The Abbotsford Entertainment and Sports Centre (AESC) ran a deficit of $3.4 million last year, including what the city anticipates will be a payment of $724,000 to the Abbotsford Heat AHL hockey team for the 2010 season.
In 2009, the centre had a shortfall of $2.6 million, although that figure did not include a Heat fee.
According to the 2010 consolidated financial statements for the City of Abbotsford, an arena deficit of close to $1.9 million was budgeted for that year. The actual figure was more than $1.5 million higher than projected.
The budget set out $4.3 million for operational costs, but ended up just over $5.8 million. The arena generated revenue of approximately 2.4 million.
A portion of those operating costs is a projected supply fee shortfall of $724,000 to be paid to the Abbotsford Heat hockey club.
The figure is a projection at this point because the Heat run on a fiscal year from July 1 to June 30, while the city’s fiscal year is Jan. 1 to Dec. 31. The final Heat numbers won’t be available until summer.
Included in the 2010 $3.4 million shortfall is the $450,637 paid to the Heat last year for the previous season.
In total, the Heat accounted for $1.2 million of the arena’s 2010 deficit.
As part of the agreement to bring the AHL Heat hockey team to Abbotsford, the city signed a supply fee agreement guaranteeing the club $5.7 million in revenue. If the team doesn’t hit the mark, the city compensates the club for the difference.
If current projections are correct, Abbotsford will have paid the Heat $1.17 million for its first two seasons.
“The Heat supply fee is contingent on attendance,” said Abbotsford city manager Frank Pizzuto.
He explained the hockey shortfall was based on three key areas:
- Attendance was lower than forecast;
- Low attendance impacted the food and beverage sales budgeted and;
- Commercial rights sales were lower than forecasted.
Despite the losses, there is no indication that the city plans to make major changes. The 2010 arena deficit will be covered by savings from various other operating budgets in the city, Pizzuto indicated, but did not specify which those might be.
“We have a 10-year agreement with the Abbotsford Heat and the city intends to honour that agreement,” he said.
The deal has eight years remaining.
Pizzuto also pointed out that hockey attendance improved in the winter and spring of 2011.
Hockey isn’t the only factor in the 2010 arena deficit. Pizzuto said entertainment revenues were also less than expected, though the centre appears to be performing better in 2011.
The city also has seven years remaining in a 10-year deal with Global Spectrum, a Philadelphia-based company that operates the arena for the city. Abbotsford pays Global Spectrum $150,000 a year for its services.
Attendance has been disappointing, said Pizzuto. However, the business continues to be built, and in the future he believes there will be less shortfall and increased revenue.
Jason Blumenfeld, of Global Spectrum, took over as general manager of the entertainment centre at the end of 2010. In the past five months, he’s seen some positive changes.
“Just look at all the shows that have been booked this year,” he said, listing names like KISS, Sarah McLachlan, Maroon 5 and Celtic Thunder as recent examples.
“We are reaching more people, different demographics – it’s not just country and Christian,” he said.
Other initiatives, such as the centre’s walking club and the upcoming KISS block party, are some of the innovative ideas being created to promote the shows and the venue, he said.
‘There is a lot of competition in Vancouver and from the casinos,” he said, pointing out the challenge is to show people why the local centre can do it better than others.
The AESC officially opened on May 10 of 2009 and was the final component of the three Plan A projects which also included the Reach Gallery Museum and improvements to the Abbotsford Recreation Centre.
In 2006, voters approved a referendum for the city to borrow $85 million for the projects, which eventually represented a cost of $115.4 million.
The city is currently paying off that amount over 20-25 years (25 for the arena and 20 for the other two projects). In 2010, the arena carried annual long term debt (external interest) and amortization costs of $5.4 million.
Including debt financing and the operating deficit, the arena represented a 2010 expense of $8.8 million.
The financial statements can be found on the city website under the financial department.