DeVos Deficit Less In FY08

June 4, 2007
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GRAND RAPIDS — The early financial outlook has Van Andel Arena recording a $1.37 million surplus for the upcoming fiscal year and DeVos Place losing $555,000 in FY08.

A surplus for the arena next year would be the 12th consecutive year that revenue has exceeded operating expenses and a loss would be the fourth straight for the convention center.

Members of the Convention and Arena Authority got their first glance last week at the projected numbers for both buildings and the budget for the new fiscal year that begins on July 1. They will review the figures over the next month and either adopt or change those budgets at their next meeting.

SMG Director of Finance Chris Machuta said the shortfall projected for the convention center is the building’s smallest since the doors opened, as revenue is expected to top $5.3 million for the first time.

“It will be the biggest budget we’ve put together,” he said.

CAA Chairman Steven Heacock said the net parking revenue expected to come from the DeVos Place ramp — about $625,000 next year — would cover the deficit. But that income isn’t included in the center’s statement because those dollars go into the board’s budget rather than into the building’s.

“We set a goal of breaking even with the convention center, and we may do that,” said Heacock.

Machuta said the arena is likely to get less revenue from sports next year mainly because the NCAA Division 1 Midwest Hockey Quarterfinals won’t be played there again until 2009, and no one is certain how many professional wrestling events the arena will host next year.

But Machuta said he expects revenue from concerts to be higher next year even though fewer are likely to play in the building. SMG General Manager Rich MacKeigan, also the CAA executive director, said it’s getting tougher to book concerts because more venues are opening across the Midwest and the nation, and acts aren’t touring as often.

MacKeigan said his staff has done the “little things” that promoters appreciate and is introducing a few new ones he hopes they’ll like, such as promoting upcoming concerts on Rapid buses to create a rolling billboard for an event.

“We’re doing a number of things to keep Van Andel as a must-play stop,” he said.

As for the current fiscal year, the arena is expected to end it with net operating income around $1.6 million. The surplus was $1.16 million last year and $1.55 million in 2005.

The convention center is expected to end this year with a net operating loss of $600,000. That figure is substantially less than the $792,000 loss recorded last year and well below the $1 million worth of red ink DeVos Place spilled in 2005.

Bob McClintock, SMG’s vice president of convention centers, told the CAA the hottest events in the centers his firm manages are festivals and amateur sporting events. MacKeigan is putting together a wine, beer and food festival for DeVos Place next year, and 474 girls volleyball teams are competing for the state junior championship this week in the building.

“I’m very familiar with the destination and the package. I’m very impressed with what you have to offer,” said McClintock, who has been with SMG for 20 years — five years more than his firm has been offering business services for convention centers.

“I think you have great growth potential with your new hotel opening,” he said, referring to the JW Marriott opening in September.

Much of the growth potential for the local hospitality industry will depend on whether the Convention and Visitors Bureau can increase its annual budget from $3 million to $5 million. Bureau President Steve Wilson said it would likely take two or three years for the agency to do that, and, he added, the larger budget is needed.

“We need that much to compete against the Indianapolises of the world,” he said.

The CAA is expected to end this year with a surplus of $422,000; revenue to its budget has been projected to top expenditures by $508,000 in the next year. The capital replacement cost for the upcoming year is small at $650,000. But that figure is expected to jump to $3 million for FY12 and exceed that amount for at least the following four years.

“You do have the operating income and reserves to take care of your needs for the next several years,” said Kent County Fiscal Services Director Robert White, who handles the board’s finances with Jana Wallace of the city’s finance department.

If the projected arena and convention center numbers hold for the current fiscal year, SMG will earn $600,000 for managing daily operations at both buildings.

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