After its fifth year in operation, the Ralston Arena continues to operate at a loss, and new numbers suggest it would be $1 million in the red without public support propping it up.
Combined with the arena’s debt, the City of Ralston paid more than $4.6 million for the arena last year.
The numbers raise questions about whether an arena that was supposed to pay for itself will ever actually pay for itself.
The arena’s finances have been a subject of increasing discord among Ralston city leaders. A slew of city staff members have quit. And, for the first time, last week Ralston officials publicly acknowledged a list of concerns: The arena has fallen short of expectations. Their budgets have been unrealistic. Maybe this is the best the arena can do.
“We need a plan,” newly hired City Administrator Dave Forrest told the City Council. He suggested the city hire an outside consultant to provide a more realistic look at the arena’s finances.
“We need a reality check: What is it that we can reasonably expect from the Ralston Arena?”
Over the years, Ralston has turned to funds not in the original plan to support the arena. Ralston now is tapping taxpayers and visitors through several sources of revenue, including sales taxes, property taxes, restaurant taxes, a seat tax and a hotel tax. In all, the city has devoted seven different streams of public revenue to the arena.
Still, last September, the city scrambled to transfer $450,000 from its share of keno lottery proceeds to avoid missing a bond payment. That was on top of $500,000 in keno money the city transferred to support the arena that year.
And that’s all on top of $2.5 million in arena incentive money paid by the State of Nebraska — the revenue source that is propping up the arena and protecting Ralston’s finances thanks to home improvement sales at a nearby Menards.
Meanwhile, the city lost its police chief, longtime city clerk and deputy treasurer, administrative assistant and economic development director all within about a year. In interviews with The World-Herald, several said the city’s financial position as a result of the arena was at least part of the reason they left.
None were comfortable being quoted.
Mayor Don Groesser, who championed the arena toward its 80 percent voter approval in 2011, remains publicly optimistic.
“We have to do what we have to do to make the thing work,” he said in an interview. “But we’re certainly looking at future opportunities to generate more income and keep the whole thing running.”
The arena was never supposed to rely so heavily on public funds. When Groesser first pitched building the arena, he said projections showed it would pay for itself right away, maybe even lower property taxes. But the reality today is the arena operates at a loss and has more debt than the city expected.
Arena General Manager Stan Benis said it’s not realistic to expect an arena of this size (it seats up to 4,600) to generate the funding to pay the entirety of its bills. Benis has experience working at the Civic Auditorium, CenturyLink Center and Mid-America Center in Council Bluffs.
“My goal would honestly be to break even,” Benis told the council. “Most cities go into it with the idea that the arena is not going to make money.”
Arenas like Ralston’s are going to struggle, he said, and that should be built into the city budget.
Ken Kriz, a public finance professor at Wichita State University, said Ralston is showing a strong commitment to its public bonds — that’s the good part for the city.
“They’ve decided that they’re not going to let the thing fail,” said Kriz, who formerly was at the University of Nebraska at Omaha.
But Kriz said the situation presents risk for Ralston if the economy were to take a downturn.
He also wondered how much Ralston residents know the extent that the arena will shift money from other priorities in the city. Until the arena’s debt is paid off — which won’t happen until 2033 — don’t look for significant improvements in city services or other community betterment projects, he said.
“They’re sacrificing everything else to make the payments on the arena,” Kriz said.
The 2017-18 budget shows that three departments — police, parks and the library — saw modest spending cuts for the year. The police department, for instance, is down $30,000 while the library is receiving $1,710 less.
Forrest, the city administrator, said it’s not fair to assume the arena caused the decreases. Department budgets are subject to a lot of factors, he said.
“I’m not aware of any outstanding department needs that we’re not meeting right now,” he said.
The City Council has shown increasing scrutiny of arena bills and even some division among council members over how to move forward with managing the difficult finances.
Councilman Craig Alberhasky, who argued against creating the city administrator position back in June, has been a frequent voice of opposition on the council. He was also opposed to bringing in an outside consultant, though the majority agreed to seek proposals for the council to consider.
“We’ve had to beg, borrow and steal for the arena,” Alberhasky said at one heated meeting in June 2017.
But Councilwoman Maureen Konwinski said in an interview that she believes the city is doing a good job under the circumstances.
Leaders are prioritizing efforts to draw more businesses near the arena, which would bring in more state turnback tax revenue. The state’s arena incentive provides a share of sales tax funding from business arguably generated by the arena, although in Ralston’s case that revenue primarily comes from the Menards on 72nd Street.
“I really am optimistic,” Konwinski said.
Ralston resident Joe Pilus said many community members are tired of paying for the arena.
“People are upset, but people have accepted there’s nothing we can do about it,” he said.
Pilus unsuccessfully ran for a council seat in 2016 and, before that, had hopes of working with the city on arena bookings.
But city officials are satisfied that much of the public funding for the arena is related to the arena itself, such as a hotel tax from a Holiday Inn Express that wouldn’t have been in place had the arena not been built or higher local sales tax collections thanks to the arena.
Ralston financial documents show that the arena itself generated $3.2 million in 2016-17. But it had expenses of almost $4.3 million. On top of that was nearly $3.6 million in debt payments.
A state incentive of $2.5 million, a turnback of state sales taxes collected near the arena, provided the most public funding for the arena.
To cover the bills otherwise, Ralston directed $950,000 in keno funds, $418,587 in money from a restaurant tax created in 2015, $350,000 in the city’s share of sales taxes, $184,000 from property taxes that have been raised because of the arena, $112,157 from the hotel tax and $98,415 from the seat tax assessed on arena tickets. The arena also made about $160,000 in inside and outside marquee advertising.
Operationally, the arena budget now simply builds in a transfer of local sales tax revenue, the hotel tax and the seat tax to make the receipts cover the expenses. That tax revenue is built into the arena’s 2017-18 budget, too, although the arena is projected to be in the black by $251,000 even if those weren’t included.
Support from the state turnback and the hotel taxes were planned from the beginning, but the restaurant, local sales and property taxes and keno funds came later to help with arena losses and debt.
Forrest acknowledged that relying on lottery proceeds to make bond payments wasn’t something the city wanted to continue doing for long.
“It’s going to take awhile,” he said. “But we’re working on it, and we’re taking a look at things. And I think we’ve got a pretty good team in place.”
In a competitive market, there are some signs that Ralston’s arena is finding its niche. Benis said the arena is booking more events — smaller concerts, kids shows, craft shows, Christian- and Latino-focused entertainment — and the pace of bookings is 45 percent ahead of last year.
The venue is moving away from the idea that it needs huge headliner concerts while managing to snag a few notable names, like Fitz and the Tantrums and Modest Mouse.
“When I came on, in my opinion, I thought they were tapping some of the shows that were a little too big for the arena, too pricey,” said Benis, who started at the arena in 2014.
Attendance was down slightly to about 227,000 in 2017, but officials say concessions were strong in the last year.
The arena’s first year drew 360,000, but after losing UNO as a tenant, the average attendance since 2014 has been about 225,000.
The arena also has opened a lounge — the Side Room + Lounge — to replace a retail store. The hope is that the smaller side venue will draw new events to Ralston Arena.
The Ralston Arena is doing a good job of attracting events for the Omaha area, said Mike Mancuso, president of event producer and promoter Mid-America Expositions. But it’s normal that sometimes those events lose money, Mancuso said.
“They’ve hosted a lot of great events,” he said. “I think they’re going to continue to do so.”
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Correction: The Locker, a now-closed apparel store at the Ralston Arena, was not affiliated with the Omaha Lancers and didn’t carry team apparel. An earlier version of this story incorrectly linked the store and team.