OK On DeVos Arena CAA Budgets

May 30, 2003
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GRAND RAPIDS — DeVos Place will have a deficit. The Van Andel Arena will have a surplus. And the Convention and Arena Authority will cover the shortfall for the coming fiscal year, which starts on July 1.

Board members formally adopted the budgets for all three last week.

SMG, which operates both buildings, has projected a $1.6 million deficit for the Grand Center and DeVos Place for the upcoming year, down $200,000 from its initial forecast.

SMG Director of Finance Chris Machuta said convention center revenue would increase once the DeVos Place exhibit space opens in December from the $2.08 million expected this year to $2.38 million in FY04.

But expenses for the new building will rise faster than revenue. Machuta expects $3.98 million in expenses for FY04, about $1.63 million higher than this year’s $2.35 million.

Machuta said the cost to light, heat and cool the new building, which will have twice the square footage and four times the cubic feet of the Grand Center, was the single largest increase in expenses. He expects utilities to jump by 250 percent to nearly $1.2 million.

Machuta said adding 10 workers to the DeVos Place staff, the equivalent of eight full-time employees, was the building’s second-largest expenditure and that it would raise labor costs from $924,000 to $1.47 million.

CAA Vice Chairman David Frey noted that at one time the Grand Center carried a large deficit, too — once reaching $600,000 — and that the current forecast for DeVos Place wasn’t unusual, especially with work on the new 40,000-square-foot ballroom just getting started this week.

“The new ballroom will provide opportunities for additional bookings. Not only additional bookings, but bookings with a larger margin,” said SMG general manager Rich MacKeigan. “This will be our worst fiscal year.”

The forecast for the arena shows a surplus of $1.46 million for FY04, down only a tad from the $1.5 million margin expected this year.

“Concerts are the main drawing force behind the facility,” said Machuta. “There isn’t much of a change in what we have had at the arena.”

Machuta added that concerts account for roughly 55 percent of the arena’s total revenue.

As for the CAA’s budget, Kent County Fiscal Services Director Robert White said the board would likely have to use $135,000 of its reserve to plug the gap between the DeVos Place deficit and the arena surplus. And White cautioned board members to keep a close eye on their net assets in the coming years, at about $3.5 million now, as that money is advanced to SMG to pay bills for both buildings.

Convention and Visitors Bureau President Steve Wilson expects more revenue once work on the new convention center is completely done in January 2005.

“Not only does DeVos Place allow us to hold larger conventions, it also allows us to hold multiple conventions,” he said.

Wilson explained that the Grand Center was “locked out” of revenue when a show was moving in and setting up in the building. He said that wouldn’t be the case for DeVos Place with the extra exhibit space the building will have.

Joe Erhardt, president of Erhardt Construction and co-general contractor for the project with the Hunt Group of Indianapolis, said Welsh Auditorium would begin to come down this week and new sidewalks along Monroe Avenue would begin to be built next week.

DeVos Performance Hall will be closed until September. A portion of Lyon Street, west of Monroe Avenue, and the Gillette Bridge will remain closed until the project is done.

“We will keep an entrance open to the Grand Center,” said Erhardt.

The Grand Center is booked for 17 days in June with four groups scheduled to meet there this month.  

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