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Hockey arena contingent on deadlines

The Metro Sports Foundation's deadlines to get bonding and nonprofit status for the Urban Plains Center hockey arena in south Fargo may be getting a little tighter.

Al Hintz

The Metro Sports Foundation's deadlines to get bonding and nonprofit status for the Urban Plains Center hockey arena in south Fargo may be getting a little tighter.

The group must still obtain about $4 million in backing from local banks to flesh out $15 million in financing for the arena, MSF Vice President Al Hintz said last week. Also, the MSF may have to wait as late as Dec. 20 to learn if the Internal Revenue Service has granted the foundation 501(c)3 nonprofit tax status, he said.

The decision on the status, previously expected by Monday, is one key to the arena's funding formula.

While the group is confident it will get 501(c)3 status, Hintz said, the deadline will not leave much time for any needed financing changes before the end of the year should the IRS decide against granting nonprofit status.

The MSF also awaits a vote Monday by the city of Frontier on conduit financing.

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That will have arena bonds issued in the city's name to make them "bank qualified," giving the bonds a more favorable tax status and making them attractive to investors. Cities can only issue $10 million in such bonds a year, so the first set of bonds must be issued by Dec. 31, Hintz said.

As of late November and early December, MSF officials said they were confident they had about $13 million in financing and expected their 501(c)3 decision by Dec. 10.

Hintz said he and other MSF members are meeting local bankers now. He said some bankers held off backing the project until the Fargo Park Board agreed to accept the $25 million south Fargo hockey and multisport arena as a gift.

MSF officials said the Park Board agreement was needed to keep the arena off the property tax rolls because the taxes would bust its budget.

MSF officials have promised they will also pursue financing for a $12 million four ice-sheet tournament facility, which they said they'd like to see completed by fall 2009.

Hintz said local credit markets have tightened up, mirroring the national problems brought on by last summer's subprime mortgage woes.

The MSF has tried to gain tax exempt status from the IRS since late spring, e-mails obtained from Park Board member Ron Sorvaag show.

Hintz said the IRS had a large number of applications, and that the MSF had to reapply for an expedited decision. The MSF's caseworker was replaced, too, Hintz said. He said the MSF recently answered the IRS's final questions.

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E-mails obtained from Sorvaag, a former MSF board member, confirmed that from spring to midsummer the group tried to finance the project with Cohen and Company, an East Coast firm.

MSF courted Cohen with the help of Bremer Bank and the Boston office of Zions Bank, which is based in Salt Lake City, Hintz said.

An April 25 e-mail from Gary Smith of Zions Bank to Brian Osowski of Bremer Bank said, "We have a very high probability of getting this done (well above 90 percent), assuming this all works out getting the 501(c)3 set up."

The April 25 MSF board minutes said the group would pursue financing with the Cohen group and the "letter of credit" option that would have banks promising financial backing for a bond sale.

Another April 25 e-mail to local bankers invited them to a May 1 meeting at the Radisson Hotel in Fargo to discuss those two options, and a third - having the banks buy the bonds themselves, much as is being put together now.

An MSF document obtained from Sorvaag estimated about $21 million in local bank support for two potential bond issues at that time. That was confirmed by Hintz. That was still short of the $34 million estimated cost for the full five ice-sheet hockey complex.

According to the May 23 MSF board minutes, Hintz said the Cohen group was "very positive about this project." Cohen required a feasibility study. The minutes said the study would be requested from Eide Bailey as a rush project for about $20,000, but the May 30 minutes reflect Eide was dropped due to a conflict of interest.

The June 6 MSF board minutes reported that Cohen was to provide a term sheet within a few days and that Convention Sports & Leisure was hired for the feasibility study.

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Talks with Cohen continued over the summer, with references in the board minutes for June 21 and July 25. But by Aug. 29, MSF board minutes indicate the group had decided to ask local banks to back the project.

"Al (Hintz) is trying to get Cohen to release there (sic) credit study to other banks to speed up the process," the minutes reported.

Hintz said Cohen hasn't put into writing their reasons for not acting on the deal.

The MSF later decided to break the project into two phases, opting to build the main arena first to meet commitments to field a United States Hockey League team in fall 2008. That announcement was made Oct. 10.

If there is a bonus to the financing troubles MSF has had, Hintz said it is that interest rates for bonds are now lower, in the 5 to 5½ percent range, rather than 6½ to 7 percent, which will spare significant financing costs.

Readers can reach Forum reporter Helmut Schmidt at (701) 241-5583 Hockey arena contingent on deadlines Helmut Schmidt 20071209

Helmut Schmidt is a reporter for The Forum of Fargo-Moorhead's business news team. Readers can reach him by email at hschmidt@forumcomm.com, or by calling (701) 241-5583.
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