2003 - 2004
September 7, 2004
Accounting error hid coliseum loss
The City Council will decide how to pay for the larger-than-expected deficit.
BY MATT WILLIAMS
GREENSBORO - An accounting error obscured a million-dollar shortfall in the Greensboro Coliseum's budget, forcing city officials to scramble to reconcile Brown the city's accounts.
The error masked what officials say was a disappointing year for the city-owned complex, which suffered from a poor economy. The result was a $2.88 million operating loss - much higher than the $1.55 million deficit that officials hoped to reach.
Matt Brown - Photo Credit: The News & Record
"We're obviously disappointed by the gravity of the year-end numbers," Managing Director Matt Brown told the coliseum's advisory board Thursday.
Brown pointed to most of the coliseum's most important indicators and noted a decrease. The number of events, attendance and food sales were all down.
"Fewer bodies in the building, fewer concessions dollars, fewer parking revenues," Brown said.
He pointed to other government-owned arenas around the country that were also hemorrhaging money in the poor economy. Complexes in Raleigh, Nashville, Tenn., and Charlotte all posted larger deficits than Greensboro's, Brown said.
But the severity of the loss was unknown to the city's finance department until three weeks ago, when accountants attempted to close out the city's books for the fiscal year that ended June 30. It was then discovered that the coliseum had understated about $460,000 in expenses from an event held earlier in the year, said Rick Lusk, finance director.
Lusk said the coliseum "may not have settled out all the things as timely as they should have been."
Brown said in a memo that the accounting error was unintentional.
In a memo, Deputy City Manager Mitch Johnson said he implemented new accounting controls to help prevent the problem from recurring. From now on, the city's finance department will review the coliseum's finances quarterly so mistakes are caught before the end of the year, Johnson wrote.
But there were earlier signs that the coliseum wouldn't reach its target of a $1.55 million loss. On June 15, the council voted to take $200,000 from the "Coliseum Improvement Fund" to offset part of the coliseum's expected losses. Money in that fund came from outsourcing the coliseum's concessions operations and was originally earmarked for small capital projects.
The deficit also includes $259,187 in losses stemming from the coliseum's operation of the Greensboro Generals hockey team. In July, Brown told council members that the team only lost $59,187 under his management. But that figure assumed the franchise's private investors would follow through on a promise to contribute $200,000, something they have yet to do.
At the time, Brown said he fully expected the investors, led by businessmen Don Brady and Bill Black, to make the payment. But Lusk said the investors' debt to the city has been written off because it is extremely unlikely that it will ever by paid. "They told us hey didn't have any money," Lusk said of the investors.
Together, the losses turned into an extra $1.3 million beyond the $1,55 million loss the council agreed to finance with tax revenue in the coliseum's budget. Finance officials were able to reduce the shortfall by spreading out capital costs and spending cash reserves, but the council will be asked Tuesday to take another $668,000 from the improvement fund to pay the rest.
Officials were quick to back the coliseum, arguing that the loss was less important than the wider economic benefit it attracts to the city. War Memorial Commission Chairman Dick Grubar said the coliseum doesn't have to turn a profit to be considered a success.
"This facility provides so many opportunities for the community," he said. City Council member Don Vaughan echoed that support and complimented Brown's management of the complex.
"I think Matt Brown is doing a good job in a very tough economy," Vaughan said.
Vaughan did say he wants the city to pursue legal action to collect the $200,000 payment from Brady and Black. He said the two are "outstanding citizens" and thanked them for working to support the team, but said the city can't simply absolve them of their debt.
"It's an agreement and it needs to be enforced," he said.
Neither Brady nor Black could be reached for comment.
For next year, Brown's challenge isn't getting much easier. The concert industry is still in a slump and the wider economy is still weak. Major events that helped boost attendance last year, such as the Generals, the Atlantic Coast Conference Men's Basketball Tournament and a Phish concert won't return next year. Market America, one of the coliseum's biggest annual conventions, announced last week it would look elsewhere for next year's meeting.
Already, the coliseum has moved to save money by out-sourcing work and leaving staff positions open. Brown said he called his employees into a meeting and told them to expect more tight times.
"We're going to be asking everybody to do more," he said.
Contact Matt Williams at 373-7004 or email@example.com