The Portland Pirates hockey team was losing about $500,000 a year and sought major concessions from the operators of the county-owned Cross Insurance Arena to cover more than half that amount before the team was sold and relocated in May.

The request for changes in the team’s lease came as the arena itself posted a $600,000 operating loss in 2014-2015, just two years after taxpayers approved a $33 million renovation to what was formerly known as the Cumberland County Civic Center.

Overall, Cross Insurance Arena had a $600,000 operating loss in 2014-2015, which doesn't include $1.9 million in annual payments on a bond used to finance the recent renovation. Gordon Chibroski/Staff Photographer Related Headlines Talks progressing on bringing new hockey team to CIA

According to emails obtained by the Portland Press Herald under a Freedom of Access Act request, the Pirates in late April said the team wanted to cut the amount it paid in union fees and other staffing costs, and also sought an increased share of food and beverage sales, to cut its losses by about $290,000 annually. The team and the board that oversees the arena exchanged proposals over the course of a week and eventually narrowed the financial gap over the lease changes, but never reached an agreement. The team announced in early May, just a week after first seeking concessions, that it was being sold to a group of investors who plan to move the American Hockey League franchise to Springfield, Massachusetts.

The departure of the team, which had been the primary tenant at the arena for 23 years, reflects the difficulties in managing a publicly financed venue in an era of changing entertainment tastes. The $33 million renovation, which was completed in February 2014, was a modernization designed to draw new entertainment acts, but the arena has struggled to achieve that goal and has racked up operating losses since reopening. Another hockey team, albeit from a lower-level league, is likely to take the Pirates’ place next year, but the departure of the Pirates blindsided city and even arena officials.

“The trustees did bend over backward to accommodate the team and do so in a way that was financially responsible,” said Neal Pratt, who was one of the trustees instrumental in drafting the lease for the Pirates and was surprised by the team’s departure. “It didn’t work out, and that’s regrettable.”

GOAL TO BREAK EVEN ON HOCKEY

Overall, the arena had a $600,000 operating loss in 2014-2015, the first year after the renovations were completed. That figure doesn’t include $1.9 million in annual payments on the 25-year bond used to finance the renovation. Because the arena has failed to make money since the renovation, the cost of covering the operating loss and bond payments has fallen to county taxpayers. That cost was about $3 million last year, or an average of roughly $30 per household, said Peter Crichton, the county manager.

Members of the arena’s board, who are appointed by the Cumberland County commissioners, have said repeatedly that they didn’t seek to make a lot of money from Pirates’ games, which helped increase the use of the arena on winter nights and also provided foot traffic to downtown Portland restaurants and bars. But their goal was to at least break even on hockey operations.

In 1977, the arena was created by an act of the Legislature to maintain and manage recreation facilities to serve Cumberland County residents. In the first 20 years of its existence, the county contributed about $40,000 a year to its operation, according to county documents. That amount had climbed to $600,000 in 2010, prompting the call for renovations to enhance the venue and draw more acts, while maintaining hockey as the anchor draw.

But entertainment options had changed. When the facility was built, there were only 400 performance arenas in the country, and now there are more than 1,000, according to county documents. Over the same period, the number of shows that a large national act will do in a tour has dropped from 150 to 40, creating more competition for those acts.

The trustees were hoping that a new management company, hired in February 2015, would be able to book more entertainment acts to drive revenue higher and help offset the cost of the renovations. The company, now known as Spectra, has had a hard time integrating the arena into tour schedules after the facility was closed from October 2013 to February 2014 for the renovations. Pratt said 125 dates were booked over the past year, and the projection is for 140 from this July to June 2017.

Crichton, the county manager, said officials hope the arena will book more acts and increase revenues, reducing the amount of operating costs that taxpayers have to cover.

“We’re paying attention to it,” he said. “We are, I think, hopeful about the direction things are going.”

OFFERS AND COUNTEROFFERS

In an effort to keep the Pirates, the county trustees made a final lease offer that would have saved the franchise about $140,000 a year. The Pirates’ final offer was for changes that would have saved the team, through a combination of shifting costs to the arena and increasing the Pirates’ share of revenues, as much as $185,000 a year.

Documents obtained by the Press Herald show that the arena made about $40,000 from hockey operations during the 2015-16 season, about $2,000 more than had been projected. Under the Pirates’ lease negotiated during the renovation, it was expected that the county’s share of hockey revenues would total $538,000 for a 38-game season, but the actual amount was $559,000. Revenues were based on shares of food and beverage sales, advertising and premium-seating ticket sales.

The county’s share of hockey-related expenses in 2015-16, which included labor, utilities and supplies, was $518,352, compared with a projection of $500,000.

Pratt said the trustees had to consider not just the loss from lease changes, but the greater damage to the arena’s bottom line if the Pirates left, including $271,230 in the arena’s share of advertising and premium-seat revenue. That all factored into the trustees’ counteroffer to the Pirates, he said.

“The time frame (for negotiations) was very short,” he said. The offer of changes totaling $140,000 “was pretty substantial,” he said, and the board “didn’t want to have the surgery kill the patient” with an offer that substantially cut the financial benefits to the arena of having the team play there.

The chair of the trustees, Mitchell Berkowitz, previously had said he didn’t know how much money the arena was making from hockey operations at the time he and other board members were negotiating potential lease changes to keep the team in Portland.

The emails indicate that while the parties were discussing a new lease, Ron Cain, the team’s owner, was negotiating with two potential buyers, one of which would have kept the team in Portland. Neither buyer was identified in the emails and officials declined to say who they were.

Cain, contacted Tuesday morning, refused to comment.

But Berkowitz, in an email to Cain on May 3, said the board was considering concessions to help ease “the financial pressure on the team should it be sold to the owner who wishes to keep the team local.” He also said the board’s offer of $140,000 in concessions a year was not final, and that the board would have to conduct a “full and formal review” of lease changes in a meeting.

The Pirates’ final offer was apparently for changes that would have saved the team, through a combination of shifting costs to the arena and increasing the Pirates’ share of revenues, as much as $185,000 a year.

CITY OFFICIALS KEPT INFORMED

Both sides had agreed to extend the original five-year lease, which ran through April 2019, by two years if the financial alterations could be worked out. Although the two sides were just $45,000 apart over financial arrangements, they couldn’t reach an agreement before Cain announced the team had been sold.

Pratt said the trustees were caught off-guard by the sale announcement. He learned of it, Pratt said, in a story on the Press Herald’s website.

The emails suggest that trustees were very concerned about how the public would view any changes to the lease and its efforts to keep the team in Portland. An April 29 news release that was drafted, but apparently never distributed, confirmed that the trustees had been negotiating potential lease changes with Cain and that city officials had been notified about “the general actions currently being taken.”

However, after the sale and departure of the team was announced May 4, Portland Mayor Ethan Strimling complained that he learned of the news from a reporter and that the city might have been able to do something to help keep the team in the city.

Pratt said city officials, specifically the city manager, were notified of the negotiations and the possibility that the team might move, although he said Strimling himself might not have been contacted directly by arena officials.

Strimling said the loss of the team could hurt the local economy. He has since called for changes in how the arena is governed, saying the city’s concerns aren’t being adequately considered by trustees.

The emails also show that trustees were worried about being blamed for the Pirates’ decision to leave Portland.

Pratt emailed Brad Church, the Pirates’ chief operating officer, after the move was announced, asking how team officials would explain the sale and relocation of the team.

“If they are positive, our response will obviously be far different than if they attempt to blame the trustees for the decision,” Pratt wrote, although he said this week the comment was made tongue-in-cheek.

“There will be no blame,” Church replied. “(To) the contrary, my communication will be that the relationship has been nothing but positive and all efforts were explored by both sides to retain the team.”

The emails and financial details about the arena’s hockey-related finances were sought by the Press Herald with a formal Freedom of Access Act request that was filed on May 10. Trustees supplied the emails Monday, more than a month later, after the paper paid $175 to cover what the trustees estimated would be the costs incurred in gathering the material.

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