XL CENTER FUTURE UNSETTLED, STATE APPROVES FUNDING 

By: Gerry Cantlon, Howlings

HARTFORD, CT – The future of the XL Center is finally at hand.

The Capital Regional Development Corporation (CRDA) is the state quasi-public agency with the unenviable task of having the XL Center as part of its portfolio. Its Executive Director, Michael W. Freimuth, said there is light at the end of the tunnel. Is that light a mirage, a locomotive heading straight at them, or the answer to an eight-year prayer?

After months of wrangling, a legislative deal has been struck, but it doesn’t spell certain victory.

“For the first time, we’re in the room, and we have made more progress than we have ever made,” Freimuth said.

Under two different governors over an eight-year cycle, the CRDA has been trying to secure legislative funding for a large-scale repair and upgrade of the XL Center into a 21st-century facility to compete in a competitive marketplace.

“If the budget (for the renovation) comes in too high, none of this is going forward,” Freimuth told the entire session of the CRDA venue committee during its monthly meeting several weeks ago. “If the budget comes in line, we can hopefully secure the OVG (Oak View Group) arrangement to invest in a long-term lease arrangement.”

Freimuth still strikes a cautionary tone as several hurdles must be cleared before celebrating.

“Two things have been reached. The state commitment of the funds and the state has authorized the CRDA to enter into a public/private partnership (with OVD when a deal has been reached) have been accomplished.”

A deal is still under negotiations with OVG.

“Three things have to occur. First, lock in the (renovation) budget. Second, complete a new CRDA-to-city agreement that agreement expires in six years, and we’re already starting work on that now. Third, a CRDA/OVG public-private partnership agreement has to be agreed to. That was approved last week. It’s all a blur to me. I’ve spent four nights in Hartford,” Freimuth said.

An exhausted Freimuth added, “Section 420:212 of the state budget if you’re so inclined to comb through the budget. That will likely be converted into statutory language by a lawyer somewhere near some gallows.

“It allows us to go forth with OVG that they will get control of the building for x number of years (20 is still the target) in exchange for their investment (pegged at some $20 million.

“It allows OVG to run the building, but they have to handle the losses of the building ($2.5-$3M per year) and handle the upside to investing in the building, and the contract will have to contain some performance clauses.

“That’s where we get in the minutiae of the details; the devil of the details. He’s gonna have some fun with this for a while,” remarked Freimuth.

Conservatively, the building loses two-to-three million a year. Over 20 years which becomes a $60 million loss on a $20 million investment. Is that worth it in the framework of OVG’s national and international footprint?

Freimuth elaborated, “Those are the three exercises we must do. The state has committed to $80 million ($51.1B state budget), and OVG has to do the $20 million that hits the $100 million bucket we need.”

In this recent budget, the state authorized up to $80 million. OVG has (Governor requires to commit the bonding) to kick in that $20M really puts us where we need to be. OVG would have to cover any annual operating losses but get to keep the first $4 million in yearly profits (there haven’t been any in the last ten years). OVG and the Capital Region Development Authority would split any additional profit evenly.

“The agreement has to coincide with an OVG agreement. We have to go to city hall to amend the agreement. The second part and the most critical is to get this on the street and get real world construction prices based in today’s market.”

The bids on the new set of numbers $107.2M that hold the XL Center’s future in the palm of their hands are set to be sent out very shortly. They are expected in the early fall when the CRDA will announce the results.

During any OVG lease, equipment or other personal property added to the arena will be considered state-owned and not subject to taxation. It’s a thorny issue with so many other buildings within the city having tax-exempt status. The state will not compensate any operator, OVG, or any other entity with a payment instead of taxes that will be required.

If that’s a deal breaker for OVG, time will tell.

The fall time frame will be just before the UCONN men’s and women’s hoops programs begin playing and a contract of undetermined length and scope of dates. Then add UCONN Hockey East, non-conference opponents, and a yet-to-be-negotiated OVG and UCONN contract. That has to be done face-to-face with no third parties this year.

The Wolf Pack will start their 27th season in Hart City as expected in a yet-to-be-announced agreement. MSG picked up its option as per the contract to the tune of $1.325M next season, as state money will foot this bill too.

All eyes are on those renovation contracts and the number $107.2M.

“We hope we get it close to the $107.2M number. If it’s in that range, the project is a go. If its $25 million over, we have to walk away and go back to the drawing board. Can we leave some elements off the shelf and not include them now, maybe an option, “comments Freimuth, who off-handedly said if “that happens, I might put in my retirement papers that afternoon,” commented  Freimuth after eight-long years of wrestling this bear.

“We think we have good estimates, and we have built some contingencies in there in the budget for a little wiggle room there. The supply chain and the construction world out there is very fluid. If it comes in, for argument’s sake, at $125 million, we’ll have to say this can’t work, and as I said, we’ll have to go back to the drawing board and come up with a solution, whether it’s us or OVG. If it comes in high, on the whole, it’s not ideal.

“There are ways to deal with it, but you can’t run the building the way you want or should. That bid process is critical. It’s a go-or-no-go-thing but allows the parties to say yea or nay.” His comment shows just how determined and relentless Freimuth is on this project.

Freimuth has said the document language is presently being done and reviewed by the lawyers before hitting the street.

“We don’t have the formal date; it might be one big package or in stages. I don’t know yet. I’m making design teams crazy after ten years. Now I need one in a week. They’ll be out late fall then we’ll make a decision.

“Then OVG and the CRDA have to reach that agreement and have it completed. Until that is done, the city agreement has to be done first so they coincide. There are so many moving parts. That agreement’s structure is important and must meet those guidelines over the next three to five months. That’s our second battery of exercises.”

The agreement being hammered out must outline future upgrades, remedies for breach of contract if they occur, and a requirement that the building operator would get from a future contractor for OVG will be furnished an annual, independent audit for the legislative report for the CRDA and the secretary of the governor’s budget office would receive.

The secretary’s approval will also be required for any long-term management agreement between CRDA and OVG. This is the language needed for a public/private partnership.

These are the delicate dance moves Freimuth and his CRDA team are attempting to finesse.

Before striking a deal with OVG, CRDA will also need an agreement with the city of Hartford to extend the lease of the XL Center to the authority.

The CRDA has tried for years to secure funding for a large-scale repair and upgrade of the nearly 50-year-old arena. Lawmakers have rejected a comprehensive $250 million plan it unveiled in 2018 but had approved $40 million for repairs and upgrades in 2017 and are working off that money now. The legislature reluctantly signed off on another $65 million in 2019, a week before the pandemic hit.

Portions of that money have been slowly given out piecemeal over the past few years through the state Bond Commission for work at the XL Center to keep it operating.

The calendar and the clock are ticking.

“If we can get all three things maybe by the end of the year, we can give it a go. Then we start, and we can block off the next two summers to do this properly. Now, we have till July 2025 because it will take 18-24 months to rip this thing (the building) apart and build it back together again (for the lower bowl strategy). The idea is the budget allows us to operate during the sports season and when the place (building) is down for two fiscal years. We are hoping in two years (when the original Spectra deal expires) to transition to OVG management and presumably be finishing up the renovation by that time.”

An OVG no would be another kettle of fish. The CRDA would need to deal with that if it comes to pass and would create a nightmare scenario after all this work.

OVG has operated the XL Center on behalf of the CRDA since late 2021 when it acquired the venue management and hospitality company Spectra, the company previously contracted to manage the XL Center.

OVG assumed it as a successor in handling the last three years of the contract extended by the pandemic.

The state budget contains an unspecified allocation for UCONN to use the XL Center in the non-Northland portions of the building to be negotiated with CRDA in the XL Center.

That’s when all bids will be received, reviewed, and selected or rejected by the CRDA and its venue committee with a provision in place.

Freimuth expects to execute his long-planned “lower bowl strategy” for the XL Center and complete its long, never-ending intractable journey.

The long-running three-year plus Atrium issue with Northland Corporation, the owner of this portion, granted a side deal by the CDA-the forerunner to the CRDA, is still at an impasse.

Work regarding the loading ramp situation has been cordial and amicable between the two.

“That’s another critical area. Shows, now have bigger trucks and more of them. We tested it last year, if one truck gets stuck you could lose a whole show and a whole lot of money. It’s important to both of us and part of the expansion does go over the (property) line controlled by Northland, but it’s our nickel. So far, it’s been an amenable situation so far.”

The Atrium is still at an impasse and not on the front burner.

We’re still a long way from the finish line…

CRDA

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