After having a poor first quarter for revenue to DeVos Place and Van Andel Arena, the buildings’ management firm SMG lowered the fiscal year’s projection for operating income going to the Convention and Arena Authority by $194,000.
That projection could take a deeper tumble, too, as the board’s parking revenue and interest income have fallen significantly through the first four months of the fiscal year.
The July through October financials revealed parking revenue was down by 30 percent this fiscal year when compared to the same period last year. The CAA retains the parking income from the DeVos Place ramp and a small lot behind the arena. Those receipts were $140,386 for the first four months this year, roughly $60,000 less than last year at this time.
Interest income fell even further than parking revenue, dropping by half to $132,982. After the first four months last year, the total was $267,140.
Kent County Fiscal Services Director and CAA Finance Committee member Robert White pointed out that if parking revenue continues its current decline throughout the fiscal year, then the board’s operating income could drop by as much as $300,000 from last year’s total.
White also said the revenue estimate could fall by an additional $250,000 if interest rates remain low for the rest of the year. He noted that the board earned 5.1 percent on its fixed-rate investments last year, but only 3.4 percent so far this year.
With a potential for revenue to fall throughout the entire fiscal year due to less consumer spending and a lower return on investments, SMG General Manager Rich MacKeigan said the list of this year’s capital improvement projects would be reviewed and possibly changed. All the work would cost about $1.8 million to complete this year. About $400,000 of that comes from projects that carried over from the previous fiscal year.
But while total revenue was down for the period by 16 percent from last year, expenses were also down, by nearly 21 percent. Those figures drove net income up by 24 percent for the four months from last year. Still, expenses exceeded revenue by $654,700 at the end of October.
The CAA posted a $600,000 operational surplus from the convention center and arena last year.
Despite what could be a gloomy year for the board, MacKeigan remained upbeat. He said the arena was on track to turn in another profitable year and DeVos Place could register its smallest deficit since it opened in 2003.
“At the end of the calendar year, we will have a better idea of what the (fiscal) year will look like,” said MacKeigan, who also serves as executive director of the CAA.
A fiscal light in the tunnel is that the number of events held at both buildings so far this year equals the number held last year, when both performed well. The difference is that spending is down at the events this year. The board’s fiscal year ends on June 30.
The arena had a surplus of $185,000 for the first four months compared to a margin of $258,300 for the same period last year. Event income was up for this year at the arena, but ancillary income was down and expenses were up from last year.
SMG Director of Finance Chris Machuta said the current trend should continue at the arena for at least the next three months with lower revenue coming from ancillary sources like food and beverage sales.
MacKeigan said a bright spot in the arena’s event lineup has been the Grand Rapids Griffins. The team’s early-season games have drawn bigger crowds than previous years.
“The $1 hot dog (and beer promotion) is going well and has helped with attendance,” he said.
The convention center lost $503,700 through the first four months, nearly twice the deficit the building had at the same time last year when it recorded a shortfall of $255,417. Event and ancillary revenues were both down from last year, while expenses fell slightly.
But DeVos Place had a surplus for October that might qualify as the smallest monthly margin ever recorded in the industry’s history. For October, revenue topped expenses by $25 and ended a three-month slide of losses for the four-month fiscal year.
“November and December look to be fairly strong,” said Machuta of the convention center’s schedule. “So, hopefully, we can make up for our losses in the first quarter.”