Merrell Center running 3-year deficit / Watchdog group says district didn't consider operating costs

The Leonard E. Merrell Center has established itself as a resource in the Katy area, bringing in a variety of exhibits while providing a permanent venue for Katy Independent School District functions.

But reports show that revenue growth for the multipurpose center, which opened in spring 2005, significantly lags behind expenditures. Expenses outpaced revenues in 2004-05 by $343,102, $779,359 in 2005-06 and $577,608 in 2006-07.

Supporters say the complex is a hallmark of a fast-growing area, benefits the community and plays a key role in attracting new development. But critics say taxpayers should be wary that the center continues to operate in the red.

District officials have said the purpose of the $23.5 million facility is to serve the community and not to be a profit-maker.

"Between July 2006 and January 2008, the Merrell Center has hosted 631 events, including 149 arena events, bringing in approximately 400,000 patrons," said school district spokesman Steve Stanford.

From August 2006 to August 2007, revenues were $276,559 while expenses were $854,167, leaving a deficit of $577,608. The bulk of the expenditures are payroll expenses for the center's four full-time employees and other part-time staff. Of the $854,167 in expenses, the district spent $341,569 on salaries. [By the 2013-2014 school year, the amount for salaries had risen to $467,502.74. MM]

Utility costs average about $200,000 per year and other costs include contracted services, equipment rentals, supplies, postage, printing and furniture.

In January, the district hired Ben Rolens from a field of 30 candidates to replace Jim Chapman as the center's general manager of facilities. Chapman is now assistant director of the United Spirit Arena in Lubbock.

Rolens, 28, earns an annual salary of $85,800 to direct operations at the center as well as manage a full- and part-time staff among other duties, said Stanford.

Watchdogs critical of center

Chris Cottrell, co-founder of the Katy Citizen Watchdogs, a school watchdog group he and other residents started three years ago, said the district didn't do the math on the day-to-day operations of the center before selling the idea to the community.

"While the idea of having a multipurpose arena was probably a great idea at the time, the Watchdogs do not believe that the district fully considered what it was going to cost to operate the venue after construction," he said.

The Watchdogs have blasted district trustees for naming the facility after Leonard Merrell, who served as district superintendent from 1995-2007.

"We firmly believe that there are plenty of local area businesses that would love to have their name on the arena; after all, the entire center fronts I-10," Cottrell said. The center is at Interstate 10 and FM 1463.

Center is an asset

Lance LaCour, president and chief executive officer of the Katy Area Economic Development Council, praised the facility as a public asset. He said the complex has a positive economic impact and contributes to the vitality of the area.

"When an economic development prospect or commercial real estate broker visits our office, and we provide a brief tour of the center, it definitely makes a positive impression," LaCour said. "Especially, when we tell them that project was built as a partnership between the city and KISD."

LaCour said critics need to understand the center's first priority is to support district functions and not to be run as a "for profit" convention center.

"Therefore, it seems hard to place a weight on a profit or break-even objective, when the first priority of the center is not a business objective," he said.

Chapman, agreeing with LaCour, said it's difficult to put a financial value on the benefit of the center to the community.

"But I would suggest that the LMC provides a venue for the community to enjoy both KISD-related events and also other events, such as the Home & Garden Show, indoor football, etc., without having to travel into Houston," he said.

The watchdog group was also critical of a deal the district struck with the Katy Copperheads, a cash-strapped indoor football team. The team left last year owing the district about $40,000 in back rent after playing one season at the Merrell Center. School district officials said the debt was settled in March 2007. [They didn't say it was paid in full! MM]

The team subsequently switched leagues, changed its name to the Texas Copperheads and moved to the Cy-Fair Independent School District's Berry Center.

The 145,000-square-foot Merrell Center includes a 21,600-square-foot arena and can seat up to 7,200 spectators. The center has a variety of venues for athletic, academic and community events and conferences.

Construction was funded through a tax increment reinvestment zone established by the city of Katy, Fort Bend County and Katy ISD in 1999. Tax revenue from new development within the TIRZ boundaries is reinvested in public infrastructure.

Repeat bookings such as the Jehovah's Witness conventions keep the center busy year-round. Other functions at the complex have included Katy Ruff Riders football games, Katy Women's Show, cheer events, trade shows, graduations and other sporting events.

District realizes savings

The district continues to save funds yearly by using the center instead of renting outside facilities, Stanford said. For example, the district each year previously paid about $40,000 to rent Reliant Center for graduation ceremonies.

The district also saves money on its annual Student Excellence Awards Dinner and Employee Service Awards Dinner, which jointly cost the district about $30,000 to stage at the Omni.

Also, previously the district paid the Omni to host a volunteer breakfast for about 1,400 campus volunteers annually. Officials were unable to estimate expenditures for the event.

Stanford said the district would not be able to estimate how much it is saving by using the center instead of outside venues.

"It was easier to do (in 2006) because it was the first year that some of these events were brought `inside' and there was a better sense of what the savings were," he said.