Talks are continuing and meetings are happening behind closed doors to privately lease/manage the Nike Base Hamburg Ice Arena. If the arena is left alone to continue to operate as it is, this facility will continue to lose between $300k and $500k every year. It’s inevitable that a single sheet of ice can’t make any money. This facility is way to small to do much with outside of ice hockey so it will always lose the town money.
Jeff Walker along with financial supporter and former Buffalo Sabre Dave Andreychuk have made a proposition to the Town of Hamburg that will increase the facility to two sheets of ice, a full indoor soccer/lacrosse field house and two lobbies/banquet facilities.
The particulars of the deal are still being worked out but the preliminary offer is such. Jeff and Dave are asking the town to bond 11 million dollars to build the facility. They need the town to bond out the money because they could never get such a low rate. If they did this themselves they would have to charge almost double the average rates in WNY for rink time. This would effectively make the project unaffordable if it was completely a private enterprise.
So if the town agrees to the 11 million bucks it would be financed over 21 years. Dave and Jeff are willing to sign and guarantee to pay the full cost of the bond, all rink costs, maintenance and utilities for the first seven years of the bond. This will all be contracted in such a way that the town will not be responsible for any money for that time frame. After the seven years are up then it will be contracted that Jeff and Dave have the option to sign a second contract for the next seven years if the venture is profitable to them. If all works well they will sign a third seven year contract and keep signing seven year contracts after that. After the 21 years are up then the town would effectively own a state of the art facility that cost us zero dollars and no tax increase. We would also have the option to charge as landlords, after the 21 years, for the facility thus making the town money.
If it’s not profitable then Dave and Jeff have the option to opt out of the deal after seven years and walk away leaving the town with the responsibility to find a new lease/management operator or take the facility over publicly again. Right now a sticking point is that the Town wants Jeff and Dave to put up approximately 1 million bucks as a down payment to be held in the bank should something happen and the deal fall apart before the seven years is up.
The thinking is, yes, they will sign legal papers making them responsible for the payments for seven years but what is there to stop them from walking away after six months if they are losing money hand over fist? So the town wants some cash in case they have to pay for litigation to force these guys to pay up.
On the financial side the town is paying about $500k a year (all inclusive) to operate that current facility and most of that is in the red. This deal would have a mortgage of about $700k a year. So the difference of $200K is being considered an acceptable risk especially since the revenue making ability is being tripled with the addition of a second sheet of ice and a full field house. The feild house is considered the cash cow in the deal because the only overhead is the heating. The feild house would only need to be heated to 55-60 degrees and their is little repair associated with it compared to the money for time it would rake in. It is also acceptable to take the chance that the deal will result in a full 21 years of a successful relationship between the town and the Walker/Andreychuk firm.
This deal will be a make or break issue for the the Republican Party. If it’s successful then Steven Walters, Tom Best, and Kevin Smardz will look like geniuses. If it falls apart and the town has to pick up the pieces, most likely with tax increases, then the three will be tarred, feathered and run out of Hamburg and the taxpayers will get hit with a hell of a tax increase to fix this.
The biggest blocking point right now is everyone is waiting for Town Attorney Ken Farrel to make a decision if it’s legal for the Town council to be able to lease/manage a public recreation facility. If he rules it’s not, then the town would have to petition Albany and the State Legislature to allow the deal. That would take years and politics would surely end the deal before it starts.
What are your thoughts on the issue?
Far too many ifs and maybes for the Town taxpayers to be on the hook for this type of liability. My feelings is that if this was a profitable business to be in, we would have seen private competition to municipal ice rinks long ago. What you’ve seen is Western New York is the complete opposite (Amherst).
I also feel that if a business person wants to invest their own money into a private venture like this, then it should be just that; THEIR OWN MONEY!! A deal like this would be even worse than some of the ridiculous IDA handouts to corporations, because if it fails, the taxpayers are on the hook for a generation.
Good deal for Mr. Walker and Mr. Andreychuck, but a horrible deal for the taxpayers of the Town of Hamburg. The risk far outweighs any potential gains.
How do expect a gut like Ken Farrell to make a decision like this? The gut is relatively inexperienced. He doesn’t even have a large legal practice, The guy is a joke.
Too many risks involved here. Even if they come up with the 1 million dollars, the Town would still be out 10 million if this venture fails. How can they be forced to “pay up” if bankruptcy is declared?
What does Mr. Walker’s and Mr. Andreychuk’s business experience consist of?
Their business plan needs to be made public so the taxpayers of the Town can review it.
One thing is for sure. Something must be done at the ice arena. The town can’t continue to lose this kind of money on an ice rink. Remember that government is meant to govern not be a baby sitter. Whether or not this is a good deal will be decided by the participation the arena gets after it’s leased out. Otherwise the only real option is to close it down and tell the residents to go to one of the other area rinks. I don’t think the tax payers should continue to be responsible to pay for an ice rink that loses this kind of cash and is used by as many outsiders as residents. Is the deal good? I think it’s to soon to say.
Maybe the best thing would be for this issue to go to a referendum. What do you think about that idea?
Jeff Walker’s proposal is in essence an application for a business loan from the Town of Hamburg and the taxpayers. I do not believe the Town should set a precedent and approve of this.
If this was an outright offer to purchase the ice rink with private dollars, then it would be another story. But to “loan” Jeff Walker this money would be very wrong.
You’ve identified the costs, what is the revenue potential? What market surveys have been done to determine if there is enough demand to make it profitable?
Most business owners go at risk and put up their own resources/houses/etc. Why should the taxpayers take the risk and not even participate in the profits? What a scam. Anyone who votes for this should be run out of town. Hey, I’d like to open a restaurant on the water. Everybody ok with the town taking out a bond to secure the money so I can start it? If it works out for the next 21 yrs, I get the profits, if it goes under, the town can just find someone else to run this unprofitable business. Why not just raise the rates at the current facility and see if it can turn a profit? As you said, government should govern, not float loans.
I completely understand what everyone is saying. There is one huge catch about doing this completely in a private manner. NYS Law forbids the sale of any municipal recreation property without very specific approval from the state legislature and governor. That means the town can’t “sell off” the property. The town can only shut it down or build it up. So with this deal the town is actually building the property up and we still own it. The difference is Walker is going to pay the bond to do it in exchange for the opportunity to make money from it for the term of the contract. Even if Walker fails the town still has a brand new facility. So in effect no-one is giving Jeff Walker anything, we would just be allowing him to operate the facility at his cost/profit/loss for the term of the contract. In the end the town still owns the property no matter how the deal works out for Walker.
A perfect example of this on a smaller scale in the town already is at the golf course. The vendor inside the club house that cooks hot dogs has a contract with the town to run the snack bar. She makes her money but the town still owns the property. This is exactly what will happen at the ice arena but on a bigger scale.
In effect, the Town is absolutely giving Jeff Walker something. They would be fronting all of the capital investment. In a normal business equation an invester must look at the risk in a venture, and weigh that risk against the potential gain. If the potential gain does not justify the risk, an experienced business person moves on to the next project.
If the Town fronts the investment capital for this project, they have just eliminated that equation, because they have assumed the risk. Sweet deal for the business person who now only has to look at the potential gains without weighing the risks.
I would also be interested to find out how this whole proposal might effect the Town’s outstanding bond rating. If the Town takes on a whole heap load of debt, that must effect the way financial instutions would view their fiscal prudence. If the bond rating suffers, that means the Town would have to borrow at higher interest rates. You combine that possibility, with the risk of making an enormous capital investment on the assumption that someone’s business plan will succeed, and you have created a fruitful scenario for enormous funding gaps which create enormous tax increases.
I would also like to point out that in Hamburg First’s last post, he states that if the business plan fails, the worst that could happen would the Town would own a “brand new facility”. But he also points out that the Town would have to jump through incredible hoops to sell this “brand new facility”. So in essence, this “brand new facility” would be a huge monkey on the backs of Town taxpayers, because even if it wasn’t making enough money to sustain itself, the Town wouldn’t be able to sell it off in a pinch.
The more I read about this plan, the more I think this may take the cake for one of the worst municipal investment plans I have ever heard of.
No, that is not a perfect example. The Town already owns that facility (this also happens at the beach concession stand), and entrepeneurs place bids every year for the exclusive right to lease that space. The highest bidder gets to sell their concessions on Town property for that season.
The difference is that these bidders do not get to demand that the Town make up front capital investments prior to them submitting a bid. The Town doesn’t have to go into heap loads of debt to attract bidders. It is just a straight revenue stream.
If there is no liability to the Town if Jeff Walker’s plan fails, why then are they asking for 1 million dollars up front?
This is exactly why I wish you guys would make screen names. I have multiple comments and it is hard to reply to any one specific comment when you are not giving me a name. For the guy who tries to quote me by saying “the Town would have to jump through incredible hoops to sell this “brand new facility”. I never said we would have to sell the facility. I made it perfectly clear we could find another lease management operation to take it over or keep it in public hands run by the town.
Frankly, I like the idea of putting this to referendum.
In 21 years the facility would no longer be considered “state-of-the art”.
NEVER WILL WE ALLOW THIS TO HAPPEN
I was asked to make comments on the latest posting by Hamburg First. First off, most of my concerns with the Walker proposal are listed in the report I submitted to the Town Board. That document has been posted on this site. When I bring it up on my computer, the headings have blended in with the text. If that happens to other readers I hope it is understandable. Whether you agree with me or not, I appreciate anyone who took the time to review it and consider my point of view.
On the latest posting I will say that I have a different view on this subject than Hamburg First. Let me start out by noting that I do not believe in big government, I believe in good government. The Town of Hamburg Recreation Department will continue to strive for excellence and attempt to bring efficiency to our operations. I would be happy to share my annual report that demonstrates the on going steps we’ve taken to reduce costs and increase revenues. In 2007 we actually brought in more than we spent (+72,000) for the first time ever. Generally speaking, we have covered 85 to 90% of our costs in the years in which I’ve been the director. Please note this does not include maintenance support. The Buildings and Grounds Department oversees those reponsibilities and accounts. In this context I always say users pay for programs and taxpayers (all of us) pay for parks, facilities and their upkeep.
For the sake of this discussion I would disagree with the statement that we are losing money on the rink. Facilities such as the rink have been developed for our citizens use and are subsidized by our tax dollars. The scope of government can include quality of life expendatures and this is what decision makers have provided for us and have funded over the years. You may not like the use of tax dollars for this purpose but it is currently part of what we are charged to do. In other words, the Town Board has decided to fund this operation for the benefit of our citizens. To me, it is the same as funding police, highway or other departments. Does police or highway’s budgeted spending fall in the category of losing money? Each taxpayer can determine the what they consider appropriate in terms of the budget appropriations. With that said, we all have the opportunity to voice our concerns on budget matters at public hearings and request change as we see it.
As a department head I feel a strong obligation to keep our costs under control. My record indicates some success in this area. I know we are far from perfect but we will continue to strive for improvement.
Another point I would like to make is that the ice related expenses are a much smaller part of the subsidized figure ($300-500k) used in this discussion. The “Nike Base” budget appropriations include year round facility operations, programming and maintenance. That includes all costs associated with our spring/summer sports and activities. Spring and summer programs are extensive, require maintenance and generate much less revenue than winter ice activity. To be more clear, the ice programs actually bring in the majority of the revenues that users pay in support of the the Nike complex. The winter expenses including the bond payment are about $450,000. We bring in $330,000 in ice related revenues. The taxpayer subsidy is therefore closer to $120,000 for ice related activity.
As long as we continue to provide parkland and facilities for our citizens there will be expenses. Fortunately for taxpayers, users do pay for much of what is offered. We will all have different opinions on how much should be spent. In the mean time, all departments should find ways to execute our assigned duties in the most efficient manner.
I could say more but I feel like I would end up repeating myself. I think I’ve clearly addressed my concerns in the report posted on this sight. Thanks for the time you’ve taken to hear me out.
Best Wishes,
Martin C. Denecke, CPRP
Director of Recreation
Well said Marty
I really hope the the Town Board is not taking this proposal seriously. If they’re just running this through the motions, that’s fine. However, if they are even taking a serious look at this (never mind will they accept it, but even considering it as a real possibility), I think we may have made the wrong choice back in November.
On the other hand, if they are taking this seriously, maybe I could make some money off the taxpayers. I’ve got a bridge to sell!!
The days of Pat Hoak will be missed, maybe Randy will run and save this Town
I have to disagree with everyone except for Hamburg First. I think it is about time someone stepped up and brought an idea to the town. I don’t really know all the in’s and out’s of the proposal, LIKE EVERYONE, but I think it is something that is POSITIVE for the Town.
I look at it this way. There is other communities in the USA that do what is being proposed and it works out great for everyone. We need a complex that can support the demand for the all the sports that can be played in the new facility, that the kids and young adults want to play.
Why are we bashing this guy who has come up with an idea to help the community? Let me take a stab at it…because you guys did not come up with the idea or maybe you guys have nothing else to do.
Something like this has never been proposed in this Town and it seems to me that you guys dont like change or new ways to do things to help the Town.
What I have read and heard is that the Tax Payers will not have to worry about anything regarding the cost. I second what Hamburg First said, If this guy fails at running this facility, then after 7 years the Town will have to choose to either run it or go out and find another company to come in and run it. There is always going to be revenue coming in and I think if it is run correctly, then we as tax payers will only benefit from having such a complex in this community.
With looking to do something outside the box, The Town is doing their part in providing a service for the people of the town by building a complex of this size.
Keep up the good work Steve, Tom and Kevin..From what I have heard the two Democrats on the board like this idea also, so my hats go off to them too.
Remember when Jeff proposed the complex at the end of Commerce Dr a few years back. Why didn’t it fly then? No interest in investment? So lets get the Town involved to insure his investment. Don’t like it one bit.
Why do we need Jeff Walker to do this? It’s the Town’s money they would be using!
I think I saw that Benderson purchased all the property back there on Commerce Dr. Maybe we will soon see empty buildings on that property.
I am new at this web site and I think it is very funny to see what you people say.
Maybe we should look into things before opening mouth.
This was before Benderson had bought the property. About 4-5 years ago.
I attended the last two meetings. Based on families at the 2nd meeting expressing their need for additional ice for their kids in hockey, there definitely is a need to renovate, and expand our facility for the sports teams. However, there must be “other options” not being discussed now. As it stands it is being made to seem if this doesn’t go through our kids will be standing there holding their skates. If this referendum fails, we will need to investigate those options. Why not present them now to give people a choice. Don’t forget this is also for the “recreational purposes of our citizens” not just the sports teams. If the object of the people running a “business” is profit, the recreational aspect may be at stake.
That the only 2 people comprising “Leaping Sports” have no prior background in the scope of this Endeavour and need the taxpayers to back their finances in order to do it, concerns me. The statement was made the “guarantee” Mr.Andrychuk so generously is offering will be backed up legally by his house, and other collateral he has. Am I wrong or isn’t Mr.Andrychuk a Canadian citizen….? Another statement made at the meeting was that he wouldn’t do this if he thought it would fail. I don’t think Jim Kelly counted on his restaurant failing when he sunk his money into that either.
I understand this was put out for RFP…. And Leaping Sports was the ONLY bid received. If it was such a good deal you would have thought there would be more.
I propose looking at other options.
Respectfully
P.Wolf