Rossford arena-amphitheater project has troubled past, and no future in sight

By Joshua Benton and Brian Nearing
Blade Staff Writers

Page A1

In the last couple of weeks at the Blossom Music Center near Cleveland, you could have pogo-sticked under the stars to the B-52s or moshed to the Red Hot Chili Peppers.

At the Polaris Amphitheater in Columbus, you could have wigged out to the rootsy sounds of Phish or grooved to Sting.

And at the Pine Knob Music Theater north of Detroit, there were shows by Canadian rockers the Tragically Hip and country star Clint Black.

But on the site of the proposed Rossford amphitheater, where the country’s top name acts were also supposed to be playing this summer, there’s little more than a few steel beams, a construction trailer, and mounds and mounds of dirt.

Sixteen months ago, Rossford Mayor Mark Zuchowski announced his $48 million dream: a hockey arena and adjoining concert amphitheater to be located near the intersection of I-75 and the Ohio Turnpike. The arena-amphitheater project, he said, will push the so-called “Golden Triangle” area into the economic stratosphere, making it a destination site for miles around.

But today, more than a month after the amphitheater was supposed to hold its first concert, the project remains primarily on paper.

Financial analysts have told officials the deal is too risky, and local taxpayers have been reluctant to put their own money into the project.

While officials struggle to find one last way to save the millions already invested in the project – including the possibility of selling the entire complex – those who have given money are becoming increasingly interested in making sure their money hasn’t just been wasted.

Just two days ago, Perrysburg Township officials met with other project investors to find a way to keep their contribution to the complex from disappearing. But no agreement was reached, and if the project falls into more trouble, at least $5 million in township money could be gone.

“Our table is getting a little bare for the township,” said Nathan Hagemeister, a Perrysburg Township trustee and a member of the Rossford Arena Amphitheater Authority board. “We want to help avoid the collapse of this project.”

From the start, the arena-amphitheater project was handled by a small group of people.

It started in 1994, with the creation of the Rossford Economic Growth Corporation, a private group formed by the city of Rossford to develop the Golden Triangle, the area south of the two interstates whose access to highways had made it a sought after area for development.

In a 1995 memo to a potential tenant, Mr. Zuchowski called the growth corporation “a shadow organization [that] has been quietly and efficiently arranging options on a large assemblage of this land.”

The corporation’s board members included representatives from some of the area’s heaviest hitters in development: Toledo Edison, Lathrop Co., SSOE, Inc., and the Northwest Ohio District Council of Carpenters.

The growth corporation considered a variety of plans for the area, including an outdoors retail center and a gambling parlor. But over time, they came to focus on an arena and an amphitheater.

Purchase options were assembled on the land starting in June, 1997, according to corporation records supplied to The Blade. One of the first to option land was township Trustee William Miller, who signed options July 21, 1997, and Oct. 9, 1997.

Under the option agreements, the growth corporation had to purchase the land within two years, or the sellers could keep the option payments. Records supplied by the growth corporation do not indicate how much was spent on options.

Township residents have questioned at public meetings whether Mr. Miller was engaged in a conflict of interest because he stands to profit from anticipated land sales in that area, which they now call the “Crossroads of America.”

Last month at a township meeting, he acknowledged to an audience member that he had sold a portion of his land for $600,000.

Linda Holmes, Wood County assistant prosecutor, who attended a Perrysburg Township meeting last month when the issue was raised, said Thursday that she cannot investigate until she gets a written request from the township.

Mr. Miller has said he has no conflict, since he did not vote when the township decided to buy the bonds from the Rossford Transportation Improvement District, which undertook construction of the roads serving the area. Mr. Miller was a holder of TID bonds. But he did vote to loan $5 million to the arena authority to get construction going.

“I have heard this fact and that fact. There are some people who feel that something is wrong,” Mrs. Holmes said. “We certainly thought that we would be asked to investigate.”

The clock was ticking on those land options when, on Feb. 23, 1999, Rossford city officials created the Rossford Arena Amphitheater Authority to finance and run the project.

Just four days later, plans for the $48 million arena and amphitheater complex were announced. Ed Reiter, chairman of Mid-Am Bank, said the project should be able to attract necessary financing, likely at a 6.5 percent interest rate.

Things moved quickly. A month after the authority was created, it approved a deal with the Detroit Red Wings, owned by the Ilitch family, to bring the hockey club’s farm team there, and with Olympic Entertainment, also owned by the Ilitches, to run the complex.

The arena authority announced plans to issue $48 million in bonds by May of last year. Excavation work on the site began May 19, 1999, with temporary financing in the form of a $2.4 million loan from the Northwest Ohio District Council of Carpenters and, later, $5 million from the township.

Several members of the growth corporation board began to bring business to their companies.

For example, growth corporation President Dick Lee is vice president for business development at Lathrop, the Toledo construction company that got the project’s no-bid construction management contract.

Another growth corporation member, David Shapiro, is a vice president at SSOE Inc., an architectural design firm in Toledo hired to do design work.

Mr. Reiter, vice president of the growth corporation, is chairman of MidAm Bank, which is the growth corporation’s depository bank. In addition, MidAm invested in bonds issued by the Rossford Transportation Improvement District, which spent $6.8 million to build a road and water and sewer lines around the project.

Toledo Edison agreed to loan the growth corporation up to $2 million, using some of its property as collateral. In exchange, Toledo Edison got exclusive right to supply power to the development.

Toledo Edison is getting repaid by the growth corporation, utility spokesman Richard Wilkins said Friday.

“The most recent payment was $500,000…made within the last month or so,” he said. “We are getting repaid as expected.”

Mr. Wilkins said that Toledo Edison gets involved in a wide variety of economic development projects in the area, and that the Rossford project is just one of many.

He said that the growth corporation is using money it has made from selling land to developers interested in putting up businesses near the project.

Mr. Lee and Mr. Shapiro did not return telephone calls from The Blade.

Mr. Reiter declined comment through a spokeswoman. “He doesn’t think commenting would be in the best interests of the bank,” said spokeswoman Darlene Minnik.

In early fall of last year, the authority announced it was buying 127 acres of land that had been optioned by the growth corporation. But the authority was already running low on cash. Of the original $7.4 million it had from the carpenters’ union and Perrysburg Township, only about $2 million was left by Oct. 5, according to Mr. Zuchowski.

After Lathrop Co. filed a lien against the project for not being paid for at least some of its work, the arena authority agreed in early October to give Lathrop a mortgage against the property.

The carpenters’ union later that month offered to put up $2.2 million loan for the project, money that would be used to help buy 55 acres of land near the arena site, but that deal never closed. A call to the union for comment was not returned.

All of the temporary loans were supposed to be paid off as soon as the project got permanent financing through a bond issue. But that never happened.

It turned out Mr. Reiter’s prediction of a 6.5 per cent interest rate was far too low. The bond rating firm Standard & Poor’s gave the project a less-than-perfect rating, which meant the project was forced to deal with a double-digit interest rate. (At the arena authority’s request, Standard & Poor’s will not release its financial analysis of the project.)

With interest rates that high, the project was not doable because the arena and amphitheater wouldn’t generate enough money to pay off the debt each year. Rossford officials tried to get more backing for the project to make it more attractive, but with little success.

On Nov. 23, 1999, construction stopped because there was no money to pay for it. Work was roughly 20 per cent complete. The project has been idle since.

Phil Dombey, Perrysburg Township’s counsel, said a month later that the township faces a worst-case loss of between $10 million and $15 million.

The arena authority’s bond underwriting firm, Stifel Nicolaus and Co. of St. Louis, whose job it was to convince Standard & Poors to give the project a good rating, and hence a lower interest rate, was fired sometime before early December. Company representatives did not return a call for comment last week.

The last investor to come to the table, after serious questions had been raised about the project’s finances, was a Detroit-based corporation called Carpenters Success. It loaned the arena authority $1.7 at 9.75 per cent on March 10, 2000, about four months after construction had stopped for lack of money.

The money was loaned so the authority could buy 55 nearby acres that later would be sold to developers who want to put businesses there.

At the time, Rossford officials said that Carpenters Success was affiliated with the carpenters’ union in Detroit. And on Friday, Vince Langevin, the arena authority’s treasurer and Rossford administrator, described Carpenters Success as “a Detroit version of the carpenters union.”

Asked to explain what the group was, Mr. Langevin responded: “I don’t know, I think it’s a pension fund. It’s the name of a pension fund. I don’t know.”

But Mike Davis, chairman of the investment committee of the Michigan Regional Council of Carpenters and business representative for a Detroit Carpenters Local 687, said Thursday he had never heard of the group. “We are not invested in the Rossford project,” Mr. Davis said.

When told of Mr. Davis’s comments, Mr. Langevin said he didn’t know the names of any of the group’s leaders or backers. He said he knew the name of the group’s lawyer, but refused to say who that was.

“It’s not relevant,” he said. “I don’t think it’s important.”

Mr. Zuchowski, the Rossford mayor and president of the arena authority, said he didn’t know the details of who was behind Carpenters Success, but he said he believed it was a joint effort of northwest Ohio’s and Detroit’s carpenters unions. “It’s just a corporation that was founded to help us out and get the project done,” he said. “I don’t know their business as much as they do, but they have funds available to invest in projects like this.”

Robert Bernius, a spokesman for the Northwest Ohio District Carpenters, did not return a telephone call seeking comment on the issue.

According to records from the Michigan Secretary of State’s office, Carpenters Success was incorporated on March 9 – the day before its loan to the arena authority. It was incorporated by C. David Bargamian, a Detroit lawyer.

On Friday, Mr. Bargamian said he was merely the group’s attorney and did not want to reveal who he works for. “I don’t know if it’s appropriate for me to comment on my client’s business,” he said

He said he would ask his clients if they wanted to reveal themselves and contact The Blade. As of yesterday, they had not.

But Carpenters Success’s role in the arena project didn’t stop with its March loan. It is currently in negotiations that will determine whether Perrysburg Township will risk losing all of the $5 million it loaned to the arena authority last year.

It’s a complicated situation, but one that could leave township taxpayers financially hurt by more troubles in Rossford.

In 1998, the township purchased $4.6 million worth of bond anticipation notes from the Rossford Transportation Improvement District, which used the money to build a 1.7-mile road from S.R. 795 to U.S. 20/23 through the Golden Triangle and install water and sewer lines. A bond anticipation note is short-term financing used as a bridge until a long-term bond is sold.

When the arena project backers needed to find temporary financing to start construction last year, a deal was struck between Perrysburg Township and MidAm Bank. The bank agreed to purchase the $4.6 million in TID bonds so the township could then use the money to loan $5 million to the arena authority.

But when MidAm signed the deal, it made the township agree to buy the bonds back at the same cost this summer. In essence, the bank agreed to loan the township $4.6 million, interest-free, for one year.

Had the arena authority’s financing plan worked as officials had hoped, the township would have been repaid for its loan to the authority, and it then would have had the money to buy back the bonds from the bank.

But because the arena’s financing has never materialized, the township has been forced to scramble for cash. On Monday, trustees voted 2-0 to sell $4.6 million worth of its certificates of deposit to buy back the note and avoid paying $800 a day in interest on the loan. Mr. Miller abstained; Mr. Hagemeister and trustee Richard Britten okayed the move.

This was not the first time the township had taken over a local bank’s obligation to the project. Last month, it came up with $1.3 million to buy out Fifth Third Bank’s share of the transportation district’s note. The TID was about to miss a payment on the note and the township bought it from the bank to keep the project from defaulting.

The TID has had trouble collecting the property assessments charged to landowners in the district to pay for the roadway and water and sewer improvements.

Several landowners have sued over the size of the assessments.

On Friday, one woman sued after being assessed more than $280,000 for her property, which she contends is landlocked and not touched by any of the roadways in the development.

In any event, the loan the township made to the arena authority is not secured.

If the authority were to declare bankruptcy or otherwise collapse, the township would risk losing its entire $5 million investment, Mr. Hagemeister said.

Other investors in the project have mortgage security. Those investors – including Lathrop, Toledo Edison parent First Energy Corp., and Carpenters Success – will be able to claim ownership of the land and any other assets if the authority defaults.

Township trustees have been trying to find a way to secure their millions. The latest plan: give the township a mortgage on the 55 acres of land purchased in March. The mortgage would be for $5.2 million: the principle plus $200,000 in missed interest payments. That would mean that the property, purchased a few months ago for $1.7 million, would be mortgaged for significantly more than its assessed value.

But Carpenters Success already has a mortgage on the land, and would have to approve a second mortgage holder, Rossford law director Keith Wilkowski said.

On Friday, Mr. Hagemeister met with representatives of Carpenters Success and Mr. Wilkowski to iron out a deal to be presented to township trustees at their meeting tomorrow.

“If we can’t get this, we’re back to square one,” Mr. Hagemeister said before the meeting Friday.

Afterward, Mr. Wilkowski said no deal had been reached and that negotiations could take another month. Mr. Wilkowski repeated that Carpenters Success is a joint Ohio-Michigan union effort, but refused to give any details. He said that Carpenters Success was represented at the meeting by an unidentified lawyer, not one of the principals or Mr. Bargamian.

Mr. Hagemeister did not return phone calls after the meeting.

Earlier this year, officials considered something that was never before an option – building only the amphitheater and putting off the arena until later.

The new plan by Seasongood and Mayer, a Cincinnati bond counsel hired by the authority last year after they fired their original counsel, would be accomplished through a smaller bond issue of only $10 million to $15 million.

And instead of being backed by the project’s own revenues – which could be influenced by market conditions – it would be backed by Rossford and Perrysburg Township.

If the project couldn’t pay off the debt, the two governments would guarantee to make up the difference, a deal that would make the bonds much more attractive to investors and allow them to be sold at a lower interest rate. Once the amphitheater was built, officials would then turn their attention to an arena.

After a year of financial troubles, this was viewed by some as a last-ditch bailout plan. At a March meeting of township trustees, Andrew Brossart of Seasongood and Mayer told trustees: “This is the last way we can figure on how to finance this.”

The proposal promised a financial position for the project. While a new arena would provide a year-round venue, it would face a long established competitor in the Toledo Sports Arena, whose major tenant, the Toledo Storm, would fight for public attention with the Red Wings affiliate, the bond counsel reasoned.

In contrast, an amphitheater would have no competitor nearer than Pine Knob. And thanks to their low cost of maintenance, amphitheaters are generally much more profitable than arenas.

According to an Arthur Andersen analysis of the proposed Rossford complex, the amphitheater would produce more than $2.7 million in revenues in its fifth year, against only $287,000 in expenses. In contrast, the arena would produce almost $4.7 million in revenues, but against almost $2.8 million in costs.

But some residents of Rossford and the township were outraged at the idea of spending tax money on the arena. The township residents felt their trustees had invested enough in the project already, given the fact the investment was unsecured. City residents said they believed they had been deceived – Mr. Zuchowski had assured them repeatedly that no local tax dollars would be used.

“It is misleading for anyone to say that the amphitheater/arena project uses City of Rossford tax dollars,” city officials wrote last year in a “Special Notice to the Citizens of Rossford.” “The amphitheater/arena project will pay for itself – using future tax revenues from the project itself to pay for the bonds,” the notice assured.

Dozens of angry residents showed up at meetings of the city council and the township trustees, calling taxpayers “sitting ducks” about to be taken by a bad deal.

The plan to use tax money to back the bonds died after township trustees rejected it. “Everyone was opposed to that,” Mr. Hagemeister said. “We were opposed to putting any more Perrysburg Township money into the project.”

Now, much of the optimism of a year ago is gone. Mr. Langevin said he wouldn’t venture a timetable for when a new deal might be announced. “We’re just still trying to put the whole bundle together,” he said.

At Monday’s arena authority meeting, there was even some discussion of selling the project off to a private group. “We have been contacted by several parties who have said they would buy one or the other [facility] or both,” Mr. Langevin said later. “Our comment was everything is for sale if the price is right.”

Mr. Langevin said that if everyone who has invested money in the project “can be made whole, that’s the selling price.”

Meanwhile, waiting for some sort of resolution of the situation is the Ilitch family.

Led by Mike Ilitch, who founded the Little Caesars pizza chain and owns the Detroit Tigers and Red Wings, the family is slated to play a major part in the Rossford deal. Aside from their commitment to bring a minor league hockey team to the arena, one of their companies, Olympia Entertainment, has signed a deal to manage both the arena and the amphitheater.

Under the deal originally signed, the Ilitch companies stood to make millions, including portions of all food sales, suite license fees, and naming rights fees.

In addition, the original deal included significant financial penalties for the authority if an arena was not ready to start hosting hockey by November of 2000. Those penalties were to compensate the Red Wings for most of their costs. Over the course of a season, that could total $3 million.

Rossford officials said in January that the deal with the Red Wings was being renegotiated to improve the penalty agreement.

Mr. Langevin said the penalties had been eliminated entirely. “They are very supportive,” he said. “They’ve said that whatever we need, they’d help on. Except for giving us $47 million, of course.”

Representatives of the Red Wings and Olympia could not be reached for interviews, but Mark Corey, group vice president for Olympia, issued a statement through a spokeswoman.

“We were not aware it’s for sale, but we are keeping the lines of communication open with the city,” he said. “We are aware that they are searching for financing alternatives and are hopeful that they will be successful.”

So are Rossford officials, who haven’t given up hope. They acknowledge that things haven’t gone the way they planned.

“I’ve certainly learned a lot from this,” Mr. Zuchowski, the Rossford mayor, said. “A lot of things were prematurely announced, and it didn’t happen. We weren’t able to get the financing together.”

He said that the pressure to have an arena open for this winter’s hockey season forced Rossford to rush into things and move too quickly.

“That’s the mistake we made, letting the deadline dictate how we do things,” he said.

Some things, he said, were done out of the proper sequence: “We shouldn’t have started construction until we got financing.”

Mr. Zuchowski hopes that Wood County or the state of Ohio might be convinced to contribute backing for the project, although the county commissioners have publicly indicated they do not intend to risk their excellent bond rating or reserves on the project. He said the project needs to be “regionalized” and draw upon the resources of something bigger than his small city and the township.

The mayor said that getting Rossford and township taxpayers to back the issue with their own money is still possible.

Meanwhile, development at Crossroads of America is continuing, with construction already under way on a shopping center. More retail development is in the works, along with long-term plans for a movie theater complex and hotels.

“The ironic part of this is that the arena and amphitheater were supposed to be the magnets to draw development,” Mr. Langevin said. “But the development is coming anyway.”

Mr. Zuchowski said Rossford has learned its lessons.

“We’re making a more disciplined effort at putting baby steps together,” the mayor said.”We’ve got nothing to report at this time. We’re still trying, still working hard, and hopefully we’ll be able to announce something soon.”