Gov. Dannel P. Malloy is proposing to spend $250 million on renovations to the XL Center though the venue lost close to $1 million in each of the previous four years, according to annual reports from the organization overseeing the building.
The city of Hartford owns the XL Center. It is overseen by the Capital Region Development Authority, a state agency, and managed by Spectra Venue Management.
In the current fiscal year, there is about a $1.9 million gap between operating costs and expenses, according to Terryl Mitchell Smith, director of marketing and management for the CRDA.
When factoring in the state’s contribution to the XL Center of about $600,000 and the authority’s funding of about $400,000, the net loss is expected to be about $900,000, she said.
That is a small improvement from the venue’s previous years.
In fiscal year 2016, the XL Center’s net operating loss was more than $914,000, the result of decreased facility surcharge revenue and an increase in marketing expenses for University of Connecticut sporting events, according to CRDA’s annual report.
The venue lost more than $1 million in fiscal year 2015 and had a net operating loss of $3.8 million in 2014, according to CRDA annual reports.
The latter was due to the building going through a management change that led to one-time expenses and a diminished marketing window early in the year, according to the CRDA’s annual report.
The venue also was adversely affected by a reduction in naming rights due to change in athletic leagues.
CRDA officially took control of the XL Center in 2013, Mitchell Smith said.
“It was a difficult year for the XL Center,” according to the 2014 report, which indicated that the management change along with fewer and lower attendance at UConn men’s and women’s basketball games contributed to the venue’s worst performance in recent years.
“Building operations were more clearly identified in CRDA’s first year of management of the building as significant expenses were experienced in utilities, police and fire service, and overall labor costs,” the report states. “Highly fatigued mechanical systems contributed to high repair, maintenance, and operating expenses as well as significant inefficiencies. Forty years of operations have taken their toll on the building as well as its reception in the market place to tenants, promoters, and the fans.”
The more than 40-year-old building has “worn systems, inefficiencies, continuous and unpredictable breakdowns,” according to last year’s CRDA annual report.
Revenue shortfalls are “due to congested points of sale and undesirable seat offerings,” the report states.
$40M spent since 2014
The state has spent $40 million on the venue since 2014.
In addition to the state contribution of $35 million for renovations to the venue, Connecticut taxpayers also dolled out roughly $3 million, $1.1 million, and $900,000 in 2014, 2015, and 2016, respectively, according to CRDA annual reports.
“The building continues to confront high policing costs relative to its competitors as well as energy and labor costs,” according to the 2016 report.
In 2012, the General Assembly established the CRDA by changing the name of the Capital City Economic Development Authority, expanding its authorities, and redefining it boundaries.
State statues say the purpose of CRDA is to stimulate new investment in the state, attract events, and encourage residential housing in downtown Hartford.
In 2015, the CRDA undertook an analysis of the building’s long-term viability, which determined that the building could be renovated rather than rebuilt. The price tag, the authority said, is $250 million — half of what it would cost to replace the venue.
Malloy has included $250 million for renovations in his current budget proposal.
Sen. Tony Guglielmo, R-Stafford, said that even before he was aware of the consistent annual losses, he felt Malloy’s proposal was “totally out of sync with the reality of” the state’s fiscal situation.
“It just defies common sense,” he said.
He said that if the state were to contribute $250 million, it would likely increase the operating costs of the building, making it less likely that the venue would be profitable.
“It’s not the way any business would operate,” Guglielmo said. “When you have bad times, you hunker down. You try to conserve, and that doesn’t seem to happen in government.”
Sen. Timothy D. Larson, D-East Hartford, has been supportive of the governor’s proposal, assuming it would help lure a National Hockey League team to the state, and the XL Center’s losses have not swayed his opinion.
“Having an NHL franchise in Hartford is really worth that type of an investment,” he said. “All of these large facilities need some sort of subsidy.”
Even without an NHL team, Larson said he still supports having a civic center in downtown Hartford, saying the state already is expected to lose concert bookings when the MGM resort opens in Springfield.
The XL Center “is tired, and it needs an upgrade,” he said. “It needs some type of investment.”
A spokesman for the governor said today that despite the consistent losses, the venue must be renovated.
“The XL Center has long been a fixture in Connecticut and it is difficult to imagine the state without it,” the spokesman, Christopher Collibee, said. “It is the only large facility of its kind in Connecticut, hosting basketball and hockey games, gymnastic competitions and ice shows, commencements and concerts. The facility is 41 years old and is at a crossroads: either we demolish and completely rebuild it, renovate it now, or close it in the near future. Renovating the center is a smart economic development investment — ensuring that the XL Center continues as a valuable asset to the region and the state.”
Convention Center not immune
The Connecticut Convention Center also continues to lose millions of dollars each year.
Its net operating loss in fiscal year 2016 of nearly $3.3 million is about $458,000, or 16 percent, more than the previous year.
The CRDA attributes this to several one-time events and conventions that occur every other year, and a higher percentage of canceled events than the previous year.
The Convention Center’s 2015 operating loss was more than $2.8 million.
State contributions to the Convention Center in 2013, 2014, 2015, and 2016 were roughly $4.9 million, $4.8 million, $4.7 million, and $4 million, respectively, according to CRDA annual reports.
