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Home My WebLink About06/20/97 BAKERSFIELD CITY MANAGER'S OFFICE MEMORANDUM June 20,1997 TO: HONORABLE MAYOR And CITY COUR~ //// FROM: ALAN TANDY, CITY MANAGER /,,~/ '// / SUBJECT: GENERAL INFORMATION ~' / 1. An update is enclosed on the events that have occurred relating to the Amtrak Station since we met with Senator Costa on May 30% 2. A status report on the Panorama Burn Dump project is enclosed. The final Site Investigation Report from Kleinfelder shows that the burn dump does not extend into Panorama Drive and that a maximum number of eight properties may be affected by remedial efforts (limited excavation). 3. A progress report on a Council referral to investigate possible improvements to Comanche Drive at Highway' 178 is enclosed. 4. Several articles regarding the privatization of public facilities are enclosed for your information. We are moving forward with a draft of an RFP on that subject. 5. Valley Plaza has announced plans to build a 16-screen movie theater, with construction beginning in Fall '97 and completion by Spring '98. Their press release is enclosed. 6. A status report from Recreation and Parks is enclosed. 7. The Museum is executing its option to purchase the property it has leased from us in Central Park. 8. We met with CSUB officials this week to discuss bringing some of their sports into the arena. It's very exploratory and a preliminary look at this time. Honorable Mayor and City Council June 20, 1997 Page 2 9. We are moving forward with the possibility of demolishing some of the lean-to type of structures at 515 Truxtun to make it available on a temporary basis for surface parking. AT:rs cc: Department Heads Pamela McCarthy, City Clerk Trudy Slater, Administrative Analyst BAKERSFIELD PUBLIC WORKS DEPARTMENT MEMORANDUM DATE: JUNE 18, 1997 TO: ALAN TANDY, CITY MANAGER FROM: RAUL M. ROJAS, PUBLIC WORKS DIRECTOR,//~~ SUBJECT: AMTRAK STATION UPDATE The following will outline events that have occurred since the May 30, 1997 meeting with Senator Costa regarding the proposed Amtrak Station: Agreement with State Pursuant to our May 30 meeting, Alan McCuen of CalTrans was to immediately begin drafting the agreement between the City and State placing the City as lead for the overall project. A draft scope of work outlining each parties responsibilities should be completed by CalTrans today and faxed to us within the next few days for our review. In addition to who would have control of the funds, payment methods, environmental oversight and time lines, issues such as Station ownership and operations will be addressed in the agreement. Coordination with Q Street Grade Separation Project The consultants working on the Q Street grade separation project have been contacted in an effort to coordinate the two projects. In addition, we have asked their railroad expert to render an opinion as to the overall compatib!lity with that of the Amtrak Station project. The initial indication was positive, however, we were cautioned that securing the necessary agreement with the railroad would be a difficult task. It should be noted that our railroad expert, Bob Barton, is employed by the same parent company that employs the consultants performing the Amtrak Station sighting study. This should help in our coordination efforts. Amtrak/Railroad Agreement Mr. Steve Zimrick of the CalTrans Division of Rail was to check on the Amtrak/Raikoad agreement and determine if the new station could be moved easterly to the S Street sight under the terms of the existing agreement. Staff has not heard back from Mr. Zimfick, however, we will make every effort to contact him as soon as possible. Property acquisition ' · Staffhas briefed Don Anderson with respect to property acquisition for the Amtrak Station. One of the issues discussed was the possible use of the same appraiser that is being used for the Q Street grade separation project to provide unity in valuation. CITY MANAGER'S OFFICE Project coordination meeting A project coordination meeting has been scheduled for Tuesday, June 24, at 10:00 am to discuss both the Q Street and Amtrak Station projects. This meeting will involve more of a "nuts and bolts" approach to the respective projects and better define the role of each of the participants. Developer/Amtrak Station proposal Staff has checked with CalTrans regarding whether a private developer could be involved in the Amtrak Station construction and operations. It was determined that the Amtrak station will be owned and operated by Amtrak or owned by the City and operated under an agreement with Amtrak. A private developer could lease space within the station but could not have any ownership interest within the facility. When asked if a developer could somehow construct the station as a stand alone facility or be integrated within a larger complex, CalTrans indicated that could not happen due to the State's bidding requirements. The station could, however, be constructed by the City and fully integrated with another facility constructed by a private party as long as there is a clear property division at some point in the facility. This would be similar to the Convention Center/Meeting Room division. cc: Jack LaRochelle Ted Wright A KE R S F I E L D PUBLIC WORKS DEPARTMENT MEMORANDUM TO: Alan Tandy, City Manager FROM: Raul Rojas, Public Works Director~ DATE: June 12, 1997 SUBJECT: BURN DUMP PROJECT PROGRESS · We have received the final Site Investigation (SI) report on the Department of Toxic Substances Control (DTSC) project from Kleinfelder, Inc. In summary, it shows that the burn dump does not extend into Panorama Drive, and that a maximum of eight properties should be affected by remedial efforts (i.e.-limited excavation). No further investigation should be needed to develop the plan. However, this will be subject to review by DTSC, who will base their decision on review of the report and the Health Risk Assessment (HRA) to be completed this week. KB:smp c: Judy Skousen, City Attorney Don Anderson, Real Property Agent Burn Dump File S:\WPDATA\L_BD0612.MEM ,,,,~ At4 AG~..R'S OFFIC:? BAKERSFIELD PUBLIC WORKS DEPARTMENT MEMORANDUM DATE: JUNE 16, 1997 ~ ~ TO: ALAN TANDY, CITY MANAGER ~/I FROM: RAUL M. ROJAS, PUBLIC WORKS CTOR~ SUBJECT: COMANCHE DRIVE REALIGNMENT ~ ALFRED HARRELL HWY At the request of Councilmember Pat Smith, staff looked into improvements to Comanche Drive where it intersects State Highway 178 near Alfi-ed Harrell Highway. A meeting was held to discuss possible solutions to an accident problem that occurs at the intersection as well as the lack of a paved shoulder along the entire length of State Highway 178 from Mesa Matin raceway to the mouth of the canyon. Those in attendance at the meeting were Councilmember Pat Smith, Supervisor McQuiston, Raul Rojas, Jack La_Rochelle and Craig Pope with County Roads. Solutions to the two problems stated above were broken into short term and long range. It was determined that a solution to the intersection accident problem could be accomplished in a relatively short time frame if the City and County got involved. Comanche Drive is planned to be realigned to connect directly to Alfred Harrell Highway at State Highway 178. It was anticipated that this work would be accomplished through the development process, however, development in that particular area has slowed dramatically. The City and County could, through a capital project, realign the roadway and install a traffic signal at the intersection. This would completely eliminate the accident problem. Total cost of the project is estimated to be $475,000 with the City and County shares being $295,000 and $180,000 respectively. As discussed in the meeting, the City would stand ready to budget the necessary, funds (with Council approval) and act as lead if the County would participate with their share. The shoulder work was seen as more of a CalTrans problem that must be addressed on a long range basis. We will be contacting CalTrans to discuss these improvements and request they . include them in their STIP. The next step in this process is to once again meet with the COunty to discuss our estimate and determine if they wish to participate. Please let me know if you have other suggestions regarding our process. Thank you. cc Councilmember Pat Smith Jack LaRochelle ~ - -'RECEtVi''?'' Ted Wright jI. I~l ~ ]' 1997 CITY MANAGER'S O! ::,,i The Greater Baton Rouge $2.00 BUSINESS REPORT ~ [] COVER What a difference a year makes .,~'~ By even the most I r, ~[s ~-~rs~ ,~.~:,r or }~[ managing d~e [~aton ~ ~ % conse~ative estimates, ~o~,~ ,~v~d. :..~}~ j private management ~o~po,' Philadelphia rcducect tl,e .~ d~v's subsidy of dm civic cemer ~ of the Centroplex ~,,~,~,,,i:,,~. " created a river of ..,~ord~. ,, ~,G'~ ,~¢,,,,~ ::~ ~ comp[c'{ecl year-end r~po~, the ,. savings for Batonco,,.:,~y ~:,~h~d ~h~ ~,~ or. .... '~ ~nning the Ccntroplex from After ~o Rouge last year ~,,~.000 ,~ 1995 to under decodes on o $300.000 in 1996. roller coaster ride of success ~nd And while ~he city's budget setbacks, priwte mon~gement ~ppe~rs m..,. ~, ~,,~ ~y ~i~h~e[ ~tFobu~ office maintains that those numbers tO h~ve the Riverside Centroplex b~ck on track. Business Repo~ staff fail to take into account indirect c6sts, even conse~atige caicula- SMG's figure for total expenses, for example, does not include tions indicate a huge shyings over S303,000 in indirect costs related to payroll, mainmm~nce, financial -- INSIDE: what the city paid to ~n tine anti legal ,se~ices, she said. Those indirect expenses were ca[culateci The co~ 0f a civic center 3~ ['acili~ during the three prior years, by David M. Griffith & Associates Ltd., a nationally rccognizect "The actual reduction in the consulting firm. she sa d SMG is n0 stranger t0 deficit is greater than tim proiec- [n addition, while the utility bill ['(ar thc Ccntroplcx during the first arena management ~ tions were," said Will Wilton. y~ar of private management was capped at $500 000, by SMG's own Centr0plex hist0~ ~4 Ccntroplex general manager "Anct nccounting, the c:ty spent S627,1-i9. -- [ think any tune that you meet Fu~hermore. Hanlon said the c tv also spent $21,9.i0 tm insur- budget, there are a lot of people ance for tt~e Centropicx buildings and $15,000 to [~crform a special- ,hat encl up having a s~le on their face." purpose audit, since the city-parish fiscal year docs not mn concur- SMG officials are among those smiling, rent with that of the Centroplex. The ci~'s contract with the private company, which operates 65 Don Parker, 5MG's director of finance at thc Ccntmplex, saki the facilities worldwide, inducling the Louisiana Superdome in New company's contract with East Baton Rouge protects the city-parish Orleans. calls for a 50-50 split be~vcen the two pames of any from bearing the extra S127,1-19 in utiiity costs. savings realized in managing the Centropiex. Under the contract, if uttli~ costs exceed $500.000, SMG splits ail %e contract establishes a Net Operating Loss Benchmark of savings under the 5712.000 benchmark only up to 5350,000 5712.000. and SMG gets to keep half of ail tnoney it saves below reduction. The c:~ then gets to keep, ctollar for dt)lkm any addition- that amount until tl~e reduction of losses reaches $500,000. Below al net loss reduction until the amount of thc utihtv cxc'css that mark, the company gets to keep 30 cents of eve~ dollar it reached. saves, But even if all the hidden c()st.s are added to thc city's official While the city's inctependent audit is not due out until thc cnc[ o( subsidy of the Ccntroplcx, SMG still comes c)ttt Jol)kl~l~ pretty adept. this month. SMG's in-house repo~ shows a net operating loss of Assuming taxpayers absorbed the addition:d $339,9-[[1 in indirect. $298,1 t7 during the fiscal period encting March 31. [f independent insurance and auciit4'ec costs suggested by [[anltm. thc private auditors agree with the ~;blG finance clcpa~ment, the private compa- company still operated thc Centroplex la.st year for ,5638.057. That's ny will cam $206.9,12 in ts first year of operation. 5.i86,943 less than 199q's 51 I25 mil[ion*>pcrnting dclicit and "Believe me, we were x'e~ pleased wid~ B~on l~ouge'i' said ,~23,1 t9 less than thc 10-year aver:igc. Glenn Mon, SMG's regional vice president. Hanlon also noted, however, that while 5MG rccorcls the manage* SMG was so gratified widl the first-year pcrfomxmce of ti~e mcnt fee as revenue, that figure represents an expenditure ti) thc Centroplex that the company named Wilton Rookie Manager~ft]~c city while SMG's net operating loss may have come to less than Consisting r)f a 12.000-plus seat arena, a 2 I/0-scat theater :md a was abo[~t $845,000. she said. 28,000-square-foot exhibition hall, the Riverside Ccntroplex has not "When yOtl look at the S8.i5,000 loss tlnat thc city is seen an operating loss of less than S350,000 in the past 10 years, incur and you compare that with the bst fierce years then it h)oks tn 1987. the facility cost.the city-parish $~,13.5.{8. and the average OK." Hank)n said. cost of mnnin~ it each year since then has bccn $761,176. The citys subsidy reached an all-time high in [992 when taxpayers paid H0ckey's impa~ 51,223.790 to mn it. Last year. the amount was $1.125.000. Wihon. who sec'ed as clircctor ~ff the Pete Maravich Center nt I, ~uiqi: nn State University bt:fore bt'coming man:~gcr of the Any way you slice it Cu'ntroplcx, atmbutcd $,xl(;'s success to dc,zc'ns of fadors hut a I'cw oiTicials said the savings to the city are not as substantial as SMG's 'The way to make these dlings xx'(~rk is [o h~>st :ts many events as Marsha Hanion, the c~-parish buciget director, saici calcui:mng One problem SMG identified wl~cn it to~>k ~wcr m:m:~gcmcnt savings at the Ccntroplex is complicated because budgeting pmce- the facility was slow mrnar~nmd hctwccn cvcms. Thc dures have changed r>ver the years, especially since SMG to~}k over fixed that pr(~iqem hy requiting those using lbo f:tcfiity last year., f, tstcr, even if it rctluir~'d ',vt~rking thr~mgl~ thc mgiv In order to figure out hr)w much better the private firm did in "When yt)u t)HCF people four :md five d:tys t{) mo~c an act/vits' managing the Centroplex. some expenses covered by taxp:tycrs (~r out, depending upon wire[ it ~s. ?r)u Ii;we ;1 Io{ (>[' i,)t facility usc must bb acldcd [o SMG's books 1o ensure apples are being corn- opp(~rltmity." Y0'ilton said SMG administra- tors Don Parker ~' ..-/,?: , (left), director of · ~ Centroplex finances, and Ray Cullen, Centroplex director of operations, first-year opera- tions in which the city's subsidy candy. A study by Peat Mar- wick recommends adding I00,000 square feet of exhibition space to the Centroplex and 25,000 square feet of meeting space for conventions. The city- parish wan~s the state to put up $50 million to help out with the proposed expansion. ?)mtmt~ect frorn ?K'e ~\l(] hrtH.l~ht (o (hc Ccntroplex was .~(ivc. rtm~n~ Thc c(~mpan~ g~neratcd ~;~7.740 la.st :,'u:~r hy ~eJlin~ space in 'There were nn existing contracts with :my corporat~ advertisers when [ :~ot h~re.' Wi[ton s~id. Most ~gree profe~sionol 5MG alsr~ reduced ~he operating ice hockey hos hod the budget by raisin~ user fe~s at '~ most impotent impa~ Ccntr~pi~x facilities for (he first upon the Centroplex in nme since tog8 The fuji impact of the past year. Accord- (l~c ['eu adjustment won'( be reMized ins to SMG, the King- unlit next year, since [he private ~ fish brought in over c(mtpany picked up 70 existing $I I9,000 ~nd account- contracts when it took over the ed for roughly 25 Cemroplux. Wilton said. percent of all Cea- But by nearly all accounts, the troplex even~. most important impact upon facility in log6 was thc intrnduction · . ,fl' prnfcssion;fl icc hockey, cost of a ciwc center Rcm Han~is. ~c~rM m~r of d~e Erie Panthers, moved his Eas( POom az,..~ c...,~.~. ~e ~an below li~ ~e amount the c~ ~f Baton Rouge has paid to subsidize the Co~s[ Hockey League ~e~m from ~u~her Rbe~fde Centrople~ during ~e pa~ I0 yaa~ of operation. Pennsylv;ni~ [o Baton R~uge one "Hockey h~d eve~hing [o do with Year., Su~tdy . Year . Su~ldy year ~o ~nd renamed k the Kin~- (defic~ ~educdon)," he said. ~987 ~ ~3,548 1993 ............. fish. 5MG's figures sho~ the :e~m ~]e success of hockey ac ~e .1988 .......... g54,900 1994 ................ $984,490 brought in $~19,29[ and ~ccoun[ed Centropiex mists ~he question of ~1989 ; .... ~_.~6~6~ ]995 ............ For roughly 25 percent of MI events. --~he~her the ciWcould h~ve decreased ':' ']'990 ~ ...... S765,000 ]996 ............... ~298, l "Thn[ has been a rem shot in the the facili~'s deficit without private 199I:~ .... ·~15,8~ T~l .... I7,611,7e1 arm." wilton .said. 'When you add 35 management. . 1992 ............. $1~,790 Avef~[~ , ~761,1~6 home dates to a calendar of acdvmes, The .Metro Council voted as early S~: Eo~ B~ ~ge Path Bud~t O~ it iust ~[[eC(S the bottom line signifi-, as ~995 ~0 spend 5~2,000 tot up- "~u~s~pi~dbySMGb~ind~de~aud~do~notindudeZ5OZ.~in candy." grades [o icing equipment and ~oor /ndi~ m~ [den~ by Do~d ~ G~ ~ ~'~ or ~21,940 in Mayor Tom Ed McHugh went even covenng at ~he Centroplex arena and building. -- can take credit for ac lease taking the Diiion-Poche won [he b~d co mn (ood mcedngs because o( die hnfited space ~r~ Rouge. April k994 And 5MG can cake credit for ind,)or Management Gr0uo ~ Jansen Hoiliday, chatrm=n or .... We w=nc from hardly doing any soccer. The Ccn[roplex has sc'hedut=d the C:mroplex AdvisoW Commisston, business ac 211 ~o 36 spomng events, 12 home games beginning in June for '~mh~t~m~l~80h~ sa~d :he ci~ was never able [o amve and that's what's really made (he the new Baton Rouge Bomb=rs team. ~tl~i~ludng~eL0ukia~5u~e ac a firm comm,[men[ from any di[fercnce,' Dillon satd. *it's hk: ~he '[ have no clue aa to how this 4nd ~S~m~Os~.N~.~ei~is~ r~0l '.enSues before 5MG took over mum difference bet,.ve:n night and day" ~hing is going to take of(," Wilton agcmcnt, biolliday added that cbc Concession revenues, which are smd. 'if i[ comes in a modest f~ ~ oho*cc o( SMG ~'rom among three spit[ with [he c:~-parish on a sliding I think the !2 s~ccr daces on un Mob,~ G~ Cen~ g~,~ managcmcm groups ,.vas based scale ranging (rom 20 pcrccm (o 28 annual basis could b=ncf~[ ibc L~~n~n~ ~n~ ~ad~ Ca~. !ars=i:,' upon tis abilky (o ui:~c[ percent, accounted for 5193,t53 in on = minimum of 55,000 per nighU' r~*~ ~e*t~ t0n~ ~,~t~. spomng e'/en~. SMG's purse Iasc y=ar. ~,~ L~,~ar~ 'Ccrtaufly if they h~d been Pumas ~ b,t o( a ~is[ on tradition- Bring 0n the convention L~ge~ ~Mg~,~lit. unable co close the dcm on the al spomng-~ven[ food, Dillon satd (f private munagcmem and the ~n~ 5anh~ Cai~ hocRcv icom, i[ would have been one of h~s mos[ oopular i[ems at introduction of spomng ¢'.'cn[s turned ~dO.~O. ~ud~d~ much more o( ~ s~ruggle ~or [h~m ~o ~n~ish g~m~s ~ ~mb~l~ym d~ C~op[~x ~round. ]ocM oific~ls Cm~C~ ~n~ude~dai~ m==~ :he standards thac they c:m~ "Jambalaya has bc~n just an unreal are now banking ~hac thc ~ ~a~e.~ up '.v~th during ~he Citgo ,/esr," saltier," he said. salvation for thc facility r~g~ ~lleC~i~km la~l~ Holliday said. "There's no way [o But Holliday sa~d not all (he major convendnns. w0~p~ Ja~ll~ ~ specuia[e on whether we would success of the r'acili~ ts completely "We are aciv< canter m/ins ~a~r .u~ae~ have got[tn i[ (hockey) had we jul: due to hockey. 5MG is due credit for fulfill many different oblccuv=s right ~c,~ ~ commued managing (the Con- managmg the faciliw better than the now, and we arc '.'oW lim~icd," Wilton ~C~ w~c~u,~ [ropiex) oursei,/es, [hat we would ci~ did in a number of ways, he said, said. "We don1 have the square ~~ w~,~s~ have gotten the same hockey cram mos[ imponantiy in improved market- /~cage needed.' ~h~C~Cml~ ~l~0ha. P~ or [he same league. 5o [ think you mS. The Greater Baton Rouge Convcn- ~S~ ~0hi~P~ have co give them some credit for 'They brought a marked improve- :ion and Visitor~ Co~nm~on, wt~ch ~r~di~ ~u~..?L ccmemmg [he deal as quickly as menu in go~ng out and shepherding is resolvable for ~kmg convcn- ~ C~ ~ ~ P~ ~~ ~ ~y. [hey did once [hey took over th~ even~." Hoilid~y ~Md. ~We just didn't [ions at [h~ Ccmropl~x, ~=c~ntiy ~C~ ~I~N.Y. m~ngg=mcn[.' ~ have leadership without (his ou~idc g private l'i~ $~0.~ to study ~e ~ C~ C~ ~ ~. Thc m~p~c~ o~ hockey h~s s~e~ch~d m~n~g~menL' expansion of ~h~ l:~cdiW. ~o~C~C~ ~em~ ren~ g~n~:z[~d by King(ish-rcia[ed met- more in thc area o( marketing concluded the l'acd~ should add Un~ ~n~m chandise "'Fo be honusL thc marketing o( the t00,~0 square (eec of cxhtbmon S~P~,Cm~ ~,t;~ed~,u~h 'Thc best thing that's happened :o /ucdity has >ail not taken o~f,' i~c 51ual. space and 25,~0 square (cut ol ~ ~ ~(hmo~, Va, ~e ~mo~ v~ us ts hockey ' smd Tom Dillon, c~ ".Vt nrc v~q/ limited in being able to me.dna spar= (or convcm:ons u,x ncr of DdMn-I ocbc Cat¢rmg >ell thc i'actiity (or tho~c planners n~r (]'unltttl~e~/un Cbnnnued/~'nmpc~.gej.j nes '.vilh simiiar nzmss have ~one ,>n ev~:r ?.~rmn~ a pro(it :it Leon M:isei. he~d ri[the CVC. The State Rep. Kip Holdcn, D-Baton 'Obviously {i'vou ius[ ',ook at it city-parish now is ~sking (he state Rouge, is working to ensure the ~rom 2 practical standpoint 7ou'd ~hose expnnsion plans. Holden L~ sponsorin~ House Bill money,' Mc~u~h s~id. "~ don'~ ff local officinl~ re~liz~ ~he dream ~346. ~hich ~ould split ~bout ~t wa~ bufi~ to mnke mon~7 [ ~hink of expanding the Centronlex Wilton S600,O00 in revenue from a cttywide it was built to se~e ~he public. 8&~ a Ii. at impo~a~ ~ said, 5MG will lobby to update the tax on hotels and mo~els among ThaCs why it's called ~ civic center.' ~he h~ol~R~d~ Ce~p~ exterior of the building. And ~he urb3n mass tmnsiL the Baton Rouge Bu[ if ~he city doesn't see :he l~s ~o~ of ~e ~17,~2,434 - R~de Cen~opl~ b~ns dudn~ compnny amy suggest n name Sports FoundAtion and the Riverside Cen{ropiex as a future money wo~y Oum~ admini~adon. ~e change at the same time. Centroplex. with the cut ~o the latter maker, 3MG management does. is toindudeana~a ~ ~afing ~more "The Centrop[ex is probably an set at $400,000. "We anticipate increased activity ~an early 1970s name,' Wi[ton said. "[ Finding sources of public suoport at the building," Sion said. 'We e~ibMon s~ce; a~ me ~ea~ ~ ~hink 7ou will Find n~ionwide, if for the Cemmpiex is necess~ Jn~c~p~e increased performance ~ you ~ere to look, that o(heF f~cili- because Few oFficmls h~ve ~heiF eye (he bottom line." m lg~ ~e Ce~t~ ~ns a~ ~a~n ...... G~ and ~ P~ a~ ~e 6~ yea~ include J~n~ ~ S~ ~a~n, Ted Nu~e~ R~ ~aH~, Ji~ B~e~ Mee~ ~ac and ~e ~a~ B~ l ~ Mike Pie~ tak~ ~r manag~ m~t of ~e radiiW. 1 ~ Surrendering to public com- plain~, Centropl~ mana~emenl ~nce(s a s~uled mn~ by hea~ m~al mu~dan O~ Osboume, ~0 had bi~n ~e head a hal at a pr~ous sh~ in Texa~ Promol- em sue the O~ for %1 million, and ~n~al- ~ s~e lot ~16,~0 in 1988. 1 g86 ~nlmplex doses dudng slow week to save SlO,O~ in u61i~ bills a~e~ eithl empl~ all a(ree ~o lake 'l ~a7 C~ lakes o~r ~ntroplex COhesions opeFal~ since ~e ~a~i~ opened ~ N~ Odeans S~ce, a m~e Ma~ Pal ~een p~i~ ~lm make setf-~inin~. I ~ ~or Tom Ed M~u~h fo~ Cen~oplex A~W Comm~ee, ~ai~d b~in~man ~ensen Holliday. ~e buildin~ Oe~ o( Cou~ aF~~ building and d~ mibra~ ~ a maior ~aul bimls ~r buildin~ ~hal ~re buiE ~' ~nd~ that did n~ ~. I~3 Pier~ ~i~s ~ Cen~plex dir~or and ~ ~e~ mat~r is indited on )rof~ ~m a Billy ~ C~s ~er Cenlr~l~ a~n~nt Stephanie Crane p eads ~ I~ o ~eal{n~ %35,~ ~m tac~ account. Foyer ~od and b~a~e dire~oF Jos~h ~oll ~lle pleads to usin~ c~-padsh food, b~ and ~uipmen~ for p~le otedn~. M~o~ Tom Ed McHugh ap~in~ ~si~nl Admini~ative ~ce~ Jim Br~r to ~n ~n~ogle~ I ~ In ~dl, Oil)o~o~e ~k~ ~e~ ~ and bwe~e se~c~ at the million for ~pital up.aries, indudin) idn~ equipmenl and ~ m~dn~ ~ ~he a~na to draw a minor meade h~kw team m paFi~ a~om~ a~o~ to dF~ up a Feque~ ~o~ pm~ls to lease the lropt~ pa~n~ Io~ lo a company m build a co~n6on-s~e, ~-~m hotel. I~ ~e dW si~ a ~a~ ~ S0~cor Mana~em~t Group ~ PhiladeL )hia :o manage ~e C~pl~ ~nnin~ ,~dt 1. ~e compa~ hi~ will lerner head of ~e P~e ~ar~ ~mb~ Cen~ at Loui~ana 5~te Un~e~W, as dir~or ~ ~e C~pi~ R~ Han~ g~e~i ma~e~ of an ~a~ Coa~ Ho~ League team in ~e, Pa. mov~ h~ team Baton Rou~e a~ ~nam~ ~ ~e 1 ~7 ~e ~ton Rouge Co~ and ,/~n ~mm~si~, [~n~ble for b~ng co~ns and ma~ ~m at ~uW ~pans~ o~ ~e f~li~. ~e ~ Peat Ma~ c~dud~ ~e ~liw s~ld add 1~,~ ~ua~e ~ of ~hib~on ~ace and 25,0~ ~ua~e f~ of me~n~ ~e c~-pansh ~ :he ~ate ~ ~30 million ~or the pmie~ In the United States, the traditional model of management by government agency for sports and entertainment venues is giving way to management by savvy, prOfit.inspired professionals. by A. Marc Ackerman scale, and target as many con- domain of the municipalities in sumer markets as there are which they were located. Civic ARENAS, STADIUMS, conven- events at each facility, officials took responsibility for tion centers, and the like occupy a Until recently, the manage- virtually all aspects of develop- fascinating yet seldom explored ment of those properties has ment and management. This niche within the hospitality typically been the exclusive article examines the current industry. Such facilities accom- modate and entertain thousands This article is an excerption of the monograph .4. Mare Aekerman on a daily basis, endure physical prepared at Cornell University, under the direction of Professor punishment on a monumental Richard Penner, while pursuing a Master of Professional Studies degree. Data from the survey questionnaire that is not presented © [994, Corneli University here may be made available upon request. 72 THE CORNELL H.R.A. QUARTERLY trend to privatize the manage- International Association of Why Privatize? ment of public-assembly facilities. Auditorium Managers (IAAM) In addition to profit, private It investigates the factors that 'released a comprehensive report management organizations offer signaled the advent of private 'highlighting the results of its first municipalities such additional' management, its steady growth in industry-wide survey dealing with lures as the creation of new popularity, and the level of suc- public-assembly facilitiesf In the revenue sources, improved tenant cess it has achieved at various majority of cases, mean gross relations, increased and diversi- sites across the United States. operating expenses exceed gross fled use, physical-property Finally, it presents an objective revenues. Large convention cen- enhancements, greater commu- appraisal of the advantages and ters appear to lose the most; on nity involvement, more-efficient disadvantages inherent in the average, the disparity between and more-accountable employees, contract management of public- convention centers' revenues and and better relationships with assembly facilities, expenses approaches $2 million subcontractors. But profit re- per facility. And for every facility mains the primary incentive. The Idea of Privatization that generates enough revenue to Because a profit motive lies at the Private management of municipal cover facility costs, there is an- heart of private management, the entities is still a relatively new other that accomplishes the same focus remains fixed on positive idea. But it is also a sign of the but cannot satisfy debt-service net income. That approach rarely times--a sign that governments requirements. In short, it has exists under municipal manage- can no longer afford laissez-faire become standard operating proce- ment. Placing financial stability management of public assets, dure for most public-assembly as the top priority benefits both Benign acceptance of public works facilities to show an operating loss the municipality and the manage- that continually operate at a loss year after year. Moreover, until ment company, as the .latter's is becoming a thing of the past. recently civic officials generally compensation package is often The promise of privatization in- accepted spiraling subsidies as the based on incentives tied to volves approaching each facility as normal course of business, bottom-line profit. if it were a profit-driven business To the rescue. Out of this Other benefits. Another with goals and objectives common municipal malaise the concept of advantage inherent in to any capitalist enterprise: · privatization was born. At first, privatization is the negotiating increased revenue, ]ow operating hiring private management savvy that a management com- costs, appropriate technology, and companies was a stop-gap maneu- puny can bring to bear on ten- market superiority, vet to stanch the outflow of cash ants, promoters, and concession- Even in an era of cyclical reces- from a facility's ledger. As time aires. Major facility-management sion, arenas, coliseums, and went by, private operators became organizations have years of convention centers have repre- increasingly adept at managing experience in negotiating deals sented an exception to the rule facility services beyond merely for permanent tenant commit- that for-bids conspicuous munici- providing financial consulting, ments, renewable rental agree- pal spending. For the past several That privatization works has ments, and recurring events and years, there has been an unprec- been shown by its growing popu- attractions. They also bring a edented boom in facility construc- larity. A 1991 report by Arthur D. history of accomplishment in the tion and renovation nationwide. Little showed that 18 percent of negotiation of tangential services In 1988, 24 of the 60 largest U.S. convention centers and 17 percent such as food and beverage conces- cities were building or planning to ,of stadiums were operated by the sions, souvenir sales, security, build facilities, most estimated to Private sector, and Russ Cline & sanitation, and parking. cost in excess of $100 million.~ Associates predicted in 1991 that The largest management Public management of public- 50 to 60 percent of all such facili- companies.enjoy tremendous assembly facilities has turned ties will eventually be privatized? economies of scale and value many of those facilities into a maximization via the leveraging drain on the public's pool of 2~ndustry Profile Survey Report on Public of their multiple facilities. That financial resources. In 1991, the Assembly Facilities (Irving, TX: International is, they are often able to negotiate Association of Auditorium Managers, 1991). lucrative deals with suppliers ~Data from an AD Little report and Russ ~Antonio G. Tavares, "The Public-AssemblyCline & Associates, as found in Privatization based on multi-year contracts Facility Industry: Managing Change in the1991: Fifth Annual Report on Privatization, ed. '90s,' Prudential Securities Journal of Public David Haarmeyer (Los Angeles: The Reasonencompassing several arenas-- Finance, May 1991, p. 13. Foundation), 1991, p. 13. which is especially advantageous APRIL 1994 73 Ogden and often more creatively than a ;.~tertainment municipality acting alone. Service's Politically correct. With a .-,~cwhead Pond, mandate to achieve a contracted i,~ Anaheim, CA, is an example of set of objectives and fulfill the how a privste goal of increased profitability, management private management is unaf- company can fected by shifts in voter opinion. successfully In contrast, the supervisory staff develop, design, finance, con- of a publicly managed facility struct, and often changes with each new civic manage first-rate administration. Private managers public-assembly end the recurrent turnover that is facilities, liable to cause instability in operating procedures and confu- sion among those facility employ- for negotiating with food-service simple. Once a track record, good ees who stay on from one admin- purveyors, relations, and a sense of trust and istration to the next. The clout that a management confidence are established, then Private management compa- company brings to the bargaining the stage is set for a continuing nies are not hampered by munici- table frequently leads to more business relationship extending pal restrictions on hiring. Sala- bookings at a lower cost than are ~ well into the future, ries, wage levels, and requisite usually achievable by a single ' Private management firms also employee qualifications are set by municipality. For example, after maintain the ability to develop management-company execu- a successful event, promoters will their own programming and to tives, affording them the opportu- often schedule their programs in promote events inaccessible to nity to bring in professionally different locales in sister facilities municipally managed facilities, trained, experienced managers. that are run by the same opera- Most of the major contract man- Consider that a popular, heavily tor. Clearly, as the number of agement companies boast a used facility may employ hun- event days at each one of an venture-capital division that dreds of permanent and part-time operator's facilities increases, the specializes in creating and employees. Municipal appointees overall operating expenses and staging activities of their own rarely possess all the skills overhead decline. The multi- devising. In this way, a privatized necessary to manage the human facility network allows each facility functions as something resources of such an operation property under the contractor's more than a hall for rental; it because their backgrounds are domain to benefit from the becomes a cooperative venture often rooted in local government successes of the others.4 This type between the management com- rather than private business. of multi-venue, multi-date lever- pany and the municipality. The Little wonder, then, that private age cannot be achieved by a mu- management company is less management companies fre- nicipality negotiating on its own. a custodian of the property quently identify staffing among More events. The number of than a vested partner, the areas where improved profit- attractions at a public-assembly Another advantage to ability can be obtained. facility will likely increase with privatization lies in aggressive Politically incorrect. Some the advent of privatization as marketing. Rather than relying of the problems associated with promoters are encouraged to on clients to approach them for public-assembly facilities under "book the whole package." For rental information, management municipal management revolve promoters who are familiar with companies take the initiative and around the nature of government a particular management seek out potential events and as a whole. There is a tendency company's various sites, the attractions. Private management for municipal authorities to decision to include several prop- companies institute dedicated impose a single set of strictures erties within a tour is relatively marketing programs for each upon all departments within their facility under their supervision, scope of command. But the needs Once an event is booked, they are of public-assembly facilities are 4 Privatization 1991: A Report by The Reason Foundation, p. 14. ~ able to promote it more widely unique and must be governed by 74 THE CORNELL H.R.A. QUARTERLY a distinct set of guidelines based situation is most common at fair, private operators usually are not upon compliance and control newly opened properties for not clandestine in their plans to but upon operating flexibility and which a private operator has been streamline a facility's opera- overall performance? consulted during the design and tions--including the workforce-- Basic municipal services, such construction phases. By getting in by eliminating unnecessary jobs as the police and fire depart- on the ground floor and contribut- and combining responsibilities. ments, operate in a noncompeti- ing to an impressive turnkey Along the same line, some tive environment. This is not the operation, a management com- employees retained by the new case with public-assembly facili- pany can take great strides management may not adapt well ties because patrons as well as toward making privatization an to the new corporate culture. tenants are free to take their attractive and uncomplicated Indeed, some private operators business to competing facilities, issue for a municipality, have been accused of imposing Therefore, marketing plans and Does it really work? Critics their management will on facility competitive strategies must nec- of privatization argue that the staff unfamiliar with a private- essarily be dictated by industry concept looks better on paper sector approach. When perfor- trends, rather than by city hall. than it works in reality. They mance expectations are elevated, Finally, unlike other munici- point out that the needs of each workers react in a variety of pal agencies, public-assembly community are unique and ways; some are spurred to excel- facilities must spend money to maintain that no outside entity lence, while others essentially make money. They are crippled can properly assume the role of a fold. Regardless, employee by spending caps and hiring caring custodian. Moreover, there attrition is inevitable during freezes. In many cases, money may be a fear among the citizenry the conversion period. spent to make money may di- that private operators are overly Long-term clients occasionally rectly minimize subsidies from concerned with the bottom line, accuse private operators of the municipal general fund or often to the detriment of the "uninspired management" after increase annual net operating community's underlying needs or an initial period of achievement. surplus? 'broader objectives. For example, They point to instances in which Maintaining control. While proms, graduations, and youth- the operator set ambitious goals privatization denotes a relin- league activities are not proven for the first and second years of quishing of some control, munici- money-makers and do not gener- the contract, then settled into a palities can negotiate manage- ate the revenue required by man- routine that was lucrative for the ment agreements that retain the agement companies. Neverthe- management company but did not precise degree of control with less, those activities contribute to produce the consistent results which they feel comfortable. In the public good, which is the un- that the municipality had antici- most cases, the governing body derlying reason such venues are pated. Those criticisms are enjoys continued ownership, erected in the first place. When largely unsubstantiated, but they approval of operating and capital public funds are used for facility do highlight an important lesson budgets, direction and supervi- construction, critics argue, for civic officials to heed: it is sion of policy, regular financial publicly supported functions rarely advantageous to enter into and management reports, and the should not suffer at the hands of a long-term arrangement with ability to. terminate for cause--in an operator ostensibly answer- a service supplier unless there other words, accountability. The able to the local community? is an escape clause. civic authority may also exercise It is also true that hiring a Another fair criticism is that in veto power in the appointment of management company frequently some cases it's simply impossible a general manager or director.? results in layoffs at a facility, to make a facility profitable. In Some civic officials prefer to Municipalities lured by impres- such a situation, a management step away and allow a manage- sive first-year deficit reductions company may recognize that the ment company to perform those at privatized facilities elsewhere extent of its capability is merely duties unencumbered. That may not realize that those sav- to reduce the deficit and negotiate ings derive, in part, from a sharp an incentive fee that rewards the 5Frank E. Russo, Jr., "The Case for Private decrease in payroll expense. To be company according to how sub- Management," Public Management, Vol. 72, stantial the reduction is. No. i (January 1, 1990), p. 11. Most critics of privatization 6 Russo, p. 12. ~ Darrell Day, "Privatization,' Facility ?Russo, p. 13. . Manager, Vol. 5, No. 4 (Spring 1990), pp. 11-12. admit that the overwhelming APRIL 1994 75 Top FACILITY-MANAGEMENT COMPANIES financing, and management, marking the first time an operator had complete control of a facility project from its This section presents an overview of the five largest facility- inception. Ogden is particularly strong in the area of food management companies identified in the main text. and beverage service, which remains its most lucrative Spectacor Management Group (SMG). Spectacor Man- and best-known arm of the business and a way to distin- agement Group (SMG) is the world's largest company spe- guish itself from the competition. (By way of contrast, cializing in the private management of public-assembly facili- SMG stresses its expertise in and commitment to overall ties, accounting for a full 50 percent of all public-assembly facility management versus focusing on specialized facilities presently operating under private management, areas.) The organization was founded in 1988 by combining the re- Leisure Management International (LMI). Leisure sources and experiences of Facilities Management Group of Management International is a Houston-based company New Orleans with Spectacor Management of Philadelphia. specializing in the development and management of Currently, SMG is a closely held joint venture, equally public-assembly and convention facilities. LMI is a subsid- owned by three concerns: (1) Spectacor, Inc., a diversified iary of the Houston Sports Association, Inc., which was sports-entertainment company owned by Edward Snider formed in the early 1960s to operate the Astrodome and (owner of the Philadelphia Flyers hockey club); (2) Pritzker thereby became the first private company to manage a Family Interests, which owns and operates Hyatt Hotels; and publicly owned assembly facility. LMI is responsible for 14 (3) ARA Services, Inc., a multi-billion-dollar company spe- facilities in operation or under development, including the -: cializing in food services, including institutional feeding. Memphis Pyramid, Miami Arena, and the Palm Springs SMG manages 38 venues encompassing 48 buildings Convention Center. The company recently finalized a joint .. around the world, including the Louisiana Superdome, the venture with Philipp Holzman, AG, to develop and operate Rhode Island Convention Center, Florida's Gator Bowl, stadium and arena facilities throughout Europe. Pittsburgh's Three Rivers Stadium, and the Centrum, in Centre Management. Centre Management was Worcester, Massachusetts. Taken in aggregate, SMG prop- formed in 1984 by Centre Group partners Abe Pollin and erties encompass more than 600,000 seats. In 1993, SMG Jerry Sachs, who are also owners of the Washington facilities hosted more than 6,200 total events and grossed Capitals and Washington Bullets sports franchises and of more than $300 million in ticket sales. SMG also manages the USAir Centre in Landover, Maryland. in 1986, centre 86 percent of the United States's total exhibit space under Management contracted to manage the Patriot Center at private management. George Mason University, marking the first time a univer- Ogden Entertainment Services (OES). Ogden Enter-. sity selected a private firm to manage and market its tainment Services, a division of Ogden Corporation, has assembly facility. Centre Management has focused on contracts to furnish total facility management at 37 locations, second-tier municipalities, primarily on the East Coast. including the Great Western Forum in Inglewood,' California; Russ Cline & Associates. Russ Cline established this and the Palacio de los Deportes in Mexico City, an arena organization in 1984 to take advantage of a property- that had remained almost completely idle since the 1968 management opportunity in St. Petersburg, Florida. Russ Olympics. Cline & Associates manages two properties in St. Peters- The company provides single or multiple services to more burg but also supervises the marketing function at an- than 100 facilities (including stadiums, arenas, civic and other five properties in Kansas City (its corporate office), convention centers, amphitheaters, performing arts centers, including Kemper Arena and Arrowhead Stadium. ski areas, race tracks, parks, and museums) throughout The company's plan is to expand its services to North America. At the Arrowhead Pond, in Anaheim, CA, European markets and consult on a full range of Ogden took responsibility for development, construction, facility management issues.--A.M.A. Other examples of facilities under private management-- Egan Convention Center; Anchorage, AK Kansas Expocentre; Topeka, KS Sullivan Sports Arena; Anchorage, AK Monroe Civic Center; Monroe, LA Mobile Civic Center; Mobile, AL Pontchartrain Center; Kenner, LA Mobile Convention Center.; Mobile, AL U. Mass. Mullins Center; Amherst, MA Long Beach Convention Center; Long Beach, CA Springfield Civic Center; Springfield, MA Los Angeles Coliseum and Sports Arena; Los Angeles, CA Baltimore Arena, Baltimore, MD Moscone Center; San Francisco, CA Target Center; Minneapolis, MN Palm Springs Convention Center; Palm Springs, CA Springfield Arena; Springfield, MO Hartford Civic Center; Hartford, CT Pershing Auditorium; Lincoln, NE Colorado Convention Center; Denver, CO Meadowland Convention Center; Secaucus, NJ Florida Suncoast Dome/Bayfront Center; St. Petersburg, FL Knickerbocker Arena; Albany, NY Ft. Lauderdale Convention Center; Ft. Lauderdale, FL Nassau Coliseum; Uniondale, NY Jacksonville Facilities; Jacksonville, FL Niagara Falls Conv. and Civic Center; Niagara Falls, NY James L. Knight Center; Miami, FL Ervin J. Nutter Center; Dayton, OH Miami Beach Convention Center; Miami Beach FL Philadelphia Civic Center; Philadelphia, PA Pensacola Civic Facilities; Pensacola, FL Sioux Falls Arena; Sioux Falls, SD Five Seasons Center; Cedar Rapids, IA Memphis Cook Convention Center; Memphis, TN Iowa State Center; Ames, IA Nashville Arena; Nashville, TN Peoria Civic Center; Peoria, IL Salt Palace Center; Salt Lake City, UT Rosemont Horizon; Rosemont, IL Patriot Center; Fairfax, VA Roberts Stadium; Evansville, IN Richmond Coliseum; Richmond, VA majority of civic public-assembly privatization. As a result, practi- improving the marketing func- facilities, particularly convention cally all potential customers have tion; and increasing bookings. centers, incur heavy annual been approached at one time or The management company works losses. But they point out that another. Because the stakes are with the municipality to develop those deficits do not take into so high and the payoff potentially a plan to achieve those objectives. account the economic multiplier lucrative, the bidding process is The contract specifies how long effect: losses can be more than quite electric. Large management the private firm has to achieve compensated for by the increased companies sign contracts to those goals (in most cases, three tax revenue and other economic manage, at most, three or four to five years). Today, some benefits derived from visitors new facilities per year; small management contracts include patronizing local hotels, restau- operators may go several years agreed-upon benchmarks rants, and shops. Still, no one in without expanding their roster of whereby an extension of the a position of civic responsibility venues. In the interim, they rely agreement automatically takes can defend perpetual red ink, no heavily on their consulting effect if those goals are achieved matter how persuasive the services, in addition to regn]ar by the operator. On the other justification, management fees. hand, benchmarks can also be Civic officials often prefer to used to nullify a contract if the Management Companies hire a private management management company falls short In the United States, five man- company on a consulting basis of minimum goals within a agement companies are at the rather than sign a management specified period of time. forefront of the privatization agreement. By doing so they can The contract also specifies a movement, representing more benefit from the operator's base management fee plus than 75 privately run stadiums, professional expertise without incentives. The annual base fee arenas, convention centers, having to hand over the reins of for small properties such as amphitheaters, and auditoriums, their facility. Once the consult- theaters and auditoriums may be Two of those firms, Spectacor ant's assignment is completed, in the neighborhood of $60,000, Management Group (SMG) and municipal employees can then while fees for larger, more heavily Ogden Entertainment Services implement the consultant's used arenas and multi-use (OES), account for approximately recommendations. From the complexes may range upwards of 70 percent of the properties management company's stand- $200,000 annually. For all exist- currently in private operation, point, consulting is generally not ing contracts, the average annual Leisure Management Interna- as lucrative as a long-term base fee is about $100,000. tional, Centre Management, and management contract, but it Depending on the contract, Russ Cline & Associates are the can be profitable nonetheless management fees may remain other three dominant firms (see and may lead to additional, constant, may increase by steady the box on the facing page), full-contract business, increments from year to year, or Other, smaller private opera- may be adjusted according to tors, such as Amphitheatre Negotiating the Contract some predetermined index. Entertainment Corporation, the Once a municipality has decided The base fee covers on-site Nederlander Organization, and to engage a management com- supervision by management- Olympia Arenas have a solid pany, it can begin to negotiate the company personnel and corporate foothold in facility management actual contract. In general, civic support (e.g., ongoing advice and and appear intent on attracting officials are deliberate and exact recommendations). Depending additional properties to their in specifying where they feel the upon the stipulations of the folds. Upon start-up, many most critical problems lie and the contract and the capabilities of management companies establish amount of time within which they the operator, the management fee a regional presence, then slowly would like those difficulties may also cover such services as branch out nationally, oftentimes remedied. Typical goals and catering and banquet dining, as a result of word-of-mouth problems to address include: eh- marketing and sales, advertising endorsements from venue users, hancing the facility's profitability; and sponsorship sales, ticket Tremendous competition exists improving employee efficiency; distribution operations, security among facility-management eliminating waste; renegotiating and crowd management, parking, companies due to the limited contracts with subcontractors, building operations and mainte- universe of properties eligible for concessionaires, and unions; nance, event management and APRIL 1994 77 promotion, insurance and risk EXHIBIT 1 management, and financial Reasons officials did switch to private management administration. In most contracts, the base fee is accompanied by a series of VERY SOMEWHAT NOT incentive clauses tied to such IMPORTANT IMPORTANT IMPORTANT measures as increases in profits, Desire to increase profitability 70% 19% -- attendance, event days, bookings, Low or negative operating growth 38 11 8% gate receipts, and advertising Low utilization 27 35 4 proceeds; or, in other cases, a Desire to increase maintenance standards 23 23 27 percentage of the savings in- Desire to improve physical plant 15 19 27 curred by the municipality as a Political mismanagement 15 27 23 Customer or user dissatisfaction 11 42 15 result of the operator's presence. SMG, for example, receives somewhere between 10 percent and 35 percent of the money recovered from a property's to (1) determine why officials centers. When the return on annual deficit, opted to privatize specific proper- investment is consistently low, Other components of typical ties and why other officials did or when a property operates management agreements include not; (2) identify problems faced exclusively in the red, civic step-by-step cost-reduction by either form of management; officials are liable to consider programs and detailed strategies and (3) discern the general alternatives. for instituting performance opinion of privatization among The civic administrators were standards. In those cases, the municipal officials nationwide, also asked whether their munici- contracts will also specify short- I received 26 responses out of pality registered a net savings and long-term objectives, identify the 40 1 sent to privately man- compared to fiscal performance in plans of action, and target those aged facilities (a 65-percent years prior to the introduction of personnel accountable for the response rate). Responses from contract management (including achievement of those plans, publicly managed facilities any base management or contract Staffing is outlined at the begin- numbered 48 out of 81 question- fees paid). The responses were ning as well, for example, by naires mailed (59 percent), primarily positive: 54 percent submitting to potential clients a Selections from a comprehen- indicated a savings of up to formal hierarchical chart and sive analysis of the private $500,000 in the most recent fiscal straightforward delineation of managers' responses appear year, while only 15 percent individual responsibilities prior to immediately be]ow. Responses reported "no appreciable savings." implementation of the agreement, from officials representing non- Another 27 percent noted that the privatized facilities are presented question did not apply to their Privatization versus later, current situation. Several of those. Non-privatization Reasons to privatize. Ac- answers can be attributed to In a survey conducted from cording to the results of the properties that had only recently February through April of 1993, survey of privatized facilities, the contracted for a private operator, 135 questionnaires were mailed desire to increase profitability is as well as to others that have had to municipal, state, and other by far the most prevalent reason contract management in place government and lay officials for a municipality to contract for since opening. responsible for the selection of private management (see Exhibit Impact of privatization. stadium, arena, and convention- 1). Low or negative operating Asked to identify factors that center management. Two var- growth followed as the second- were affected as a result of sions of the survey were pre- most important reason to contract management and to pared: one for public-assembly privatize. Those findings are not indicate their degree of satisfac- facilities under private manage- surprising: bottom-line perfor- tion with each one, just under ment and the other for facilities mance is frequently the bench- half the respondents reported under municipal government or mark that sponsoring localities that "quality and efficiency of the authority management. The use to judge the success of stadi- venue staff' and "fiscal account- survey questions were designed ums, arenas, and convention ability and timeliness" were the 78 THE CORNELL H.R.A. QUARTERLY most improved areas. The key factors are summarized in Exhibit 2 (see page 81). Staffing. With the advent of private management, the person- ne! function is often targeted for Added to that familiarity is the (42 percent) while the remain- restructuring. The survey que- corporate support and resources ing 15 (58 percent) all selected ried whether net full-time of the company's home office, the response "moderately." employment was reduced as a Second, when the operation of The other two options, "mildly result of contract management, a public-assembly facility takes recommended" and "not recom- and 18 of the 26 respondents on the added dimension of a mended," were not selected by confirmed that it had been (69 client-supplier relationship', any respondent. percent)? That is likely to certain expectations and commit- Plans for the future. Civic happen through some combina- ments evolve that may not have administrators were also asked to tion of staff cutbacks and job existed previously. For example, predict what will happen when realignment as the new manager private-company employees may their contracts with the private streamlines the payroll by feel more pressure to adhere to management companies expire. removing excess labor and deadlines and budgets than do Half envision renewing the controlling for overlapping job municipal appointees or civil- contract with their current responsibilities. Specific job service personnel. Moreover, the operator; four may consider positions that remain unaltered renewable aspect of the contract soliciting new bids from other are those judged to be the most and the presence of incentives private management companies; essential to the proper function- encourage accountability, and three plan to revise and ing of the facility. Almost two- Overall influence. Another renegotiate their management thirds of the privately managed - survey question asked respon- contracts currently in effect. facilities surveyed (17 of 26) had dents for an overall assessment of The remaining six respondents fewer than 40 full-time employ- the effect contract management indicated it was too soon to ees on the payroll, has had on their facilities. Of the make that determination. Accountability. Fiscal 26 respondents, 20 remarked that The concept of privatization is accountability usually improves their property was "better than thriving among this small but for two reasons. First, a general before" or "significantly better representative sample. Clients manager trained to run a public- than before" (77 percent). Not one appear to be satisfied and man- assembly facility and versed in respondent selected "worse than agement companies are receiving accounting, financial manage- before" as an answer, favorable reviews. Most impor- ment, and operations brings a When respondents were tant, the primary goals and basic familiarity and where- asked about the degree to which objectives upon which each withal to each new assignment, they would recommend contract municipality's facility manage- 9 In almost 60 percent of the cases where management to their counter- ment contract is based are employment was reduced, the municipalityparts in a similar-size municipal- being met consistently. indicated it had offered to reassign those ity, 11 replied that they would Non-privatized facilities. employees who did not continue working for the private operator, recommend it "very highly" The second version of this survey APRIL 1994 79 ALTERNATIVES TO PRIVATE MANAGEMENT incentives, assembly facilities under the manage- ment of a quasi-public authority may not achieve Historically, the management of public-assembly their full revenue potential. facilities has been the domain of local or state gov- Leasing. In a lease arrangement, the municipality ernments, either as a separate department or as an entrusts a private concern with the management of a enterprise account similar to other revenue-generat- facility for a certain length of time, and the lessee is lng departments, such as airports or public utilities, free to operate the property in any manner, subject to The primary advantage of a municipal property is the the restrictions written into the lease. This practice steady stream of public funding and other financial occurs most commonly with sports stadiums, often support available to subsidize the facility's operation, as a concession from the municipality to keep a pro- On the other hand, standard municipal policies can fessional sports franchise from pulling up stakes. be rife with drawbacks, among them: rigid purchasing Leasing is also a cost-free way for a city to upgrade regulations; civil-service procedures for hiring and its facility while retaining ownership and enjoying firing; uniform compensation standards; labor-union guaranteed access. Lessees often pay a fixed per- restrictions; inflexible scheduling policies; and ap- centage of ticket sales to the municipality and pocket proval of contracts by legislative action. Such restric- all other revenues to cover expenses and profit. The tions can hamper avenue's capacity to provide even San Diego Sports Arena and the Met Center (Bloom- the most basic services. Moreover, municipally man- ~ngton, Minnesota) are examples of leased venues.1 aged facilities are usually bereft of efficiency incen- Consultants. Practically every private manage- tives, and it shows in the performance of venue staff, ment company will work with a municipality on a con- Public authority. Many facilities are run by a pub- suiting basis, providing yet another opportunity for a lic authority or a not-for-profit corporation. Such gov- facility to improve its fortunes without altering its erning bodies act as a buffer between the municipal- management structure or placing public funds at risk. ity and building management. Representatives from By contracting out management of specific services the public and private sectors are selected by the such as food and beverage, security, and parking, mayor or city manager to serve on an administrative civic officials can maintain complete control of activi- board that sets building policy, hires management ties, reduce municipal payroll costs, bypass the city's personnel, formulates operating budgets, and over- procurement procedures, and benefit from the exper- sees all decisions relating to the property. Official tise of industry professionals.2 Any city can take ad- representatives are often joined by others from the vantage of the cost-effectiveness of private manage- community: lawyers, bankers, and executives. By ment by engaging a private operator to supervise including private citizens on the board, a municipality one or more functional areas within the facility and, can take advantage of available business expertise, by keeping the GM on the city payroll, still maintain A public authority is sometimes established in an a comfortable degree of control.3 effort to free the facility from the restrictions of local Private from the start. Of course, the owner or government so that it may operate profitably. A public owners of non-municipal facilities are free to contract authority managing a stadium, arena, or convention for a private operator if they wish, or to hand-pick center enjoys far greater operating autonomy than its their management staff and run the property as an publicly managed counterpart. Revenues are inde- enterprise. Several sports facilities have been pri- pendent of the municipality, so they are rarely af- vately managed from their inception by virtue of pri- fected by local budget constraints, civil-service, or vate ownership: the Great Western Forum in purchasing requirements. Naturally, there are guide- Inglewood, California; Chicago Stadium; and lines and regulations, but there is also built-in flexibil- Minneapolis's Target Center are examples. In such ity to permit the board to proceed in a businesslike instances the municipality has little to do with the manner without becoming ensnared in red tape. operation of the venue beyond the collection of ap- Government representation is still present, of propriate taxes. Local sports franchises, both ama- course, but not intrusively so. teur and professional, are free to negotiate tenant Although properties under public-authority supervi- agreements and rental fees with the facility, side- sion can exercise some flexibility in decision making, stepping the local bureaucracy.--A.M.A. such governing authorities are still plagued by politi- cal influence and bureaucratic inertia. Success is , Lawrence R. Quinn, "Privatization: Has Its Time Come?," Facility Manager Vol I No 4 (Spring 1986) p 15 very much dependent upon the caliber and conscien- '!~ Cit 1'9 ' ' ' ' ' ' ' tiousness of the d~rectors, and without performance op. cit., p. 19. polled civic officials responsible for public-assembly facilities EXHIBIT 2 Factors affected as a result of contract management under municipal government or authority management (i.e., non- privatized venues). As a group VERY SOMEWH^T (48 responses out of 85 question- SAT,SF,ED SATISFIED NEUTRAl- i DISSATISFIED naires, or 56 percent), the respon- Quality and efficiency of staff 46% 42% 0% 0% dents seemed to realize the Fiscal accountability and timeliness 42 27 4 4 potential advantages of priva- Tenant relations 38 27 8 0 tization. Notable among the data Customer and user satisfaction 27 42 11 0 collected is the parallel between Creation of new revenue sources 27 50 11 0 the two survey audiences regard- Deficit reduction 27. 42 8 4 lng key reasons for a municipal- Community involvement 27 19 23 4 ity to investigate the viability of Quantity of new events 27 27 9 4 contract management. Once again, the desire to increase profitability was the popular re- sponse. Many respondents EXHIBIT 3 labeled this factor as "very impor- Reasons officials desire to switch to private management tant' or "somewhat important," followed by low or negative VERY SOMEWHAT NOT operating growth and low IMPORTANT IMPORTANT IMPORTANT utilization (see Exhibit 3). Customer dissatisfaction 38% 21% 27% Perceived benefits of Low or negative operating growth 23 29 15 privatization. I also asked Low utilization 19 31 17 survey participants to identify Desire to increase profitability 18 38 10 which "privatization benefits," Political mismanagement 17 10 35 Desire to increase maintenance standards 10 23 33 from a list of 15, they felt were Desire to improve physical plant 10 23 31 important relative to their Desire to improve (or obtain) tenant relations 8 19 33 situation, and to prioritize them. "Deficit reduction and positive effect on net income from opera- tions" was foremost in the minds EXHIBIT 4 of the civic administrators, listed Perceived benefits to be gained through privatization as the top priority by 16 of those responding and noted as a second PRIORITY I PRIORITY 2 PRIORITY 3 or third choice by another Deficit reduction (improve net income) 35% 18% 6% nine respondents (.Exhibit 4). Increased utilization 15 12 3 Reliance on subsidies. The Capital improvements 15 9 12 questionnaire also asked respon- Quality and efficiency of staff 9 9 6 dents whether their public- assembly facilities were in any way subsidized by city, county, or state funds; tax revenues; or bond revenues. Since that is usually the case with municipal stadiums, arenas, and convention centers nationwide, the 35 affirmative responses were not unexpected (73 percent). The amount of subsidy varied across the board, however. Of the subsidized venues, 13 receive more than $1 million annually APRIL 1994 81 The that stakeholders would exhibit "little or no support" was the Mem~ most popular, and, not surpris- is ingly, nearly half the respon- by Lei~ dents predicted that facility Intern employees would be resistant to any change (see Exhibit 5). The low degree of support for private management revealed in this survey, although specula- tive, is in startling contrast to the high levels of satisfaction reported in the other version of the survey by those who have already privatized. What about the future? The survey concluded by asking respondents whether contract (37 percent), 15 receive less than management might be a viable $400,000 (43 percent), and the alternative for their public- remaining 7 receive between assembly facilities and, if so, $400,000 and $1 million (20 when they foresaw a formal percent), inquiry taking place. More than Nearly half of the respondents half of those who responded stated that the entire amount of concluded that privatization was their subsidy originates from the not likely in the foreseeable municipal general fund. The future (57 percent). Five thought others cited various sources of it might be possible in three to revenue applied toward their five years (11 percent), four annual operating deficits, par- suggested it could happen in ticularly a local hotel-motel tax, two to three years (9 percent), which accounted for at least some and three replied that an in- subsidization in 18 instances (37 quiry was currently in progress percent), and the entire subsidi- or had recently been completed zation in eight cases (17 percent). (7 percent). In all, only seven Controversy. To gain a better predicted that they would be sense of the level of anticipated investigating contract manage- controversy associated with ment within the next fiscal privatization in each community, year (15 percent). I gave survey respondents a list Historically, the movement of local stakeholders and asked toward privatization has been respondents to predict the rela- incremental. Therefore, if just tire degree of support or resis- 16 percent of the universe of tance to privatization from each properties eligible for contract contingent. The results anticipate management were to initiate a high level of doubt, discomfort, requests for proposals, that and suspicion on the part of most would satisfy the growing stakeholders (see Exhibit 5). capacity of existing management The response "strong support" companies. The goal, in the for contract management of minds of the private operators, public-assembly facilities was the is to have nearly 50 percent of least-likely anticipated response all public-assembly facilities from all stakeholder groups in all operated under private contract but one category. The prediction by the turn of the century. 82 THE CORNELL H.R.A. QUARTERLY Conclusion EXHIBIT 5 The survey found that public Predictions of stakeholder resistance officials who have signed man- agement contracts for their public-assembly facilities are ST.O.G MOOE.ATE Lsvr,E os .o pleased with their decisions to do su,oo.r SOPPO.T SU,PO.T RESISTANCE SO and recommend privatization to others. At the same time, the Employees of facility -- 8% 31% 48% survey reinforces the supposition Elected officials 6% 31 35 10 Business community 13 40 29 2 that municipalities that have yet Chamber of Commerce 15 33 35 -- to fully investigate or pursue Convention & Visitors Bureau 10 29 31 13 contract management remain Tenants 4 15 40 15 skeptical regarding its eventual Subcontractors 2 17 42 19 benefits and applicability to Community & arts-oriented users 15 31 25 25 their situations. Local promoters 4 21 38 19 Given such a dichotomy, how far will privatization go? Man- agement companies and others affiliated with the public-assem- potential client if they foresee an ties, and the like demonstrate the bly-facility business foresee unwinnable situation looming, applicability and acceptability of steady growth into the next It is certainly a balancing act. private management, stadiums, century. Due to the political Privatization eases some burdens arenas, convention centers, and nature of the privatization on a municipality and contrib- theaters will join the fold with concept, however, the private- utes toward others. But if it were greater frequency. While the management industry is not up to the public to decide the privatization trend is not slated likely to skyrocket overnight, form of management under to dominate the public-assembly- Municipalities must be converted which its assembly facilities facility industry in the near one at a time, and uphill pro- should function, I believe ordi- future, it increasingly will become kress against existing bureaucra- nary taxpayers would opt for a viable alternative, one in which cies is a slow and strenuous privatization. Their suspicion of all parties derive satisfaction process. Meanwhile, hesitancy on government lethargy and petti- and profit. the part of civic officials may be ness would guide them away Private management may tied to the dearth of private from city hall and toward the indeed provide the greatest operators. Communities enam- private sector--toward managers number of opportunities to a ored with the concept of priva- who are more answerable to the municipality, coupled with the tization will eventually select an customer. The fact that private fewest limitations. By surmount- operator, but others on the cusp operators are able to customize ing objections to reduced govern- may wish the pool of potential contract arrangements to meet mental control, a community managers were deeper, the needs of individual clients is stands to benefit from a public- How effective, really? a tremendous advantage; it assembly facility with higher Without information outlining identifies the operator as more efficiency, greater operating the terms of each city's manage- than a purveyor or service, but autonomy, a more experienced ment agreement, there is no way as an agent of change, staff, simpler purchasing proce- of calculating just how cost- Most public-assembly facilities dures, faster decision making, effective privatization really is. opt to renew their management focused marketing, better ac- To be sure, it is not a panacea for contracts, and many wish to countability, and increased the ills of an aging convention extend the relationship for long flexibility in negotiating contracts center, nor can it ease the pain of periods. The challenge for private and rental rates. In the often a poorly located arena with bad management companies, there- chaotic and undisciplined milieu acoustics. But private operators fore,, is to make the initial sale, of municipal government, the have become more and more then allow the benefits to speak option of contract management, adept at promising only those for themselves, at the very least, should remind services they can deliver well, As airports, correctional civic officials that there is always and will walk away from a institutions, health-care facili- room for improvement. CQ APRIL 1994 83 Reprinted from ity & ounty April1996 City complex turns bottom line fr°m redt°black In 1990, Den*e} ope~i~t.its, new c0nVefi~ion complex to overtime labor Cosis. Thus, the :l~uilc[i~'~s'i ~et loss has lrave'arc)si'teetu}al r~'{iie~s~!'There'were.great expecta- dropped b]/$1.5' million since the ptf~/~i& ti6ns for the.S1:35 .mill[c~/.~facility, wl~ich was going to .Furthermore, an additional 50,000'patf~fii"hfive visited boost the '~ity;i"~'~i~i~6th~'7~ith C0nWntion business and the 'facility Sir/de 1994, and the complex'his'.. become the tourist trade~' :~_?' ~;~!7~:f,~i'~:?~c':!':::- ' ~ :'. ' ',;' ' economic catalyst the'city originally intendedit to be. :7 T, he pr0bl~s(l~ek~i!~i6kiy.'inste'~d:6f fulfilling .the A numl0et Of f~ct6rs 'contributed fi)the iucdeis of the 'city s dream~7~h~"f~il'i~.~pe~ated over budget and under effort'. Firs~;'p~i,kiite manageme~t'-'firm~ have dadicated 'eVent capacit~:duri~i~'its'fir~t, three years.? - professionals Whose'knowledge aiid contacts rathe indus- ' Booking re~.enues fell far 'beloTM fbrecas'ts. The new try have a profound and immediate impact on a facility. center was:'suppo§ed ~o'spaWn a majo} hotel opening,, but, In Denver, fo~ example, the convention center divi- this too, did 'not hap-: ...... " ~' ' sion enabled the pen. Turning the tide' network of facili- required a new tactic:.[ -ties.- to "block Realizing the 'need' fOr' book" events. This cohesiveness among 'way, smaller-mar- the Convention and -ket' buildings are Visitors Bureau, the still'able to attract Hotel and 'Motel large'market trade Association _and the shows, 'c0nven- Downtown Denver tions, concerts and Partnership, Mayor family shows, Wellington Webb which increase decided to hire an out- patronage. Private side firm to manage companies also the Denver conven- have leverage with tion facilities., vendors and 'sup- The city reasoned a pliers, which can private management ~the Denver Convention Complex features two facilities:the Colorado con, ' help them negoti~ firm can increase rev- vention Center and the Currigan Exhibition Hall, comprising roughly 300,00 ~ "i'ate* the best and square foot. A private management company capitalized on its networking , ,. least expensive enue quickly by attr- ~bilities to bring in more convention and tourist business... ' ,.,: :"', acting new events I . '~ .. ;: :.~contracts because it has more contfl, cts in the industry, and it can ' Second, improving the bottom line' is a s.tr°ng incen- exert more control over 0P, erating costs and evaluate per- tive. Cities rarely have enough }es0urces to support and formance levels. ~ make the necessary marketing initiatives to increase The Denver Complex hired SMG, Philadelphia, a firm attendance, but with. private compaiiies, management that manages convention!centers in cities all over the can tie compensation directly to the improvement of the country, to help boost revenues at the convention build- facilities' bottom line. ' · ings from $4.1 million to $5.1 million, largely through In two years, the Denver Convention Complex not the attraction of new events, including the Western only experienced a significant increase in the number of Hemisphere Trade and Commerce Forum and the World bookings for the next two years, but a number of shows, of Wheels. specifically the Minority Enterprise Show and the SOS Additionally, annual operating expenses decreased by Taste of the Nation Benefit (a local fund raiser for the over $600,000, while pre-existing employee levels have food bank of the Rockies) have already re-booked, a been maintained, major accomplishment within an industry where repeat The management company was able to reduce expens- business is critical to success. . es by adapting an aggressive energy conservation pro- The result isa vibrant convention center that pro- gram, purchasing supplies at lower prices and reducing motes the city's downtown economic activity. - Reprinted courtesy of Intertec Publishing Corp. © AMERICAN CITY & COUNTY. Aoril 1996. Overland Park. KS 66212. All ri.hts reserved. Three years ago, SMG was hired to run the $135-million Colorado Convention Center. Since then, annual revenues have increased by $1 million. Operating costs have decreased by over $600,000. And this success hasn't come at the expense of convention center staff. All pre-existing employee levels have been maintained! The Colorado Convention Center has brought a new high to the city of Denver. SMG is proud to be part of it. Private management partnerships work. To see how we can improve performance at your facility, call SMG at 1-800-964-4SMG. The People Behind the Per~rormance Independence Cen~er · 701 Market Street Fourth Floor · Philadelphia, PA 19106 (£15] VALLEY PLAZA §05§324312 06/19 '97 16:1~ N0.395 01 faoslmile to: ALAN TANDY, CITY MANAGER f,~x ~t: 324.1850 m: THEATER ANNO! INCEMENT: VALLEY PLAZA dats; June 19, ! .997 page: 2, including this cover sheet. Attached is the press release which has been sero to the media in the Bakersfield area. As you will note, we have made a decision to bring Pacific Theater into the market. We arc very impressed with their olxn~ation and look forward to the opening. As soon as we have further infi~rmation and details on the design,, etc,, We will inform your office, planning department and local neighbors to maintain the fine dialogue we currently enjoy. Thank you for your assistance with our project, PETE RAMIR, Fr.,Z GENERAL MANAGER VALLEY PLAZA SHOPPING CENTER 2701 MING AVENUE BAKERSFIELD, CA 93304 (80fi) 832-243~ Fax: (805) 8~.-4312 VALLEY PLAZA 8058324312 06/19 '97 16'12 N0.395 02 2701 Ming Avenue * Bakersfield, California 93304 ,, 805/832-2436 · Fax'. 805/832-4312 VALLEY Release'. June lB, 1997 Pl Contact: Nancy Ba. nicki (805') 832-2436 VALI.,EY PLAZA ANNOUNCES ADDITION OF PACIFI'C MULTI-SCREEN THEATER BAKERSFIELD, CA -- Responding to customers' desire for entertainment features at shopping centers, Valley Plaza has announced that Los Angeles-based Pacific Theatres will build a 3,200-seat, 16-screen state-of-the-art theater with stadium seating and other amenities, according to Pete Ramirez, regional vice-president and general manager of the mall. Mr. Ramircz says that construction is set to begin in Fall 1997 with an expected completion date of Spring 1998. The free-standing 65,000 square-foot theater will be built directly south of the mall nearest the Robinsons-May department store. The Valley Plaza complex will be Pacific Theatres' first project in the San Joaquin Valley. The new theater complex will feature all three digital sound formats available to exhibition: DTS, SDDS, and Dolby Digital. Stadium seating offering movie-goers unobstructed views of the screen from any seat in the house will be standard in all auditoriums. Luxurious high-back "love seats" with retractable armrests and cup holders will be features throughout the complex as well. MEPC American Properties, which ovals and manages Valley Plaza, recently announced that Pacific Theatres will build a similar theater complex at MEPC's Northridge Fashion Center in Los Angeles. "Nationwide, there is a continuing trend toward shopping centers becoming overall entertainment venues," says Mr. Ramirez. "Depa~lment stores specialty retailers, food courts and other traditional mall fixtures are being joined by theater complexes, themed restaurants and other features to give today's shoppers what they want." Valley Plaza is home to Macy's, Gottschalks, JC Penney, Sears, Robinsons-May and more that 140 specialty stores. The 1. l-million-square-foot mall recently announced the addition of an on-site police substation, complementing the shopping center's new statc-of-the-art surveillance system. The system incoxporates the use of 28 closed-circuit, live-time television cameras to monitor all areas of the 74-acre property. In addition to Valley Plea and Northridge Fashion Center, Dallas-based MEPC owns and manages regional shopping centers in Atlanta; Jacksonville, FL; Las Vegas; San Antonio; and Rochester, MEPC also owns and manages office and industrial developments in Dallas, Minneapolis, New York City and Washington, DC. MEPC American Properties is a wholly owned subsidiary of London- based MEPC pie, one of the world's largest commercial property firms with assets of $6 billion. -30- DIVISIONS OF RECREATION AND PARKS DATE: June 19, 1997 TO: Alan Tandy, City Manager FROM: Stan Ford, Director ~ SUBJECT: Status Report I wanted to update you on-the status of three items at this time instead of waiting for my monthly report. These are:. · Bakersfield Centennial Gold Rose - We received 20 plants from Lisa Sukut of the Centennial Rose Committee. They have been planted in the flower beds at Central Park. I will keep you posted of their progress. · Swimming Pool Filter at MLK Center -The new filter has arrived and the installation is scheduled to be complete this weekend. The pool should be open for normal operation on Monday, June 23. · Heart Smart Cities Grant - Several months ago you forwarded to me a grant application for the California Department of Health Services Heart Smart Cities Grant. As previously reported, we did apply in April. Basically, this program is for a city-wide education program for health and fitness with a program focus area of Southeast Bakersfield. This week we received verbal confirmation that our application was approved and we will be receiving $30,000 for the program. I will forward more information when it becomes available. If you have any questions or require additional information, please let me know. RECEIVED jutq t 9 1997 CITY MANAGER'S OFFI¢'