Renovation of CT arena will need to downsize as costs spike

A major renovation of Hartford’s XL Center would cost tens of millions of dollars more than an estimate of $107 million, throwing into uncertainty a long-debated makeover of the aging arena and likely forcing another downsizing.

Five months ago, the Capital Region Development Authority sought bids for what the already-downsized renovation of the sports and entertainment arena would actually cost. Since then, an analysis by the quasi-public CRDA of the bids — covering the individual components of the project — came in at more than $140 million. That’s not only well above the estimate, but also the state funding and private investment are tentatively in place to finance the renovation.

“The dilemma is this: we can spend the $100 million and just make a lot of repairs and not have much to show for it,” Michael W. Freimuth, executive director of CRDA, which oversees the arena’s operations, said. “We can do a lot of sexy things and not do basic repairs. Then the elevator stops and then it’s ‘What did you do?’ We’re kind of between a rock and a hard place.”

Freimuth said the $140 million is clearly a “nonstarter.” But Freimuth said he believes the project could be trimmed down to $125 million, making some deep cuts without sacrificing what is needed to make the venue profitable, critical to securing the private investment.

“I think we’re close, but we’re not there,” Freimuth said.

The approach would require a new set of bids, as required under the state’s procurement rules, Freimuth said. A decision would be pushed out until June and it’s not certain, even then, if the project will go forward. If it did, renovations would potentially get underway in the fall.

If the next set of bids comes close to the $125 million, the project may still require additional money, perhaps from the local corporate community.

Freimuth said if the bids are again too high, the venue may be forced to continue to “muddle through” as it has, making repairs in “band-aid” fashion.

CRDA’s board of directors at their monthly meeting Thursday were supportive of pursuing another round of bids,

Board member Andy F. Bessette, chief administrative officer at Travelers Co., said he found support for the renovation among senior state officials to whom he has recently spoken.

“I’d say the mindset is very positive,” Bessette said. “It’s not like they’re saying blow it up or stop it or whatever. I think there is real support in the legislature and above. Everyone understands how important it is to downtown and to Hartford.”

This latest development at the cost of an arena renovation comes after more than a decade of disagreement over the future of the arena, which turns 50 next year.

Opponents of a makeover have long argued that it is too costly for state taxpayers, and the building should eventually be closed. Typically, the venue has lost $2 million a year, more during the pandemic.

Supporters say it is an essential part of downtown’s ecosystem and a regional asset. With an expected shift to less office space and more housing, the arena could emerge with even more importance, as entertainment rises in prominence.

The opening last year of a $5 million sports betting venue at the arena was seen as a prelude to the bigger renovation.

Whittling down

The renovations are aimed at making the XL Center more competitive with new arenas to attract more events; help the venue turn around a money-losing track record and carry it through another two decades.

The current plan — downsized from $250 million a few years ago — concentrates on adding premium seating to the lower half of the arena, which commands higher ticket prices.

The premium seating — includes “loge” seating off the concourse, club space under the stands and “bunker suites” at the event level — plus upgraded concessions are all intended to increase the arena’s revenue.

Technology would also be a priority to better accommodate electronic ticketing, phone app transactions and the heavy social media posting and texting during events.

Whittling down the renovation might mean cutting out the reconfiguration of the loading dock to get trucks connected with shows and concerts in and out more quickly, saving $18 million, Freimuth said.

There might be less premium seating, say, fewer bunker suites, Freimuth said.

Freimuth said technology has to be a priority in whatever form the renovation takes. Upgrades to electrical systems are another must-have to accommodate the ever-increasing needs of shows and concerts, Freimuth said.

Attracting more concerts

The state legislature has approved a total of $80 million in public funding for the renovation in recent years.

Gov. Ned Lamont has supported a significant upgrade to the XL Center, but only with private investment that would ease the burden on state taxpayers who would pick up the largest part of the tab.

Last year, state lawmakers backed a plan that would allow at least $20 million in private investment in the project.

Los Angeles-based Oak View Group, which now runs the day-to-day operations at XL, has expressed a strong interest in investing in the XL Center for nearly two years. OVG has been in negotiations with CRDA over the level of investment.

But for OVG to make that investment, renovations must be made to secure a return on that investment.

OVG has a depth of experience in repositioning sports and entertainment venues. The organization manages 300 sports and entertainment venues globally and develops others.

OVG’s investment is tied strongly to attracting more concerts to the XL Center, events that are large money makers for modern arenas. But to draw more big-name concert bookings, renovations will also have to include relocation of the stage to increase the number of seats that have an unobstructed view of performers; build the overhead structure needed for modern light shows; and retrofit a loading dock at the back of the arena to move shows in and out more quickly.

If OVG agrees to invest, the organization would significantly expand its operations of the arena, including negotiating contracts with major tenants such as the University of Connecticut and paying for the majority of repairs to the building, excluding major big-ticket improvements.

The legislation calls for OVG to absorb any annual net losses at the arena, but it would keep the first $4 million in net profits. Above $4 million, net profits would be split between OVG and CRDA.

Kenneth R. Gosselin can be reached at [email protected].