CAA to track building debts to better pinpoint projects, investments
Although the Convention and Arena Authority is not responsible for the bonds that helped build DeVos Place and Van Andel Arena, members of the board’s Finance Committee decided last week that they need to be kept informed of the debt position for both buildings.
Finance Committee member Michael Freed said the panel needs that information to make accurate decisions on how the CAA should spend its funds for capital improvement projects and how it should invest.
At the end of November, the CAA had a cash reserve of $21.6 million. CAA Chairman Steven Heacock said the board will eventually spend those dollars on upgrades and repairs to the buildings and won’t just sit on it. “We have $300 million of assets that are depreciating,” he said of the buildings.
The Grand Rapids Downtown Development Authority makes the debt payment on the arena, while the Kent County lodging-excise tax was projected to cover the convention center bond payment. Both debts are roughly $5 million a year at this point.
But the DeVos Place debt rises at 3.2 percent each year and the revenue the county receives from the hotel-motel tax hasn’t been large enough to cover the payment. The county has transferred about $4.3 million from its general operating budget over the last three years to make the bond payments and to provide financial support to Experience Grand Rapids and the West Michigan Sports Commission, two groups that draw meetings to the area.
Experience GR President Doug Small said if the county can collect all the tax revenue from the lodging operators this year the account could see an increase of $435,000 over last year. Small said hotel room revenue had grown by 10 percent through November from last year and that growth was worth $8.7 million in income that operators didn’t have in 2009. So Small said the county should have more taxable revenue coming in later this year.
Through the first five months of the current fiscal year, the CAA had a deficit of almost $2.5 million. Total revenue to the board was down by 38 percent from the same period last year at $802,000, while expenditures were nearly 200 percent higher at $3.2 million. The CAA is also spending $4.1 million on capital improvement projects to both buildings this year and $2.2 million of that amount had been spent through November, which accounted for the board’s largest expense so far this year.
DeVos Place was $422,272 in the red for the first five months, a deficit that was $90,000 lower than last year’s shortfall at this point. The number of events held in the building through November was slightly higher than the projection. But attendance at events remains lower than expected, as it has been for the past two years during the recession.
The board’s bigger concern is for the arena. The building, which had a surplus of $1.3 million last year, had a deficit of $241,000 for the first five months of this year. Direct event income in November was only $7,782, while in November of last year it was $77,200. The arena had a surplus of $544,000 at the end of November 2009. So there has been a $785,000 change in revenue in the past year. No concerts were held in the arena this past November and only two have played the building so far this fiscal year.
Concerts have consistently provided the arena with roughly half its total event income every year it’s been open. But this year the touring industry is down nationwide by as much as 20 percent in certain markets. That trend may continue for a while as many of today’s recording artists are “one-hit wonders” who don’t do live performances. The CAA plans to look into the current and future state of the concert industry and try to determine what the situation means for the arena.