CAA deficit will be smaller next year

June 17, 2011
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The Convention and Arena Authority, which oversees operations at Van Andel Arena and DeVos Place, is facing an operating deficit of $340,469 for the 2012 fiscal year that begins July 1.

Total operating revenue to the board is expected to be $3.9 million, while expenditures will top $4.2 million. The largest revenue sources in the coming year are $2.3 million in utility reimbursements and $930,000 in parking receipts from the ramp below the convention center. The board's biggest expenses for 2012 are $2.3 million in utility charges and $926,000 in capital outlays.

The loss the authority is looking at for next year is an improvement over how the current fiscal year is expected to end, as the board is on track to record a $2.7 million deficit for FY11. The size of that shortfall, however, is mostly due to the large capital investment by the board in the buildings, especially the arena, this past year. That investment exceeded $3.5 million, easily the most the CAA has spent on improvements and additions in the past several years.

CAA Financial Consultant Robert White said the board will close the fiscal year with a balance of roughly $22 million, with $6 million of that set aside as an operating reserve and the rest dedicated for building repairs and upgrades.

CAA Operations Committee Chairman Lew Chamberlin said Rossetti & Associates, the architect that designed the arena, is putting together a long-term maintenance plan for the board to follow as the buildings age — especially the arena, which turns 16 years old this year.

"I know we do a great job of taking care of things. But some things will pop up that are more important than drain caps," said Chamberlin, referring to the caps that recently had to be replaced in the arena's concession stands.

"The building was well constructed and is well maintained," said SMG Regional General Manager Rich MacKeigan, who also serves as executive director of the CAA. "If we have to replace the roof in 10 years, what should we do? Replace it with a roof that lasts 50 years or one that lasts 30 years?" he said of the type of decisions the board will have to make in the future.

"Overall, I think the facilities are in excellent shape," added SMG Assistant General Manager Jim Watt.

As for the buildings' financial health, DeVos Place is expected to have an operating loss of $775,500 for the upcoming fiscal year, while the surplus for Van Andel Arena is projected to top $1 million in 2012.

"Concerts, which are a definite driver for the arena, are in a better position than a year ago," said SMG Director of Finance Chris Machuta. The forecast calls for 21 concerts over the next fiscal year generating $1.6 million in revenue. Those figures include five more shows than this year, and $600,000 more in revenue for the building.

The arena will close this year with a surplus of about $811,000, marking the first year the building's margin will fall below the $1 million mark. The convention center will finish FY11 with a loss of $502,000.

The board agreed to a new personal-services contract with MacKeigan to continue as CAA executive director. MacKeigan's salary will go from $25,000 a year to $30,000. The board retains the right to terminate the contract at anytime. MacKeigan begins his 13th year as the buildings' general manager in September.

The public costs for DeVos Place

Here are the yearly operating losses for DeVos Place from 2005-2011 and the annual bond payments Kent County has made and will make for the construction of the convention center over the same years.

CAA Fiscal
Year

2011-12
2010-11
2009-10
2008-09
2007-08
2006-07
2005-06
Total

 

Operating
Loss

$775,503*
$502,387
$839,590
$466,413
$651,247
$792,111
$1,029,560
$5,056,811

 

County Fiscal
Year
2011
2010
2009
2008
2007
2006
2005
Total

 

Bond
Payment
$5,641,319*
$5,445,268
$4,866,957
$4,684,456
$4,898,344
$4,728,144
$4,572,344
$34,836,832

*Denotes estimate.

Note: The CAA’s fiscal year runs July 1-June 30. The county’s fiscal year is the calendar year.

Sources: Convention & Arena Authority and Kent County financial statements

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