Trouble in RiverCentre

St. Paul built a new hockey arena for the Wild and a new convention center for the city. Guess which one is losing money?

When Kimberley gave the council the bad news, some members were outraged. "Years ago we were painted this rosy picture about how successful this operation was going to be," complained council member Jay Benanav, who represents the city's Fourth Ward. "And we all fell for it like a bunch of saps. Now we are being told, 'Oh, guess what? We were way off base here.'"

There are a variety of reasons why the roses have gotten thorny. When the Touchstone convention center was being planned, its bottom line was to be supplemented by revenues from the Civic Center as well as Roy Wilkins. But just months after Touchstone opened, the Civic Center was suddenly being razed to make room for Xcel Energy Center; and now the Wild reaps whatever profits come from that space.

"Before we tore it down, the old Civic Center was limping along--fat, dumb, and happy," says Dan Bostrom, the St. Paul City Council president and a RiverCentre Authority board member. "There wasn't much debt or overhead on the place, and between the parking and concessions we made a nice chunk of dough on it."

"I'm not sure the metamorphosis at RiverCentre has ever been communicated to the community," says Jim Ibister, the vice president and general manager of RiverCentre, which makes him a SPAC employee. "If we still had the Civic Center, there would be another 70,000 square feet of trade-show and convention space, which would [nearly] double our existing space. Obviously, we could compete for more business, book more events, take the small stuff and the big stuff, too. The rack rate for that 70,000 square feet for a four-day trade show would be about $20,000, and that's just rent, not counting [additional revenues from] food and beverage."

Large, arena-size concerts are another significant revenue source lost to the city. "In the old arena, we would average twelve big concerts a year, which could easily be $600,000 net profit," says Dick Zehring, board chair of the RiverCentre Authority. "But listen, we knew we were going to have to make sacrifices in St. Paul to get a national-league hockey team, and that we were probably not going to be able to hold on to the arena."

It is easy to conclude that the City of St. Paul is better off having a brand-new arena instead of a decaying Civic Center in need of a new multimillion-dollar roof. It is also easy, however, to overestimate Xcel's benefits--to see people flocking downtown for events at Xcel without considering the public revenue that was lost in the Civic Center's rubble.

"The big events at the arena, like the concerts and the hockey tournaments, were always the cash cow, especially because of the parking and concessions they could bring in," says one veteran staffer at city hall. "The conventions always struggled to make money or break even. The way it is now, RiverCentre has been set up to fail."


When the joint operating agreement between the city and the Wild was first approved, the expectation was that it would save St. Paul about $500,000 a year. Even as that estimate was being thoroughly discredited, members of the Coleman administration steadfastly spoke of the deal in glowing terms. "The RiverCentre was well-run before entering into the joint operating agreement," Deputy Mayor Kimberley told the city council in November. "And it has been run even better since entering into that agreement."

But the numbers don't add up. In its final six months as a publicly managed entity, RiverCentre showed an operating profit of $886,995. During the first six months of joint operation at Roy Wilkins and Touchstone, revenues dropped nearly $300,000 and expenses increased more than $600,000, resulting in a net loss of $104,153 (included in those losses is $87,500 that the city paid to SPAC as a management fee).

SPAC's Jim Ibister says the city's facilities generated more revenue under public management in 2000 because of a particularly strong June (the last month before SPAC took over), when a wealth of conventions and sporting shows were booked into Touchstone and Roy Wilkins. He also points out that the sharp rise in expenses under SPAC are due in part to an agreement with the city that RiverCentre's union contracts would be renegotiated when the city employees were privatized. It is difficult to make direct, budget-line comparisons between the public and the private management of RiverCentre, Ibister explains, because SPAC doesn't classify its personnel under the same titles used by the city. As an example, many building maintenance workers have been reclassified as event managers or workers in event services, causing SPAC's budget line for building maintenance to drop while other budget lines go up.

It is true that the line item for salaries and fringe benefits for building maintenance employees plummeted from $311,000 under the city's management of RiverCentre to $96,000 under SPAC--a savings of $215,000. But that gain was eclipsed by a $429,000 rise in salary and fringe-benefit expenses for event services and event managers. In all, the city spent just $632,000 in 2000 on building maintenance, event services, and event management, while SPAC spent $846,000. And while union contracts were renegotiated, workers would have had to average a 34 percent raise in just six months' time to explain the discrepancy. They didn't.

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