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Report: Arena budget deficit up to $600,000

LOWELL -- The annual report on the Paul E. Tsongas Arena is in, and the delay in opening the building pushed the city's operating deficit up by about $200,000.

City leaders knew from the start that they'd have to subsidize the Arena on a yearly basis to the tune of about $500,000 -- in addition to the $4.9 million already bonded. The first-year deficit was predicted at about $400,000, but the actual deficit came in at $616,185.

The main reason for that, according to Peter Aucella, executive director of the Arena/Civic Stadium Commission, is that the Arena opened four months late due to construction delays. On the other hand, the commission is withholding $339,000 in liquidated damages as a penalty to the construction firm due to the late completion.

"We had a number of problems with the Arena, construction problems that kind of compromised the goals we had as it relates to making this thing a very profitable investment," said City Councilor Richard Howe, chairman of the council's Arena/Ballpark Subcommittee. "But I think we've overcome those problems, and I think in the next few years we'll see a definite improvement."

According to the report, the city has spent $8.627 million in the North Canal area, between the Arena, Edward LeLacheur Park and the utility relocation for the post office.

That's about 10 percent of the $81.595 million invested in those projects. Adding in other projects in the area -- such as the riverwalk and development of Lawrence and Wannalancit Mills -- the total investment in the area has been about $140 million.

At least one city councilor, Daniel Leahy, has argued that the city's yearly contribution to the Arena reflects the $400,000 or so in bond and interest repayment. Leahy, a critic of the specific plans for the Arena since he was a state senator, has argued that the Arena should be owned, and maintained, by the state.

"The fact of the matter is, it's going to cost about a million dollars a year to run it," Leahy said, adding in the bond repayment. "I'm not saying we don't have it, but you've got to tell the taxpayers where the money comes from and how we're going to cover it."

The city budgeted about $1.3 million for the first year of the Arena's operations. The Lock Monsters hockey team pay a yearly rent of $500,000. The University of Massachusetts Lowell pays $3,000 per hockey game the River Hawks play there. Those fees, plus any made from shows or conferences, pay back the budgeted amount -- except for the operating deficit.

"I don't look at it as a deficit," said City Manager Brian Martin. "It's a subsidy. I look at it as a part of what the city has to offer as an attractive community."

Benefits from the park and the Arena go beyond monetary, proponents argue. City image and quality of life both benefit from the developments, they say.

"To me, this goes hand in hand with the marketing strategy," Martin said. "We're trying to build a livable city so families will stay here."

The bond repayment is covered under the treasurer's part of the budget and is handled no differently than bonds for schools, parking garages or the Lowell Memorial Auditorium, Aucella said.

"We're functioning the same way city government does -- it's no secret," Aucella said of the yearly repayment.

Aucella said it was the city's commitment to bonding the initial money that led to leveraging the state, federal and private funds.

"The city deserves a lot of credit for being the first one with cash on the table. Out of that, planning and design could occur, and it added credibility to the ability to secure grants," Aucella said. "Look at all the things that came to the table because of that initiative -- that's leadership."

Aucella said there's no promise that the yearly subsidy will ever go away. But, he said, it will surely go down from the first year's amount.

"The goal of the City Council was always to control the deficit. Six-hundred-thousand dollars, though, is very substantial and significant. I'm optimistic that it can be reduced substantially," Howe said.

The report also addressed the LeLacheur Park. For the first year, the Lowell Spinners baseball team will cover such operating expenses as rent until a fair cost can be determined.

The report on the park was glowing -- since moving downtown from Route 38, the team's attendance jumped by 62 percent, from 107,000 to 174,020. Twenty-three games out of 38 were sellouts.

The entire report is expected to be discussed at tonight's City Council meeting. One of the things sure to surface is the performance of Globe Facility Services, the company running the Arena for the city.

Councilor Edward Caulfield has said he's unhappy with the company's performance, due to what he said was a low number of shows.

Aucella, Martin, Howe and Globe's Tom Paquette, the general manager of the Arena, said it will take a few years for the building to really get off the ground, and that judging the first year really isn't fair.

Paquette cited the events already held -- including "Disney On Ice," national gymnast and dance competitions, professional wrestling, and Liza Minelli and LL Cool J concerts -- as proof that Globe hasn't been idle.

The Arena had 41 shows, Paquette said, working through the dead time of summer and around start-up problems.

Those shows, as well as the Spinners' games and Lock Monsters' games -- which started just two nights ago -- are adding to the quality of life in Lowell, as well as enhancing it's reputation, Aucella said.

"I think the Arena and the baseball stadium have finally struck a chord," he said. "And I think they are generating the positive image we've never had before."Report: Arena budget deficit up to $600,000