Call it a loss leader, a common strategy among businesses: Take a loss in one area to help fuel profits elsewhere.
Something like that is underway at Canalside, where losses are helping to develop a once-neglected part of Buffalo. It doesn’t mean that Canalside should plan on perpetually losing money, but the red ink is certainly an acceptable price for the municipal benefit that the still-developing area has delivered to a resurgent city.
Judging solely by attendance, Canalside is a rousing success. The free Thursday night concert series in summer is a people magnet. Special events like this summer’s giant rubber duck attract the curious from near and far. The Queen City Bike Ferry was so successful in its first year that additional service was added.
Shark Girl remains a favorite and, in winter, skating and other activities are popular.
It all costs money and, thus far, expenses are clobbering revenues. Canalside posted a $1.4 million loss this year, and while it’s a lot of money, it was a heartening improvement from the previous year’s loss of $1.7 million and, before that, $1.6 million. The trend is hopeful and, in fact, Canalside’s model projects surpluses before many more years.
Some context is important in evaluating Canalside’s operations. Not all public entities make money. Public transportation, here and around the country, would be a money-loser based solely on passenger fares. The Buffalo Zoo requires public support to balance its books. Yet, both of these assets and many others contribute significantly to the quality of life in Buffalo. The same is undeniably true of Canalside.
The good news is that income is increasing. Sponsorships are up as are revenues from food and beverages at events and from rentals.
But expenses are growing, too. The Thursday night concert series is a prime example. Its cost is expected to more than double, reaching about $1.95 million this year compared with $862,813 in 2015-2016.
That is due, at least in part, to the costs of increased personnel and security, said Tom Dee, president of Erie Canal Harbor Development Corp., which oversees Canalside. Possible changes that could increase revenue and lower maintenance costs include instituting age limits or charging a low admission fee.
The ECHDC contracts for management of Canalside. The deal with Spectra, owned by Comcast Spectacor of Philadelphia, expires in March. Whoever wins the right to manage Canalside in a new contract needs to help drive the area toward economic self-sufficiency.
That’s Dee’s vision for Canalside. He hopes to reach that break-even point in five to seven years, which seems a reasonable amount of time to further develop the area, control expenses and maximize revenues.
Part of his plan is to encourage property owners within the Canal District eventually to pay most of the cost of operations and maintenance. In addition, as Canalside continues to expand, other possible sources of revenue will appear.
It’s the right approach, but for now, no one can complain about the balance sheet. Canalside, even with its losses, counts as a net addition to life in Buffalo.
After years of little accomplishment, as corporation leaders focused on landing a big-box store to anchor the district, the area is thriving. It has turned what only a few years ago was a wasteland into a lively area that people want to explore by the tens of thousands. That will only improve. It’s been a good job.