in Savage, Stock said.
"All along in this project I have been advising our council that the potential exists for this facility to make money or lose money," Stock said. "We didn't go into this saying this thing for sure is going to make money." Under a worst-case scenario it could lose $200,000 a year, Stock said. "There is also the potential for it to make $200,000 a year."
Audit raised concerns
The Savage project was driven by three local sports organizations and their teams, which are expected to lease time in the new dome, Stock said.
In Vadnais Heights, the council's decision to sever ties with the sports facility will protect city taxpayers from future subsidies of up to $1 million annually. But the city will lose everything it has invested in the complex so far and may be open to lawsuits from bond holders and a reduced credit rating.
The Vadnais Heights council fired the sports management firm after a city-ordered audit raised major concerns over a lack of documentation in advertising, user contracts and financial transactions.
Last week, the Vadnais Heights City Council postponed a decision on whether to order another in-depth audit to determine why the complex did not generate as much revenue as supporters had predicted.
Company has different role
In West St. Paul, the role of Bigelbach's company is to market the dome, bring in leases for playing time and operate the facility -- leaving all money matters, including the handling of contracts, to the city, said Council Member Jim Englin, who has been the chief supporter of the West St. Paul dome.
"Up in Vadnais, [Bigelbach] was the city's front man. He handled the money and the contracts with the different users. Mark's role for us is really just to go out and find the users. He's the marketing manager and the scheduler," Englin said.
Despite the ugly "divorce" between Bigelbach's firm and Vadnais, "we have to judge Mark and his firm based on what they do for us," Englin said. "Mark has done everything we have asked him to. His paperwork has been on time and complete."
So far, the sports firm has worked without payment to line up more than $500,000 worth of leases for West St. Paul, Englin said.
'Eyes wide open'
Savage is paying Sports Facility Development and Management Group $90,000 for the first year of operating its new dome, expected to open Nov. 1. Stock said the city's relationship with the firm "has been very positive. They have been very responsive to any call or question." So far, the firm has booked more than half of the playing time in the dome.
West St. Paul looked into including one ice rink in its project and concluded early on that revenue would not be strong enough to cover the cost, Englin said. "We did our due diligence and said 'This isn't going to work.'"
Whereas the Vadnais Heights sports center was looking at a $1 million a year deficit, projections show that the most West St. Paul taxpayers would have to make up is $120,000 in year six -- then the debt payments should start reducing, lowering the city subsidy, Englin said. "Even on year six, that is the worst-case scenario," Englin said. To be conservative, "we counted on 12 months of costs and only six months of revenue." Any revenue for use of the dome during the summer would bring the number down, he said.
"We went into this thing with our eyes wide open. We laid all the cards on the table. Everybody knew the worst-case scenario," Englin said.
Laurie Blake • 952-746-3287