Same Stuff, Next Year
GRAND RAPIDS — Van Andel Arena and DeVos Place are likely to have similar fiscal years next year as this year, according to the budget forecasts for 2007 from buildings manager SMG.
SMG Director of Finance Chris Machuta told the Convention and Arena Authority last week that he expects the arena to end the 2007 year with a surplus of $1.41 million and the convention center to finish with a shortfall of $771,000.
“This is intended as a draft, an overview,” added Robert White, Kent County Fiscal Services Director and a member of the CAA Finance Committee.
Adjusted gross income to the arena has been forecast to grow by $200,000 next year over the expected level this year, while expenses have been projected to stay at this year’s level.
Adjusted gross income to DeVos Place has been forecast to rise by nearly $260,000 next year from the current year. Much of that gain should come from more revenue opportunities through booking smaller meetings in smaller sections of the massive building.
White pointed out that revenue to DeVos Place this year is running 17 percent over what was forecast last summer, and that next year’s projection has income at 6 percent above what the building is currently receiving.
“I think the improvement is related to the smaller events. Add up all of those little things and they affect the bottom line,” said SMG General Manager Rich MacKeigan.
But expenses for DeVos Place have been projected to be $244,000 more next year than this year, with $100,000 of that higher amount going to utility costs. Another expense likely to rise somewhat is the cost of labor, as the state’s minimum wage will go from $5.15 to $6.95 per hour on Oct. 1.
“Overall, it may have a slightly negative impact,” said MacKeigan of the wage hike.
MacKeigan told the CAA Finance Committee that both buildings are performing better financially than most others across the country. He said arena operations normally lose money and convention centers normally lose a lot more money, but neither is the case here.
Still, MacKeigan acknowledged that one reason for the buildings’ operational success is that the CAA isn’t responsible for servicing any of the debt for either structure. County lodging excise tax receipts cover the bond payments for DeVos Place, and the Downtown Development Authority does the same for the arena. Each payment runs about $5 million a year and neither expenditure is listed on the operational ledger.
As for this fiscal year, the arena is expected to end it with a surplus of $1.2 million — or about $250,000 less than what was projected at the beginning of the year. The culprit seems to be a lower-than-expected return from concerts and family shows, as per-capita spending on concessions and merchandise for some recent performances has been lower than previous events.
“People are saving their money for gasoline,” said Cliff Charles, CAA vice chairman.
But at the end of March, and the year’s third quarter, the arena was $534,000 in the black — or $666,000 away from the projected $1.2 million surplus with only three months left in the fiscal year.
“We have some strong shows for the final quarter,” said Machuta when he was asked about being able to hit the surplus over the next 90 days. “I’m not guaranteeing anything, but I feel good about it.”
At the three-quarter mark, DeVos Place was just $133,000 in the red, but is projected to lose $786,500 by the end of the fiscal year. Even if that does happen, that loss will be much better than the $1.1 million shortfall that was projected for the building last summer.
Machuta said ancillary income, mostly from food and beverage sales and rentals for equipment, has driven revenue higher at the convention center. Wedding receptions and proms being held in the Steelcase Ballroom have also provided additional revenue, as has the new premium-seating policy in DeVos Performance Hall.
The CAA learned last week that its charity event held last month at the arena raised more than $100,000 for the three designated charities: the VAI Hope on the Hill program, Gilda’s Club and St. John’s Home. That figure is about $20,000 more than was raised from the first event three years ago.
“I think the event symbolizes what is right about our community,” said Leann Arkema, executive director of Gilda’s Club. “We had great corporate support.”