LOSS: Lincoln’s new arena has attracted a string of big name entertainers in its first seven months of operation, but is operating in the red.
By Deena Winter | Nebraska Watchdog
LINCOLN, Neb. – Mayor Chris Beutler acknowledged today that Lincoln’s new Pinnacle Bank Arena is losing money, contrary to what Lincoln’s newspaper opined on Sunday.
It might seem obvious, since even the Lincoln Journal Star has reported that the arena posted an operating deficit of $376,000 in its first seven months and is projected to end the fiscal year $400,000 in the red. But the Journal Star wrote in an editorial Sunday that “Unfortunately there may be a few misinformed souls in the community who will go on saying the arena is losing money. They should be ignored. The facts say otherwise.”
Apparently, the mayor is one of those misinformed souls who should be ignored, because he acknowledged on KLIN Radio Tuesday that “It’s coming up short. If you want to say it’s losing money, it is losing money the first year so far.”
Mayor Chris Beutler acknowledges the arena is losing money, but says the joint public agency that oversees it can plug the gap.
The Journal Star seems to think that the arena is the same thing as the joint public agency that oversees the arena and West Haymarket development. It’s not, but it oversees the arena and is flush with money and able to step in and fix the problem, like a sugar daddy. Which is what the JPA plans to do at its next meeting.
The problem is solvable without raising taxes. The crux of the arena’s problem is utility costs are higher than expected, the festival parking lot isn’t generating as much money as expected and Husker basketball games don’t bring in much money because the University of Nebraska-Lincoln structured a sweet deal.
“It’s true, not all of the revenues were exactly as we predicted in the beginning,” Beutler said, but overall the JPA is “doing quite well.” (Beutler is one of three members of the JPA.)
Basically, the city structured the deal so too much revenue is going to the JPA, and not enough is going to the arena. Revenue from advertising, naming rights, suite sales, club seats and loge seating goes toward paying off the $378 million in West Haymarket construction debt, rather than operating the arena, as in many other facilities.
“Obviously if you cut off all the streams of revenue, they’re bound to lose money,” Beutler said on the Jack & Dave show.
Beutler said the city made assumptions about expenses, crowd sizes, how much money the arena would make off basketball games – and started out devoting a conservative amount of money to the arena to make sure there would be enough money to pay off the construction debt.
To plug the arena’s budget gap, Beutler said there are a couple of options:
• Divert arena advertising revenue to arena operations. “It makes sense to make that adjustment,” he said. “We think that’ll make a big, big difference.”
• Purchasing software that will help the arena better manage its utility costs. The JPA has already voted to do this.
The trick is to make sure there’s still enough money for the JPA to pay off the debt for the overall West Haymarket (which includes the arena). Currently, annual debt payments are about $15 million, but those are interest-only payments. In 2020, the city will begin making payments on the principal, with debt payments increasing to about $25 million for the remainder of the 30-year life of the bonds.
The JPA has the power to tap into Lincoln property taxes if necessary, but city officials have always said they don’t expect to need to do that, and Beutler reiterated that belief.
“It’s not something that I can see happening at all,” he said, while noting it’s “unwise” to make promises about what will happen 20 to 50 years down the road.
Nebraska Watchdog first reported on the arena’s revenue problems in January, when the arena’s general manager explained how the financing was structured so the arena gets less revenue than most arenas.
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