Arts & Entertainment, Economic Development, and Travel & Tourism

DeVos Place heads down the stretch with a surplus

Revenue to Van Andel Arena also is up from last year.

June 14, 2013
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(As seen on WZZM TV 13) What began as a year-long marathon now is a two-month sprint.

DeVos Place is headed to the finish line with a $400,000 surplus and could close the fiscal year with its first operating profit in its 10-year history.

“It continues to be strong throughout all facets of the facility,” said SMG Director of Finance Chris Machuta of the county’s convention center that opened in 2003.

Event income came in $30,000 higher in April than expected, at $199,262, and ancillary income remained consistent at $177,000. Over the first 10 months of the fiscal year, those two sources have brought in $4.7 million in revenue for the convention center’s operations.

“DeVos Place continues to perform very well as the fiscal year winds down, as the facility remains very busy in what has historically been a slower time of the year,” added Machuta.

Van Andel Arena also has performed well: It ended April with net income of $243,000 and a fiscal-year surplus of $1.67 million. Total operating revenue has been $4.7 million, so far.

The Convention and Arena Authority operates both buildings and it has also benefited from the revenue receipts. The board’s net proceeds from both buildings through April totaled slightly more than $1 million. At the same time last year, the figure was $345,000.

Operating revenue to the arena is up by 21 percent over last year, while the convention center’s income has risen by 11 percent.

“It’s quite a significant increase in operating revenue,” said Bob White, a financial consultant to the CAA.

The CAA is on track to finish the year $2 million in the black, up by $1.5 million from FY12.

Board members also adopted the FY14 budgets for both buildings. A shortfall of $254,500 has been projected for DeVos Place, with $5.26 million in adjusted gross revenue predicted.

Van Andel Arena has been estimated at having a surplus of $1 million next year, with $5 million in total revenue expected. The new fiscal year starts July 1.

“Revenues have been revised upward based on this year’s figures, while expenses remain the same,” said Machuta.

The 2014 budget that drew the most attention was for capital improvements. There are 26 projects on the list, with four being carried over from this fiscal year, at a cost of $3.3 million. That number is more than three times the $1 million budgeted for the current year.

“You’re not going to spend $3.3 million. I can guarantee you today you’re not going to spend $3.3 million,” said David Hoogendoorn, a member of the board’s finance committee, to CAA Executive Director Rich MacKeigan.

Hoogendoorn told MacKeigan he can’t roll projects over into the budget. He said the CAA needs to have improvements ranked by priority to give the board a better idea of which are the most vital. “Don’t get me wrong, I trust you guys. But you can’t just roll these over,” he said.

CAA board member Lew Chamberlin said a priority list also should include the amount of time it will take to finish a project. “That will give us a cross reference for it,” he said.

“We can do that,” said MacKeigan, also SMG regional general manager of daily operations at the buildings.

Chamberlin said some of the projects listed were borderline. He felt about half of the spending contained important projects that could also be revenue enhancers. Replacing the video board on the arena’s south wall and installing a new sound system in DeVos Performance Hall are two of those projects. Both cost a total of $1.3 million and are scheduled to be done next year.

Hoogendoorn said capital items need to be reviewed by the CAA at least twice a year instead of once, especially when it comes to the arena. The building opened in 1996 and needs closer attention than DeVos Place does because of its age.

“The biggest revenue source is the building itself,” he said. “If you lose a concert, you’re not going to make it up with a hospitality suite.”

Hoogendoorn also said he’d like to have the markups and discounts reported for the rental rates at DeVos Place. “What I want to know is what we’re recovering from the discount,” he said.

CAA Chairman Steven Heacock pointed out there are a few improvement projects not on the list, such as new bathrooms for the performance hall and a parking deck behind the arena. He said the board needs to get options and costs for both.

MacKeigan said a line item in the board’s budget can be used to find out what needs to be done and what the various price tags would be.

Heacock also said the CAA needs to capture $1 million in profit from both buildings each year and spend $2 million annually on capital items. Doing that, he said, would secure the board’s fund balance for the future. “The city and the county don’t have the funds to do this,” said Heacock.

The CAA’s fund balance, or reserve account, is at $22.6 million. The board adopted the capital budget.

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