DeVos Place Deficit Declines

May 19, 2003
Text Size:
GRAND RAPIDS — The Convention and Arena Authority Finance Committee learned late last week that the deficit for the new $212 million convention center should be less than originally projected.

About $200,000 less.

The expected loss for FY04, which breaks out to seven months of operations for DeVos Place and five months for the Grand Center, has been ratcheted down from $1.8 million to $1.6 million. The reason for the dip in red ink was a reassessment of utility charges, which lowered that expected expense for the upcoming year from $1.39 million to $1.19 million.

“Our conversations over the last two or three weeks have focused on utilities,” said Rich MacKeigan, SMG general manager. “I think this is a well-informed guess. It’s a number we really researched.”

SMG Finance Director Chris Machuta told committee members their review of that charge dropped the expected rise of utility costs for next year from 300 percent to 250 percent. More square footage to heat, cool and light in the new building, along with higher rates, accounted for the increase.

“A year from now, when we present the ’05 budget, we will have a better grasp of this,” said Machuta, adding that he felt confident with the revised budget.

Kent County Fiscal Services Director Robert White, who serves on the committee, said he was satisfied with the work SMG did on the budget.

MacKeigan and Machuta also compared the DeVos Place forecast, on a square-footage basis, to the balance sheets of eight other convention centers. MacKeigan acknowledged that the comparison wasn’t an industry norm, but said the numbers put the local building third in a line of the nine reviewed. (See chart)

Of the nine, only the Columbus center showed a profit, at $1.38 per square foot. And only the Denver building had a smaller loss than DeVos Place, $3.73 per square foot compared to $4.92 per square foot.

MacKeigan said the Columbus surplus was due to the $3.4 million in parking revenue the building collected last year. The DeVos Place ramp won’t open until the end of 2004, the same time the ballroom opens, and that revenue won’t show up on a ledger until FY05 is half over and it won’t reach the Columbus level.

“We’re not out of whack. We’re still in the ballpark and we should get better,” said MacKeigan.

Even though the deficit has been lessened, the game plan remains the same. The CAA will use surplus revenue from the Van Andel Arena, projected to be about $1.5 million next year, to cover a majority of the shortfall. The remaining $135,000 will come from the board’s fund balance, which should be $3.4 million when the new fiscal year starts on July 1.

SMG projected adjusted gross income for DeVos Place and the Grand Center at $2.3 million, while setting expenses at $3.9 million for a $1.6 million deficit. Arena income was set at $4.7 million, while expenses were set at $3.2 million leaving a surplus of $1.5 million.

SMG has the arena hosting 24 concerts during the fiscal year, events that are expected to bring in $1.57 million in income or roughly $65,000 per concert. In contrast, 58 sporting events at the arena should yield $581,729 in income, or slightly more than $10,000 for each event.

The CAA will review the budgets on Wednesday.           

Recent Articles by David Czurak

Editor's Picks

Comments powered by Disqus