Although the Alerus Center's events revenue alone does not cover its budget, city officials say the facility is financially healthy, with an improving fiscal position.
Its bottom line is lifted significantly by various types of tax dollars, financial documents show, and that is something city leaders have said -- both now and decades ago -- is a natural part of the center’s public mission. That role, however, has been criticized in recent days, offering a discussion over how heavily the public events center should lean on public support.
A review of financial documents show that, for the city’s account that runs day-to-day events at the facility, 2018 operating revenues were about $424,000 below operating expenses. Those documents also show a second “capital” and debt repayment fund, used to pay off big loans and big projects. A big depreciation expense in that fund, plus other items on the books, total about $3.35 million.
Taken together, that makes a nearly $3.8 million operating loss in 2018. But city leaders say that’s only half the picture.
Those same financial documents also show multi-million-dollar revenues based on multiple streams of income, chief among them two separate sales taxes. There is a 0.75 percent sales tax that helps pay off the cost of the building, which sunsets in December 2029. There also is a separate 0.25 percent hospitality tax that City Finance Director Maureen Storstad said helps pay off operating costs of the Alerus Center.
Sales tax revenue to the Alerus Center’s fund for big projects and debt payments came in last year at nearly $8.2 million, and the same kind of revenue to its operations fund was nearly $600,000.
The bottom line for the Alerus Center’s net position, as of Dec. 31, 2018? A total of $49,945,385, which is $3.8 million higher than one year prior.
In providing the documents, city officials were responding to a lengthy post appearing on Rob Port’s “Say Anything” blog. The post, by an anonymous author, said “city leaders are apparently in denial about just how bad things are going” at the facility after the Herald reported that “income” at the facility — the total change in the operational fund — will drop from $354,000 to $140,000 in 2020. The Herald’s analysis was based upon city finance projections for the facility.
The blog post went on to argue that tens of millions in depreciation expenses in recent years, coupled with annual operational losses, paint a grim picture of the facility’s future that appeared to be masked by tax dollars subsidizing the facility.
Storstad called the blog’s analysis “very misguided.” Regarding depreciation, Storstad said it’s “a non-cash entry that is made based on the value of the building divided by the life.” In other words, it’s not directly reflective of the state of the building.
The post’s author also does not clearly state the history of the 0.25 percent hospitality sales tax, which Storstad said can be applied to pay down long-term debts — and has been since its inception — but can also be used to pay for day-to-day operations. Indeed, a 2001 article in Herald archives calls the hospitality sales tax a “built-in subsidy” for the Alerus Center “that is counted as [...] revenue.” The 2019 budget explicitly states that the tax “is used toward Alerus Center operations.”
Historical financial statements show that, across the last decade, the bottom line for day-to-day operations has fluctuated wildly, from more than $700,000 in the red in 2009 to about $470,000 in the black in 2012 back down to a loss of more than $920,000 in 2017. It recently ticked up from that decade-lowest mark to a loss of about $423,941 during 2018.
“There was a period of time that the state’s oil economy was booming and I think we saw some of the benefits here in meeting room use and attendance,” Storstad wrote in an email. “Also, this was also at a point of time that the Canadian rate exchange was favorable as compared to now. We had discussions at the time that we should not assume this would always be the case, and (it) is (the case) when we set aside money into an Alerus Center operating/capital reserve as a safety net as all years (aren’t) as profitable.”
But the operational fund has been buoyed all along by sales tax revenue from that 0.25 percent hospitality tax, where income has grown exponentially between 2009 — when sales tax revenue to the fund was about $387,000 — and 2018, when it brought in $576,495. That’s an increase of nearly 50 percent.
And that’s a big reason the bottom line for the operational fund has gone up almost every year since 2009, starting at $387,000 in the hole and ending last year at almost $2.1 million.
The biggest difference between the way the anonymous author and City Hall see the operation of the center is the role that this taxpayer support plays on its ledgers. While the anonymous author argues that “it’s time for them to operate the center in a business like way,” the 2001 Herald article reports Alerus Center leaders argued that “the center can’t be measured against business standards … because it is a public facility.”
Anna Rosburg is the Alerus Center’s general manager, working directly for the venue management firm Spectra, which has overseen operations at the facility since mid-2017. She said the building hosted 326 events in 2017, 427 events in 2018 and is on track for 456 events in 2019. And on Wednesday, she echoed what local leaders said nearly two decades ago.
“From a management standpoint, our focus is very much on (the facility’s local) economic impact,” she said.
Say Anything -- the blog site hosted by Port, who is an employee of Forum Communications Co. -- this week published the anonymous 1,200-word post regarding the Alerus Center. When asked by the Herald about the post, Port said in a private social media message that the item was submitted by a reader and is comparable to a “letter to the editor” that might appear in a newspaper.
“Telling the public the Alerus Center is successful and profitable leaves the impression that it is generating enough revenue from its operation to cover its expenses,” he said. “It does not. It receives a subsidy, and counting that subsidy as though it were generated revenue the same as ticket or concessions revenue is just plain dishonest.”