Paetec Park is not another fast ferry, said city Corporation Counsel Tom Richards last week. Mayor Bob Duffy's announcement that the city was moving swiftly to take possession of the soccer stadium has people wondering if the city is in for a repeat performance of the ferry farce. But Richards said the two ventures are very different.

What could have been a sweet deal for Steve Donner and Frank DuRoss, principal owners of the Rochester Rhinos, as well as the city, has soured. But how did it happen? With the state providing $19 million to build the stadium, and the city kicking in another $4 million in street improvements and site preparation, what went wrong?

The city owns the land the stadium is built on, and leases it for $1 a year to the Rhinos Stadium LLC, Donner and DuRoss's limited liability corporation, which operates the stadium. Donner and DuRoss's failure to meet the terms of the lease, said Richards, is what gives the city the right to take possession of the stadium.

The bank and the city are working together to find new owners. But unless a deal comes together quickly, the 2008 season could be lost. The delay could mean an even greater loss for 2009, Richards said. The team's players and fans could dwindle, making the team and the stadium less attractive to new owners.

But some important questions remain unanswered. How financially feasible is a soccer team at Paetec Park? No one really knows for sure. And are Donner's  problems with the Rhinos rippling toward the Amerks? He is part owner of the hockey team.

Richards has asked the State Comptroller's Office to audit how taxpayer money was spent on Paetec Park, but hasn't yet gotten an answer.

"Given how this has gone and everyone wondering what in the world happened here, I think it would be healthy," Richards said.

In an interview late last week, Richards talked about the Rhinos stadium, how things got to this point, and where the city of Rochester goes from here. The following is an edited version of that interview.

City: What is the advantage of the city taking possession of the stadium?

Richards: There are two things. One is our concern for its condition. The current owners of the team and operators of the stadium have failed financially. Our concern is that this would result in the deterioration of the stadium, both in terms of the security needed to make sure things aren't taken out of there and in terms of simple maintenance. They've had trouble paying the utility bills - all the things that happen when someone fails financially.

Protecting the asset is one thing. The more forward-looking reason is, to be able to enter into a new arrangement with someone who is willing to take over the franchise, we first have to get control of it. And we have to take possession, because it is quite obvious that no one is going to come in and take over the situation that is in place. There's so much debt, so many claims, and so many unknown problems, that no one will come in and step into the shoes of the current owners.

Do you have a sense of how long it will take?

We want to work with the bank on this, and we are simultaneously working with some potential new owners. So it's a matter of if and how fast that transaction will go forward.

It isn't going to be very long. If we don't have a new arrangement with respect to operating the team soon, it will be too late for this year.

Does the city become more vulnerable to litigation by taking possession of the stadium?

Well, the thing the city assumes when it does this is not the past debt. That's not what the risk is.

But obviously we would have to assume responsibility for maintaining the stadium and the security for the stadium. There is a cost associated with it. It doesn't approach the million of dollars in debt these people have run up.

It's an asset. It's in the city. It's on city land. It's going to come to us eventually. It's in our interest to make sure it's in as good a shape as possible.

Also, let's look at this from what the city's choices are. In the long run, the stadium is going to be the city's problem. It would be the city's problem even if we didn't own it. It's in the middle of the city of Rochester. The people who were supposed to put a team in there and operate it are broke. They're not going to be able to perform. That's obvious.

And, you know, this is an unusual transaction here. The state put up [$23]million, and the new owners were supposed to put up at least that much. They were supposed to be responsible for operating both the team and the stadium.

What happened when it came to running the team? Instead of having money of their own, they borrowed money.

So it sounds like you're saying this is a now or never sort of thing?

It's not now or never, but it's within weeks of losing it for this year. And if we lose it for this year, we'll do what we've got to do to get it started for next year.

But it sounds like you feel the best chance for it to be successful would be...

Yes, to do something this year. Even if you don't do as well as you would like to and you lose some money, I still think it's worth it to not lose a year. And the league wants this, too. There's a lot of disruption associated with not having this team performing, so there's motivation here to see if we can get this done.

Critics might try and compare this to the fast ferry: here's the city once again taking possession of an asset that it doesn't want to manage.

Well, there are a lot of differences here. First of all, when the city took over the operations of the fast ferry, the cost and the financial risk to the city was many times more than what it is for Paetec Park, and I mean many times more. The size of the risk that the city took there was geometrically bigger.

We all have to take risks. The issue is, can you define and manage it. I can define what it will cost to take over the stadium. I can define what it will cost to maintain it. So I know the limit of our risk there. Now I prefer not to do that, and I will do everything I can to get somebody else in there to assume it. But I know what the magnitude of the risk is, and we can pay it if we have to.

That is different than the ferry; it could lose almost any amount of money. I mean, it lost $10 million in the first year of operation alone.

This is also unavoidable; that's another point to make here. The city could have walked away from the ferry. When CATS failed, the city could have said, "Nice try, but we're not going to do it."

But we can't walk away from a stadium in the middle of a neighborhood. I think someone said, and they were right, "You're not going to be able to take the stadium out the St. Lawrence Seaway." I mean that is an important point. One of the main purposes behind the stadium was to help that neighborhood. So the city doesn't get to say, ‘Sorry, we're going to forget about it.'

When did signs of trouble with Paetec first appear?

The first thing was that, as you probably know, the attendance wasn't very good over there. But what got us involved directly was the last of the three state grants.

The first was for $15 million. The second was for $4 million, and that's almost all in there, except about $600,000. The third was for $4 million, and that was to finish the luxury boxes and a few other things.

The only money the city put in was for infrastructure. The city put in some new roads, took over some properties, and a few other things to prepare the site. The city's investment was slightly less than $4 million.

The last $4 million grant from the state, we were supposed to administer, which is not unusual. But there were some requirements that they had to meet before they could qualify for the grant. And I called them in and I told them that you're going to have to demonstrate to me that you are viable financially. We can't give you money and have you fail the next day. And they said OK. But shortly after that, they revealed that they were in default on their loan. So the only answer was to sell it.

So what went wrong? Was it bad business management? Was this inherently unworkable?

I don't hold myself out as someone who knows how to manage a soccer team. But this much I know: back when this whole thing was put together, there were a whole lot of statements about how they were going to come up with a lot of private money. The stadium was going to run about $40 million, and they were going to come up with most of it. What is obvious now is they either didn't have or they did not put the money into it.

What they tried to do was operate on debt. And they did that as they went along. And as they got farther behind, they would borrow more money. And you can't run these franchises on debt. They don't produce enough income to run them on debt. You've got to have money, because if you borrow money to operate it, you still have to make enough to pay off the debt.

Could it be successful with someone who has a little less debt, maybe? Remember, this is the classic seasonal business. While your expenses go down in the off-season, they don't go to zero. So you have to have operating capital.

Do you know how much money the Rhinos put in?

I don't know entirely. I know that Mr. DuRoss put some money into the team. I can't find any evidence that Donner put anything in there. All I know is there is no evidence that they put any equity into this. And then there were other people who put money into this, and that will be lost.

Mayor Duffy said that the fast ferry was not feasible. Have you done a feasibility study on the Rhinos at Paetec?

Well, it can work under different circumstances. Remember, from the point of the operator this is a pretty good deal. They don't pay any rent. They get the stadium, and they get to use it for any other legitimate purpose.

I don't want to make this sound like some kind of sweetheart deal for the operator. You get to keep all the concession revenue, so if you run it well and keep it busy, you ought to be able to do OK. But you can't do it with debt, and certainly in the beginning you have to be able to be prepared to lose some money for a while.

We're asking people to come up with a business plan. That's not because we want to tell them what to do. But we want to make sure that they are not being too optimistic. And we need to know: do you have the money to do it? And are you prepared to put it into this venture?

How culpable is the bank in this? They qualified Donner and DuRoss and approved the loan.

I don't know what they did. But they will pay a penalty on this. They could lose a lot of money.

But the obligation to make this happen is on the part of the people who own and operated it. They are the ones who made the representations that they made. That's who is responsible. They went to the bank and borrowed the money.

Whether it was a wise decision for the bank to lend them the money, I really don't know.

Does this leave the Amerks and the Blue Cross Arena vulnerable, too?

It leaves Donner vulnerable. Someone else can determine how vulnerable. But the bank has sued Donner for the personal guarantees for that debt, and it's a very substantial sum of money.

Some cities provide public support for projects like Paetec Park. Rochester seems to opt for as little public support as possible. Is that realistic?

That's not entirely true. At the War Memorial, public money is used. The War Memorial receives part of the hotel-motel Tax, and it receives a direct subsidy from the City of Rochester. So does the Convention Center. Frontier Field's debt has been paid by the county. So one of the issues we have with the Amerks, for instance, is not whether there is a subsidy. There is a subsidy for the arena. You know, whether there is a subsidy that goes to support the arena or it goes directly to them, it's still the same thing.

The Amerks came to us and said, "We think you need to increase our lease," which means, "You need to give us more of the revenue from the arena." We said, "You're running up a huge amount of debt over here [at the arena]." It's the same story. You're paying yourself hundreds of thousands of dollars a year, and we're not going to subsidize that. We're not here trying to make private people rich.

As to this operation over here [Paetec Park], there is a huge public subsidy that's gone into it. It looks like they spent, give or take, $23 million on the thing, and $19 million of that is public money. When the dust settles, $4-million more will go in there to finish it off. So there is a huge public subsidy there.