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Published May 26 2012

Forum editorial: Rink power play gone badly awry

The Scheels Arena, after skittering along the financial ice like an errant puck since it opened in 2008, now appears headed for some sort of painful reckoning. It’s a long and complicated story, but it can be summed up as another unfortunate case where wishful thinking prevailed over wisdom. It’s also a moment when Fargo voters can justifiably say, “We told you so.”

The arena, run by the nonprofit Metro Sports Foundation, is the realization of a long-held dream by hockey boosters to have a first-class arena in Fargo. Scheels Arena is home to the Fargo Force junior hockey team and hosts events, including hockey tournaments. With all of the kids involved in youth hockey, and Fargo-Moorhead’s position as a northland hub, it seemed a no-brainer to a dedicated bunch who convinced themselves this is a hockey hotbed.

Not so fast, Fargo voters said on two occasions when asked to approve sales taxes to support arenas with hockey prominently in mind as providing marquee events. Most recently, in 2005, by a margin of more than 2 to 1, voters rejected a half-cent sales tax to pay for a downtown events center. Five years earlier, voters overwhelmingly said no to a multipurpose center, again with hockey as a major intended use. So much for hockey enthusiasm when it comes to paying the bills.

Now for the bottom line. The Scheels Arena, according to the foundation, makes enough to cover day-to-day operations – but not nearly enough to pay off the remaining $23 million in debt for the $25 million building. The vast majority of the debt – $18.5 million – is held by a consortium of more than a dozen banks. According to the foundation’s president, Scheels Arena can keep muddling along for two more years before crossing the blue line with its creditors.

If there is any good news in this debacle, it is this: Although financing for the project is anything but transparent, Fargo taxpayers do not appear to be on the hook. Public-spirited bankers, who undoubtedly lent money for the project to enhance community amenities, are the lenders who must come to terms with a debt that appears skittering toward insolvency. Although the Fargo Park District now owns the building, officials are vehement in saying the district clearly has no financial responsibility for the debt.

All of this means that the bankers and the park district will have to sit down to agree to some refinancing arrangement that will keep the arena going, although the lenders might well end up taking a bruising body check on their loan repayments. Fargo has its hockey palace, and another cautionary example.

Forum editorials represent the opinion of Forum management and the newspaper’s Editorial Board