FLAAA Sports Center now in foreclosure
(Editor’s note: The Times learned of the foreclosure on the FLAAA Sports Center just before this issue went to press. Preliminary details are posted at the end of this article. Check www.forestlaketimes.com later this week for updates or see next week’s edition for additional coverage.)
In May the District 831 school board voted to buy the Forest Lake Area Athletic Association Sports Center for $3.3 million. To raise the money, the district planned to issue tax abatement bonds paid over 15 years, with debt service for the bonds added to the property tax levy. The closing date was to be June 30.
At the Oct. 3 meeting, the school board voted again to buy the arena – but this time with lease purchase financing. The new vote was necessary because the Minnesota Department of Education rejected the district’s plan to use property tax abatements.
Board member Kathy Bystrom again voted against buying the arena. At the May meeting, Bystrom said the school district should not be in the arena business.
The purchase price would still be $3.3 million, below the appraised market value of $5 million, for the building and contents.
The purchase price is also less than the outstanding debt of $4.3 million. Last spring, during the negotiations between FLAAA and District 831, the four banks that own the outstanding debt all agreed to take a loss.
Business Manager Larry Martini said that at the next meeting, Oct. 10, the school board will approve a document with the new financing proposal to send to the Department of Education, which will have 60 days to review it. The arena purchase could still happen before the end of 2013, he said: “I’m hoping it will happen in a matter of weeks, not months.”
Lease purchase is like a mortgage or an installment loan, Martini explained. For 20 years, the district would pay $200,000 to $220,000 a year. The equity would increase each year until year 21, when the district would own the arena outright.
Certificates of participation would be sold to finance the lease, and the buyer of the certificates would receive payment from the school district each year. Additional fees would go to the financing agent, Springsted, and legal counsel, Dorsey & Whitney.
The lease purchase method is not subject to a referendum. With tax abatement financing, Martini said, all debt payments are made from a debt service fund. Buying the arena would have no impact on the general fund, and any net income would benefit the general fund. With lease purchase financing, the debt is paid from the general fund. Martini said that system leaves less profit to the district.
When the school district was determining the maximum the district should pay, Martini said, they were assuming lease purchase financing would be used. The abatement bonds idea came later.
The Times was awaiting comment from the Department of Education as this edition went to press.
On Thursday, Oct. 3, a foreclosure notice in the Stillwater Gazette said the mortgage for the facility is in default.
The notice says the original principal amount was $4,500,000 and the current amount due is $4,302,817.
Using the power of sale in the mortgage, the facility will be sold at public auction at 10 a.m. on Thursday, Nov. 21 at the Washington County Sheriff’s Office, 15015 N. 62nd St. in Stillwater. The city of Forest Lake owns the land.
The time allowed by law for redemption by the mortgagor is six months after the date of sale.
Four banks — Village, Frandsen, Central and First Resources — own the outstanding debt. Village Bank is the creditor of record.
Look for more coverage at www.forestlaketimes.com and in next week’s print edition.