City considers taking over ownership of Northwoods Arena
The Cloquet City Council is contemplating taking over ownership of Northwoods Credit Union Arena from the Cloquet Area Hockey Association.
City Administrator Aaron Reeves said during the council's work session Wednesday, Jan. 2, he had been working with CAHA President Don Gentilini to form a plan to deal with some of the building's repair needs.
Built in 1996, the city initially paid for the arena, with CAHA paying the city approximately $70,000 each year to pay back the construction cost. Reeves told the councilors the NCUA and the neighboring Pine Valley Ice Arena — also called the "Barn" — require about $240,000 per year to maintain and operate.
CAHA receives a combined $165,000 per year from the Cloquet-Esko-Carlton boys and girls hockey teams and the Minnesota Wilderness junior hockey team to use the arena. Cloquet would begin to receive that money to operate the NCUA.
It is unique for a hockey association to own a rink in Minnesota, according to Gentilini. Most rinks are owned by a school district or municipality who either manages and operates the arena, or contracts with a local association for the services. He said there were just a couple of rinks in the state that have a similar arrangement, including Roseau.
During an Aug. 8 discussion with the City Council, Reeves recommended the city take over ownership of the NCUA and use the money from the team contracts to continue to operate the arena, with CAHA overseeing management.
Reeves said the city originally budgeted $600,000 in 2019 for repairs and maintenance for the building. However, after doing a facility review with the consulting firm SEH Inc., the company found only $475,000 in needed projects in 2019, including a new roof and dehumidifiers.
However, the study also found nearly $3 million in upgrades and repairs needed in the next five years. The biggest price tag is $2 million to replace the refrigeration system, concrete floors and dasher boards at the NCUA and the Barn.
The system in use was purchased from a seller in Alaska and is believed to have been manufactured in the 1980s. Refrigeration systems of that type have a 25-year lifespan, but the system in Cloquet is probably more than 30 years old.
The system also uses freon, a chemical with a high global warming potential rating that is being phased out of use. The cost of the chemical, according to SEH, has risen 850 percent since 2005.
SEH recommended replacement of the system, as well as the concrete floor and dasher boards, with an indirect, industrial grade ammonia-based system at a cost of more than $2 million.
The problem for the city and CAHA is, as a volunteer-based nonprofit, CAHA isn't equipped to deal with such expensive repair costs. Reeves told the council the city is already budgeting for repairs at the arena and CAHA approaches the city for additional funding for unexpected repair costs from time to time.
As the owner of the arena, the city would have a better idea of what repairs are needed ahead of time and would be better prepared to fund those repairs. Currently, when CAHA approaches the City Council about repair costs, the repair is already needed. With a comprehensive assessment of the building and its needs, the city will have a better idea of when repairs will be needed ahead of time.
"This is basically a major community asset," Reeves said. "I don't anticipate that the council, if nothing changes and CAHA comes in a year or two and said, 'We need this money, the system has failed' whatever, I don't think we're going to say 'No, shut her down, we're not going to have any hockey arenas in the community.' So if you look at that way — that this is an asset we want to keep — it seems to me that this makes the most sense as to how we should move forward. But again, it is a big cost commitment."
CAHA would continue to manage the arena and take care of the day-to-day maintenance of the facility. Its payments to the city would also decrease the in 2020 and 2021, according to the draft agreement presented to the City Council. Reeves said CAHA would pay the city $70,000 in 2019, but that amount would drop to $45,000 in 2020 and $25,000 in 2021 and beyond.
Gentilini said the reason was to keep CAHA's registration fees as low and available to as many families in the area as possible.
Reeves said he hopes the additional funding for the arena and its upkeep would come from the city sales tax. The city had its sales tax included in legislation vetoed by former Gov. Mark Dayton in 2018. Reeves said the chances of the sales tax going through this year are even better with a new DFL governor, Tim Walz, and a DFL majority in the House of Representatives.
The City Council is scheduled to discuss and vote on an agreement with CAHA to take over arena ownership, as well as use agreements with CAHA, the Cloquet School District and the Minnesota Wilderness, during its meeting at 7 p.m. Tuesday, Jan. 15.