Twilight Zone at the Alerus Center
It was like an episode of the Twilight Zone this morning when the City Beat groggily went to the Alerus Center commission finance committee's 7 a.m. meeting.
It's the first time the Pollyannas at the Alerus Center have planned to lose money, about $150,000. Everytime, they've planned to make money or break even and they've never made goal.
Here's how it normally works: The center reports it lost money and I go, "Holy heck! How dare you fools waste taxpayers' hard earned cash!"
Center commissioners say, "No, Tu-Uyen, you fool, we're losing money but what do you think all those people that come to our events do when they're in town? They spend money at the mall and the restaurants and the hotels!"
Here's how it happened today: Center commissioners say, "This projected loss of $150,000 is terrible! How can we show our face before the City Council with a budget like this?"
Some of these guys actually agonized over the losses. I swear, committee chairman Randy Newman said bringing a deficit budget to the council would be like "accepting" the inevitability of losses.
I couldn't believe it, but I actually said, "Realistically, shouldn't you be budgetting for a bigger loss? I mean, you've got that Canad Inns construction right next door disrupting everything, you've got huge energy bills and big concerts are as scarce as ever. It'd be reasonable for you to expect to lose more money, right?"
[Fade out as Twilight Zone theme plays. "Dah-dah-dah-dah, dah-dah-dah-dah..."]
Anyway, I still think they ought to try to break even. After all, the Alerus Center gets about $300,000 in hotel tax revenues that it gets to count as its own revenue. It's deficits are paid out of the economic development fund. But all those obstacles I just mentioned are truly outside of the Alerus Center's control and it'll take a little time to transition into some kind of new revenue model. Whatever that is.
As a side note, expect this year's budget to be skewed by the cancellation of redneck woman Gretchen Wilson's concert.
It's the first time the Pollyannas at the Alerus Center have planned to lose money, about $150,000. Everytime, they've planned to make money or break even and they've never made goal.
Here's how it normally works: The center reports it lost money and I go, "Holy heck! How dare you fools waste taxpayers' hard earned cash!"
Center commissioners say, "No, Tu-Uyen, you fool, we're losing money but what do you think all those people that come to our events do when they're in town? They spend money at the mall and the restaurants and the hotels!"
Here's how it happened today: Center commissioners say, "This projected loss of $150,000 is terrible! How can we show our face before the City Council with a budget like this?"
Some of these guys actually agonized over the losses. I swear, committee chairman Randy Newman said bringing a deficit budget to the council would be like "accepting" the inevitability of losses.
I couldn't believe it, but I actually said, "Realistically, shouldn't you be budgetting for a bigger loss? I mean, you've got that Canad Inns construction right next door disrupting everything, you've got huge energy bills and big concerts are as scarce as ever. It'd be reasonable for you to expect to lose more money, right?"
[Fade out as Twilight Zone theme plays. "Dah-dah-dah-dah, dah-dah-dah-dah..."]
Anyway, I still think they ought to try to break even. After all, the Alerus Center gets about $300,000 in hotel tax revenues that it gets to count as its own revenue. It's deficits are paid out of the economic development fund. But all those obstacles I just mentioned are truly outside of the Alerus Center's control and it'll take a little time to transition into some kind of new revenue model. Whatever that is.
As a side note, expect this year's budget to be skewed by the cancellation of redneck woman Gretchen Wilson's concert.
posted by Tu-Uyen at 5:48 PM
21 Comments:
This is why tax-funded "economic development" projects are such a fool's errand.
Be it money for a convention center like the Alerus center or a tax-subsidized loan to get a call center or other business to move in...the tax payers rarely get their money's worth out of the deal.
'Zackly, Rob.
"Economic development is like a city hiking on the old fishnet stockings, putting on some lipstick and trying to attract some horny business looking for a good time and no commitments"
I think it is time to get new management at the Alerus Center. I do see that type of center as making money for the community, but it SHOULD break-even. There are plenty of concerts in Winnipeg and Minneapolis that we can try pulling this way. They need people that want to be aggressive in bringing stuff to town.
"On the horizon is the growing concern that Canad Inns intends to take over catering. Newman said he keeps hearing rumors to that effect. Catering, too, is a major source of revenue for the center, making up another fifth of the 2007 budget."
Can't GF say no? Just because the Canad wants to take over catering, should we have to let them. Are we a submissive beaten down wimp?
Let me ask you guys something. You're talking about the Alerus Center as if it isn't earning its keep in sales tax revenues. Remember there was that UND study that said it generated $12.6m in additional economic activities in town? What did you guys make of the study?
GOB: Economic development applies to firms like Cirrus Design (city bought equities) and LM Glasfiber (city built the plant and leased it out). Canad, too, is a form of economic development (city leased land for cheap and gave tax incentives). When you put millions of your dollars in the ground in exchange for a much smaller amount you get from the city, that's "commitment." With bricks in the ground, none of these guys are gonna be going anywhere for a while.
The biggest problem with the Alerus Center (in my view) is that it does not do exactly what it said it was set out to do, and that is bring in outside dollars. If you take a look at many of the events in the center it seems they are local in nature, they hold Sioux booster events, weddings, Christmas parties, and local meetings far more than any statewide conventions or regional conferences that I can see. It's no wonder why people are upset with the Alerus, it's because no body really cares about those things, we were perfectly happy to have those events in our local hotels/restaurants, and the locals relied upon those meetings/weddings/etc. for a big source of revenue. It is just a matter of time before Ramada, Goodribs and others finally shut down and follow the path of The River Bend and Westward Ho due to the marketing strategy of the Alerus Center. The Alerus Center can lose all the money in the world for all I care as long as they bring in big conferences to GF, it's those events that bring in the money, not the nickel and dime stuff the Alerus will charge for. If they would lower their prices and make an effort to market the big groups they would have no problem bringing conferences into town, but they are too busy marketing to the locals and pissing off the hotels/restaurant owners to figure that out.
Coupla questions.
Is there (outside) money to be made with a lot more smaller concerts, etc. than trying to get the big acts? For example acts like the ND State Fair has next week. Not the same ones, but similar sized/popular acts. I really don't know, maybe there is something goin on every week at the Alerus anyway.
The other question.
There area a lot of negative comments about "economic development" as it is done in GF today. How would you improve it or would you just accept everything the way it is, w/o economic development?
Wouldn't it make sense to just turn over management of the Alerus Center to the folks at Canad Inns?
Common best interests, a business approach instead of a government approach,...
Way back in the planning stages the consultants hired by the city said straightout that the Alerus would never operate in the black. This was one of the reasons the whole project was opposed by so many people. If it were a money-making enterprise, private sector money would build and operate it. Problem is, in order to make a buck, the Alerus would have to have an event just about every day.
Dave: I never spin for the city. You know better than that.
You're right that economic impact isn't predictable where we can know the specifics but neither is, say, the impact of cutting interest rates.
Economics is a science and it does have some modest predictive abilities. One can't say with certainty what the impact will be but one can extrapolate, based upon spot data, and come up with a ball park range. It's easy to be an armchair critic but, outside the world of political ideology, few things are exact or certain.
I don't disagree that the Alerus Center should break even but I disagree when you dismiss the economic impact out of hand. It's fair to critique the analysis, which was done by a UND economist -- and I have yet to hear anyone do that -- but it's intellectually lazy to wave your hand and say it's "unpredictable" so we shouldn't accept it.
I like Conservative Yahoo's attitude: How do we make it better if we don't like the way it is?
Apology accepted. Too much media-bashing these days make a reporter sensitive to charges of unprofessionalism.
Anyway, Dave, you're forgetting that the Alerus Center is already being managed by a private business: Compass Facility Management out of Ames, Iowa. They have a contract with the city. Would Canad do a better job? I'm doubtful because Canad is in the hospitality (as in lodging and food service) business not the entertainment business.
Maybe what you guys mean is the city should just sell the events center to somebody, say Canad. It cost us $80m to build the Alerus Center and we're still paying it off. I doubt any business would pay that much and Canad, with debt from the hotel construction, won't have any money anyway.
I know things look kinda crummy right now but I'm reserving judgement for another five years or so. Why five? The next few years are transition years with Canad under construction and UND going D1.
Here's a couple of factors that could change in the future (and I admit this is being pretty Pollyannaish):
a) The troubles we have attracting concerts could pass as just another business cycle. Maybe the big concert promoters, by focusing so much on metro markets, might discover that they've saturated those markets.
b) The Canad Inns could fulfill its promise of attracting lots of big conventions. We lose money operationally but get lots of sales taxes. Dadinggf has a point, the Alerus Center can't be cannibalizing local business. It'll have to get outsiders who wouldn't otherwise come here.
c) Alerus Center management, whoever it turns out to be in five years, could come up with a better business model to cope. They're trying to attract smaller concerts now as CY suggests. Maybe it'll work out better.
And not to be outdone, the city will again build some kind of architectual wonder and call it a fitness center. In todays GFHerald:
Park District to study possible construction of new fitness center
By Ryan Bakken, Herald Staff Writer
The Grand Forks Park District's goal is to build a new fitness center -- at the cost of perhaps $10 million to $14 million
The city will again kill local businesses with their goofy socialist ways of thinking.
A few things I wonder about:
1. Was the Alerus plan conceived and commited to in tandem with that of the Ralph. Or did the Ralph steal some of the Alerus' thunder-and unintentionally foil their business plan?
2. I have it on good authority that, for some reason, the Alerus has an aversion to advertising to the Winnipeg market. Even though it's more costly, I would think it would also provide the biggest bang for the buck. Any ideas?
3. I think a smalltown mindset (Alerus director hired from Jamestown barn, I mean Arena) and a lack of creativity have hampered its ability to attract top name acts and events.
Anonymous has some good points. One question I am wondering is how long has the current commission been in place, and whom were they appointed by. I wish that some commissions in this city were held to an election, such as Alerus Center and Planning and Zoning. I'm not sure that is the best answer, but they seem to be making a lot of newsworthy decisons that affect our taxes. I would also like to see a matrix of local commissions and see how many times the same names pop up, it'd be interesting.
Jeffrond: Note that the Park District is an entirely different body than the city of Grand Forks. They're elected separately and have separate budgets. I'm sure you're aware of that, but the point is these are an entirely different bunch of "socialists."
Anonymous: 1) The Ralph was a surprise to the city and, yeah, it does occassionally steal the Alerus Center's thunder. 2) I'm surprised about the Winnipeg thing. Could you say more about it? With Canad on board, you'd think they'd be upset about this. 3) Don't blame Charlie Jeske. It's not small town or big town. Compass Facility Management knows it has a problem getting acts out to the boondocks (as in here) and has hired a guy to look for acts nationally. We'll see how that works this year.
Dadinggf: I tried that matrix a while back. The overlap is not as great as you think. None of the Alerus Center commissioners, other than the City Council representative, sit on other public boards as far as I know.
"Jeffrond: Note that the Park District is an entirely different body than the city of Grand Forks."
True, and maybe I should have specified more, but it is an US vs. THEM, and I just generally point my finger THEM, and blame THEM.
It is like taxes. People say that the city is taking too much tax, but if you really look at it, near 45-50% of that tax is for the school system. The city gets very little. But people still point at THEM and complain.
tu-uyen,
1. thanks
2. I can't say much more without betraying my source, but I'm guessing things WILL change thanks to Canadinns marketing agreement with city. I think GF must start thinking more regionally in its tourism and economic developement strategies. I think there's far more potential in Winnipeg and Western Minnesota than Western ND. Time after time, ND tourism officials snub the East in favor of spending marketing dollars on the West, even though everyone contributes equally based on a revenue formula. It may be true that the Badlands attract more out-of-state visitors than our area, but it has become a self-fulfilling prophesy. Local tourism officials are have spoken up strongly about this in the past-to no avail. I think it's time to make it more of a political issue.
3. You say I shouldn't blame CJ but in the same breath you say he has hired a guy to attract national acts. What took so long!?
Jeffrond: I pointed that out so you knew who you could vote against.
Anonymous: "You say I shouldn't blame CJ but in the same breath you say he has hired a guy to attract national acts. What took so long!?"
This guy we're talking about was hired by Compass Facility Management. In other words, Charlie didn't do the hiring; his boss did.
Compass manages arenas in mostly smaller markets. The problem is it's cheaper and more profitable for many concert tours to stay a couple of nights in one big metro market rather than branch out to smaller markets. I'm not hearing that from Compass alone but from people in the industry. Even Fargo is complaining.
So Compass hired this person, Craig Samborski, to focus on getting the concerts.
I don't know for sure, but I always thought that it was Charlie and local staff that worked with promoters. With Samborski and the entire company's resources behind him, Compass is trying to partner with promoters instead of just booking shows with them. When the word "partnership" is used in this context, what it means is risk sharing. If the show takes a bath, the promoter doesn't take a bath with it.
Jeffrond: I pointed that out so you knew who you could vote against.
Anonymous: "You say I shouldn't blame CJ but in the same breath you say he has hired a guy to attract national acts. What took so long!?"
This guy we're talking about was hired by Compass Facility Management. In other words, Charlie didn't do the hiring; his boss did.
Compass manages arenas in mostly smaller markets. The problem is it's cheaper and more profitable for many concert tours to stay a couple of nights in one big metro market rather than branch out to smaller markets. I'm not hearing that from Compass alone but from people in the industry. Even Fargo is complaining.
So Compass hired this person, Craig Samborski, to focus on getting the concerts.
I don't know for sure, but I always thought that it was Charlie and local staff that worked with promoters. With Samborski and the entire company's resources behind him, Compass is trying to partner with promoters instead of just booking shows with them. When the word "partnership" is used in this context, what it means is risk sharing. If the show takes a bath, the promoter doesn't take a bath with it.
Thanks for the explanation. At least it's good to know Alerus is exploring new ways of working with promoters.
Nice colors. Keep up the good work. thnx!
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