03-02-2007, 04:14 PM
Audit shows operating deficit of $800,000
As critics had predicted, the controversial Eastern Kentucky Exposition Center in downtown Pikeville is having serious money problems with no immediate solutions, officials said yesterday.
State Auditor Crit Luallen reported that the 7,000-seat civic center ran up an operating deficit of almost $800,000 in fiscal 2006 and "cannot continue to operate within its current financial structure."
Local leaders renewed calls for the state to assume financial responsibility for the civic center, built largely with state money secured by former Gov. Paul Patton, who served a decade as Pike judge-executive.
The center opened in October 2005 at a cost of $29 million, $16.5 million more than what was proposed in 1998.
Nine months after a brisk beginning, however, a slowdown prompted the seven-member Eastern Kentucky Exposition Center Corp. -- appointed by Patton -- to ask Executive Director Donna Damron to serve as its general manager as well.
Three months later, Damron retired and the board asked a Philadelphia-based management firm, SMG, to run the center's day-to-day operations.
General Manager Steve St. John, who noted that the audit covers a period of time before he moved to Pikeville, said Damron has returned as a "contracted provider."
"We have high hopes," St. John said, "but right now, I don't see how it's going to be able to operate this coming year without state funding or some kind of help."
Local officials want that help from state coffers.
"It's there," said Pike Judge-Executive Wayne T. Rutherford, who was not involved with the project's construction. "We've got to live with it and deal with it. It's a state project, so they ought to take care of it."
Rutherford said the county and the city of Pikeville "cannot bear the burden alone. Maybe we will have to look to surrounding counties for assistance since it is, after all, a regional facility."
Gov. Ernie Fletcher said the state should work out a plan with local leaders and expo center officials to make the facility self-sustaining.
"This project may require interim funding from the state toward the path of becoming self-supporting," Fletcher said in a statement.
In a response released with the audit report, the expo center's board chairman, Charles Baird, said efforts are under way to increase revenue and trim expenses.
State Sen. Ray Jones II, D-Pikeville, said last summer the expo center had boosted the region's economy and provided unprecedented access to entertainment found previously only in Lexington and Louisville.
At the time, however, Stan Cave, Fletcher's chief of staff, said the general belief among state policy-makers was that while the state can build civic centers, "once they're constructed, they should be stand-alone facilities and self-supporting."
St. John said the facility's major problem is the lack of an "anchor tenant," such as a sports team, to pay down the fixed costs of running a civic center.
"We don't have enough activity going on at this point to substantiate our budget," he said.
St. John said the center's expenses were mostly for "staffing, utilities and general expenses."
In the audit report, Luallen said the center plans to cover this fiscal year's anticipated deficit with the remaining interest from construction funds and $250,000 in coal severance money appropriated by fiscal court.
While these funds address short-term cash flow needs, they will not meet the arena's long-term budgetary needs, Luallen said.
As critics had predicted, the controversial Eastern Kentucky Exposition Center in downtown Pikeville is having serious money problems with no immediate solutions, officials said yesterday.
State Auditor Crit Luallen reported that the 7,000-seat civic center ran up an operating deficit of almost $800,000 in fiscal 2006 and "cannot continue to operate within its current financial structure."
Local leaders renewed calls for the state to assume financial responsibility for the civic center, built largely with state money secured by former Gov. Paul Patton, who served a decade as Pike judge-executive.
The center opened in October 2005 at a cost of $29 million, $16.5 million more than what was proposed in 1998.
Nine months after a brisk beginning, however, a slowdown prompted the seven-member Eastern Kentucky Exposition Center Corp. -- appointed by Patton -- to ask Executive Director Donna Damron to serve as its general manager as well.
Three months later, Damron retired and the board asked a Philadelphia-based management firm, SMG, to run the center's day-to-day operations.
General Manager Steve St. John, who noted that the audit covers a period of time before he moved to Pikeville, said Damron has returned as a "contracted provider."
"We have high hopes," St. John said, "but right now, I don't see how it's going to be able to operate this coming year without state funding or some kind of help."
Local officials want that help from state coffers.
"It's there," said Pike Judge-Executive Wayne T. Rutherford, who was not involved with the project's construction. "We've got to live with it and deal with it. It's a state project, so they ought to take care of it."
Rutherford said the county and the city of Pikeville "cannot bear the burden alone. Maybe we will have to look to surrounding counties for assistance since it is, after all, a regional facility."
Gov. Ernie Fletcher said the state should work out a plan with local leaders and expo center officials to make the facility self-sustaining.
"This project may require interim funding from the state toward the path of becoming self-supporting," Fletcher said in a statement.
In a response released with the audit report, the expo center's board chairman, Charles Baird, said efforts are under way to increase revenue and trim expenses.
State Sen. Ray Jones II, D-Pikeville, said last summer the expo center had boosted the region's economy and provided unprecedented access to entertainment found previously only in Lexington and Louisville.
At the time, however, Stan Cave, Fletcher's chief of staff, said the general belief among state policy-makers was that while the state can build civic centers, "once they're constructed, they should be stand-alone facilities and self-supporting."
St. John said the facility's major problem is the lack of an "anchor tenant," such as a sports team, to pay down the fixed costs of running a civic center.
"We don't have enough activity going on at this point to substantiate our budget," he said.
St. John said the center's expenses were mostly for "staffing, utilities and general expenses."
In the audit report, Luallen said the center plans to cover this fiscal year's anticipated deficit with the remaining interest from construction funds and $250,000 in coal severance money appropriated by fiscal court.
While these funds address short-term cash flow needs, they will not meet the arena's long-term budgetary needs, Luallen said.