CAA adjusts its operating budget at mid-year point
The Convention and Arena Authority unanimously agreed last week to make mid-year adjustments to its operating budget.
Members reduced projected operating revenues by $416,254 and operating expenses by $143,194, changes that leave the board with a net income loss of $273,060 for the fiscal year.
The CAA also agreed to delay several scheduled improvements to Van Andel Arena, but not because of financial difficulties.
“This was very much expected. We expected a mid-year adjustment and, frankly, I’m happy it’s not worse than it is,” said CAA Chairman Steve Heacock.
“To have to show a 4 percent decrease in projected revenues seems to be a positive as compared to what we’re seeing around the country and sort of what I thought might occur. So while it’s hard and you need to absorb it into operations, I’m pleased it’s not more,” he added.
The adjustments still leave the CAA in the black for the fiscal year. The operations ledger is expected to show a surplus of $287,786 at year’s end, which is June 30. But when the non-operating income from investments and the capital transfers for improvements are included, the surplus falls to $71,946.
“We’re now at a breakeven or plus $71,000 mark,” said Heacock.
Less revenue from investments and parking receipts account for the majority of income reductions. Projected parking revenue has been lowered by more than $150,000 for the year.
The CAA’s return from investments was expected to be near 3.5 percent. Now it’s projected to be closer to 2 percent and will result in $167,000 less income.
In addition, the cancellation of the Arena Football League season means the CAA won’t be collecting the $80,000 it normally gets for capital improvements from the Grand Rapids Rampage. At the start of the fiscal year, the CAA planned to spend $1.8 million on upgrades to the arena and DeVos Place, but cut that expenditure by $953,000 last week.
“This may not be the year to do some of those items,” said Birgit Klohs, chairwoman of the CAA Finance Committee.
An upper bowl curtain system, removable lower bowl seating and an expansion of the northwest concourse, all for the arena, have been pushed back to at least next year. The board said revenue isn’t the reason for the delays as the CAA was going to dip into its reserve account to pay for the projects and that fund is over $20 million.
“We have the reserves to make things happen. Our maintenance and custodial staffs are very busy. We’re not taking the approach that we can’t spend anything,” said Executive Director Rich MacKeigan.
“We’ve got the money to do these things,” added CAA member Joseph Tomaselli.
MacKeigan said the expansion project is being put off to give the building’s architectural firm, Rossetti Associates, a chance to study the traffic congestion that occurs in that corner when event attendance tops 8,000 and then offer alternatives.
“We’ve got the right people in place to see if expansion is the right way to go,” said MacKeigan, also SMG regional general manager.
“On the capital issues, I’m pleased it’s not delay for delay’s sake. We are going to continue to improve the buildings as we’re ready to and as we need to, and we’re not going to let this get in our way. We’re optimistic about the long term,” said Heacock.
Seven months into the fiscal year, at the end of January, DeVos Place showed a deficit of $685,889. Klohs said the number of events held in the building is on track with the budget projection, but attendance is down from last year.
Fewer attendees mean less ancillary income. Revenue from that key source, second only to event income, was down by $140,000 from last year. MacKeigan said that situation should continue for the rest of the fiscal year, and the convention center is likely to finish the year with a higher-than-projected deficit.
“(But) the building continues to be busy,” he said.
The arena had a surplus of more than $750,000 at the end of January. MacKeigan said the arena needs a few more events for the building to reach its projected surplus of $1.2 million. If those events don’t get booked, MacKeigan said any loss at the arena would be small and would range from $50,000 to $100,000.
“We’re doing very well (in comparison to other markets),” he said.
The arena was recently rated by several trade publications as one of the best in its class, an honor the building began to regularly capture shortly after it opened in 1996. The arena drew 208,000 ticket holders through its doors during the last quarter of the calendar year, and had a strong start to this quarter with 118,000 coming through the turnstiles.
“I guess the point is, here we are in the 13th year and the arena is still getting great use and great recognition,” said Lew Chamberlin, CAA member.
One expenditure adjustment the board approved last week was hiking the allowance for legal fees from $35,000 to $90,000 due to a lawsuit that Delta-Turner LLC filed last June against the CAA and SMG. The plaintiff, which owns the DeltaPlex Entertainment & Expo Center in Walker, alleges the defendants entered into an illegal preferred provider contract with concert promoter Live Nation that violates federal and state antitrust laws, the open meetings act and the freedom of information act. Mediation is scheduled to begin March 10.
The CAA met in closed session last week with its attorney, Richard Glaser, of Dickinson Wright PLLC. Heacock said the purpose of the meeting was to update board members on the progress in the case.