Alerus Center projects $123,000 loss
VenuWorks, the management firm that runs Grand Forks' Alerus Center, will likely reimburse the city for losses at the city-owned events center for the first time at the end of this year.
VenuWorks is the firm the city of Bemidji is negotiating with toward a management contract for the Bemidji Regional Event Center.
Executive Director Steve Hyman is projecting a $123,000 loss for the Alerus, which he said is conservative. Deeper cuts in expenses, higher attendance at future events and bigger revenues from the hospitality tax, which subsidizes the events center, could bring down the losses, he said.
On the other hand, if it snowed as much in December as it did in December 2008, losses could worsen.
As of Sept. 30, the events center is in the red by $508,000, the center reported Wednesday.
By the terms of VenuWorks' contract with the city, whatever losses the Alerus Center incurs on its operational side, the firm has to pay back out of its management fee. The fee is based on revenues not expenses. Last year, it totaled $175,000 and, this year, is projected to total $183,000.
The other loss
What isn't included in the reimbursements is the concert and contingency fund that the Alerus Center withdraws from when it's running short on cash or taking a risk on a concert.
In June and July, the events center withdrew $225,000 and there have been no deposits to bring that amount down. If no deposits materialize -- the Alerus Center is expected to pay back into the fund if it can -- losses would, in reality, total $348,000.
All that comes out of the city's economic development fund, which is fueled by sales taxes.
Hyman said the contingency fund, for the purposes of the contract, doesn't count as a loss. The $97,000 loss after the Britney Spears concert, he said, is included in the concert fund.
The clause in the contract that defines how VenuWorks would reimburse the city and what it has to reimburse became active Jan. 1, 2007. The contract for 2010, renewed in August, left the clause unchanged.
Alerus Center commissioners said in April that they feel it's OK to lose money on concerts provided those concerts have a positive economic impact on the area, that impact being a mission of the events center.
So far this year, the center has reported an economic impact of $10.1 million, of which $194,000 were sales tax dollars paid to the city by the center for economic development, streets and sewers and property tax relief. This doesn't include sales taxes going toward the debt on the Alerus Center.
The Spears concert alone was reported to have a $2.6 million economic impact, of which $35,000 was sales taxes paid directly by the center to the city.
What's behind the losses so far this year is not the Spears concert, Hyman argued, but from lower than anticipated UND football attendance.
He estimated low attendance will cost the Alerus Center $120,000 by the end of the year.
There have been three home games so far this year, the last two of which saw attendance lower than 8,500. Average attendance in 2008 was 10,200 and 9,900 in 2007.
By the terms of UND's lease agreement with the events center, the center's share of profits from concessions, tailgating and parking increases as attendance increases. At less than 8,500, the share is only 10 percent. It goes up to as high as 25 percent if attendance tops 10,500.
There are two more home games scheduled, one Saturday and another Nov. 7.
Though the losses at this point are deep, Hyman is optimistic things will look brighter because of the holiday concert and the money made from Larry the Cable Guy's show this month.
One ominous trend events center Commissioner Randy Newman noticed was the decline in suite leases. As of Sept. 30, revenue from leases totaled $176,000 compared with $203,000 for the same period in 2008. Food and beverage purchases by suite holders totaled $9,000 compared to $16,000 in 2008.
Alerus Center Finance Director Wendy Nimens said that's attributable to "content." The events center needs more events to attract suite holders, she said.
Also noticeable is revenues from ads and sponsors. As of Sept. 30, the total was $347,000 compared with $382,000 the same period in 2008.
The commission acknowledged criticism that the Alerus Center wasn't working hard enough to get new concerts. Bon Jovi, for example, is returning to the FargoDome.
Newman said it's not "mismanagement" as people think. There's just not that many concerts available in the Grand Forks market, he said.
Grand Forks' metro area has an estimated population of 97,000; Fargo's has 196,000.
In this context, though the Spears concert was a loss, the fact that she filled more seats at the Alerus Center than in much bigger markets such as Des Moines and San Diego may help get the events center better concerts in the future, center officials have said.