You’ve got hand it to Jane Sumpter – she’s such a jokester.
Sumpter is Fresno City Hall’s budget manager. As such, she’s busy this month with budget hearings in front of the City Council.
The Convention Center was in the spotlight on June 7. Sumpter gave the council a brief summary: A proposed $18.6 million budget for Fiscal Year 2017-18; a general fund transfer (or subsidy, if you please) of $1.1 million for operations; various debt service transfers for the Convention Center and Chukchansi Park (for administrative purposes, the stadium is part of the Convention Center’s domain); various operating expenses for the Convention Center and the stadium.
Before turning things over to Convention Center General Manager Bill Overfelt, Sumpter delivered her punch line: “There’s isn’t a great deal to this budget.”
Sure – and there wasn’t a great deal to that iceberg in front of the Titanic.
The Fresno Convention Center has long been the sick man of City Hall. Jim Patterson, Alan Autry and Ashley Swearengin all struggled as mayors to stabilize its operations in a brutal and fast-changing convention/entertainment industry.
Mayor Lee Brand is staggering under the burden, as well.
The Convention Center will begin a new fiscal year on July 1 without a circus act coming to town. The Ringling Brothers show, always popular in Fresno, recently went out of business.
The Convention Center will be without the state Future Farmers of America convention. The youngsters and their families are headed to Anaheim.
The Convention Center has taken a beating in the courtroom. Lawsuit settlements over the Americans with Disabilities Act mean big investments to bring the 50-year-old facility up to code.
To help pay for these legally mandated repairs, the Brand Administration plans to triple a local tax on tickets sold to events at the Convention Center (the so-called APES fee).
And the stadium is looking at an estimated $20 million in maintenance bills. That should be no problem, city officials say, as long as 1.) the Grizzlies’ current owner agrees to give a big chunk of money from the possible sale of the team to City Hall coffers and 2.) the possible new owner also agrees to give City Hall a nice big cash gift just for the privilege of doing business in a ballpark with an annual rent of $1.5 million.
If this disaster is the budget manager’s idea of a snoozer, I’d hate to see what it takes to make her pulse race.
Let’s begin with the circus.
Council Member Luis Chavez noted that the circus at Selland Arena was always a big regional attraction.
“Are we looking for anything else?” Chavez asked Overfelt.
“Absolutely,” Overfelt said. But, he added, “There’s nothing on the table or any contract discussions or anything else.”
Losing the circus means losing about $120,000 a year to the Convention Center’s bottom line, Overfelt said.
In addition to seeking another circus-type event, Overfelt said, “we’re also pursuing co-promotion concerts very vigorously. As an example, I now have three Latin promoters vying for dates in the arena for next year. We have a very good relationship with our promoter that does R&B and urban type shows, which have been very profitable for us in this past year. Just as a point of information, by the end of the fiscal year we will be right at $480,000 net on the co-promotion funds for the arena. Over the four-year period since we have been authorized to use this deal structure, it’s now over $1.1 million. I’m hopeful that is going to very much help us recover from losing these shows.”
Chavez asked about efforts to sell naming rights for any portion of any of the Convention Center’s venues – Selland Arena, Valdez Hall, Saroyan Theatre, the New Exhibit Hall.
City Hall for years has chased the naming-rights pot of gold. It’s the same story with the sale of advertising on city-owned assets. The big payoff is always just around the corner.
City Manager Bruce Rudd said the Administration expects in July to deliver a report to the council on naming-rights possibilities.
Rudd retires on July 7.
A better bet when it comes to boosting government revenue is raising taxes. The city’s Arts, Parks, Entertainment and Sports (APES) fee is currently $1 per ticket. Rudd said the Mayor will soon propose an amendment to his budget that triples the fee to $3 per ticket.
The hike is due to recent lawsuits, Rudd said. He didn’t go into detail. But it’s clear that the Convention Center needs modernization.
“There is a significant investment that has to be made, not just at the Convention Center but at other facilities in order to make them ADA compliant,” Rudd said. “The increase in this fee will be used to help mitigate the impact to the general fund, which right now is looking to support that effort to the tune of about $1 million over the next five years.”
When it comes to phrases guaranteed to send a chill down the spines of council members, it’s hard to beat “help mitigate the impact to the general fund.”
Council Member Esmeralda Soria was next. She was professional but relentless with her questioning.
“We also lost the annual FFA conference,” Soria said to Overfelt. “What kind of impact do you anticipate from that? Are we trying to figure out and get another customer to backfill on that loss? Are we trying to get them back? What are your efforts?”
Overfelt: “We work very closely on a daily basis with the Visitors Bureau. That, if you will, is their line of business. They are actively seeking other potential clients of that size. As far as the impact goes, that event was probably $65,000/$70,000 of net income to the (Convention Center) operation (and) upwards of $100,000 in hotel tax collected by the city. That’s the fiscal impact. But, absolutely, we’ll do our best to replace that with a like-size event.”
No one thought it necessary to add that City Hall loves the hotel/motel room tax because it goes to the general fund. More than half of the general fund goes to police and fire.
Soria asked what the Administration is doing about the FFA disaster.
“We’ve reached out to Fresno State,” Rudd said. “We’ve also reached out to the folks at the (Big Fresno) Fair to create some additional value-added (options) – facilities – that (the FFA) could have events at the Fairgrounds. We put together a proposal (for state FFA officials). We haven’t heard back whether or not they are coming back. But there is an ongoing effort to get that event back in Fresno.”
Rudd said he, the Mayor and Overfelt all asked the same question of FFA officials: What can Fresno do to get you back to our fair city?
Said Rudd: “The response I got was that this year’s event went very well. We had a high level of security. We took care of their parking issues. We took care of a lot of the challenges. The only thing they could pinpoint as a concern is, from a logistics standpoint, the proximity of the hotels in relation to the Convention Center. And Anaheim is Anaheim. It’s Disneyland. And there are a lot of hotels within proximity of their convention center.”
Anaheim has better lodging and the Happiest Place on Earth – those youngsters aren’t coming back to Fresno
In response to Soria’s questions, Overfelt said the Convention Center would spend $224,000 to replace 132 doors that aren’t ADA compliant. The bill would be largely covered by the higher APES fee.
This project hit one of Rudd’s favorite themes: Maintaining what you own.
“When you build something, there is a cost of ownership,” Rudd said. “There are a lot of things out there that we have not taken care of and need to be taken care of.”
And at the top of that list is the $50 million, city-owned Downtown stadium with its $3.4 million annual mortgage payment to bond holders.
Let’s stipulate at this point that the finances and the politics of the Chukchansi Park mess are stunningly complex. Truth to tell, a budget hearing debate on the stadium should have been thoroughly divorced from the Convention Center. As noted above, the stadium has been shoehorned into the Convention Center folder strictly as a matter of bureaucratic convenience. I can remember when the stadium was lumped into Parks.
It’s enough context for this story to note that Fresno Baseball Club LLC, the Grizzlies’ owner, wants to sell the team. A new owner (still to be publicly identified) is in the wings. The twin challenges are 1.) various changes to the stadium lease over the years, combined with daunting local market conditions, make it hard for a deal to pencil out for a new owner, 2.) City Hall has to play ball for a sale to go through, and City Hall always has both eyes planted firmly on public opinion.
Soria noted that the proposed budget includes $3.5 million for stadium improvements. She asked for more explanation.
This sent Rudd on a rambling journey, caused not by the City Manager’s lack of focus but by the deal’s many moving parts.
To begin with, Rudd said, “they (Fresno Baseball Club) get a reduced rent, but at the time of the sale that balance is due to the city.”
At the same time, Rudd said, the potential new ownership group doesn’t want to foot the full bill for stadium upkeep over the next 20 or so years, especially in light of all the other financial baggage that would go with a deal.
The stadium needs repairs – air conditioners, bathrooms, roofs, etc. City Hall wants to create a “sinking fund” – an account for the maintenance of a wasting asset. A sinking fund requires cash.
If I heard Rudd correctly, City Hall plans to get some of the money that a new owner would pay to Fresno Baseball Club. This money and the money from the payment of back rent would go into the sinking fund.
We’re talking about funding the $3.5 million budget item that was on Soria’s mind.
”That is where those dollars will go,” Rudd said. “They’ll come from the sale of the team, the proceeds from the sale of the team. It’ll be invested into a capital fund that will be used to replace various assets over a period of time – over a 20-year period or over the term of the contract or the new deal we may have.”
Soria: “Do we know that the proceeds will be able to cover the $3.5 million?”
Rudd added that the stadium probably needs “well north of $20 million” in repairs/upkeep over the next 20 years.
Rudd: “The concern that the new ownership group has – there’s a whole list of things that needs to be replaced over the term of the lease that will have a direct impact on the cost of operating a franchise. In order to address that, the city as well as the current ownership group and the potential owner have reached a tentative understanding as to how we’re going to fund that (sinking fund) over the next 20 years.”
Soria asked how much Fresno Baseball Club owes in back rent.
Rudd: “I believe they have a balloon payment of about $1.8 million. Each month that number ticks up.”
Soria noted that $1.8 million is considerably less than the $3.5 million for stadium improvements in next year’s budget. Soria asked if Rudd is confident that these mysterious “proceeds” heading City Hall’s way from the sale of the Grizzlies will cover the difference.
“Yes,” Rudd said.
Rudd added: “I think we have some commitment from the current ownership group to also contribute to this sinking fund as part of a sale. We’re looking for the current ownership group as well the potential new ownership group to contribute toward this.”
Soria: “What’s the time frame we’re working on?”
Rudd: “It’s still fluid. We were hoping we would have already negotiated a deal, but we haven’t been able to do that. We are close….But we are at a point where we’re either going to make a deal or we’re not going to make a deal. And that should happen within the next 30 to 45 days.”
The Soria-Rudd exchange concluded with a textbook definition of “pie in the sky,” government style.
Soria: “These funds don’t exist unless a sale happens – is that what I’m hearing?”
Rudd: “That’s correct.”