Now The Hard Part For DeVos Place

January 3, 2005
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GRAND RAPIDS — When the Convention and Arena Authority meets later this month there will be a new board member, as Mayor George Heartwell will move into the seat held for four years by former three-term mayor John Logie.

The board will also put the finishing touches on the construction of

DeVos Place
. Work on the $212 million convention center is expected to be done by month’s end and the four-year project, which is under budget, will be capped with a dinner for 2,500 on Feb. 1.

But once the pleasantries are over, members will take a hard look at two issues that are clouding the financial future they’re facing.

The first is to balance the operating budget of

DeVos Place
so the surplus generated by Van Andel Arena isn’t needed to subsidize the building’s annual losses. The second is to find enough money to create a capital replacement account to cover repairs and upgrades to both buildings, an amount estimated between $2.2 million and $2.6 million annually.

November brought the board a bit of encouraging financial news, as

DeVos Place
only lost $70,877 for the month. That figure is the smallest red-ink month in the building’s first 12 months of operation. From December 2003 to November 2004, the center lost $1.09 million. The building averaged a monthly loss of $91,045 in its first full calendar year of operation. For three of those months, though, the center had a surplus.

DeVos Place
lost $1.19 million in FY04, but performed $400,000 better than initially expected. The forecast for FY05 has the building losing $1.39 million and five months into the fiscal year expenses topped revenue by $532,831. These losses weren’t unexpected.

“You really won’t see business picking up until 2006, 2007, 2008,” said Robert White, Kent County Fiscal Services director, CAA staff member, and part of the board’s Finance Committee.

White said that as long as the arena can host 22 to 24 concerts each fiscal year, revenue from that building should cover operational losses at

DeVos Place
. He added, though, that the arena has booked fewer concerts so far this year than in past years.

The Convention and Visitors Bureau said that 109 conventions were held in the county last year and that 136 were booked for

DeVos Place
in the coming years by the end of last month. Those future bookings have an estimated economic impact of $50.7 million.

Just 10 highlighted conventions in 2005 offer the city an economic boost of $4.8 million, with an August meeting of the Ancient Accepted Scottish Rite worth $1.3 million by itself.

DeVos Place
has put us in a new league for convention business and we’re booking larger conventions than ever before,” said Steve Wilson, CVB president, in a statement.

“Yet, we’re operating in a buyer’s market with many cities competing for the same business,” he cautioned. “To be successful, we must increase marketing and effectively deploy our staff.”

If history does repeat itself,

DeVos Place
should have a few profitable months coming up. Revenue beat expenses last February and March by $236,747, largely because Showspan Inc. held its series of consumer shows in the building. The trade-show producer, headed by John Loeks Jr., starts this year’s series on Jan. 27 with the Michigan International Auto Show and ends it on March 20 with the final day of the Sport, Fishing and Travel Show.

In between those two, Showspan will present the Boat Show, the Golf Show and the Home and Garden Show. Other producers will bring in RVs, classic and souped-up cars, and wedding planners to the building during the busy winter months.

As for the capital replacement account, board members will learn at their next meeting that their projected $3.2 million operating reserve could grow to $8.1 million by the end of the fiscal year, if projections hold true and if members approve a fund transfer.

But they will also learn that in five years that account will have to reach nearly $16.2 million, at least that is the projected balance the fund needs by the end of FY10. Their mission is to grow that reserve account. It will be a tough assignment to fulfill if

DeVos Place
continues to produce a deficit and one that will be made even tougher if a slowdown in concert business hits the arena.

The arena is projected to have a $1.51 million surplus for FY05 and in November, five months into the fiscal year, the building was $377,000 to the good. But that figure was nearly $248,000 short of the five-month forecast. Net income to the arena in November was only $13,372, or $135,000 below the month’s forecast.

In his monthly report, SMG Director of Finance Chris Machuta said event income was lower than expected in November because the building held only one concert for the month, instead of the three that were anticipated.         


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