Kent Concerned About CVB Funding

November 10, 2004
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GRAND RAPIDS — Before they approved Kent County’s share of the Convention and Visitors Bureau’s annual budget, commissioners wanted to know more about the lodging industry’s lackluster occupancy rate. The rate, projected to be 54.5 percent for this calendar year, is of key interest to county commissioners because it directly affects the amount of revenue that Kent gets from the 5 percent lodging excise tax.

The county, in turn, uses those dollars to make improvements to the zoo, contribute to the annual arts festival, fund 30 percent of the bureau’s budget, and meet the payments to the bondholders who bought the $96 million worth of securities that paid for much of the construction costs at DeVos Place.

“Potentially, we are the guarantor of the facility,” said commission chairman David Morren of the $212 million convention center.

The county is on the line for $4.57 million in DeVos Place bond payments next year, up from the $3.98 million obligation that Kent met this year.

Receipts from the tax this year are expected to reach $4.1 million, a total that will be $1.17 million short of meeting all its demands. This year will be at least the third consecutive year that revenue from the motel-hotel levy will have missed its expense mark.

Revenue projections for 2005 through 2008 show receipts growing by 3 percent each year to $4.62 million in 2008. Still, that growth of 12 percent over four years is expected to leave the fund nearly $2 million shy of meeting expenditures in 2008.

In that year, the account’s reserve fund will be empty except for the $1.46 million IOU that commissioners will find at the bottom of it. They will either have to cover that shortfall with general fund monies, or make some spending cuts, or do both unless traffic at hotels and motels picks up.

“At this time, we’re looking at increasing the volume of business,” said CVB President Steve Wilson.

Wilson told commissioners that the hotel occupancy rate this year may turn out to be the lowest since 1999, even lower than last year’s 54.6 percent. But he added that the rate here was still the highest in the state, and that the bureau was looking for a 12 percent increase in room nights next year.

Wilson said occupancy by the convention and meeting industry was up, but business from the corporate sector was down and has been for the past three years. The bureau expects to reach 110,000 room nights this year. If so, it will be the first time in recent memory that total room nights has topped 100,000. Last year, it stopped at 96,925.

“Without DeVos Place, our occupancy rate would have been a lot worse,” said Wilson.

“The corporate business traveler is really the bread and butter for every hotel, downtown and elsewhere,” he added.

Commissioners agreed to give the CVB $840,000 for its 2005 budget. In 2002, the county pledged to award the bureau up to 20 percent of the lodging excise tax receipts to market the area as a place to visit. Kent expects to receive $4.22 million from the tax next year.

But commissioner Paul Mayhue wanted to know what the county could expect in return for its investment in the CVB.

“For every public dollar invested in the bureau, we bring back $23,” said Wilson.

The bureau has proposed a $2.81 million budget for the coming year, up $33,217 from the 2004 budget. Most of that increase — $23,000 worth — is going into marketing services, a category that will have the CVB spending $50,000 in 2005. At the same time, the bureau plans to cut spending on advertising by $44,000, dropping that annual expense to $366,000.

CVB Vice President of Sales George Helmstead recently told the Convention and Arena Authority that 127 meetings have been booked at DeVos Place through October, and those gatherings have a total economic impact of nearly $48 million. Of those meetings, 104 have been booked for this year and are worth $24.5 million to local coffers.

Helmstead also said the bureau has locked in 78,500 room nights, surpassingd its goal of 75,036.

As for DeVos Place, CAA members recently learned that the convention center lost an additional $21,665 for the past fiscal year. An audit of the year-end financial statements raised the shortfall from $1.17 million to $1.19 million. Despite the increase, the official deficit was still under the $1.59 million loss that was projected at the start of FY04.

In other financial news, county commissioners approved two bond series worth $10.6 million. One is for eight years and will pay for the riverfront Monroe Avenue property the county bought earlier this year for $2.4 million. The other is for 20 years and will cover the cost of a settlement the county entered into for the courthouse property and the purchase of 82 Ionia Ave. NW. Kent is expected to close on that transaction in February.

Payments on both tax-exempt bonds will cost the county $966,660 next year. 

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