More Losses Revealed for Troubled Aquarium
The income losses that sent the Long Beach aquarium begging for $2.4 million in state funds are far worse than expected, financial statements show.
Despite assurances by local officials that the 2-year-old Aquarium of the Pacific is in decent economic shape, records show the aquarium lost $4.5 million from Oct. 1, 1999 through March 31--more than twice the $2-million loss anticipated in its 1999-2000 budget.
The aquarium’s net income fell in the red during its first year of operation, traditionally a period of high attendance for such new attractions, and the losses have continued to deepen. Net income is the money left over after paying expenses.
Financial reports filed with the city reveal that the waterfront attraction lost almost $7.5 million from Oct. 1, 1998 through March 31, 2000. The only time the attraction reported a profit was in the first three months after its opening in June 1998, when it made $312,000.
So far, the $120-million facility has paid its bills and bond interest payments by turning to its reserves. If the situation does not right itself in the years ahead, the backup accounts will be exhausted, officials have said. In that case, port funds and the city’s hotel bed tax may have to be used to help pay the attraction’s debt.
Aquarium officials could not be reached for comment Wednesday.
City Finance Director Bob Torrez, whose office has been working with the aquarium, said he was worried at first about the losses. But Torrez said the attraction is developing a business strategy that should help it break even by the end of the year. The aquarium is on city land and is part of a massive waterfront redevelopment effort.
Torrez downplayed the significance of the most current financial statements because they do not reflect this year’s attendance for the spring and summer months, usually the busiest time of the year.
“I’m optimistic,” Torrez said. “They have a good staff over there. They are re-energizing their marketing program and are being very aggressive about raising both revenue and attendance.”
The Long Beach aquarium is considered a key component in the city’s effort to remake itself into a recreational destination after the economic recession of the early 1990s.
With enough exhibit space to fill three football fields, the facility displays more than 12,000 animals, ranging from sharks and sea lions to sea horses and moon jellies. The project was financed by revenue bonds, which cost more than $9 million a year in interest.
Before it opened, city officials predicted that the aquarium would not require government subsidies and that attendance revenue would pay for its construction, operation and debt service.
Opponents of the project challenged the predictions, saying they were unrealistic and that the aquarium might end up being heavily subsidized by local government. Some of them unsuccessfully sued the city, alleging that the forecasts used to justify the project were fraudulent.
“The problem is compounding like a snowball rolling downhill,” said Joel Friedland, a former Long Beach port commissioner who participated in the lawsuit. “When all the walnut shells are lifted, we will finally find out the true loss.”
The sagging revenue and attendance figures have prompted aquarium officials to cut costs, seek state assistance and revise their projected attendance figures downward.
Although original forecasts estimated about 2 million visitors a year, officials now predict that 1.2 million people will pass through the turnstiles this year.
Warren Iliff, the president and chief executive officer of the aquarium, has said the original projections by Coopers & Lybrand, a Dallas-based accounting firm, turned out to be faulty because the company relied too much on data from aquariums in other parts of the country.
City officials say the attendance forecasts also were based on the assumption that Queensway Bay--with the potential to attract 10 million visitors annually--would be finished last year. The $100-million restaurant and entertainment complex, which will be located across the street from the aquarium, is now two years behind schedule. Groundbreaking is scheduled for this month.
Long Beach City Auditor Gary Burroughs cautioned that the aquarium must not rely on other projects for its success.
The reported losses, Burroughs said, “raise questions that I’d like to sit down and talk about, but I wouldn’t call out the fire trucks right now. The aquarium needs to come up with a successful plan without Queensway Bay, which could help but will not be their savior.”
Torrez said part of the aquarium’s strategy is to seek out new sources of revenue, including grants and government funds.
Earlier this year, local legislators sought about $2.4 million in state aid for the facility. Last month, Gov. Gray Davis agreed to give the facility $500,000.
“We knew about the drop-off in attendance last year,” Torrez said. “I’m not as concerned today about it as I was initially. They are now working hard to pump up attendance.”
Burroughs said the aquarium has met its bond payments to date and has assured city officials that it has the ability to make the next bond installment in December.
“Sooner or later,” Burroughs said, “they will have to achieve two things--profitable operations and a positive cash flow from their operations, assuming they don’t have any other benefactors.”
