Sullivan Arena posts $600,000 operating loss for 2016, well before Aces exit

Months before the Alaska Aces hockey club folded, the Sullivan Arena snapped its profit streak.

The arena posted a nearly $589,000 operating loss at the end of 2016. Up to then, the arena hadn't lost money in at least a decade, officials said — raising questions about the financial future of Alaska's largest entertainment venue amid rising competition and a state economic recession.

As part of its contract with the private company operating the arena, Anchorage is on the hook for covering the deficit. The administration of Mayor Ethan Berkowitz is asking the Assembly to draw the money from what's essentially the city's general savings account.

Meanwhile, SMG of Alaska, the contractor, has been asked to revise its revenue projections and create a new business plan, said Chris Schutte, city development director.

"They'll have to provide reports on how well they're doing, so we can keep our finger on the pulse of the facility," Schutte said.

SMG officials didn't respond to requests for comment this week.

Sullivan Arena, off Gambell Street where the Fairview neighborhood blends into Midtown, can fit thousands of spectators and boasts an Olympic-size hockey rink and an insulated floor for basketball, concerts and trade shows.

The Aces were by far the biggest tenant for the complex, bringing in 44 percent of its revenue in 2016, the audited financials show. In February, the Aces canceled the contract, and the team has since announced a move to Portland, Maine.

[The demise of the Aces leaves a scheduling hole for Sullivan Arena]

In good times, which stretch back more than a decade, the arena split its profit with the city. In 2015, the city received $15,165, deposited into a capital reserve account for future repairs and renovations.

If the arena loses money, it's up to the city to cover the gap, according to the contract signed in 2011. That means backfilling where revenues fall short of expenses, within a limit set each year by a complex formula.

In its funding request to the Assembly, which is slated for a public hearing next month, the Berkowitz administration doesn't spell out the specific reasons for the arena's $588,999 deficit.

Schutte said major upgrades in 2015, including new seats, flooring and an ice plant, didn't contribute to the deficit.

He instead anecdotally pointed to the downturn in the Alaska economy and increased competition from other convention centers and sports arenas, particularly the new Alaska Airlines Center at the University of Alaska Anchorage.

"It's increased competition because UAA's center is basically subsidized, and it's a lot more competitive for the Sullivan to keep annual tenants," Schutte said.

Attractions that have relocated to UAA arena since it opened in 2014 include the Great Alaska Shootout, the annual college basketball tournament, and the Anchorage Home Show, a home improvement trade show.

Officials with the Alaska Airlines Center and the university were careful not to pit the two arenas directly against each other.

"Competition is good," said general manager Chris Orheim.

The university arena is meant to be mainly for community events and athletics, interim UAA vice chancellor Pat Shier said in a phone interview. Shier also suggested the arena attracts artists who wouldn't otherwise come to Alaska.

Shier said the university's annual subsidy for the arena exceeds the city's Sullivan Arena subsidy this year. He couldn't immediately quote an exact number but said the university has kicked in "more than $600,000" annually since the arena opened.

The Alaska Airlines Center has yet to turn a profit, Shier added, though he said the numbers were improving. He said the new arena hasn't been open long enough for the university to know whether the economy was affecting ticket sales.

Amid the uncertainty, there's at least one sign the city has been re-examining its plans for Sullivan Arena. In 2013, officials were toying with the idea of moving Mulcahy Stadium to make room for a new arena parking lot.

That plan is now "on the back burner," Schutte wrote in an email.