Revenue projections were off, cutting profit, interim chief says

By DAVID SKOLNICK
CITY HALL REPORTER
YOUNGSTOWN -- Financial projections developed by Chevrolet Centre management overestimated the profit of the facility, its interim executive director said.
The center's management had estimated the facility's profit for this year at $1,153,802. The estimate was largely developed by Jeff Kossow, who quit as the center's executive director in December, according to Roger Swanson, his interim replacement.
When the profit figure was released in August, center and city officials said it was a conservative one, probably too low.
"A lot of the revenue projections were over-optimistic," Swanson said.
That summer projection estimated that Youngstown SteelHounds minor league hockey home games, played at the center, would average about 5,100 fans. The Central Hockey League, of which the SteelHounds are a member, averaged 4,478 fans a game last season.
But the SteelHounds average about 2,700 fans a game, Swanson said. The team pays the center rent for each game, with the amount based on attendance, and with fewer fans, the center's concession projections are also lower, he said.
"Hockey is about half of what was figured," Swanson said. "The original figure was too high. We've had to modify the profit."
Another unexpected financial change was the increased cost of utilities, he said. For example, the facility's November natural-gas bill was about $48,000, considerably higher than originally anticipated, Swanson said.
The incorrect estimation means the center's management is making a change to the 2006 profit projection less than two weeks into the year.
Global Entertainment Corp., the Phoenix-based company serving as the center's management, provided the estimated profit along with October and November financial reports to city officials Friday. That information will be released to the public at Wednesday's council meeting.
Monthly financial figures are usually finished about five or six weeks after the month ends, Swanson said. The center's management will provide monthly figures to city officials on a regular basis.
Though Swanson has seen the estimated profit figure and helped revise it with Global corporate officials, he didn't recall the amount Friday. But Swanson said the projected profit would not be any lower than the city's debt service, estimated to be $850,000 a year.
"The debt service is the minimum; anything else is gravy," said Youngstown Mayor Jay Williams, who hadn't seen the projection Friday.
Global corporate couldn't be reached to comment late Friday.
Other details
The city borrowed $12 million in August to make up a projected funding gap for the cost of building the center between the money it received from a variety of sources, primarily a $26.8 million federal grant, and the actual cost of the building.
Though a final construction figure won't be available until probably next month, city and center officials have estimated the cost at $45.38 million in a worst-case scenario.
Besides rent, the city receives money for the center through the sale of merchandise and concessions, Swanson said.
There are a few exceptions, he said. The SteelHounds keep all the money from the team's merchandise sales, and Disney keeps its merchandise money.
Concession sales at SteelHounds games, with the city getting a cut of that, average about $6 to $6.50 a person, Swanson said. The hockey games are the most profitable for the facility among the events held there as far as concession sales, he said.
October concerts by 3 Doors Down and Tony Bennett, the first two events at the center, did poorly in the merchandise and concession categories, Swanson said. Bennett's concert averaged about 83 cents per attendee in concessions, he said. Bennett doesn't sell merchandise.
"Who would walk around with a Tony Bennett T-shirt?" Swanson said.
Two December shows by the Trans-Siberian Orchestra sold out, but concession sales were about $1 per ticket-holder, he said.
"We haven't had the big blockbuster, knock-'em-dead ticket sale for an event," Swanson said. "We are going to go after the artists who can make the big pop for us. We want the 'big wow' act, and we haven't had that yet."
The focus is now on popular artists, particularly those who appeal to people between ages 12 and 25, he said.
As for the SteelHounds, Swanson said there are ways to get more people to attend games. The center and the team are focusing on group ticket sales, he said. Once they see a game, they'll want to return, Swanson said.
Additional changes
There have also been operating changes at the center.
Compass Facilities Management Co. of Ames, Iowa, which formed a partnership with Global Entertainment, is no longer involved with the Chevrolet Centre, Swanson said. The partnership ended Dec. 31, according to Swanson, who didn't have any details on the breakup.
Also, Global fired two full-time employees -- the group sales coordinator and the premium seat coordinator -- because of finances, he said. Those duties were reassigned.
City officials last received financial information from Global in September. Swanson, who's run the Chevrolet Centre on an interim basis for just a few weeks, said the delay was caused by Kossow's leaving, and the center employees' needing additional training including how to use the facility's computer software, he said.
Global will have a short list of about five or six candidates to replace Kossow on a permanent basis in about a week to 10 days, Swanson said.