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Paynesville Press - August 21, 2002

Township pays part of its debt on the ice arena

By Michael Jacobson

Last week, the Paynesville Township Board of Supervisors approved paying off part of the township's debt on the Koronis Civic Arena.

The board, on Monday, Aug. 12, unanimously approved paying off a $248,000 bank loan, incurred when the township-owned facility added artificial ice in 1997.

The loan was used to match a $250,000 Mighty Ducks grant, which helped to pay for improvements at the facility.

The township discovered early this year that the debt payment structure - where the city, township, and hockey association each paid $7,000 yearly for debt retirement - was barely paying for the interest on the ice arena debt. The township has another, approximately $80,000 low-interest loan (which it received because the ice arena is extremely energy efficient), and the monthly payments for that loan, which is at 4.9 percent, were basically being added to the higher-interest bank loan (6.5 percent).

In April, the township board directed board chairman Don Pietsch to discuss the predicament with the city and look at a mutual solution. A tentative agreement was reached, whereby the township and city would each pay $160,000 up front to pay off the arena debt, with the city getting 50 percent ownership in the facility in the bargain.

That proposed deal, which had not been approved nor signed, fell apart recently when the city opted out of the joint powers airport agreement, citing the opposition to the airport by a majority of the current township board. Both the city council and the township board agreed to an early termination of the airport agreement, in which the township gets to keep $194,000 in funds designated for the airport, and the city gets to stop making debt payments on the arena, though the city will still contribute $5,000 annually toward the arena's operation.

Now without a partner, the township board approved last week to pay off the bank loan for the arena, which cost $248,053.17 to pay on Tuesday, Aug. 13. The board approved using the $194,000 left in its airport account and to cash in some CDs to pay the rest (at a minimal penalty, since the interest rates on CDs have been so low, Pietsch told the board last week.)

The township still owes around $80,000 to the low-interest loan, which has monthly payments of about $4,200 and will be fully paid in February 2004.

The greatest loss in the failure of the city and the township to agree to work together on the arena, Pietsch told the board two weeks ago, was losing the city as a 50-50 partner in future arena maintenance. According to the Mighty Ducks grant, the township needs to have ice in the arena for 40 years or repay the $250,000 grant. The ice making equipment has an average life of 25 years, meaning both cubes (at $50,000 apiece) will likely need to be replaced to honor that commitment.

The township board has also discussed the need for planning for the replacement of equipment at the ice arena, but any plan to save money to use eventually to repair or replace the ice-making equipment has yet to be decided.

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