The lowdown at the ESL Centre, part 2

Here's the second installment on the ESL Centre resulting from my conversation on Wednesday with Jack Driscoll, the chairman of the board that nominally operates the centre. In an ensuing post about the centre, I'll discuss some of the things another Monroe County legislator has discovered about the facility.

The main thrust of this post could be summed up in something Driscoll told me about the centre: "It is in perception publicly owned, but in fact, it is privately owned."

That's right, the ESL Centre isn't owned by MCC or the county of the town of Henrietta or any other public entity. It's instead owned by private investors. And you might be surprised once you find out who those investors are.

To sum up parts of my previous post ... in 1997, a group of hockey enthusiasts formed a not-for-profit entity called the Monroe County Sports Centre Corporation to create and later operate the ESL Centre. The MCSCC decided to locate the building on the Monroe Community College campus; the college would own the land and lease it to the MCSCC.

The MCSCC board then issued tax-exempt bonds, through the County of Monroe Industrial Development Agency, totalling $11 million to build the facility. Driscoll said brokerage houses bought up blocks of the bonds and thereby claimed ownership of the building. The fact that the bonds were tax exempt are key to this storyline. "That made them very good investments if the business worked," Driscoll says.

(For its part, COMIDA has come under fire recently from critics who say it gives unreasonably sweetheart deals on taxes and other breaks to politically-connected companies. COMIDA will also come up in one of my posts this coming week about Frontier Field and the Greater Rochester Outdoor Sports Facility Corporation.)

David Christa's company was hired to construct the ESL Centre. After other people (including Steve Donner and a bunch of outside accountants) unsuccessfully tried to operate the centre, Christa was tabbed for the job. However, that didn't work out either; the facility continued to spiral into debt and, in Driscoll's terms, neared "the precipice of bankruptcy."

Shortly before Driscoll was chosen to serve as president of the MCSCC board, the MCSCC decided to farm out management of the facility to a private company to see if such an arrangement could work any better. The board selected Advanced Arenas, an Illinois-based firm owned largely by a man named Leon Lekai.

Driscoll says Advanced Arenas did a miraculous job of turning the centre's financial fortunes around. At this point, he says, the facility has paid off or restructured all of its debt and actually made a profit of around $300,000, money Driscoll says will now be put toward improvements at the building.

"Advanced Arenas has done a superb job managing the place," Driscoll says. "Without them, there was no way we could have stabilized our finances."

Driscoll says Advanced Arenas receives 7 percent of the facilities gross revenues as payment.

But here's where it gets interesting — and, some might say, unsettling.

Remember how the ESL Centre is owned by the people who hold the building's bonds? Well, guess who currently owns about 70 percent of those bonds ... David Christa and Leon Lekai. Yep, the facility is owned and controlled by the guy who built and tried to manage the building, and the guy whose company now manages the thing.

Driscoll says Lekai and Christa formed a company called Empire Ice LLC to purchase their shares of the bonds and waived payment on the bonds to help the MCSCC. "Without that," Driscoll says, "we would have gone under. We wouldn't have survived."

So why would Lekai and Christa want to invest in a facility that, for a long time, was deeply in debt and defaulting on the bonds the pair purchased? What's in it or them? Because, Driscoll says, the bonds are tax-exempt, which makes them good investments in the long run.

Now, the relationship between Empire Ice (Lekai and Christa) and the MCSCC board — which is still technically charged with operating the centre but does so by employing Lekai's Advanced Arenas — is a little cloudy. It's unclear, at least to me, who works for whom in the relationship.

During the interview, Driscoll said, "The board works for the owners, and the owners and Lekai and Christa." However, later in our conversation, he described a seemingly different picture.

"We (the MCSCC board) have total control, but it is with the tacit agreement of the bondholders (Lekai and Christa)," he says. "If the board wants to do something to the detriment of the bondholders, they (Lekai and Christa) can invoke control by going to the bank (that backs the bonds)."

But whatever form the actual power structure takes, Driscoll says its absolutely working. "The bondholders, the board and (general manager) Ray Maluta are a great team," he says. "We work well together."

But I had to ask a nagging question ... because Lekai owns a portion of the facility itself AS WELL AS the company that operates the building (Advanced Arenas), isn't that a major conflict of interest? Driscoll says no.

"It's a perfectly normal, rational thing to do in business," he says.

I also inquired about whether the MCSCC board meetings are open to the public. Driscoll says they aren't. I'm not sure I agree on this, because to me the board itself is still a public entity because its members are appointed by MCC (a county-owned school), the County Legislature and the county executive.

So, that's the official side of the ESL Centre story. Take from it what you will. In ensuing posts, I'll continue to explore what exactly goes down there.