GLENS FALLS — Born in controversy, Glens Falls Civic Center has passed a lot of milestones in its 35-year history.
Some have been more fateful than others in guiding the facility along a road to its present travails. Through a combination of financial statements, audits and archival news stories, a theme emerges of repeated questions about regional support, fears about long-term viability and attempts to examine an ownership change as a possible solution.
Another fact becomes clear: These questions will lead to big changes for the venue in 2014, one way or another.
Though it may seem like the city’s upcoming effort to divest itself of the Civic Center came suddenly, there have been harbingers over the years.
Even the Civic Center’s May 1979 opening celebration happened against a backdrop of debate and lawsuits. Then-mayor Ed Bartholomew — now EDC Warren County president — summed up the angst that surrounded the project in a special publication produced by The Post-Star on May 18, 1979.
“Critics contend the city is too small — could not support such a venture — and that it is too far removed from the major market areas,” he wrote. “Contentions were made that municipal government should not be involved in this venture. ... Following the conception of this project, lawsuits were initiated, court battles
ensued and controversy prevailed in the community. The community became divided. It became a question of personalities. Issues became secondary.”
Initially conceived as an ice rink and convention center, with seating for 2,800 people, the project grew to encompass an American Hockey League team (the deal with the Adirondack Red Wings was signed after construction of the Civic Center had begun), hopes for a new hotel being built adjacent to the facility and a goal of bringing in enough entertainment and convention business to revitalize the city and surrounding communities.
Though financial details from the early years of the Civic Center have been lost — the city’s records only go back as far as 1993 — it’s believed the facility was initially self-sustaining, if not profitable.
But in recent years, the facility’s costs have sparked renewed debate about long-term viability, taxpayer angst and the value of the Civic Center to the region’s economy.
Several events have pushed the issue to the breaking point for Mayor John “Jack” Diamond and the Common Council. In a recent interview, Diamond summed up events that brought the city to a place where it has planned to offer the Civic Center for sale at a Monday auction.
How we got here
July 2006: Following the exit of the Adirondack Frostbite hockey franchise and amid a flagging effort to form a regional authority to support the Civic Center, city officials approached Warren County leaders for help in making the Civic Center a facility supported by a broader base of taxpayers.
That year, the city subsidy of the facility was $841,563, about 11 percent of the city’s total budget, and Diamond, then councilman-at-large under Mayor Roy Akins, was among those who pushed for an appeal to the county.
(Annual Civic Center subsidies have ranged from 15.5 percent of total city spending in 2000 to 6.4 percent for the current year, though that assumes the total subsidy remains at the budgeted $605,360.)
The county made it clear it was not interested in taking over operation of the facility, and Diamond’s frustration was evident.
“Your tourism budget alone is larger than our entire economic development budget in the city of Glens Falls,” he said during the July 28, 2006, meeting with county officials.
By October, the effort to create a regional authority had been abandoned, as the county promised to work with the city to find solutions to the Civic Center’s fiscal woes. That sparked a series of meetings involving both state and local officials.
Diamond, in the recent interview, recalled those discussions included discussions about closing or selling the Civic Center.
“This process really started with (the 2006 meetings),” he said. “When we had this meeting on what to do with the Civic Center, and there were multiple options: Bring in a management firm. Shut it down. Sell it. These were all things that were talked about. We’ve run that gauntlet now.”
(At the time of the 2006 meetings, the city was managing the Civic Center, a situation that changed with the hiring of Global Spectrum in the spring of 2008.)
2008: After winning the mayor’s seat on a platform promising to cap city tax rate increases at 2 percent going forward, the city’s budget strategy for the Civic Center — and other departments — changed.
Prior budgets provided funding based on projected spending and debt repayment, each of which makes up about half the annual Civic Center subsidy.
With Diamond’s arrival in City Hall, the Civic Center budget was calculated based on how much the city could afford to provide to the facility while keeping tax rate hikes in check.
“In the early days, you could say, ‘OK, we’ve got to raise the tax rate 4 or 5 percent because we’re hemorrhaging money,” Diamond said during the recent interview. “It was acceptable. That’s not now anymore. That’s not the way you can run business.
“On a positive note, we have been successful staying within our proposed budgets by telling our department heads — whether it’s the Civic Center, whether it’s the police — this is what you’ve got to work with.”
But the strategy has had consequences. As reported by The Post-Star in July, the city rolled over $31,863 in unpaid expenses from 2008 into the following budget year. It was the start of a practice that would be repeated, with rapidly increasing roll-over amounts, culminating in deferred accounts payable of $342,271 in 2013, the latest year for which the rolled-over figure was available.
(Loans taken out to build the Civic Center in 1979 were paid off in 2005, but new debt was incurred — to the tune of about $1.8 million — for improvements to the facility, including a new roof and extensive interior renovations, like seating, concession stand improvements and a troubled audio/visual system upgrade. Annual payments of about $300,000 are being made now. Though different loans will be paid off at different times, some debt payments — specifically for a seat replacement project done in 2007 — won’t be finished until 2032.)
December, 2010: In response to a suggestion by 3rd Ward Councilman Scott Watson that the city should consider closing the Civic Center in order to control costs, Diamond said that wasn’t an option.
“I want to clear the air on that; that’s not an option for me,” he said.
That year, after providing a subsidy of about $709,000, the city rolled over another $2,183 in Civic Center accounts payable to 2011.
January 2011: The city of Glens Falls decided to allow Global Spectrum to continue managing the facility for at least another 15 months, though the city said it wanted to try to negotiate changes in the contract that would reduce the city’s subsidy of the venue.
At the time, the city was subsidizing the Civic Center to the tune of about $750,000.
It was also in 2011, according to documents provided by the state Comptroller’s Office, that Glens Falls wrote off about $400,000 of deferred revenue related to the Adirondack Ice Hawks hockey team, which preceded the Adirondack Frostbite and the Phantoms.
Diamond recalled during the recent interview the Ice Hawks promised to make payments to the city over time, but those payments never materialized. The city’s auditors, after allowing the deferred revenue to remain on the books for several years, finally said the city had to write off that revenue as a loss or seek payment through a lawsuit. Diamond said it was well known the Ice Hawks wouldn’t have been able to pay back the cash even if a lawsuit had prevailed.
It was that experience that motivated Diamond to resist efforts to lower expectations on the search for a new hockey tenant, he said.
“One reason I chose to hold my ground, and people were critical of focusing on American Hockey, is because I had a bad experience with a lower level of hockey,” Diamond said.
After rolling over unpaid 2009 Civic Center expenses of $59,976 into 2010, and unpaid 2010 expenses of $2,183 into 2011, the latter budget year would end with another $198,680 in accounts payable being pushed into the following budget year.
“As a result (of the Civic Center exceeding spending limits set forth in the budget), we have incurred some accounts payable, and as we bring in more revenue, we pay those accounts payable down,” Diamond said in the recent interview. “I’m not faulting Global (Spectrum) for lack of effort or performance. We appropriated what we felt we could afford to give them to operate the building.”
November 2012: The city voted to chip in an extra $50,000 to help the Civic Center pay outstanding bills, after the facility used up its appropriation for the year. Total Civic Center funding from the city — including debt repayment — was $665,360, as a result.
The city still ended up rolling $342,271 in accounts payable from 2012 into the 2013 budget year.
April 2013: Diamond, for the first time publicly, said he would consider closing the Civic Center if a funding solution can’t be found.
“The city budgets simply can’t absorb any dramatic increase in the subsidy to the city-owned arena,” he said.
The city had budgeted a $605,360 subsidy for the facility in 2013, and Diamond said another $300,000 or so in accounts payable has been rolled into the current budget year.
Days after announcing his change in position, Adirondack Regional Chamber of Commerce offered to host a meeting of regional leaders to have another discussion about regional support for the Civic Center.
“We have to strategically look at being able to help the city with its subsidy because this is a regional asset, not just a city asset,” said Peter Aust, the chamber’s president and CEO, in a story published April 6, 2013, in The Post-Star.
May 2013: Richard Schermerhorn, a real estate developer from Queensbury, told The Post-Star he met with Diamond to express interest in buying the Civic Center from the city.
By mid-month, the latest effort to create a regional funding mechanism for the Civic Center suffered a lethal blow with a straw vote taken by the Queensbury Town Board. The action followed similar rejection days earlier by Washington County leaders.
The funding plan would have had homeowners in Queensbury, Moreau, Kingsbury, Fort Edward and village of Lake George paying about $10 more per year in property taxes. Queensbury officials said they decided to oppose the plan after they heard from residents upset over a possible tax hike.
Also in May, city officials considered raising the “facility fee” on ticket sales by $2, an effort that would have raised an estimated $170,000 for Civic Center funding.
The Adirondack Phantoms also agreed to extend their stay in Glens Falls for one more hockey season, with a planned exit the following April. That news prompted the start of a search for another hockey team.
Toward the end of the month, Diamond said he would ask voters in November whether the city should put the Civic Center up for sale or auction.
“Let the people that paid for the building since 1979 decide,” he said, in a May 25 story published by The Post-Star. The Mayor said days after the announcement he heard no opposition to the idea of selling the facility.
The sale process began with city officials approving a formal appraisal of the facility.
January: In the recent interview, Diamond said the need for a permanent solution to the Civic Center’s woes became even more clear at the beginning of this year, with hockey’s uncertain future in the city and rising accounts payable balances rolling from year to year.
That’s when he started reaching out again to county leaders.
“Some of them did respond; some of them didn’t meet with me,” he said.
He also knew another hockey team, by itself, wouldn’t be enough to save the Civic Center. While hockey brings people to the arena 36 nights each winter, the sport just isn’t profitable enough to pay for the facility’s operations and debt.
In 2012, for instance, the Civic Center realized total revenue of $734,694, including ticket sales, rents, concession sales and advertising. It spent $1,468,666 on operations, according to audited financial statements provided by the city.
“We were able to bring an American Hockey League team (the Adirondack Flames),” Diamond said during the recent interview. “That still doesn’t solve the financial dilemma that we’re faced with: How do we move the bottom line?”
He became convinced a solution was needed by the end of 2014.
“We don’t have a surplus of sales tax,” Diamond said. “We don’t have a fund balance that’s rich. We don’t have the abilities to expand our property tax, because we’re land-locked. We don’t have hotels, other than the Queensbury, to generate occupancy. I’ve been telling the public that we are struggling here. We’re doing the best that we can.
“When Frank O’Keefe was mayor, he had 70 guys in the Department of Public Works. I have 21 with a superintendent. There’s nobody left (to cut), and we’re still struggling to stay competitive within the 2 percent tax cap.”
May: The last straw, Diamond said, came during a Warren County Board of Supervisors committee meeting at which an idea was floated to increase the county’s occupancy tax by 1 percentage point (to 5 percent), with the extra revenue going to fund the Civic Center.
“I’m sitting here, and I’m looking at the board, and I’m looking around the room, and I’m saying, ‘Do I have a different perspective than everybody else here?’ ” Diamond recalled. “Because on my side was (City Councilman at Large) Dan Hall, (executive partner of Aeon Nexus Corp.) Omar Usmani, local businessmen Scott Endieveri and Paul Bricoccoli. I don’t want this to be taken as criticism, but there was nobody else there from Glens Falls. There were no local businesspeople.”
The occupancy tax plan got a cool reception from county leaders. That’s when Diamond resolved to seek a sale of some kind to end the city’s ownership of the Civic Center.
“You know what, I said to myself, ‘This is it. This is the last straw for me,” Diamond recalled. “The only salvation to this building — and to these taxpayers in Glens Falls — is to sell it.”
July 22: The city Commmon Council voted unanimously to enact a local law authorizing the auction of the Civic Center on Aug. 18.
“We’re hemorrhaging money there,” Diamond said during the meeting. “We have to cut our losses and get out from under it.”