Lincoln arena’s budget gap grows

By Deena Winter | Nebraska Watchdog

LINCOLN, Neb. – Lincoln’s brand-new Pinnacle Bank Arena’s operating deficit has widened to nearly $376,000 in its first seven months of operation.

As Nebraska Watchdog was the first to report in March, although the $186 million arena has attracted a dazzling lineup of big-name concerts and a sold-out season of Husker men’s basketball games, it has been posting operational losses. In its first five months, it posted a nearly $172,000 loss.

On Monday, Nebraska Watchdog asked for the most recent figures. We were not given the numbers, but the Lincoln Journal Star was and published a story Thursday using the numbers. That’s likely because Watchdog has been more critical of the arena project, pointing out the original overall West Haymarket project has exceeded its budget by over $30 million, for example.

The city provided us with the numbers Thursday — after the Journal Star story was published and largely explained away the deficit. As Nebraska Watchdog reported back in January, the reason for the arena’s operating deficit is simple: utility costs are coming in higher than expected, the festival parking space isn’t generating as much revenue as expected and Husker basketball games don’t bring in much money.

But the overriding problem is the way the city structured the deal so the University of Nebraska-Lincoln gets most of the revenue off basketball games and the joint public agency that oversees the arena and surrounding West Haymarket development gets most of the revenue generated by the arena.

Why? The city needed UNL to be the arena’s major tenant; UNL didn’t need the city. So guess who got the better deal? (You can thank Tom Osborne for helping negotiate a good deal for UNL.)

The JPA is literally starving the private arena operators who are paid a fixed fee to run the place. Revenue from advertising, naming rights, suite sales, club seats and loge seating goes toward paying off the $378 million in construction debt, rather than operating the arena, as in many other facilities.

In fact, the JPA has so much money that it’s setting extra money aside for when its debt payments rise (when they no longer are just paying on the interest) and agreed to kick in a couple million dollars towards an ice center that will be owned by UNL.

The JPA will likely have to move money around to plug the arena’s budget gap, and should be able to do so without jeopardizing its ability to pay off the project’s debt. Officials will discuss doing so next month.

One of the reasons arena supporters said Lincoln needed a new arena was the city had to subsidize the old Pershing Center to the tune of about a half-million dollars per year. By building a new arena that would cost — with interest — about three-quarters of a billion dollars. Now that’s some interesting rationale right there — that’s like saying, “We can’t afford the payments on this house, so we need a bigger house.”

But the fact that new arena is also operating at a deficit — it’s projected to end the fiscal year about $400,000 in the red — is poetic justice. Clearly, that was another red herring thrown out by arena supporters. Not that anyone’s keeping count.

Contact Deena Winter at deena@nebraskawatchdog.org. Follow Deena on Twitter at @DeenaNEWatchdog

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