Trouble in RiverCentre

St. Paul built a new hockey arena for the Wild and a new convention center for the city. Guess which one is losing money?

Mische's passionate address to the council spoke of his desire to be involved in everything from snow removal to directing traffic toward neighborhood business areas. He acknowledged that the RiverCentre Authority wanted to take over management of the entire downtown skyway system. He said that he should be involved in high-speed rail at Union Depot because it could help generate more convention business and that he should be in on plans for a baseball stadium because if one was built next to RiverCentre it would have a major impact on operations.

"Where do you draw the line?" asked Seventh Ward council member Kathy Lantry.

"I don't think there is a line," replied Mische.

Earlier in the meeting, the council asked the Authority about RiverCentre's finances and its monitoring of the joint operating agreement. Treasurer Rick Beeson happily reported that in addition to the state audit of the agency's budget that is conducted each year, the Authority had also reached an agreement to enlist the services of SPAC's auditor. When the council pointed out that it might be a good idea to hire an auditor independent of SPAC, Beeson conceded: "That could be done."

Beeson went on to say that according to the contractual terms of the joint operating agreement, SPAC was providing RiverCentre with interim financial statements on a monthly basis. But the council wanted to know why they hadn't seen the statements they had requested for January and February of 2001. Mische said that Martha Fuller, then-chief financial officer for the Wild, would explain why they weren't available. Fuller said that there had been problems with a new computer system.

Council member Blakey raised concerns about the status of the joint operating agreement's cost-allocation plan. "It's important, because we have a public entity and a private entity and we need to have that check and balance. And it isn't there, and that concerns me," he said. Blakey went on to note that the agency's retained earnings (its balance after lease and debt payments) had been in the red the previous year. Then he asked if RiverCentre was now profitable. Authority board chair Dick Zehring replied that they would have had enough excess revenues, somewhere in the range of $400,000 to $600,000, to start replenishing their budget reserve. Zehring added that he hoped to build up a six-month operating reserve because the board was asking the state Legislature to help fund a new, $110 million Roy Wilkins Auditorium. If that request is green-lighted, RiverCentre will need to compensate for lost revenues during construction.

"Are retained earnings in the black?" Blakey repeated.

"Yes," answered Zehring.

 

But what Zehring and the other RiverCentre representatives either didn't know or weren't telling that day was that the agency was in the midst of a huge increase in its debt load. In fact, even as Zehring was dreaming aloud about operating reserves and a fancy new auditorium, RiverCentre was operating with a 2001 budget that benefited from the Coleman administration's deferment of a $660,000 debt payment--a payment the agency owed to the city's Housing and Redevelopment Authority to pay off refinanced bonds on the Civic Center. When the 2001 budget was up for consideration, no one thought to bring this deferment to the attention of the council, which didn't spot the line-item change among the reams of figures when it signed off on the budget. In essence, the HRA paid off $660,000 of the RiverCentre's debt last year. Even so, RiverCentre had enough other debts and disappointments to finish with a projected net loss of $697,000 in 2001. (Final figures are unavailable.)

As recently as September of 2001, the minutes of the RiverCentre board meetings gave no indication that the agency was experiencing financial difficulties. But on November 14, eight days after Kelly was elected to succeed Coleman as mayor, Susan Kimberley went before the city council with the bad news: RiverCentre would need to double its revenues in 2002 to make good on all of its current debt. The fallout from September 11 and an intensely competitive convention market augured for 2002 being a very difficult year. Thus Coleman's final RiverCentre budget included a creative restructuring of RiverCentre debts and omitted funding for repair and maintenance.

While discussing the failure to adequately notify council of the $660,000 debt deferral the previous year, a sore point with Lantry and some other council members, Kimberley was conciliatory: "There was no intention by the administration to play 'hide the ball.' I honestly don't know why this didn't get attention last year. I don't accept that it reflects any kind of sinister plan on anyone's part. It just didn't come up."

The reason Kimberley had to broach the subject in the first place was that Coleman was proposing another $660,000 deferral to help RiverCentre out of a financial squeeze in 2002. In addition, the outgoing mayor wanted the council to write off $1.5 million in debt that RiverCentre owed the city for the dasher boards and seating it purchased in 1994 for the Minnesota Moose minor-league hockey franchise at the Civic Center. (With the Moose having relocated to Winnipeg just two years later, the city sold the boards and seating for a measly $75,000 when the Civic Center was being demolished, and threw that revenue into the pot to help pay for the Xcel arena. But the debt still remains.) The final pieces of Coleman's bailout proposal were that the city give RiverCentre the approximately one million dollars in annual revenues it receives from hotel/motel taxes, and that the RiverCentre Authority merge with the more financially stable Convention and Visitors Bureau.

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