As Chemung County’s new executive administration and legislature prepare to take office on January 1, many unresolved issues are being researched and discussed. One matter near the top of the list is how to pay for debts associated with Elmira’s First Arena. From my time at the doors last year it became clear that although few people want to see First Arena fail, figuring out a way to pay for it absent an outright sale to a private buyer is of great public concern because it involves the use of tax dollars.
The best place to start for a full overview of the history of First Arena from its construction through the spring of 2017 is found here in a thorough investigative article by Star Gazette reporter Amanda Renko. The article is also embedded at the end of this blog post.
It appears that Chemung County continues to contribute money directly to offset the First Arena’s debts in at least one way, and possibly several others.
The first way stems from a resolution passed by the Legislature in 2014 that authorizes $103,000 to be paid every year until 2039 to Chemung County Economic Development, Inc. (now called Twin Tiers Economic Development, Inc. or T.T.E.D.) Put another way, this resolution requires that $2,575,000 in tax dollars be spent over 25 years to help First Arena.
The money used to meet the obligation under this resolution is collected through a Hotel & Motel Occupancy Tax (or “room tax”). Room tax is a fee added to the cost of temporary lodging – such as hotels, motels and bed-and-breakfasts – located in Chemung County.
According to New York law, found here, money collected through room tax must be used to promote tourism. Specifically, Article 29, Section 1202-H states that all room tax money, less a small portion to compensate the county for tax collection activities, must relate in some way to tourism:
“[S]hall be appropriated annually by the county legislature upon adoption of the budget for the county of Chemung to enhance the general economy of the county of Chemung, its city, towns and villages, and the general economy of the tourist region in which the county of Chemung is located, through the promotion of regional tourism, tourist activities, conventions, trade shows, special events, tourist attractions and other directly related and supporting activities.”
Under the 2014 Resolution, $2,575,000 of county tax dollars that could otherwise be used to pay for tourism-related activities will instead be pumped into First Arena for the next two decades. Is this the best use of our money? Perhaps, if the only alternative is closing First Arena’s doors – something that has not been made clear to the public.
Moreover, this is not the only way local tax dollars are potentially being used to keep First Arena afloat.
An arrangement proposed to the Legislature last year by the outgoing executive administration would allow for three payments of $150,000 to be paid to First Arena in 2017, 2018 and 2019. Combined with the arrangement discussed above, this means $253,000 of tax dollars would be spent each year.
I described the background of this arrangement in a blog post published on New Year’s day last year, found here, entitled “Key fiscal issues to watch in 2018”:
What to do about a portion of the debt associated with Elmira’s First Arena is a matter that will be taken up by the Chemung County Legislature during the first few months of 2018.
In June, 2016 the Chemung County Industrial Development Agency (CCIDA) purchased the First Arena despite significant yearly deficits in an attempt to facilitate a sale to a private buyer. A description about the history of the Arena’s ownership is found here.
At roughly the same time, an entity called Twin Tiers Economic Development (T.T.E.D.) was created and assumed ownership of the Elmira Jackals hockey team. The team was increasingly unable to meet its financial obligations to private vendors, resulting in more than $700,000 of outstanding debt at the conclusion of its final season in 2017.
Chemung County officials have repeatedly pledged that no revenue generated through property tax or sales tax would be used toward operation of the Arena, limiting the options for dealing with this problem unless, as former Elmira Mayor James Hare suggested in this Your Turn piece last year, the County reconsiders its pledge.
One option on the table that will be taken up soon is a proposal by Chemung County Executive Tom Santulli and Deputy Chemung County Executive Mike Krusen to allocate $150,000 of monies collected through room tax (also referred to as “Hotel and Motel Occupancy Tax”) over the next three years to pay off a total of $450,000 of the Jackals’ debt and write off whatever amount remains. This money would be channeled through the Chemung County Chamber of Commerce, as room tax money must be used to promote tourism, something that is arguably enhanced by having a downtown Arena. Stories from WETM-TV, the Star Gazette and WENY-TV detailing the proposal are found here, here and here,
Muddying the waters, however, was the recent allocation of $150,000 from Chemung County’s operational budget to the Chamber of Commerce to make sure the Chamber remains fully funded in the event the Legislature agrees to use room tax money to pay off the the Jackals debts, with the associated recommendation that the Chamber be given $150,000 for an additional two years to cover the room tax money that will be used to pay off the Jackals’ debt. In (at least the recent) past, the Chamber has not received money from the County’s operational budget, but instead was funded only through room tax collections. The allocation to the Chamber of Commerce in the 2018 Chemung County Budget is found here on page 49.
At a Legislative Budget Workshop I attended in December, Krusen explained that the operational budget would be amended to remove the $150,000 payment to the Chamber of Commerce if the Legislature votes against allowing room tax money to be used to pay off the Jackals private debts.
This is a difficult issue that only addresses a small part of the problem. Finding a buyer for the Arena is clearly a good thing, but using taxpayer money to bring about a sale is likely to bring about many questions and a great deal of public discussion in the near future, as can be seen here following WETM #Questionoftheday poll on the matter.
The difficulty in understanding what happened with respect to this proposal illustrates precisely why we need far greater openness in local government.
Even though I followed the actions of the Legislature closely over the past eighteen months, I remain unclear as to what decision was made. Today I called three elected Chemung County officials, and received three different answers. The local media featured this issue prominently when it was first proposed as evidenced here, here and here, but I did not find any stories detailing what ultimately happened. Moreover, the Minutes from the Legislature’s meeting on March 12, 2018 show payments from of room tax for $103,000 and $150,000, but do not make clear exactly what the $150,000 was used to fund:
Writing this post has made two things abundantly clear: (1) our community needs to take a wholesale look at what we are going to do with respect to the arena and its debts, and objectively evaluate how much public money should be use do keep it afloat; and (2) we must make local government more accessible and easier to navigate for everyone.
FIRST ARENA: Alive, but at a cost
“This place does not make money.”
Chemung County Executive Tom Santulli’s words echoed through the second floor of First Arena on a March afternoon, where he announced the facility’s proposed transfer of ownership from the county’s Industrial Development Agency to local car dealership co-owner Brian Barrett.
“This place,” Santulli continued, “has roughly an $800,000 operational deficit every year. I do believe Brian’s going to put a program in place that will help bring that number down. Brian, when he becomes the owner of this facility, is willing to take that loss.”
When the arena — then the Coach USA Center — opened in 2000, boosters said it would bring new life to a lagging downtown. But even though sellout crowds showed up to watch the Elmira Jackals play, the facility was financially troubled from the outset — from a Michigan-based operator’s failure to pay the bills, to year-after-year operating deficits, to the IDA’s eventual purchase of the facility in June 2016 to flip it to a private buyer.
Barrett — who was announced as First Arena’s new owner March 10, pending the completion of a final contract — knows what he’s getting into, county officials have repeatedly said. He wouldn’t require the county to subsidize the facility’s operating losses, as other prospective buyers had asked. And he wouldn’t require any more public funds after the Elmira Jackals vacate the premises in April.
IDA officials have said the facility, since it’s already built, is worth saving — and they’re still calculating the costs of doing so.
Expenses associated with the 2016-17 Elmira Jackals hockey season, during which the IDA owned First Arena, are being added up, according to IDA Executive Director Mike Krusen. The season isn’t over yet — the Jackals’ final home game, in what has been announced as the team’s last season, is scheduled for April 8. However, Krusen estimated those costs at between $700,000 and $800,000.
Earlier this year, the IDA estimated it may not be able to close out the hockey season, although it was later determined the agency would have enough cash flow to operate the facility through April.
The IDA, a public benefit corporation, spent $3.5 million to purchase the arena. Of those funds, $1 million was donated by Casella Waste Management, which operates and manages the Chemung County Landfill, out of a pot of community development funds it provides through its lease agreement with the county. The IDA also had proceeds remaining from a building sale.
As part of the Casella donation, which the county legislature approved in June, a deed restriction was placed on the arena that requires it to remain open for public use for at least 10 years.
The IDA also refinanced an existing $500,000 bond and added $1 million, giving it money to pay team-related debts and service expenses, Krusen said.
Casella funds from another pot — a $1 million annual payment to the county that started in 2005 and continues through 2030 — have subsidized arena losses in the past and could cover the IDA’s current arena-related shortfall in the future, Krusen said. The agency is also looking at other ways to mitigate the operational costs.
The IDA would also negotiate a payment-in-lieu-of-taxes agreement with Barrett after the final deal has been executed, which Krusen said could take “weeks to a couple more months.” None of the arena’s owners have ever paid property taxes, although the facility pays sewer tax and other special district taxes. And the $3.5 million purchase price would go back into arena renovations, including roof, ice plant, mechanical and aesthetic updates.
A $500,000 loan from the Southern Tier Regional Economic Development Council issued in 2014 for the arena’s restaurant, Splitrock Brewing Company, also needs to be settled, but Krusen says the loan is the obligation of the arena’s previous owners.
The IDA will require Barrett to secure a new hockey franchise to replace the Jackals as part of a final deal. The existing team will be voluntarily withdrawn at the end of the season, a decision officials say was Barrett’s. According to Krusen, Barrett is in discussions with the ECHL — the league in which the Jackals currently play — regarding a new franchise.
Chemung County has not used tax revenues toward subsidizing the arena’s losses, officials said, although Santulli acknowledges the Casella money that’s been used for that purpose in the past — about $1 million — could have been used elsewhere, including the general fund.
“Yes, it could have been put into our reserve, we could have done something for the county with it,” he said. “But we’ve never touched our property tax, our sales tax, our reserve revenues.”
Some county room tax revenues, required by law to go toward tourism purposes, have also been allocated to the arena over the years. First Arena has received $103,000 in room tax revenues per year for the last two years, according to figures provided to the legislature in January.
When the arena was built, local and state sources contributed a significant chunk of the facility’s $16 million construction tab, rounded out by a $3 million state grant, the sale of naming rights and millions in private investment. Officials at the time praised the funding split, enabling Elmira and Chemung County to participate without a drop of general fund money.
The county contributed a $1.25 million loan to be paid back with room tax, and Elmira paid $4 million from a U.S. Department of Housing and Urban Development loan, to be paid back over 20 years with community development funds.
By the time Elmira’s HUD loan — generated through the Section 108 program, which essentially loans a community’s future Community Development Block Grant funding to itself for large-scale projects — is paid off in 2019, the city will have used $7.2 million in CDBG funds over 20 years, with interest.
As of March, the city had paid almost $6.1 million toward the loan since 1999, said Jennifer Miller, the city’s community development director.
CDBG funds can be used for a variety of projects that improve housing, living environments and economic opportunities for the communities that receive them. They’re primarily meant to benefit low- and moderate-income persons.
The use of CDBG funding to pay down the HUD loan “prohibits us from putting all of that money into our neighborhoods,” said City Manager Mike Collins.
Earlier this year, when negotiations with Barrett included a $1.5 million investment into the arena’s aging ice plant proposed to be split between the city and Chemung County, Elmira City Council refused to contribute the city’s half and also rebuffed an IDA request to contribute $700,000 toward outstanding payables at the end of the hockey season.
At the time, Collins said the city would need to raise property taxes by 3 percent per year over five years to absorb the costs of those payments — and with the city already increasing taxes to make up for financial shortfalls, including a 4.2 percent increase in 2017, Elmira just couldn’t afford it, he said.
At the March 10 press conference, it was announced that Barrett would cover ice plant improvements himself.
Collins said he was thrilled a final deal seems to be on the horizon — “especially,” he noted, “with us not having to pay money that we don’t have.”
Could Elmira ever support a civic center?
When the City of Elmira – still battered by the flood of 1972, and further bruised by the migration of retail to suburban shopping centers – updated its comprehensive master plan in 1998, a civic center was an integral part.
The document promotes a downtown sports and city center complex as a catalyst for development, the key to long-sought rejuvenation.
“Over the past years, this area of downtown has, like many others in the U.S., lost businesses to suburban development. As a result, the city has made redevelopment of this area a top priority,” says a section of the 19-year-old plan, which was updated again in 2016. “Therefore, it is recommended that the city focus on the development of a downtown sports/city center complex as a primary catalytic event that will revitalize development. As a primary people-generating activity, a recreational/meeting center in the heart of the central business district can serve to spur additional development.”
The civic center idea was core to not only kick-starting a new downtown, but creating a place for families to make memories, said Stephen Hughes, who served as mayor of Elmira from 1998 to 2005.
“There were conversations between city and county leadership at the time about how we could create a gathering place for our community, so that children and grandchildren and families didn’t have to travel 45, 60 miles away to enjoy something that, frankly, we deserved to have here in our community,” Hughes said.
Studies conducted prior to construction by Legg Mason, a Philadelphia-based firm, and by Lauridon Sports Management, the company initially attached to the arena, found the Elmira area had a population to support a sports and city center complex. According to Star-Gazette coverage at the time, the Lauridon study anticipated 260,000 visitors a year and net income of $1.1 million in the inaugural hockey season.
But some — including Santulli, who was deputy executive when the civic center project started and became executive in 2000 — say they were skeptical of those figures from the start.
“The company that did the study said that there was going to be — every game would be standing room only, that there would be 50 or 60 major events a year,” he said. “If we’re the smallest pro hockey venue in the country, the standing room only didn’t make sense to me. It’s a small community. You only can support so much.”
At the time, city leaders thought an arena would generate upper-floor downtown living, improvement and reuse of vacant buildings, and new forms of retail — concepts that would emerge again nearly 20 years later as Elmira prepared its ultimately successful application for $10 million in state Downtown Revitalization Initiative funding.
Officials wanted to create “a critical mass of activity in the downtown corridor, ultimately resulting in the emergence of a new form of retail in the downtown community. We operated with the belief that retail follows people,” Hughes said. “I think that vision is still very much alive, and the goal is still there today.”
The first operator
While early estimates projected large profits, it’s hard to say whether the arena ever made money. Early Jackals seasons and big-name events drew sellout crowds, but officials say Mostafa Afr, the arena’s first operator, wasn’t forthcoming with financial information.
“The problem with the original owner was he took all the revenue and left all the expenses,” Krusen said. “It’s been a challenge from the very beginning, financially. It had some very, very good years in terms of attendance, and even then, it has always been a challenge to break even.”
It wasn’t until after Chemung County initiated foreclosure proceedings on the facility in 2012 — after Afr had racked up over $130,000 in unpaid sewer usage and special district taxes — that county leaders learned Afr apparently never made one payment on his mortgage.
“I’d say they went 13 years and never made a payment on the principal or the interest, unbeknownst to us,” Santulli said. “Everyone always contended that when the Afrs were here, they were making money off the arena. Well, a lot of people would live a different lifestyle if they didn’t make their mortgage payment.”
Chemung County never foreclosed on the arena. Instead, Tom Freeman, president of Coach USA Transit Services, and attorney Nathan Cook entered into a settlement with Key Bank, which held Afr’s mortgage, and took on operation of the facility.
During that period, the arena continued to operate with yearly deficits of up to $800,000, officials have said. Meanwhile, attendance at Jackals games has dwindled.
In the 2007-08 season — the first year the Jackals played in the ECHL — Elmira’s games drew an average of 3,583 attendees and filled 95 percent of the main rink. But since the 2012-13 season, average attendance has been below 3,000.
With three weeks to go in the 2016-17 season, Elmira’s home games have drawn an average of 2,246 people — the lowest figure in the ECHL.
Why save a facility that doesn’t make money?
The arena is worth saving, officials said, because it’s already built.
An empty arena would be a detriment to continued revitalization efforts in the downtown business district, and the risk of closure could have deterred developers looking to take part in increased economic activity, Krusen said.
First Arena is an integral part of the city’s Downtown Revitalization Initiative proposal, which uses the arena, the Clemens Center and a yet-to-be-built mixed-use building on Water Street — the empty lot where Harold’s, Marvin’s, Rosenbaum’s and Damomics used to be — as anchors for what’s hoped to be a reinvigorated and lively downtown district.
“The arena by itself is just one piece of a large puzzle. You need downtown living. You need quality commercial retail space. You need a whole involvement of a lot of different activities, a lot of capacity in the downtown to make downtown successful,” Krusen said. “All of these pieces are so important to that puzzle, and that’s why we fought so hard for the arena. If any of the big pieces of the puzzle are missing, it doesn’t make any sense. I think you’ll see a better-utilized arena, higher attendance at events moving forward, if we start to put that puzzle together.”
There’s also the possibility that First Arena could thrive under private ownership and become the community gathering place Hughes and other officials had in mind when plans for a civic center first got underway.
Glens Falls, a city of about 14,500 people an hour north of Albany, has seen new life at its civic center since a business group entered into a lease-purchase agreement with the city. Under public ownership, the arena consistently ran at deficits of between $300,000 and $900,000 annually. Assistance from the county wasn’t available, and a sealed bidding process didn’t generate any realistic bids.
The Adirondack Civic Center Coalition, made up of 16 business and community leaders, fundraised and paid the city $650,000 up front and has paid $50,000 a year in rent since taking over the civic center in 2015, with the ability to own the building for $1 after five years, said Dan Burke, the coalition’s president.
The group terminated existing concessions and management contracts and operated the facility themselves, cutting costs and exploring new ways to generate revenue. Events were booked around hockey games, and the remaining ice time was rented out to youth and adult hockey leagues.
“They have been booking events in there at a much higher pace than had been in the past — concerts, circuses, wrestling, we have high school basketball, we had Siena (College) basketball in here,” Burke said. “At the end of the day, our mission is to have a viable sports and entertainment and community building.”
In 2016, the civic center obtained a $2 million state grant for capital improvements, including a new scoreboard, locker room updates, new covering for the ice surface, and replacement of the center’s original seats. The center also received almost $700,000 for an outdoor marquee and lighting and sound system improvements and receives some of Warren County’s room tax money for operations and marketing.
Sectional high school basketball recently drew as many as 15,000 people to downtown Glens Falls, and hockey games continue to attract spectators. In February, the coalition announced an effort to raise $1 million by June 30 to purchase the ECHL team that plays there.
“It’s a vital part of downtown. It’s exactly what we’ve wanted it to be. The community is very invested in it,” Burke said. “It makes people feel good, and it should. We’re making it better. It’s part of the fabric of the community. We sat there and said we can’t let this building go away.”
What’s the secret to making a challenging arena work?
“There’s no substitute for dedication,” Burke said. “If you act like an owner and think like an owner, you will probably be very successful. We’ve taken this under our wings, and it is personal. We’re going to make this work. We’re out trying to sell tickets. The commitment and the dedication, no doubt, that’s been the key.”
A regional asset?
First Arena has been more of an economic driver at some times than others, said Kamala Keeley, president of the Chemung County Chamber of Commerce. But with a change in ownership, she’s excited for the potential a reinvigorated site could hold.
Historically, the arena has brought people in from surrounding counties in both New York and Pennsylvania, making it a valuable regional asset to retain, Keeley said.
“If we only look at it as an Elmira asset, we’re being short-sighted,” she said. “I think everyone understands that we have this wonderful facility and we need to keep it in the community. What are the alternatives?”
Hughes, too, thinks the arena would thrive with increased community interest.
When the Jackals first arrived, they were “a rallying point everyone could get behind,” the lifelong Elmira resident said. “It was really refreshing to see the entire community have something to rally around. I really hope that we are able to get this facility back to a place where the community has something to rally around.”
An agreement with Elmira College to bring their hockey programs downtown — discussed several times over the arena’s two-decade lifespan, to the point where the seats inside the main rink are the college’s signature purple hue, but never fully realized — would also go a long way toward future success, Hughes said.
“I think, by every fair and objective measure, that the downtown is in a much stronger, potentially more vibrant place as a result of having that facility there. Do I think that it was the catalytic event that resulted in the kind of growth of downtown that was envisioned? I do. Has that been materialized since we opened the facility in 2000? It has not,” Hughes said. “But there are other forces that the community is fighting every day that really challenge communities like Elmira to achieve that goal.”
To Hughes, those factors include the community’s overall financial health, declining revenue sources for local governments, an aging housing stock, an older population and eroding infrastructure — all issues Krusen says the DRI and other initiatives are aiming to address.
Ultimately, Krusen believes the IDA took a responsible approach, calling the decision to purchase the arena difficult but necessary to save it from closure.
“The IDA stepped up and did what it felt it had to do to preserve that asset. They wrestled with it as a board, and I wrestled with my conversations and recommendations to them as well,” he said. “I hope we’ll look back at it and think it was a great decision, and not a bad decision, but that won’t happen until the story’s fully ready. But it’s at least still on track. At least we have a fighting chance.”
-Amanda Renko, Elmira Star Gazette