Alerus Center projects $123,000 loss

By Tu-Uyen Tran

October 28, 2009 at 8:18 AM

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.

Executive Director Steve Hyman is projecting a $123,000 loss, 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.

Football key

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.