CAA looking at tough fiscal year

June 22, 2009
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When members of the Convention and Arena Authority meet this week to adopt the new fiscal year budgets for DeVos Place, Van Andel Arena and the board, the chances are very good they won’t be cracking open the champagne.

Although the arena is expected to post a $1.1 million surplus for the upcoming year that begins on July 1, the convention center has been projected to lose almost $850,000 over the same period. The budgets will leave the board with gross income projected at just $250,000.

“While the numbers are down from what we’ve seen, the activity level at both buildings is still good,” said Rich MacKeigan, SMG regional general manager for the buildings.

The CAA could use more revenue than that as its 2010 fiscal-year budget is forecasting a loss of $968,585, or $116,585 more than the deficit DeVos Place is expected to record. But the board can cut its loss by trimming the capital replacement budget they will also review and adopt this week, an action members took earlier this fiscal year.

Replacement projects total $1.9 million. The most expensive item is an electronic ribbon board for the arena that will cost $1.2 million. The ribbon board would run along the interior façade between the arena’s lower and upper bowls and would replace the existing advertising boards. An electronic ribbon board has a tendency to draw more attention, and the thought is that it would generate more advertising revenue.

The CAA Operations and Finance committees gave conditional approval last week to buy the ribbon board — conditional in the sense that the purchase price has to be reduced and the time it takes for the board to make a return on the investment has to be shortened. So both committees included the appropriation in the replacement budget, but a contract wouldn’t be signed until a cost-benefit analysis is approved.

“Right now, we’re looking at a return on investment of 10 years, and there is some concern over that,” said MacKeigan.

MacKeigan said he is talking with DP Fox Sports and Entertainment about picking up a portion of the cost for the ribbon board. DP Fox is majority owner of the Grand Rapids Griffins and sole owner of the Grand Rapids Rampage.

“I think I have a plan in place, but it’s going to take some time to get there,” said MacKeigan. “They see this as a great game enhancement for their fans.”

Both teams play homes games in the arena, although the 2010 Rampage season is on the sideline until the Arena Football League decides whether to operate next year.

“As it sits right now, the Rampage is considered to be playing next year,” said SMG Finance Director Chris Machuta of the arena’s budget.

DP Fox also handles much of the in-house ad sales for the building. But the arena doesn’t receive revenue from in-game ads, only permanent ads.

“We think the ribbon board would enhance the permanent advertising,” said MacKeigan.

MacKeigan pointed out that artists have zip drives of material they want shown during concerts, and ribbon boards are designed to accommodate that. Concerts are the single, largest source of revenue for the arena.

Other capital replacement projects call for spending:

  • $250,000 to replace the fire curtain in DeVos Performance Hall

  • $175,000 for a new wayfinding sign system in DeVos Place

  • $150,000 to install high-definition, flat-screen TVs in the arena suites

  • $50,000 to upgrade computers in both buildings

  • $20,000 for custom air-handling units in the arena.

The final item requires the board to spend $100,200 on two automatic pay stations for the DeVos Place ramp and one for the Area 2 lot, the parking facilities owned by the CAA.

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