BANGOR – A special panel that the City Council established to help determine the location, size and scope of a proposed new arena began Wednesday what could be years of work.

The proposed arena, which might include space for conferences and exhibitions, would replace the city’s aging auditorium, which was built in 1955 and by most accounts needs to be replaced.

“This is the largest project the city will have ever undertaken by a factor of probably at least three,” City Manager Edward Barrett said during the group’s inaugural meeting. But getting there won’t be easy and will cost a lot, he acknowledged.

“It would be the largest single bond issue we’ve ever put out, and we always have to be concerned about making sure that we can cover these payments in the future without getting the tax rate up,” he said, later adding that the city’s game plan calls for “trying to match cash flow against debt service payments.”

As it stands, the plan is to begin designing the new facility around 2010 and to complete construction by about 2012. The city’s strategy calls for funding the project, which would cost about $90 million to build now, with revenues it receives as host city for Hollywood Slots at Bangor.

The good news is that the city’s share of revenues from Hollywood Slots is ahead of projections. The bad news is that the longer the city waits to start construction, the more it will cost, based on recent inflation in the construction industry. In the five years that have elapsed since the city commissioned an arena feasibility study, the project’s cost has jumped from $64 million to about $90 million.

So far, the city has received from Hollywood Slots about $3.5 million, about 20 percent more than anticipated, according to Finance Director Debbie Cyr.

The city has used some of that money to recoup its costs connected to the project.

The remaining balance stood at $2,795,739 as of the end of February, Cyr said.

The revenue figures are based on Hollywood Slots’ interim facility, which opened with 475 slot machines in November 2005 in the former Miller’s Restaurant building on Main Street. That facility will soon be replaced with a larger permanent facility slated to open with 1,000 slots this summer a few blocks up Main Street across from Bass Park.

The new facility, which comprises a gaming and entertainment facility, hotel and parking garage, is expected to generate more income for the city, though how much remains to be seen.

If the new arena is to be built anytime in the near future, the city likely will have to issue municipal bonds.

Cyr said that the latest projections indicate that if the city issued a $50 million bond, debt service costs would amount to $4 million a year. A $70 million bond would cost $5 million a year to cover, and an $80 million bond would cost about $5.7 million annually in debt service costs, she said.

“So it is going to be a balancing act to determine at what point do we have enough cash so that we can actually start down this road,” she said.

Barrett said part of the planning effort will involve determining how much risk the city is willing to take on.

“If we issue bonds, those bonds are not just going to be backed by the revenue from the slots facility,” Barrett said, adding that to do so would add about 2 percentage points to the bond’s interest rate. “It will also be backed by the full faith and credit of the city of Bangor, which means that if the revenue source goes away, that bill still has to be paid, so keep that in mind.”

But not all residents are in favor of the city’s plans for a new arena.

Bob Cimbollek, who spent decades in the current auditorium as a high school basketball coach, said he has suggested several ways to offset auditorium operating losses over the years, including a surcharge on event tickets sold to nonresidents.

As he saw it, the arena project was being pushed by businesses and groups with a financial interest in the project.

“The average citizen of Bangor has no interest in an auditorium because they feel it’s going to raise the tax rate,” he said.

Cimbollek said Bangor residents had not been paying taxes on the auditorium since 1955 so that people from the rest of the region could come to enjoy the facility with all the same rights and privileges local taxpayers have.

“I’m against the [Bangor] taxpayer paying one red cent for that facility,” he said.