Break even definitely a goal for Alerus Center
So it's official: Alerus Center commissioners said again Wednesday that one of their main goals is to break even. One of them, Brian Conneran, was so intent on breaking even he voted against the new 2007 budget because it's a deficit budget. He said he thought management should check to see if the labor cost to revenue ratio was within industry standards.
This dissent is significant because usually by the time a budget is ready to be voted on, everybody's on board.
The other commissioners approved the budget, too, but only because they felt there was no way around the higher expenses, blamed mostly on new electric rates. Boy I wish I had the presence of mind at 6:30 a.m. to ask if they'd seen these new rates coming. The new rates standard commercial rates that most businesses pay. The Alerus Center has been paying the economic development rate reserved for new facilities.
Anyway, the concern with breaking even is a big deal to me -- as you'll have noted from this post -- because for a few years, it seemed like it wasn't on the commission's radar screen. Typically, the conversation about breaking even comes up after the year end financial report is released and the center is in the red. The commissioners usually get pretty defensive and point out the big (estimated) economic impact. And I end up saying, "but you guys said that one year when the moon was blue and hell was cold that you wanted to break even."
Anyway, here's some facts about the budget, which you can also read in the Herald story:
* Revenues are expected to be in the $4 million range. Last couple of years, actual revenues have been in the $3.8 million range. I'm not saying it's impossible but they have a lot of work ahead of them.
* Revenue from the hotel-motel tax (a built in subsidy) is about 9 percent of total revenue.
* Commission Chairman Randy Newman keeps saying that the whole budget is driven by "programming," meaning by concerts and other events. He sounds like he's really worried that without enough concerts, advertisers and suite holders would leave. Together the suite leases and advertisers make up 22 percent of the budget or $880,000.
* As Dadinggf commented, the Alerus Center does compete for weddings with local businesses. Catering makes up 20 percent of the budget, or $817,000.
I'm sure that's not all from weddings but center officials were pretty excited about how good they were getting at the wedding business. In June, the single biggest category of event in terms of attendance for the Alerus Center was wedding receptions with 1,800. That's a 242 percent increase over the same month a year ago. The second biggest was conventions with 1,600.
It's just a single month, so I'm curious what it was like for the first half of the year.
* Electricity costsis are up 55 percent to $242,000.
* Parking fees, a new revenue source, is expected to total $103,000. The center doesn't plan on starting parking fees until September so that's just the last four months of the year, albeit potentially very profitable months with the football games and winter concerts. The amount would be more than enough to cover the higher electricity costs, which amount to an additional $86,000 in spending.
* Labor costs amount to about 48 percent of total revenue at $1.9 million. That's what Conneran was concerned about.
This dissent is significant because usually by the time a budget is ready to be voted on, everybody's on board.
The other commissioners approved the budget, too, but only because they felt there was no way around the higher expenses, blamed mostly on new electric rates. Boy I wish I had the presence of mind at 6:30 a.m. to ask if they'd seen these new rates coming. The new rates standard commercial rates that most businesses pay. The Alerus Center has been paying the economic development rate reserved for new facilities.
Anyway, the concern with breaking even is a big deal to me -- as you'll have noted from this post -- because for a few years, it seemed like it wasn't on the commission's radar screen. Typically, the conversation about breaking even comes up after the year end financial report is released and the center is in the red. The commissioners usually get pretty defensive and point out the big (estimated) economic impact. And I end up saying, "but you guys said that one year when the moon was blue and hell was cold that you wanted to break even."
Anyway, here's some facts about the budget, which you can also read in the Herald story:
* Revenues are expected to be in the $4 million range. Last couple of years, actual revenues have been in the $3.8 million range. I'm not saying it's impossible but they have a lot of work ahead of them.
* Revenue from the hotel-motel tax (a built in subsidy) is about 9 percent of total revenue.
* Commission Chairman Randy Newman keeps saying that the whole budget is driven by "programming," meaning by concerts and other events. He sounds like he's really worried that without enough concerts, advertisers and suite holders would leave. Together the suite leases and advertisers make up 22 percent of the budget or $880,000.
* As Dadinggf commented, the Alerus Center does compete for weddings with local businesses. Catering makes up 20 percent of the budget, or $817,000.
I'm sure that's not all from weddings but center officials were pretty excited about how good they were getting at the wedding business. In June, the single biggest category of event in terms of attendance for the Alerus Center was wedding receptions with 1,800. That's a 242 percent increase over the same month a year ago. The second biggest was conventions with 1,600.
It's just a single month, so I'm curious what it was like for the first half of the year.
* Electricity costs
* Parking fees, a new revenue source, is expected to total $103,000. The center doesn't plan on starting parking fees until September so that's just the last four months of the year, albeit potentially very profitable months with the football games and winter concerts. The amount would be more than enough to cover the higher electricity costs, which amount to an additional $86,000 in spending.
* Labor costs amount to about 48 percent of total revenue at $1.9 million. That's what Conneran was concerned about.
posted by Tu-Uyen at 8:56 PM
24 Comments:
Am I reading this right? The Alerus only does 4M a year and 360K is from tax collections?
Same anon here (I'll register someday), am I also reading that 990K of the 4M is advertising and suite revenue?
48% in labor costs is too high for a "business" that has been running for as long as they have. They haven't been around that long, but I'd think they can at least get that under 40%. I imagine Mr. Conneran is most upset about that being his experience in labor costs at all of his Subways.
Where's all the defenders of this travesty? Aren't there any left?
Seriously, where do you begin? From the campaign stages, 'til now, this project has been a Twilight Zone deal.
The sad thing is, evidently the Commission has given up on their mission, and now their primary focus is to lose less. How does that benefit the community? Even the figures that they use for economic impact are obviously false.
Can someone get called on the carpet please, with a copy of those B.S. campaign promises and explain, line by line, just what the hell happened here?
Guys, you're sort of misreading what I wrote. Brian Conneran was the only guy to vote against the budget, but a lot of other commissioners were uncomfortable with it. Unlike Brian, they didn't think the labor cost could be adjusted. Their thinking, to me, was that most of the expense increases, such as electricity, were really out of their hands.
The point I was trying to make is the commission as a whole appears more focused on the bottomline than before.
The other thing to bear in mind is that Compass Facility Management, the private company that runs the place, has a contract that gives them more money if they earn more revenue.
No Tran, it's crystal clear. Many, many people in town new that this whole dream was waayyy to aggressive for Grand Forks. The Randy Newmans, and Hal Gershmans, of the community were very condescending and down-right insulting to many great local citizens that were always there for this community. Talking down to them like they just didn't "get it" when, very simply the numbers did NOT add up. Now, guess what, there's 5 years of data there and they are wrong...VERY wrong.
Not all of us are selling cheap 6 packs down the street. I wonder if that has anything to do with it. Do these so-called community leaders have any idea how transparent their motivations are?
Take a look at the front page of the Forum web site today. Fargo residents have even worse things to say about the Dome.
Maybe there are some outside reasons these big facilities aren't making money...other than our civic leaders pulling the wool over our eyes.
Come on, we're a college town. There are a lot of perks that go along with that-and as we're learning, a few costs as well.
Final price tag is $80m, I think (didn't check). But that doesn't include the signage cost. So I guess that makes it about $82m.
Whistler, keep rollin' with the rehash. I love a good history lesson. The raw meatballs at the All High School Reunion may warrant its own chapter.
Keep rollin'!
Is anybody paying attention in Grand Forks anymore? The Alerus is excited about their wedding business? Excuse me?!!! This just exemplifies how far this project has gone astray.
What happened to blah, blah, blah BiG Regioal Events, blah, blah, blah, Every Motel in Town Packed, blah, blah, blah, Busses Running Thousands of People to-and-fro The Alerus.
They openly admit to going after privately owned local competitors.
Why doesn't EVERYONE in town have a major problem with this!!!!
What a bunch of naysayers! If you look at the FargoDome you would see that it's "profits" are the tax revenues it receives from various funds like the Alerus Center. They work the accounting books the same way. Except Grand Forks tells people that where the money goes, Fargo doesn't.
"Naysayers"...that's hysterical. With five years of hard numbers that arguement doesn't fly anymore! Take a look, it ain't pretty!!!
The citizens need to demand a press conference where the Randy Newmans of town need to be held accountable!
The claims and promises that were made in the campaign stages need to be painstakingly researched and these big Alerus supporters need to account for every failure one-by-one! The citizens need to demand this.
The "naysayer" arguement at this point just makes one look stupid and not willing to face facts.
The naysayer thing was a nice card 5 years ago. It ain't working now.
I'll admit I'm not factoring the economic impact of an individual gassin' up the car, going to the ticket outlet for a concert ticket, grabbin' a latte on the way, stoppin' for a cocktail on the way home...Oh!!! Shows cancelled...back in the Suburban, gas 'er up, back to the ticket outlet, get nicked for some fees on your refund, grab a latte, stop at the bar on the home and bitch about the show. It goes on and on.
So, yeah...there is an economic impact there I guess.
"The Randy Newmans, and Hal Gershmans, of the community were very condescending and down-right insulting to many great local citizens that were always there for this community. Talking down to them like they just didn't "get it" when, very simply the numbers did NOT add up. Now, guess what, there's 5 years of data there and they are wrong...VERY wrong."
This sound familar?
I would only hope that the same people who want accountability on the Alerus expect the same kind of truth from Bush administration leading up to the war in Iraq and mistakes in executing it.
Nobody said H.G. and R.N. were coucil members at the time that the events center passed. They were however individuals leading the charge in the campaign stages. And yes, they were very condescending, talking down to people that didn't agree, as if they were just small town hicks. Now, time has spoken and they were wrong, very wrong. I think it's important to not forget these facts and hold these people accountable.
After you back out tax dollars and sponsorship / advertising funds, the property doesn't even generate the sales of a sucessful single-entity restaurant. It is truly mind boggling how massive of a failure this project is.
In the next few years you'll see...
Sioux football abandon the Alerus.
Utilities will go up at least 25%.
Suite and advertising revenue will drop by 50%.
That will put the average annual operating loss at over $1,000,000 per year.
So where is UND going to play football? Back to the stadium? Unlikely.
With D1 will come a new stadium so they can go from paying for a facility to reapin' the big bucks of playing in their own on-campus stadium.
Dream on. UND doesn't have enough bucks to maintain its buildings, let alone build a new stadium. Where is all this money going to come from, on the tail of a new parking ramp, apartment complex, and Lord knows what else? Revenue from athletics? That's a joke. No D I school, no matter how successful, turns a profit. They're a lot like the Alerus.
1.9M in wages. That's a big number. Are the wages paid at the Alerus public record?
A lot of it probably is public because about $600k is for part-time labor and I'm guessing they don't work for Compass Facility Management, the private management firm contracted to run the center. The management team does work for compass, so I'm guessing wages would be private.
Here's the management team. I'm pretty sure they all pull their weight. Executive director Charlie Jeske tells me he's often negotiating long into the night after the concerts are done. At the wedding I went to the other night, event manager David Jensen played the doorman for a while. Senior sales associate Stephanie Byro was working the banquet inside, I think. My point is, it's not like they sit around pushing pencils all day.
I forget exactly what he told me, but I can imagine a situation where the promoter felt he the Alerus Center didn't fulfill a contract and want to reduce his payment. You know those infamous riders where the star demands, say Fox TV be on in the hotel room (pretty easy considering all the nutty things musicians want)? Well, if they wanted 20 bottles of a rare mineral water and they thought they only got 19, maybe the promoter says he won't pay the full amount for building rental. Whatever. Just hypothetical situation.
Some understanding of the hidden economics of GF is important. When I was a student in the late 60s early 70s I worked part time in a local watering hole frequented by the mayor. He would empty the tip jar(paper slots) on a weekly basis at multiple joints. His annual gambling bill was $250,000. The bill was covered by the power company. When the power company needed a rate increase the mayor could deliver the council votes. "Follow the money" as Watergate reporter Woodward was told by Minneapolitan fundraiser Kenneth Dahlberg.
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