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Westworld losing money amid expansion project By Beth Duckett The Republic | azcentral.com Sat Feb 9, 2013 10:24 PM Despite numerous upgrades and efforts to attract events, Scottsdale’s WestWorld center continues to hemorrhage money. An audit of the city-operated enterprise shows Scottsdale has subsidized operations to the tune of $335,000 to $878,000 a year during the past five years. The shortfall could grow if finances continue down their current path. WestWorld will need to raise revenue or cut costs by nearly $3 million in 2014-15 to cover its portion of operating costs as well as debt from an expansion project that already is under way, according to the audit. In late 1996, Scottsdale finalized a deal to assume control of WestWorld, which was previously run by private operators. Critics denounced the $4 million purchase as a form of corporate welfare, while supporters said city ownership could inject new life into the financially troubled enterprise. Sixteen years later, WestWorld, an event venue near Loop 101 and Pima Road that is home to a major annual car auction and dozens of horse events, continues to be a money-loser for the city. Despite that, many contend that the municipally operated facility is a vital part of tourism, pumping hundreds of millions of dollars into the economy through events that might not set foot in Scottsdale otherwise. A $43 million expansion of WestWorld’s Tony Nelssen Equestrian Center could significantly boost revenue as city officials work to draw as many new special events as possible. The expanded equestrian center, which already is partially complete, will accommodate horse shows, auctions and other events year-round in an air-conditioned facility of more than 300,000 square feet. With the expanded facility, “there is actually a chance we could make WestWorld self-sufficient,” said Scottsdale City Councilman Bob Littlefield. “That depends on getting the expansion finished and getting these new events in,” he said. Drawing events all year Brian Dygert, WestWorld general manager, said the arena will be able to operate year-round with climate control, which previously wasn’t possible. Event producers have expressed strong interest in coming to WestWorld with a larger, air-conditioned facility, he said. While Dygert could not disclose names of the special events, he said they “have a good number of new events already in the contract pipeline.” “The expansion allows us to capitalize on the time of the year with climate control in the event world and allows us to increase the amount of consecutive events occurring,” Dygert said. While WestWorld has never been self-sufficient, “most of these types of facilities do not” reach that point, Dygert said. “Their value is larger than that,” he said, adding that it “has to do with the larger economic impact.” A year from now, the Barrett-Jackson Auction Co. plans to hold its nationally known auction at the expanded center, which will replace the event’s previous home, a temporary tent at WestWorld. Alone, the Barrett-Jackson auction in 2006 was estimated to have generated $96.3 million for the local economy, which covered off-site spending as well as non-vehicle spending at the auction, according to a 2007 study performed by Tempe-based O’Neil Associates. The collector-car event has since grown. “The numbers certainly indicate that the horse shows and Barrett-Jackson bring in a lot of money to the city and to our businesses,” Littlefield said. ‘Unrealistic’ forecast In addition to municipal funding, the Arabian Horse Association of Arizona, the Arizona Quarter Horse Association and Barrett-Jackson have committed funds toward the project. Even so, an audit of WestWorld’s financial operations predicts a shortage of nearly $3 million starting in 2014. The projection takes into account WestWorld’s operating costs, as well as debt owed on the center’s expansion. The estimated debt payment that year is $3.2 million. Last year, city economic officials predicted the Tony Nelssen Equestrian Center could generate new shows and rate increases on existing shows that, combined, would increase base revenue $2.6 million by fiscal 2014-15. Scottsdale City Treasurer David Smith questioned the estimates, issuing a report in March that partially concluded forecast assumptions “appeared unrealistic.” Even if the forecasts were achieved, “operating income does not improve sufficiently to cover the remaining debt service,” he said. A city audit, dated Jan. 24, suggests ways to curb expenses and increase revenue at WestWorld. The audit found, among other things, that rates for arena pricing, labor and other work were “inadequate” to cover related costs. At a meeting last Monday, Scottsdale City Councilwoman Linda Milhaven said the audit seems to indicate that the city’s subsidy “is going to be much greater than what we originally anticipated.” Milhaven suggested officials take a closer look at the audit findings, sooner than later. “My concern is that as we increase our costs, there’s not going to be enough,” Milhaven said, noting during the meeting that the facility is charging fees that are below average. In March, Milhaven was the sole council member to vote against a financial plan for the project, voicing concerns about the potential burden on taxpayers to close the funding gap. Other council members were more optimistic. Littlefield said the city can “tinker” with rates and increase efficiencies. Either way, the center “is never going to pay for itself unless we bring in a lot more business,” he said. Scottsdale Vice Mayor Suzanne Klapp agreed. “That’s why it’s important to make a decision on how we’re going to bring in some marketing expertise to increase the revenues from more events,” she said. An improved situation Currently, the plan is to pursue marketing that would primarily target the equestrian center, which shares WestWorld with numerous horse arenas, barns and stalls, a polo field and a multipurpose tent. City officials note that WestWorld, which hosts close to 100 events a year on average, is in far better shape than it was 20 years ago. Past Arizona Republic reports show the facility, built in the 1980s on federal Bureau of Reclamation land north of the Central Arizona Project Canal and east of Pima Road, has had its share of financial difficulties, with losses approaching $1 million a year or more under private management. “If you read its 20-plus year history, it is vastly improved and has grown to phenomenal amounts,” Dygert said. Scottsdale entered into a cost-sharing and land-use agreement with the bureau in 1982. Four years later, K-Lin Corp. assumed management and built the covered Equidome arena, now known as the Tony Nelssen Equestrian Center. In late 1996, the Scottsdale City Council approved the purchase of the assets and operating agreement, under speculation that the horse show and auto auction would leave Scottsdale, reports show. The total purchase was $4 million, far less than its estimated value at the time. |