Work on Rochester sports complex could outpace legislative action

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Dec. 31—ROCHESTER — An updated construction contract for Rochester's planned sports and recreation complex is slated to be ready for signatures within the first days of 2026.

"The fully executed Knutson (Construction) contract amendment will essentially commit the funds for construction and construction purchases," City Administrator Alison Zelms said of a nearly $28 million contract amendment approved by the Rochester City Council.

The Dec. 8 approval, which was reaffirmed with a Dec. 22 veto override, also included $24.2 million for the purchase of tax-exempt materials.

With $52.2 million approved for construction, the city has already spent nearly $8 million on purchasing the land and developing site plans.

Also set for anticipated signatures in early January is an operator's agreement with California-based Sports Academy, which is expected to call for roughly $803,000 in management and general compensation in the first year, along with the estimated potential for $283,000 in management fees and incentives.

A pro forma provided by Sports Academy estimates the facility could generate $200,000 in earnings beyond expenses in the first year, with earnings after expected projected to increase to $1 million or more in following years.

The final contract details come as a legislative warning lingers, with four Rochester lawmakers threatening that they will consider legislation to revoke authorization to extend the Local Option Sales Tax, which made way for the local vote to provide $65 million for the sports complex, as well as $140 million for other projects.

The lawmakers stated they believe the proposed complex doesn't reflect what voters expected when the sales tax extension was approved, since the allowed $65 million budget isn't enough to cover the cost of an indoor and outdoor facility proposed as a concept before the 2023 vote.

The vote was taken without specific plans in place, asking voters to approve the tax extension based on a concept, which initially proposed indoor and outdoor facilities to draw regional sports activity, with community uses planned during weekdays.

"Rochester residents deserve to get what they paid and voted for," the Rochester DFL lawmakers — Sen. Liz Boldon, Rep. Kim Hicks, Rep. Tina Liebling and Rep. Andy Smith — wrote in a Dec. 18 statement, days before the City Council voted to override Mayor Kim Norton's veto of planned contracts. "The updated plan for the sports complex no longer serves the best interests of Rochester residents. Rather, it serves a narrow set of special interests and ignores the community's need for indoor recreation space — the very reason voters approved the project in the first place."

Hicks said the proposed revocation would be limited to unspent sales tax funds for the sports complex, but she has not defined how the funds would be calculated or how the legislative action could affect the city budget.

"There's no desire to hurt the citizens of Rochester," she said. "We are citizens of Rochester as well."

Hicks, who initially proposed revoking the tax authorization in July 2025, said she doesn't expect the sales tax funds will be fully committed by the time any legislation is passed in mid-2026, pointing to a potential June signing, after the Legislature adjourns in mid-May.

By that time, construction on the project is scheduled to be underway in southeast Rochester.

Zelms said the project's design team continues working on plans for the site near St. Bridgets Road and 45th Street Southeast, with a site development plan application and final plat application submitted on Dec. 23.

The goal is to have all permits in place for construction to start in April.

The city administrator said she cannot speculate how the proposed state action could affect the project down the line, but work continues as planned.

"We are not aware of a legal basis to reverse a voter-approved local options sales tax project, with funds already collected and committed," she said.

She also said actions resulting in the need to cancel existing contracts could result in legal claims against the city.

According to the city's 2025 audit, roughly $15.4 million was collected in 2024 through the city's 2023 sales tax extension.

Zelms said sales tax revenue for 2025 is similar to what was seen in 2024. At that rate, the authorized $205 million could be collected within 14 years, rather than the 24 allowed by voters.

The ballot question that set aside $65 million in sales tax for the sports and recreation complex also provided $50 million for an economic vitality fund, $50 million for street reconstruction and $40 million for flood control and water quality efforts.

As work on the sports complex moves forward, Zelms said city staff and elected leaders continue work to address gaps in access to sports and recreation opportunities, which have been highlighted by the local legislators and community members critical of the project.

Work involves collaborating with Rochester Community Education and other partners to engage residents and help connect people to existing opportunities.

"As part of these efforts, the city is working closely with Rochester Community and Technical College, building on a strong 30-year partnership to expand access and programming within existing facilities while exploring options for additional indoor space," she said.

With the work ongoing, Zelms said she hopes to have more details available for City Council members by the time the city needs to propose local financing for the sports complex, which is expected to be in the first half of 2026.

Plans call for issuing bonds to cover the bulk of the anticipated $52.2 million construction expenses, with sales tax funds being used to cover future payments and interest.

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