Timeline of contract negotiations for use of Edge Ice Arena

The Executive Director of Foothills Park & Recreation District (FHPRD), Ronald Hopp, was contacted on February 14, 2020 by a person affiliated with Littleton Hockey Association (LHA).  They represented LHA was informed by South Suburban Parks and Recreation District (SSPRD) they were not going to be part of the new ice arena being built.  They inquired if we would be willing to meet to discuss the possibility of providing ice to LHA at the Edge.  Of course, we were willing to meet to discuss this opportunity, and the Executive Director directed the management of the Edge to explore this possibility.
Over the next week, staff met with leadership of LHA to discuss the feasibility of providing ice hours.  This due diligence process included determining what their needs were, as well as evaluating our current primary tenant, Foothills Hockey Association (FHA), and comparing and contrasting the pros and cons of continuing to work with FHA versus potentially changing to LHA as the primary tenant.  The District had concerns related to FHA’s declining ice hour usage, poor communication, organizational fiscal stability, timeliness of payments, negative feedback about the organization, and our perceptions of a lack of opportunities for enhanced growth from recreational users from the District and lack of potential viable growth. Based on our due diligence, we did not have these concerns with LHA.
In addition to our evaluation of both organizations, LHA expressed a strong desire to commit to a long-term contract at a higher ice rental rate and guaranteed terms.  The guarantee was especially attractive to our team as we had been experiencing a reduction with FHA in ice use hours for leagues and practices over the past four years.  The bottom line for us, we were concerned about FHA’s multi-year declining usage and the impact that was having on the District both for users of our facilities and financially.  The Edge is one of the District’s greatest assets in terms of revenue generation.  If we did not act to ensure its continued viability, including maximizing revenues, we would be doing our 93,000 District residents a disservice by not exploring this opportunity.
With these thoughts in mind, we evaluated the financials based upon our preliminary discussions about the number of potential hours that LHA requested.  We compared the increased number of ice hours at a higher rate, and we also forecasted the impacts on other services at the Edge like the Penalty Box, Performance Training, other program utilization, blade sharpening, etc.  These additional forecasts were based upon a presumption of increased numbers of people at the Edge and the anticipated increased utilization of these services.  Based upon these projections, this equates to between $2.5 and $3 million dollars over the next decade in ice hour rental alone, and with the other aforementioned revenue streams included, a total of $4.5 to $5.0 million in potential additional revenue over the 10-year agreement.
The District as a whole derives 43% of its revenues from property taxes through a mill levy imposed on the assessed valuation on the property of District Residents.  An additional 5% of the revenues are realized from grants and other taxes and the remaining 52% of revenues is derived from earned income like programming revenue, rentals and user fees.  As a result of revenues being generated by different types of uses and programs, every facility and program area varies and some facilities require more tax subsidy than other facilities, or don’t require any tax dollars to operate.  In the case of the Edge, the revenues generated from the utilization of the various revenue streams are higher than the funds required to operate the building as a whole.  Therefore, the Edge requires no tax dollars to fund its operation and the net revenue is used for other areas of the District that require a subsidy to operate like parks, trails and swimming pools.  Additionally, the operational costs of the Edge specifically continue to go up every year.  To demonstrate, in 2015, the Edge netted $654,876 in operational revenues, after the allocation of maintenance and administrative costs.  Because of static revenue and increasing operational costs, the operational net revenue has shrunk to approximately $393,000 in 2019 and is expected to continue to decrease. Creating additional sustainable revenue streams is important to the District and all of the taxpayers of the District.
With these estimates of revenue and the other information we gathered, staff presented the information as Contract Negotiations to the FHPRD Board of Directors during an executive session on February 25.  Subsequent to the conclusion of the executive session, the staff proceeded pursuant to plan.
In the ensuing days, discussions with LHA increased.  LHA was highly motivated to secure ice time for their 800+ members, and presented the District with a non-binding Letter Of Intent that addressed the general terms that both parties agreed would be the basis for an agreement if both parties decided it would be feasible to continue discussions. The LOI was executed on March 2.  From there, we negotiated a contract with LHA.  The number of hours initially discussed with the Board, based upon our conversations to that date with LHA, were 1,988 guaranteed hours annually.  During the next several days, our discussions ranged from 1,600 to 2,100 hours.  Knowing that staff presented 1,988 to the Board, we were focused on trying to negotiate to that number.  We were able to negotiate 1,950 hours, and offered other revenue streams such as logos in the ice and office space that would make up some of the difference. Once the 1,950 ice hours annually with a ten-year guarantee and other core terms were agreed upon, lawyers from both entities worked through finalizing the agreement, and it was executed on March 5, 2020.
The prior day, March 4, three of our staff members met with leadership with FHA and informed them that we would no longer be allocating ice to FHA, and we gave them notice to end the lease of the office space at the Edge.
At the March 10 FHPRD Board meeting, the Board listened to impassioned families and young hockey players for over three hours. It became increasingly obvious that District staff should have handled this differently regarding communication with our long-term tenant FHA. During that meeting, several Board members offered their sincere apologies.  In a face-to-face meeting with Don and Gabe on March 12, the Executive Director directly apologized to them as well.  The apologies have continued as part of continuing discussions and responses to FHA individuals in emails and on social media. Even with this fast-moving development, the District should have engaged in conversations with FHA and given them the opportunity to provide a counter or matching proposal. However, we did not out of a sincere belief that there was, essentially, no likelihood FHA would be able to match LHA.  Again, FHA’s usage had been steeply declining for several years, it was paying a lower rental rate, and it has only a fraction of the teams compare to LHA. The District sincerely believes that even if we had given FHA an opportunity to make a proposal, we would have come to the same conclusion.
Immediately after the March 10 meeting, which included an executive session, the Board gave the Executive Director direction to try to make something work and get FHA hours back at the Edge.  Given that we were already under contract with LHA for 1,950 hours, there was not the simple option of giving the hours back to FHA because ice time is a limited resource. This was a complicated task that would require many steps and nuanced discussions with both FHA and LHA.  The first discussions were had with a face-to-face meeting with FHA leadership. Through that meeting and follow-up e-mails, FHA advised that the maximum hours they could use would be roughly 1,000 (which would have been the same total usage from the prior year), and that they had hopes of bringing Junior Hockey to the Edge in the future that would perhaps generate another 1,000 hours.  We believe the Junior Hockey option is highly speculative and does not promote the youth hockey options promoted by the District and lauded by FHA. Speaking frankly, this confirmed that FHA could not have matched the hours and revenue provided by LHA. In a later e-mail, FHA President Don Codner stated that they needed 40% of their total ice time to be at the Edge in order to consider the Edge their “home.”  We projected the target 40% range would be somewhere between 260 hours (for team practices and league games) and 400 hours (if tournaments are added to practices and games).
From there, except for updates provided to FHA, discussions turned to LHA since the District needed to ask LHA to give back contractually allocated ice time.  As a result, we met with LHA on several occasions primarily via telephone and Zoom conferences to limit in-person meetings due to COVID-19. Hundreds of hours were spent related to these discussions: staff-to-staff, lawyer-to-lawyer, board-to-board, FHPRD Board-to-constituent and combinations of all of these participants.  We also spoke with Colorado Amateur Hockey Association (CAHA) to gain assurances that statewide regulations would not be an impediment to any deal that could be structured.  We were advised they will not.  Also, although under no obligation to do so, we had direct and indirect communications with other arenas to ascertain the availability of ice hours elsewhere for FHA.  It is available. To everyone’s frustration, but borne of absolute necessity, this process took several weeks because of the number of moving parts.
After weeks of discussions, on April 23, LHA agreed to reduce their contracted guaranteed hours from 1,950 to 1,750 for the purpose of providing ice time to FHA.  Having secured that commitment, the District then got to work evaluating potential internal programming adjustments. Understanding that all internal adjustments displaced other youth participants, those adjustments were not easy.  However, through other sacrifices within the Edge ice schedule, the District identified an additional 150 hours for use by FHA at the Edge.  We successfully executed an amendment to the LHA agreement that formally reduces its hours so that we can offer them back to FHA.
We offered 350 hours to FHA leadership on Saturday, April 25 to be used towards leagues and practices.  This represents about 53% of the ice hours used by FHA for leagues and practices this past season, and more than satisfies the “home viability” FHA stated it needed.  We presume FHA would need to secure additional hours at different rink(s) for remaining ice time needs, including games, practices and tournaments. We provided a contract for 350 annual hours for 10 years to FHA for their consideration on April 30. On May 14, FHA responded to the contract with a redlined version and the District responded with an updated contract on May 18.  FHA responded with additional comments on May 22, and the District provided a final contract for execution on May 23.  The District is committed to having the contract with FHA finalized and signed before its Board meeting on May 26, and has communicated that to FHA.  FHA’s comments have not deviated from the 350 annual hours, but have questioned and commented on other contractual terms.  The structure is in place to have FHA participants back in the Edge as their “home” ice.

Update #1:  The District did not hear from FHA prior to the May 26 Board meeting as required.

Update #2:  On May 28, the District received correspondence from FHA about the agreement. Despite being past the May 26 deadline, the District agreed to consider entering into the agreement and requested a response by 9:00 p.m. on Friday, May 29. The District received a signed agreement from FHA on May 29; and it executed and provided the finalized agreement on June 3. The District looks forward to working with FHA in the future.

Frequently Asked Questions 

Are FHA and FHPRD affiliated organizations?  Despite the shared word “Foothills” in the name of each entity, the Foothills Hockey Association is an external user group that is not affiliated with FHPRD and has historically rented ice time from the District for leagues and tournaments.  The association played at the Foothills Ice Arena (not an FHPRD facility) prior to moving to the Edge Ice Arena.
Why was FHA informed they would not be allocated ice time at the Edge and how long was their ice rental contract with the District? FHA did not have a long-term ice rental agreement with the District.  FHA was on a year to year contract that either side could elect not to renew.  This arrangement is not unusual and allows organizations flexibility.  In years past, FHA was allocated ice time as part of the District’s annual ice allocation process, which distributes ice time to various user groups by June.  This provides all external programs such as FHA, an opportunity to find ice elsewhere if the District is unable to meet their needs.  As a result of the ice rental agreement with LHA, FHA was informed that ice time would not be allocated to their association for the 2020-21 season.
Why did the District make the decision to enter into a contract with LHA if it meant FHA would no longer have access to ice time at the Edge?  FHA has experienced a decline in numbers over the last several years. During the 2016-17 season, they had approximately 330 members and 12 total teams. By the 2019-20 season, their number of participants had decreased to approximately 200 members with 8 total teams. With the decline in the number of members and the number of teams, the annual hours of utilization for leagues and associated practices fell from 1,230.5 hours in 2016-17 to 655.75 in 2019-20, nearly a 50% reduction in four years.  FHA’s total ice usage for 2019 was 1,009 hours, which included tournaments.  Some ice time allocated to FHA over the past three years has either been given back or remained in FHA’s possession but has not been used which directly impacts the Edge and its ability to operate and maximize usage.  In fact, in the past three years FHA has paid for ice rental fees in the amount of approximately $36,000 without using it.  Table 1 demonstrates league ice allocation and associated changes by FHA over the past four hockey league seasons.  Table 2 includes the tournament hours used by FHA over the same four years.
Table 1
Table 2
In addition to the decreasing annual need for ice time, FHA offered limited spring and summer programming which limits the District’s ability to maximize revenues during those months. Additionally, FHA at times was unable to provide timely invoice payments to FHPRD, lacked opportunities for enhanced growth from recreational users from the District and generally lacked potential viable growth.
LHA is currently comprised of more than 800 players and over 50 teams and provides more opportunities for children in our District and surrounding areas to play, including both recreational leagues for multiple age groups and leagues that offer a more competitive level of play. They plan to offer year-round programming at the facility and have committed to running both spring and summer programming.  LHA has committed to paying a significantly higher hourly rate for ice time; and they were willing to contract for an original guaranteed minimum of 1,950 hours of ice time per year.  In addition to these benefits, the District anticipates that with the higher number of ice rental hours that foot traffic in the facility will  increase, and will result in higher demand for the additional program and service offerings the District provides at the Edge. While the District anticipates an increase in revenue from these other sources, the final decision was driven by the increase in ice rental revenue and the increased breadth of opportunities that LHA will provide to residents of the District.
Why did FHA never get an option to match the new contract by LHA?  When the business opportunity was presented to the District, staff evaluated many factors as they relate to the current user of ice, FHA, and the potential of the new user of ice, LHA.  As a result of the evaluation, there was a sincere belief that there was, essentially, no likelihood FHA would be able to match the contract with LHA.  Therefore, FHA was not provided an opportunity to make a competitive offer.  The way this was handled was a mistake, one which both the Board and District management team acknowledge and have apologized numerous times publicly and privately.
Was this a decision made by the Board of Directors or staff? This was an operational decision made by staff members of the District and did not require Board approval. However, the Board was briefed in February during executive session and in advance of the final decision. They did not object at that time.
How much additional revenue is anticipated with the new agreement and who will benefit from the increased revenue?  The new agreement is anticipated to generate approximately $294,000 of additional ice rental revenue on an annual basis as a result of the higher number of guaranteed hours and the higher hourly rental fees. In addition, with the expected increase in foot traffic in the arena, it is estimated that the District could experience revenue growth for other programming and services offered at the arena of $150,000 – $200,000 annually. Based upon these projections, this equates to between $2.5 and $3 million dollars over the next decade in ice hour rental alone, and with other programming and service revenue streams included, a total of $4.5 to $5.0 million in potential additional revenue over the 10-year agreement.
With the reduction of contracted hours with LHA from 1,950 to 1,750, and the potential of FHA contracting 350 hours at the same hourly rate, the anticipated revenue does not change.  FHPRD’s general budget will see a positive impact from the increased revenue, which reduces reliance on property tax funding and benefits all District residents and patrons.
Of course, the District would also have some incremental costs associated with the revenue increase. These would consist of primarily wages for the additional services, and food and beverage costs associated with increased sales at the Penalty Box, however, the District is confident that after these additional costs, the net bottom line impact of the LHA contract would be of significant financial benefit.
How does FHPRD expect to realize the revenue? With the amendment to the intial agreement, LHA has guaranteed a yearly minimum use of 1,750 hours at a higher hourly rental rate than what FHA was paying.  With FHA expected to contract for 350 hours at the higher rate, the revenue projections will not change.  This guaranteed revenue at a higher rental rate benefits FHPRD’s overall budget. In addition, it is expected that with increased hours of use there will be increased participation in other activities at the Edge, like public skating, learn to skate/play, the Penalty Box, Edge Performance Training, etc.
Director Tim W. James, Board of Directors Treasurer,  has conducted a thorough analysis of the ice hours from both entities and the related revenue projections.  His analysis and opinion can be viewed here.
Is there a requirement for FHPRD to seek a Request for Proposal before entering into this type of agreement? There is no requirement for a Request for Proposal for facility user groups. The Board intends to examine this topic in future meetings and will consider adding a policy which would include Board involvement in such financially substantial decisions in the future.
Can FHPRD legally enter into a multi-year agreement?  Yes. This agreement and the process under which it was reached conforms to Colorado law.
There have been allegations of corruption within the District.  Are any individuals on the board or in management benefiting from this move? No, none of the FHPRD Board members or staff will benefit personally or financially from this move. Allegations of corruption at the District have been taken seriously and investigated.  We have requested evidence from everyone who has raised such allegations, and none has been provided.  To be very clear, there is no evidence of corruption or self-dealing by any District employee or Board member. Nothing was done illegally and there is no concern of jeopardizing tax funds. This was a revenue enhancing decision which enables taxpayer dollars to be spent in other areas, including capital projects, and other important subsidized facility and program areas. The LHA contract and the process under which it was negotiated conforms to Colorado law. The Board has been working closely with District management to find a solution to the problem. As a result of this direct involvement, the Board has concluded there was no ulterior motive for the decision, nothing nefarious that influenced the decision, and the Board has no concerns about the integrity of District management. While the FHPRD Board and staff fully realize and accept the mistake in handling this process (not notifying FHA prior to the agreement with LHA), it is a sound and prudent financial decision.
This decision was made based on the fact that LHA could guarantee a minimum of 1,950 ice rental hours per year (which is nearly double the amount that FHA had requested for the upcoming season), and the fact that LHA offers a wider breadth of opportunities for District residents to participate in hockey programs because they have a larger number of teams at various levels of play from recreational to competitive. All citizens of the District and patrons of FHPRD will be beneficiaries of the new contract due to the increased revenue that supports the overall budget of all FHPRD programs, facilities, parks and trails.
If LHA attempted to recruit FHA players, was anyone aware that recruiting goes against CAHA and CCYHL bylaws? FHPRD has no knowledge of LHA attempting to recruit FHA players.  Any bylaw violations need to be addressed with CAHA or CCYHL.  FHPRD has no governance over CAHA and CCYHL bylaws.
Was FHPRD involved in the letter LHA sent out to their families about the new agreement prior to having a conversation with FHA? LHA’s letter to its member families was dated March 8, after FHA was provided notice that ice time would not be made available to them in the 2020-21 season.  FHPRD did not write the letter, did not contribute to its content and LHA did not give us an opportunity to offer comments on it before it was sent.  FHPRD does not regulate the communication of any external user group with its members.
Why would LHA be under the impression that FHPRD will be building a third sheet of ice?  It has been a long standing request of many entities and individuals who utilize the Edge to build a third sheet of ice.  FHPRD’s Vision 2030 Master Plan outlines the need for a third sheet of ice as a community gap and need (page 23). No promises have been made to any organization or individual regarding a third sheet of ice at the Edge Ice Arena, and there is no current plan or funding for the addition of a third sheet of ice.
Why was the LHA contract confidential? Originally, there was a confidentiality clause in the contract, however, LHA has waived the confidentially clause and the contract has been made public.
Can LHA back out of the agreement and return to a different facility?  The agreement entered into between the District and LHA guarantees a minimum use of 1,750 hours of ice time.  LHA cannot back out of the agreement and the guaranteed hours committed to in the agreement without a material breach of the contract and the resulting financial exposure to LHA.
After the March 10, 2020 FHPRD Board meeting, the Board members agreed that something needed to be done to assist FHA to continue using the Edge. Why is FHPRD still under a 10-year contract with LHA? FHPRD signed a legally binding contract with LHA for the next 10 years. There would be significant legal and monetary consequences to the District if the terms of the contract with LHA were violated, which means the District cannot simply cancel the LHA contract.
Why can’t the District provide more ice hours to FHA?  The District has a binding contract with LHA and it provides, in part, an allocation of useful ice time.  FHPRD has only two sheets of ice, so it is a limited resource.  Our ability to provide LHA with its contractual allocation of useful ice time, and provide ice time for other FHPRD programming, has a significant impact on the current situation since there is a limited supply of useful ice hours at the Edge Ice Arena.
What is the Board doing about this situation to help FHA?  The Board cares deeply about the community and the various user groups who participate in District programs and activities provided at our facilities.  The Board of Directors recognize this decision has had a major negative impact on the families of FHA members and directed District management to work toward a solution that would accommodate both LHA and FHA. Management worked tirelessly with LHA and other users of the Edge Ice Arena to find a solution.  The Board has been involved in this process, even participating directly in discussions with LHA about the possibility of LHA taking a lower number of hours so that the District can accommodate the needs of FHA.  In addition, the Board has had continuous and extensive communication about the matter with District management.  As a result of this process, the District was able to negotiate with LHA on the initial contract, and LHA agreed to change their commitment of hours from 1,950 to 1,750 annually, to help FHA continue to have a presence at the Edge.  Through other sacrifices within the Edge ice schedule, the District identified an additional 150 hours for use by FHA at the Edge and as a result, the District has offered a total of 350 annual hours to FHA to be used for associated activities. We provided a contract to FHA on April 30 for their consideration.  The District is currently negotiating the terms of an agreement for the rental of the hours identified with FHA.      
How is the FHPRD Board elected? Are any board members ever appointed? There are five Board members that represent the whole District. They are elected from five different geographical Wards and the Board members’ terms are staggered.  Elections are held in May, when necessary, preceded by a self-nomination process.  Each Board member is elected by eligible electors in their specific Ward.  In the event a Board member leaves the Board for any reason prior to the expiration of their term, state statute outlines the process used to appoint a replacement.  Beyond state law, the District takes additional steps to ensure a transparent and public process. A notice is published seeking self-nominations from individuals seeking to be selected to fulfill the unexpired term and the other remaining Board members develop a process to select the replacement. The new Board member is sworn in and completes the remainder of the term.   District’s management and staff do not “hand pick” Board members.
Does the Executive Director monitor the Board’s emails? The current process that is being utilized was developed in coordination with the current members of the Board in August 2016, and operates as follows:  Each Board member is assigned a Foothills District email address when elected or appointed to the Board.  Any emails sent to a Board member are received by the Executive Director who then shares the email with the Board member, and collectively they confer about how to address the concern or comment. Often times, the Board member asks the Executive Director to respond on their behalf and address the issue, and sometimes the Board member will provide a response for the Executive Director to send back to the citizen. Board members also have the opportunity to set up their Foothills email on their own devices and respond directly if they so choose. This process encourages transparency among Board members and ensures responses to critical concerns brought up by constituents.
The Executive Director discussed at the March 10, 2020 Board meeting that it was necessary to increase revenues at a facility like the Edge to assist with the overall financial condition of the District.  How does increasing the net revenue at the Edge help and does the net revenue of the Edge cover future maintenance projections?  The District relies mainly on fees from operations and the collection of property taxes to meet its general operating needs. Over time, the cost of operating the District increases due to inflationary pressure.  In addition, the District has a 2.75 mill operating mill levy with a 2026 sunset provision.  The sunset of this mill levy in 2026 will have a negative budget impact of more than $3.0 million on an annual basis.  To meet our current operating budget, and in anticipation of financial challenges in the future, the District does everything in its power to maximize revenue from revenue producing facilities.  All of the District’s revenue producing facilities, including golf courses, ice arena, and other indoor sports facilities contribute to “covering” the operating costs of the District.
How many Foothills District residents are members in each of the associations? The Edge Ice Arena is a regional attraction and hockey associations who utilize the facility attract participation from all over the Denver metro area.  Players are free to play for any association such as FHA or LHA regardless of where they live and families consider much more than the geographic location of a facility when choosing a hockey association.  Residents of the District participate in Learn to Skate and Learn to Play Hockey programs at the Edge and as they seek out hockey leagues and programs, they will likely join programs at the Edge Ice Arena.
Is the Edge Ice Arena supported with taxpayer dollars? The District as a whole derives 43% of its revenues from property taxes through a mill levy imposed on the assessed valuation on the property of District residents.  An additional 5% of the revenues are realized from grants and other taxes and the remaining 52% of revenues is derived from earned income like programming revenue, rentals and user fees.  As a result of revenues being generated by different types of uses and programs, every facility and program area varies and some facilities require more tax subsidy than other facilities, or don’t require any tax dollars to operate.  In the case of the Edge Ice Arena, the revenues generated from the utilization of the various revenue streams are higher than the funds required to operate the building as a whole.  Therefore, the Edge Ice Arena requires no tax dollars to fund its operation and the net revenue is used for other areas of the District that require a subsidy to operate like parks, trails and swimming pools.
How was the construction of the Edge Ice Arena financed? The District utilizes a variety of financing sources to generate funding for the construction of facilities.  Certificates of Participation (COPs) are essentially loans that are collateralized by District facilities and are paid back over an extended period by the District. General Obligation bonds are bonds that require a vote by the District’s residents and are paid back through property tax payments by District residents over a long period.  In part because of the regional nature of the arena, the construction of the Edge Ice Arena was financed with COPs, and the payments of the loan were made with the revenues generated from the facility operations.  It was not funded with a General Obligation bond nor any other property tax increase for District residents.

Have a question?  Email us at info@fhprd.org