Ramsey County became the new owner of the Vadnais Sports Center on Tuesday in a move that promises to end the center’s financial struggles, but comes at a steep price to private investors who paid for its construction.
The County Board voted 6-1 to pay $10.55 million for the complex, which was built in 2010 for $26 million in revenue bonds issued through the Vadnais Heights Economic Development Authority on behalf of the Deephaven-based nonprofit Community Facility Partners.
The four-year-old building is at the corner of County Road E and Hwy. 61 in Vadnais Heights.
In the weeks since signing a letter of intent to buy the center, which includes a 100,000-square-foot domed fieldhouse and two ice rinks, county officials and an independent firm — Ehlers, a financial advisory firm that works with local governments — have combed through the facility’s finances to make sure it can support itself.
Victoria Reinhardt was among several commissioners who said Tuesday that the due diligence has convinced her that the county is getting a nearly new arena that poses no financial risk to taxpayers.
“It’s going to have a spotlight on it — and it should, because we’re making a big step here,” Reinhardt said. “The bottom line is that I feel confident with this, and it’s been something that I know we’ve scrutinized from every possible angle to make sure our taxpayers weren’t going to get stuck with additional costs.”
But Janice Rettman, the commissioner casting the lone dissenting vote, questioned the board’s willingness to make an internal loan from the county’s capital projects fund to buy the sports center when many of the county’s 10 arenas could use upgrades. If those arenas were brought up to newer standards, she said, “I might be more willing to consider this.”
Other commissioners, however, including Rafael Ortega, said the deal to buy the Vadnais Sports Center was too good to pass up.
“The reality is, this is a good opportunity for us,” he said, adding that the purchase will serve as a catalyst for discussing the future of all the county’s arenas.
The Ehlers review showed the sports center generated about $1.68 million in revenues in 2013 and is projected to match that in 2015.
The center’s expenses, excluding debt service, were just under $1.3 million last year. The county expects to reduce those costs in 2015 by about $300,000 because it won’t have to pay as much for management and other fees and will save about $75,000 in insurance costs and $68,000 on service contracts.
Based on that analysis, the center should generate about $680,000 in net revenue. Of that, an average of $490,000 will be repaid to the county’s capital improvement fund each year for 20 years. About $190,000 would be left annually for contingency costs and future improvements to the center.
The analysis also noted that maintaining that revenue depends on whether the center’s main tenants, which include four skating clubs and hockey teams, continue to use the facility. County officials say that they don’t anticipate a drop-off in use.
A reduction in debt service costs is a key reason the sports center will have a better cash flow under county ownership. When revenues failed to meet overly optimistic projections, Community Facility Partners defaulted on the bonds and the city of Vadnais Heights stopped subsidizing the sports center.
Last month, a group of the bondholders lost an appeal in Ramsey County Probate Court to halt the sale. In a letter to the County Board before the meeting, bondholders made one more last-ditch plea to find another option aimed at forestalling their losses.
The bondholders will receive whatever is left from the $10.55 million purchase price after fees due to their trustee, U.S. Bank, and Community Facility Partners, lawyers and others are paid.