Arena finances are improving, Schmoke says But $14,070 profit excludes $325,000 management fee

March 14, 1991|By Martin C. Evans

Mayor Kurt L. Schmoke held a news conference at the Baltimore Arena yesterday to proudly proclaim that the city-owned entertainment center, which two years ago posted a $1.2 million loss, was finally turning a profit.

"Now I am proud to say that the Baltimore Arena is operating in the black," Mayor Schmoke told reporters, then flashed a triumphant thumbs-up and left through a tunnel of festive balloons -- black balloons, to signal profitability.

But while Mr. Schmoke said the arena made money last year, city taxpayers paid more than $300,000 for its operation, officials said later.

The figures cited by the mayor -- which suggest that the arena posted a profit of $14,070 for 1990 -- did not include the $325,000 management fee the city must pay the Landover-based Centre Management, under a complex formula aimed at encouraging Centre Management to operate the arena efficiently.

Clinton R. Coleman Jr., the mayor's spokesman, later acknowledged that the arena still cost the city money, but insisted that it could be considered profitable nonetheless because income exceeded expenses by $14,070, once the management fee was excluded.

"Of course it is not in the black, because we still have to pay a management fee," Mr. Coleman. "What the mayor is saying is we're still better off by about a million dollars" compared with the 1988 deficit.

"Do the books balance out? No," he said. "But we're still only two years into the agreement."

He said the mayor was justified in not mentioning the management fee because it was reasonable to expect to have to pay for management expertise in achieving savings.

In fact, the city has spent much less to run the arena on West Baltimore Street since Centre Management took control Jan. 1, 1988.

Under terms of the contract, the city pays the firm a management fee to cover the arena's operating costs up to $650,000. If operating costs fall below $650,000, the city and Centre Management split the difference, according to a formula that gives the first $100,000 in savings to the city, the second $100,000 to Centre Management and divides evenly any further savings. If costs exceed $650,000, Centre Management pays the additional cost.

Because the arena produced an operating surplus of $14,070 for 1990, of which the city got half, the actual cost to the city of running the arena was $317,065.

In 1989, when the arena lost $50,786, it cost the city $350,000 to operate. It cost $1.183 million to run the arena in 1988, the year before it was turned over to private management.

Centre Management officials said that in order to eliminate the need for the city to pay a subsidy, the arena would have to generate an operating surplus of about $500,000, something they predicted would not happen soon.

Nonetheless, the mayor appears to have been encouraged by what is his most visible experiment in finding private operators for city-owned facilities as a way of reducing city costs.

Although Mr. Schmoke's administration has considered privatizing other recreational facilities, such as some of the city's dilapidated clay tennis courts, he would not comment yesterday on how far along those plans are.

"This may serve as a model for other privatization matters we look into," Mr. Schmoke said. "I really did believe it was going to work, and that is why I was willing to be so insistent."

Mr. Schmoke was criticized in 1988 for having turned over management of the 28-year-old arena, which is home to the Baltimore Skipjacks of the American Hockey League and the Baltimore Blast of the Major Soccer League, to CentreManagement without seeking competitive bidding. At the time, he defended the deal as a way of reducing city losses that were averaging about $850,000 per year.

Yesterday, Centre Group's board chairman, Abe Pollin, praised Mr. Schmoke for his perseverance.

"He had a lot of guts to stick his neck out," Mr. Pollin said of the mayor's decision to bring in Centre Management. "But I think he has been proven successful."

Centre Group empire manages the George Mason University Patriot Center in Fairfax, Va, the Gampel Pavilion in Storrs, Conn., and the Capital Centre in Landover.

He said his organization was able to generate advertising and concession revenues and produce savings that eluded city managers relatively unfamiliar with running a modern entertainment complex.

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