Madison Ice Arenas and Other Updates for the Week of January 6

Hi Everyone and Happy New Year to you all.

After the holiday break, we get down to business tonight at Finance Committee where the main topic will be ice arenas. The following analysis is thanks in large part to staff and Council President Figueroa-Cole.

MADISON'S INDOOR ICE SKATING AMENITIES 

Here’s some background information:

In 2004, the City was providing approximately $250,000 annually in subsidies to cover operating and capital improvements. At that time, Council entered into a land contract agreement selling the two arenas to Madison Ice, Inc, or MII, a non-profit organization. As a result, over the past twenty years, the city has saved at least $5 million that would have otherwise been spent to operate and maintain the two ice rinks.

It should be added that the current operating costs are $1.4 million, so the amount of avoided expenditures is likely considerably higher. Moreover, MII has also spent $5 million in building maintenance and repairs over the past 20 years.

Regarding the 2004 land contract agreement selling the ice rinks to MII:

• MII has paid $446,518 toward the land contract.
• As noted, MII has spent $5 Million in building maintenance and repairs.
• Hartmeyer, the ice rink on the east side, needs an additional $3 million capital investment.

In 2011 & 2017, the city refinanced the debt owed by MII.

• The balance currently owed is $1,613,365.
• The Revenue and Expenses for Madison Ice, Inc. can be found in their IRS statements (2011 to date)

Who does the Madison Ice, Inc serve?

• About 400,000 to 450,000 people visit the ice arenas every year.  Following is a breakdown of participants:
  • Youth Hockey Players: 750
  • High School Hockey Players: 120
  • Figure Skating/Synchro Participants: 200
  • Learn-to-Skate Program Participants: 2,000 community members
  • Adaptive/Disabled Skating Participants: 100
  • Broomball League Participants: 100
  • Adult League Skaters: 250
  • Group Outings (schools, birthday parties, community groups): 4,000
  • Public Skate Attendees: 4,500 community members
  • Open Hockey Participants: 350
  • Tournament Participants: 3,500
  • Competition Participants: 850
• This includes local users and out-of-town users. People coming from out of town eat in our restaurants, purchase items in our stores, and may spend the night, all which has a multiplier effect supporting our local economy.

East Madison Ice Collective (EMIC)

• A new non-profit organization is willing to be part of the solution to provide continued access to year-around indoor ice on the east side
• EMIC is committed to raising $3 Million for the capital investment needed for Hartmeyer.

Ice Ownership

• Currently, both arenas belong to Madison Ice, Inc.
• The City of Madison is not selling land or buildings; the sale of land and buildings was completed in 2004.
• East Madison Ice Collective (EMIC) is asking for a title transfer from Madison Ice, Inc., not from the City of Madison. The $1 is a common practice used to record a transfer in the general ledger.

The options

1. Madison Ice, Inc. is in default on its loan. Payments were suspended in 2021 due to the pandemic. Lost revenue, accumulated debt during the pandemic, and inflation have prevented MII from resuming payments. MII and the City have been in negotiations since 2023. Our options are as follows
   1. We shut down the ice rinks and repurpose the land, perhaps for housing.
   2. We take back ownership of the ice rinks, pay the $3 million in repairs, and add the $1.4 million operating cost to our city budget for years to come.
      1. Pay salaries, benefits, and yearly increases.
      2. Catch up with the maintenance, some of it deferred and expensive, and stay current with capital cost repairs year after year.
   3. Take the business back from MII, find another operator, and negotiate a deal to cover capital and operating costs.
2. The option we are discussing tonight, worked out as a result of negotiations between the city and MII is described in Legistar 86169: East Madison Ice Collective (EMIC) is required to raise $3 Million in 3 years, and no payments are required during the fundraising period. Provided the $3 million is successfully raised, the following will take place:
   1. Transfer of the title of Hartmeyer to EMIC for $1 (Madison Ice, Inc. will not benefit financially from this transaction).
   2. Transfer the Hartmeyer portion of $1,284,612 debt to EMIC as a 15-year forgivable loan.
      1. In years 0-5, if EMIC stops operating the facilities, the full amount will be owed back to the city. If operations stop after 5 years, EMIC must repay portions of the loan.
      2. Year 6-15, the city's forgivable loan is reduced by 10% yearly.
   3. For the west side facility:
      1. The loan portion for Madison Ice, Inc. is $328,753, and it will follow the forgivable structure used for EMIC.

Additional Restrictions:

1. Both organizations must keep a 25% reserve of their annual expenses to cover unforeseen capital repairs and operations.
2. A Deed Restriction will also limit the land use to "sports and recreation".
3. If needed, the deed restriction can be negotiated in the future, and the city can claim compensation for its release.

My Thoughts

After passing a referendum to allow city services to continue at current levels, I am not in favor of bringing the ice arena business back into our operating budget. Nor will I support additional measures that involve investing additional funds that can be invested in other priority areas.

Staff’s multi-layer approach negotiated with MII and EMIC offers multiple safeguards and is in my mind thoughtful and responsible.

We will be discussing this further at Finance tonight. Please join us if you have time. If you have additional questions, please send them to me before tonight’s meeting and next week’s Council meeting on January 14th.

The following are graphical representations of the options presented:

CLOSE ICE ARENAS

KEEP ICE ARENAS OPERATIONAL

In summary, the proposed path forward neogtiated with MII and EMIC by city staff protects the City's interest by including a Deed Restriction stipulating specific parameters. This means of ensuring our interests is preferred over reclaiming ownership. We can help guide MII and EMIC in their respective endeavors to preserve these important amenities for Madison residents according to our values and interests without reinvolving the city in the financial, political and legal obligations that come with ownership.

For those of you interested in tonight's meeting, here's the info you need: