School will measure city interest in running arena
School board directs superintendent to meet with mayor
Should the city of Forest Lake have a greater role in the operation or ownership of the Forest Lake Area Athletic Association Sports Center?
That will be one of the topics of discussion when ISD 831 Superintendent Linda Madsen meets with Mayor Chris Johnson at a date still to be determined.
Madsen was handed the chore by the ISD 831 School Board last Thursday as the board laid over to a later date any additional discussion of a possible school district purchase of the ice arena in the Headwaters development near the city airport.
The action came as the school board fielded numerous negative comments last week from district residents over the possible school acquisition of the FLAAA facility.
With debt service on a district purchase of the facility resulting in a negative cash flow picture, Madsen, in a report to the board, recommended continued discussion of the FLAAA arena and possible purchase by the district.
The pro forma completed for the district shows that under an optimistic scenario, a deficiency of $146,000 could result and require general fund dollars for the 2015-2016 school year. Under a pessimistic scenario, the operation could run a deficit of just under $228,000.
The scenarios are based on the school selling bonds of $4.9 million over 20 years at a projected interest rate of 3.7 percent.
The school board had the arena matter on its regular meeting agenda for possible action, but would not move in that direction.
Instead, Madsen was charged with exploring a deeper city involvement by meeting with Mayor Johnson.
In an interview on Monday, Johnson said he is open to hearing more on the arena, but was skeptical as to how much involvement the city council would want.
“My sense is that they are not,” Johnson said of council interest in taking over the arena that was built on land in the Headwaters development provided by the city.
“I do think it’s important that we have an ice arena in this region,” Johnson said. “I’d like to see it stay.”
In his evaluation of the arena finances, Johnson said a way must be found to lower the debt burden. That will require closing the gap between a 20-year and 30-year amortization of debt or a lower purchase price, he said. “That’s the key,” Johnson said.
The city has been involved with a school-FLAAA-city task force that formed late last fall when FLAAA approached the city and school to explore future options for ownership transfer. Johnson saw the city’s role, however, as more of a bystander as the clear direction was for the school to move forward.
The school retained Ehlers & Associates to do the financial study that led to the pro forma that has been used in the district evaluation of the purchase.
The consensus of the school board last week was to flesh out more financial details and explore the city’s involvement. Board members agreed they were not to a point in time where a decision could be made.
Member Kathy Bystrom, who questioned the move in March, repeated her concerns last week.
“The numbers, in my opinion, are just not there,” she said, adding that a district purchase was not in the district’s best interests. “Where is the city in this process?” Bystrom asked.
Board members Julie Corcoran, Erin Turner, Dan Kieger, Karen Morehead and Gail Theisen supported the move to seek more information. Theisen said now was a “good time to take a step back.”
Kieger and Corcoran, however, both expressed frustration with the negativity toward the project that came from district residents.
Corcoran said she was upset by the constant “bashing” of the project. “There is opportunity here,” she said. She added that FLAAA stepped up to build the ice arena complex “when no one else would.”
Kieger, who said he had enjoyed a long history with FLAAA programs over many years, said attacks on the integrity of FLAAA officials amounted to a personal affront.
Larry Porter, arena manager and a long-time FLAAA official, said after the meeting the critics were correct that FLAAA did not make its January mortgage payment, but failed to mention that the payment was made in February along with its monthly payment.
A number of critics of the process addressed the board during the meeting’s open forum segment.
Steve Goedeke said the purchase was “not a good investment” and the district should get involved only after a default by FLAAA. The buyer should be the one setting the price, not the seller, he said.
Goedeke has railed on the early discussions and financial documents that indicate FLAAA could clear a $500,000 profit in the deal. School officials have stated the pro forma indicates a starting point and the final purchase price would be negotiated.
District resident Dick Tschida, a one-time school board member, questioned the transparency of the process, the financial data and the due diligence by the school district.
Jim Banta, who serves on the board’s building and grounds committee, questioned the adequacy of information presented to the committee.
John Freed, who ran for school board last fall, said the district was taking on more risk than reward and that taxpayers face the risk of being saddled with the debt. He said the district did not have the historical background involving the arena to make a purchase decision.
John Beckstrom, another school board candidate who like Freed did not win election last fall, was critical. Beckstrom said revenue projections of the operation were “overly optimistic” and that the district should not be the only solution for the arena’s future. He questioned how the district could fill the work functions that volunteers now handle for FLAAA.
Steve Schwister, who serves on the board’s finance committee, said the pro forma financial forecasts for revenue under a school operation were “too rosey.” He urged the board to involve the city in the matter.
Board member Morehead said she is feeling a sense that a community center is becoming a priority with Forest Lake residents. That message has come through during recent “community conversation” sessions, she said.
Could the ice arena complex be part of a larger community center?
“That came through pretty strongly,” Mayor Johnson said of the community center topic. “It was brought up at every community conversation. There is definitely a desire.”
How much the public would support in tax dollars is hard to determine, he added. “It’s hard to read that,” he said of taxpayer financial support.
The city owns 6.6 acres adjacent to the land the city provided for the ice arena.
As the city continues its strategic planning, the community center topic could be further defined to involve the FLAAA facility. “We’ll see,” Johnson said.
On a personal level, Johnson said he has not figured out what role makes sense for the city as it relates to the ice arena. The city has no staff to run it and does not offer a recreation department as many cities do.
“We’ll see what the council thinks,” he said. “Maybe there is a larger solution.”