Board president confident financials will add up to win-win deal for FLAAA Sports Center
I recently got a call from a community member who said that although he and wife are strong school supporters, they were having a hard time understanding what was going on with the school district’s purchase of the Lichtscheidl Ice arena. I can understand where they were coming from. This has been a long and sometimes confusing process.
In my opinion the purchase of the arena is a win-win for the students of our district, FLAAA, and local taxpayers. At the current purchase price the district will be able to have a consistent and high-quality sports facility for years to come while bringing in additional revenue, around $119,000, to help our academic programs.
First let’s look at the numbers. As a school district we have to be very conservative in all our spending decisions. When FLAAA first came to us with the idea of purchasing the facility, we had all the revenue and expense numbers audited by the Ehlers and Associates auditing firm. As a board, we wanted to be sure that if we made an offer, our academic programs would not be hurt and that we had clear accounting of revenue, expenses, and future repair costs. The offer of $3.3 million supported these constraints and was far below the current $5 million value of the building. FLAAA worked with the banks that held the mortgage on the building to adjust the term of the mortgage in a way that would allow the district to purchase the facility at a fair price. At this price we fully believe that, using conservative assumptions, the district will benefit from this purchase.
Why is FLAAA selling the arena? FLAAA has done an excellent job of running youth programs in our communities, but it became clear to them more than a year ago that managing a facility was not their core competency. For FLAAA the costs in running the ice arena fall harder upon them than they would for our school district, which has the financial capacity and the economies of scale to be able to keep costs lower and to generate greater revenue.
Where are we going to come up with $3.3 million without affecting academics? The simple answer is that at this purchase price, revenue from the building should cover the mortgage payments with extra left over for future repair costs and some for our general fund.
The more complicated answer is that as a school district we must follow all state statutes, and the Minnesota Department of Education must approve our financing plan. Originally, with the advice of Springstead & Associates, we put together a financing plan using what are called abatement bonds.
This financing method would have brought more money into our academic programs, but MDE didn’t believe that we qualified for this type of financing. We asked MDE to reconsider, given supporting information provided by the district and Springstead & Associates, but they again turned us down. So we put together a financing plan using a more traditional loan called a lease/purchase certificate. This is much like a loan on a business space. It requires a down payment and is paid off with revenue from that space. At our Oct. 3 board meeting we approved this new financing plan, and last Friday the Department of Education gave its approval.
Now that we have the OK from MDE, we are ready to finalize the purchase. Over the last year we have spent time discussing the issue at a number of public meetings and getting input from citizens. We have spent time ensuring that this is a good deal for the district. Finally, we spent more time than we liked getting the financing right. All through this process we have rightfully had to answer tough questions from citizens and the press about the purchase, but we believe that the purchase will be in the best interest of our district and a win for our community.
Rob Rapheal is president of the Forest Lake Area School Board.