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Paynesville Press - April 17, 2002

Ice arena financing troubles township

By Michael Jacobson

Paynesville Township might have trouble retiring the debt on the Koronis Civic Arena unless it looks at other financing options.

Board chairman Don Pietsch brought the problem to the attention of the other township supervisors at their meeting on Monday, April 8, and received approval from the board to discuss the situation and possible solutions with the city.

In order to install ice-making equipment, the township received a $250,000 Mighty Ducks grant in 1997, but had to borrow money in order to match that grant with local funds.

Currently, the township owes around $88,571 at 4.9 percent interest on a five-year loan from Xcel Energy and $225,875 at 6.5 percent interest to a local bank, Pietsch told the Press last week.

The current arrangement has the city, township, and the Paynesville-New London-Spicer (PNLS) Hockey Association splitting the debt retirement and operating costs for the arena. Each partner contributes $7,000 annually toward the debt retirement, and another $5,000 annually for the operation.

But these contributions are not sufficient to pay off the debt on the arena. What brought the matter to his attention, Pietsch told the Press, was seeing the loan to Xcel Energy (which has 22 monthly payments left) being reduced by $4,200 while the other loan increased by $4,200.

At that rate, the expensive loan from the bank would keep increasing, and the $21,000 in annual contributions from the three partners might not cover the interest.

Interest rates could also rise above the 6.5 percent.

Furthermore, Pietsch told the board of supervisors, the township is committed to having ice in the arena for 40 years, as a condition of the Mighty Ducks grant, while it only has commitments from the city and the hockey association for another 16 years.

Right now, nothing is being put away for long-term maintenance on the arena, he added. "If we think this building is going to stand for 40 years without maintenance, we're lying," he said.

"If the arena breaks down, the township is responsible for fixing it," he added.

The township would have sole ownership of the arena when it is paid for, Pietsch said, but right now that looks to be a long time in coming. In 16 years, the township might still owe $200,000 and not have any partners.

Supervisor John Atwood tried to avoid any responsibility for the predicament, saying, "Some people say I'm conservative. Well, there's a reason why I'm conservative."

Pietsch pointed out that Atwood was on the township board when it approved the Mighty Ducks grant and the now troublesome loans, which Atwood initially denied before conceding.

"Don't you wish we still had a dirt floor?" asked Atwood, in reference to the gravel floor in the arena before the addition of ice-making equipment. Later, he said of the hockey association, "Let's send them over to Richmond."

In addition to the ice arena, Pietsch noted that the township has also committed financially to the Koronis Trail (one-third of the matching share of a $100,000 federal grant that the trail committee has applied for), it recently paid $4,600 for summer recreation, and it has shown interest in a community swimming pool.

Atwood also questioned the township's support of the trail, saying they had indicated support without specifying financial support.

Pietsch asked trail committee member Ed McIntee to confirm that the township had committed to paying its share of the matching grant cost, which McIntee confirmed.

In the audience, Julie Atwood said that action was not in the township's minutes and, therefore, was not official.

"We were recessed. We met there as a board," countered Pietsch, who noted that all three supervisors could not have met with the trail committee if it hadn't been an official meeting.

Supervisor Pat Meagher suggested trying to use EDAP money to pay off the loans on the ice arena and then repay the EDAP money from the annual contributions from the city, township, and hockey association. By cutting out the interest, it would help pay off the principal faster.

Pietsch thought this was a good idea, but was leery since he had tried to use EDAP money to pay for the township's portion of the new airport. It originally had been approved, he said, but later was denied after someone "rattled the cage."

Julie Atwood maintained that using EDAP money for the arena would be illegal, and that she had a letter to prove it.

In the end, Meagher and John Atwood agreed that Pietsch should talk with the city about what they could do together. Meagher noted that you can generally get more done working together than alone.

Atwood, though, didn't want Pietsch to discuss another joint powers agreement with the city for recreation, saying "joint powers" was too strong.

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