Despite promises the Pinnacle Bank Arena would not need a city tax subsidy, the new arena is not breaking even through five months of operation.
The new arena was $171,598 in the red at the end of January, five months into the city's fiscal year.
City leaders are hopeful that they will be able to make up the loss, in part because revenues were limited during the three months of predominantly basketball games at Pinnacle Bank Arena.
"We are still expecting at the end of the year they would be at break even," said Steve Hubka, city finance director.
City and arena staff are meeting monthly to review the financial outlook, including discussing ways to increase revenue and reduce expenses, he said.
Even if arena operations don't break even this year, revenue from all sources is enough to cover operations without jeopardizing bond repayments, said Tom Lorenz, who manages the arena for SMG.
The city and the West Haymarket Joint Public Agency are both involved in arena operations but have different responsibilities and income sources.
The city, which is responsible for operating the arena, draws income from ticket sales to concerts, food and beverage sales and parking revenue from the attached garage and the nearby festival space lot.
The West Haymarket JPA, a separate legal entity, is responsible for paying off the $378 million in bonds used to build the arena and related public infrastructure.
The JPA's revenue sources include the city's occupational tax, a portion of the state sales tax known as the kick-back tax, sale of arena suites, naming rights and other sponsorships.
The city pays SMG, a national firm, $200,000 annually, plus a percentage of food and beverage sales, to run the arena and food service.
The nearly $172,000 loss to date represents about 1 percent of the city's $15 million annual budget for arena operations.
The city's revenue reports list only net income to avoid inadvertently providing proprietary information about ticket sales and payments to individual performers.
Beyond the bottom line, the arena has been a smash hit to date. It hosted 10 concerts in its first 80 days, drawing a combined 100,000 people.
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Nebraska men's and women's basketball games have brought in another 370,000 fans. Throw in crowds for the state high school basketball tournaments, and combined hoops attendance at the arena approaches 450,000.
Officials, however, blame higher than expected utility costs and delays in opening a pedestrian bridge for the operating loss.
"It is a new building and we are learning what it takes to run it," Hubka said.
Arena staff expect to better manage utility costs next year, and the delay in opening the pedestrian bridge cut into parking revenue. The bridge links the arena to the festival space parking area.
It opened several months late after two girders slipped during construction.
And to date, a majority of the arena's events have been Nebraska basketball games that do not generate as much income as concerts.
Ticket sales for basketball games go back to the University of Nebraska, and NU pays little in rent to compensate for food and beverage revenue that the university lost when it moved basketball games out of the Devaney Sports Center.
With basketball season complete except for the NCAA women's basketball regional, the arena will have more money-making events through the remainder of the fiscal year, Hubka said.
SMG also operates Pinewood Bowl and is able to apply profits from those summer concerts to arena operations, Hubka added.
With most public arenas, income is not split into two pots. In those cases, the city gets all the revenue -- including the special taxes, suite sales and naming rights -- and is responsible for both bond repayment and operations, Lorenz said.
In its entirety, Lincoln's new arena is doing well financially with the occupation tax coming in ahead of projections and kick-back sales tax revenues strong, he said.
The city may want to look at the total budget and revenue and do some rebalancing, Lorenz added.
The city has been providing a $600,000 annual subsidy for operation of the Pershing Center and anticipated no subsidy for the Pinnacle Bank Arena.
"If things go as projected, we can make that break-even point operationally," Lorenz said during a 2012 public hearing on the agreements with SMG to manage the new arena.
Lorenz said Thursday he doesn't think there will be any need for a subsidy. In addition to working to reduce expenses, revenue streams are on pace.
It's just not allocated quite perfectly, he said. "We need to reallocate it."
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