PALMER -- The Palmer City Council on Tuesday night unanimously approved spending more than $800,000 to upgrade the city's ice arena to accommodate the Alaska Avalanche junior hockey team's relocation from Wasilla for the next five years.

Although the expenditure will drop the city's emergency fund balance in the General Fund down to $1.6 million -- below the two-month fund reserve of $1.7 million for the first time -- the long-term benefits of turning the ice arena into a year-round, multi-use facility anchored by the additional sports revenue seem to be worth the risk to council members.

"It's a good thing for the facility and for Palmer in general," council member Brad Hanson, a Palmer High School football and hockey coach, said after Tuesday night's vote. "The enhancements will provide alternatives we don't currently have."

Council member Kevin Brown voiced concerns about relying on $400,000 in grants from the Rasmuson and Mat-Su Health foundations that have not yet been secured for covering a portion of the construction costs that are estimated to total $1.2 million over the next three years.

Brown asked City Manager Bill Allen if he had a plan for coming up with alternative funds if the grants don't come through. Allen said he didn't.

"That really surprises me, Bill," Brown said during pre-vote discussions. "You always have a plan B."

Allen joked that they could always have bake sales and car washes to cover the difference before telling Brown that he couldn't put together all the financial resources for the project until the council made a decision on the initial $885,385 allocation to get the ball rolling.

The North American Hockey League's Avalanche club, a Tier 2 Junior A team, had approached the City of Palmer last month about moving out of Wasilla after suffering too many financial losses there. But in order to meet league facility requirements, Palmer would have to increase the arena's seating by at least 500 to accommodate a minimum of 1,500 people.

It was also determined that the arena would need a lighting upgrade, a new speaker system, raised seating for executive boxes, and a new exterior door before beginning its 2010-11 season.

Phase Two of the project includes a 20-foot addition on the west side, new locker rooms, new office space, new rest rooms, and an upgraded kitchen before the following season. Additional parking would also need to be provided to accommodate the increased attendance.

By upgrading the facility and entering into a five-year contract with the Avalanche team for 27 home games, the city expects to generate more sales tax revenue from food, beverage and ticket sales during the hockey season, as well as bringing in funds by renting out the facility year-round for graduations, trade shows, and other community functions.

In exchange, the Avalanche would pay the city about $30,500 per year for ice time, home games, an exhibition game and for practice time.