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Naming rights: It's The Sanford Center

As of 5:11 p.m. Friday, the BREC is no more.

It was then that the Bemidji Economic Development Authority consented to an agreement with Sanford Health, though which the city sold the naming rights for the 185,000-square-foot multiuse facility, known before as the Bemidji Regional Event Center.

It is now The Sanford Center.

In exchange for naming rights, the city will receive $2 million over 10 years from Sanford Health. That equates to $200,000 a year, which is more than the $75,000 to $100,000 that consultants predicted in feasibility studies before the facility was opened.

"This is $200,000, which is phenomenal in comparison," said Mayor Richard Lehmann.

The new name is not surprising - the city and Sanford Health announced in October that they had agreed to the terms through which the city would sell naming rights.

However, it took nearly two more months for the state to complete its review of the proposed agreement.

Due to the state bonding dollars that went into the construction of the facility, the state needed to make sure the naming rights deal would not bring into questions the state's tax-exempt status.

Naming rights deals are considered private use of the facility by the Internal Revenue Service and the state needed to ensure the proceeds from those rights did not exceed permissible thresholds.

City Attorney Al Felix, himself admitting that he was probably oversimplifying the IRS formulas, said that the allowed percentage is 10 percent of the city's sales tax bonds ($44 million), for a total of $4.4 million.

The $2 million is significantly under that threshold, Felix noted.

The state contributed $23 million in total toward the facility through bonding dollars: $3 million for planning dollars in 2006 and $20 million in 2008.

"That state does not want the $23 million to come into jeopardy for private use," Felix said.

More so, because the 2008 statewide bonding bill funded $717 million for projects, the state would not want those affected either, he said.

City Manager John Chattin said the naming rights agreement also will not affect the city's tax status.

"Our bond counsel has told there is no way it will ever impact the tax-exempt status of our $44 million (in sales tax bonds) either," he said.

Other considerations include that the term of the naming rights agreement could not exceed 50 percent of the facility's lifetime, which it does not.

South Dakota-based Sanford Health is a relatively new name in the Bemidji community. In November 2009, it merged with the MeritCare Health System, creating Sanford Health-MeritCare. In June the merged system then chose to drop MeritCare from its name.

Just last month, Sanford Health and North Country Health Services also announced their intentions to merge as well.

The city will receive annual payments of $200,000 from Sanford Health.

In exchange, Sanford Health will receive exclusive naming rights and the building becomes The Sanford Center.

The deal means that Sanford would have exterior signage rights and get an exclusive suite designated for the naming rights partner. The event center logo would incorporate Sanford's name, which also will be used on correspondence, uniforms (staff), tickets, website and advertising.

The city will pay 50 percent, up to $25,000, of the cost of an exterior sign to be placed outside of the main entrance to The Sanford Center.

Sanford gets exclusive advertising rights to advertising for health care services or products in or on The Sanford Center.

Sanford Health will have the right to extend the naming rights agreement an additional five years with a one-year notice.

Three unanimous votes were taken in the span of 11 minutes Friday evening.

The Bemidji City Council convened at 5 p.m., heard from Felix and Chattin and then made two votes.

The first approved a resolution to amend the grant agreement with the state for the construction of the event center.

The second was to approve the naming rights agreement with Sanford Health.

The council then adjourned and councilors convened as the BEDA. The BEDA owns the land the event center was built upon, and because of that, the BEDA must consent to certain actions taken by the city in regard to activities on that land.

The BEDA voted to consent to the naming rights agreement that the council just moments before had approved.