City of Madison reaches agreement to keep ice arenas open under non-profit ownership
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The Madison Common Council approved an agreement at its January 14 meeting that will keep two popular ice arenas in Madison open and address the outstanding debt owed to the City. The ice arenas serve a number of ice sport organizations and have around 400,000 combined visitors per year.
Under the agreement, ownership and operation of the Hartmeyer Ice Arena on the north side of Madison will be transferred from Madison Ice, Inc. to a new non-profit, the East Madison Ice Collective (EMIC), which will lead a new fundraising effort to raise $3 million in private funds to replace the arena’s roof, as well as new chiller, HVAC and compressor equipment and upgraded electric transformers.
Madison Ice, Inc. has owned both the Hartmeyer Ice Arena and the Madison Ice Arena on the city’s west side since 2004, when the City sold both properties to the non-profit through a land contract. Prior to the sale, the City owned and operated both facilities for many years. The subsidy for the arenas was approaching $250,000 annually. In addition to paying operating expenses for the past two decades, Madison Ice, Inc. has spent around $5 million in facility maintenance and other capital improvements while making payments to the City.
Starting in 2020, a global pandemic, increasing operating costs, and the need for major facility improvements jeopardized the ability of Madison Ice, Inc. to successfully operate the ice arenas. This prompted Madison Ice, Inc., the arena’s users, and the City’s Economic Development Division to seek a new solution that would keep the ice arenas as community-run assets while also limiting the impact on Madison taxpayers. The agreement approved by the Council is a framework for reaching those goals which includes strict conditions to ensure compliance.
Why this was necessary
Since the initial sale, the City of Madison refinanced Madison Ice, Inc.’s debt in 2011, 2017 and 2021. The City also provided a Capital Improvement Loan of $1,075,240 to the non-profit in 2017. Madison Ice, Inc. reports annual operating expenses for the ice arenas to be about $1.4 million, with revenues showing losses over the last two fiscal years (-$56,364 in 2022 and -$43,744 in 2023). At the end of Fiscal Year 2023 (April 30, 2024), Madison Ice, Inc. reported having just $178,042 in cash on hand.
Madison Ice, Inc. has paid the City of Madison a total of $446,516 toward the land contract to date but has since fallen into default. The 2021 debt restructuring included provisions that allowed for $0 in payments in 2021 due to the effects of the COVID-19 pandemic and a new payment plan picking up after that, with annual principal and interest payments of about $120,000 per year starting in 2022 and lasting until January 2028, when a final payment of $1,031,418 would have been due.
The outstanding debt owed to the City of Madison between the land contract and the Capital Improvement Loan now totals $1,613,365.
Under the terms of the contract, once Madison Ice, Inc. was in default, the City had three possible remedies:
- Identify a long-term solution with stakeholders and amend the contract with Madison Ice Inc. to keep the ice arenas open and operated by community-focused nonprofits.
- Take back the properties and run the ice arenas as City Facilities. The City would be responsible for operating expenses and capital costs, including the immediate need for $3 million in facility improvements to Hartmeyer and expected repairs to the Madison Ice Arena in the near future.
- Take the properties back and shut down the ice arenas. This would start a new process where City staff, elected leaders, and residents would determine the future use of the properties.
City staff was asked to work with Madison Ice, Inc. to identify a privately-led solution to keep the arenas open without spending any additional City funds. The East Madison Ice Collective (EMIC) was identified as an option to take over ownership and operation of the Hartmeyer Ice Arena, while Madison Ice, Inc. would retain ownership and operation of the Madison Ice Arena.
Ownership and operations transfer process
The transfer of Hartmeyer Ice Arena to EMIC will only occur once EMIC raises $3 million from private sources to fund the necessary capital improvements. The City is giving EMIC three years to raise that money or the equivalent of $3 million through in-kind services. During the fundraising period, the City will not expect any payments toward the existing debt. If $3 million is not raised within three years, the City will have the option to take back the properties and re-evaluate its options.
If and only if that money is raised, the City will then terminate its existing land contract with Madison Ice, Inc. for Hartmeyer Ice Arena, and the property will be transferred from Madison Ice, Inc. to EMIC for the price of $1. The existing debt associated with Hartmeyer Ice Arena (a total of $1,284,612) will be restructured as a forgivable loan between the City and EMIC. To ensure terms are met by EMIC, the debt will be slowly forgiven over a 15-year period.
Madison Ice Inc. will maintain operations of the Madison Ice Arena and the existing debt associated with that facility ($328,753) will also be restructured as a 15-year forgivable loan.
New safeguards
The City of Madison has a long history of directly supporting both Hartmeyer and the Madison Ice Arena, stretching back to the 1960s. The agreement approved by the Common Council contains new conditions that require the ice arenas to remain facilities that serve the public interest.
A Deed Restriction will be placed on both properties mandating they continue to be used as “sports and recreation” facilities and run by non-profit entities. This is being done to ensure both properties continue to be used as ice arenas and prevent them from being sold and used for something other than what is intended through this agreement. Previously, these long-term deed restrictions on the properties did not exist.
Both Madison Ice, Inc. and EMIC will also be required to maintain a cash reserve equivalent to 25 percent of their typical annual expenses to cover unanticipated capital and operating needs. The City will retain the ability to negotiate a release from the deed restrictions at a future date if either or both of the non-profits cease operations or wish to sell the properties. The City can demand financial compensation for any release from the deed restrictions.
The Economic Development Division will now work over the next six months to finalize the provisions of the agreement.
