DeVos Place on track for its lowest deficit in years

May 13, 2012
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The Convention and Arena Authority will adopt the fiscal year budgets for the DeVos Place Convention Center and Van Andel Arena in a few weeks. But at their last meeting, board members learned revenues to both buildings have fallen, while expenses have risen slightly the past several years.

From 2007 through the projections for the upcoming fiscal year that starts July 1, total revenues to the arena dropped by 12 percent and expenditures went up by 1.5 percent, according to a financial review by CCA consultant Robert White. At the convention center, White reported revenues dipped by four-tenths of 1 percent, and expenses rose by six-tenths.

Arena revenues totaled $5.6 million in 2007, but are projected to be just under $5 million for 2013. At DeVos Place, revenues were $4.86 million in 2007 and are expected to be $4.83 million next year.

“This is a little bit deceiving. This doesn’t include parking (revenues),” said CCA Chairman Steven Heacock.

The CAA owns the underground parking ramp below the convention center and a surface lot near the arena. “This doesn’t include interest and parking,” said White, who compiled his comparison based on the buildings’ direct operating income and expenditures. “Between the two parking facilities, you would add $800,000 (annually).”

In 2007, the net operating income that went to the CAA from both buildings totaled $902,373. This year that CAA number is expected to be $236,690, and for next year it’s been pegged at $409,034.

The arena is expected to close out this year with an operating surplus of $672,175, the second straight year the margin will be below $1 million and for the second time since opening in 1996. The projection for this year was $1.1 million, but SMG Director of Finance Chris Machuta said the building will fall short of reaching that figure.

“It looks like, for the next couple of years, we’re going to have net operating income under $1 million,” said SMG Regional General Manager Rich MacKeigan, also CAA executive director. White said concert revenue is the arena’s most important budget line. The building normally has to host about 21 concerts each year to reach the $1 million-mark, and this year the number will be closer to 18.

All concerts don’t return the same revenue amount, as spending on concessions and merchandise varies from show to show. At the three-quarter point of this fiscal year, which was the end of March, 15 concerts had played the arena. Those shows only represented 19 percent of the events held in the building but accounted for 54 percent of the total event income.

Van Andel Arena has been projected to record a surplus of $1 million in 2013. The goal is to host 21 concerts over the next fiscal year.

DeVos Place is on target to finish this year with a shortfall of $435,485, about $40,000 better than the deficit it recorded last year and its lowest since 2006.

Machuta said March turned out to be the highest revenue month in the building’s history with a total of $741,736 in event and ancillary income. He said consumer shows in the exhibit spaces and those held in the DeVos Performance Hall have done very well this fiscal year. “The bookings are fairly comparable for this year with last year,” he said.

The convention center has been projected to lose $608,000 in FY13. If so, it will be the largest deficit since 2006. The board will adopt the buildings’ budgets June 1.

“I don’t view it as a negative budget. I view it as a positive budget with an operational reserve,” said Heacock of the $22.7 million expected to be in the CAA’s fund balance at the end of this fiscal year. As Heacock pointed out, much of that fund balance came from the lower-than-expected cost to build the convention center. “We’re very lucky to be in the position we’re in.”

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