The management contract for the Fresno Convention Center is on the City Council’s plate this Thursday.
That probably means we’ll again be discussing what kind of future the Center has in an entertainment/convention market that is highly competitive and constantly changing.
The Brand Administration is asking the Council to approve a five-year management agreement with ASM Global, with a termination date of Dec. 31, 2025. The deal calls for a five-year extension upon approval of the City Manager.
The deal’s context touches on some of the most interesting pieces of Downtown Fresno’s history.
For starters, someone might ask: Who is ASM Global?
You might think that SMG was the private sector firm that took over the Convention Center’s day-to-day management more than a decade ago.
And right you would be. But the staff report from City Manager Wilma Quan and Assistant City Manager Jane Sumpter says SMG ceased to exist earlier this year. The company merged with AEG Facilities, becoming ASM Global.
The staff report says City Hall in early 2019 asked the private sector to submit proposals for management of the Convention Center. Only SMG submitted a bid. This was pre-merger. Then the merger went through. City Hall ended up negotiating with the newly-formed ASM Global.
The deal calls for ASM Global to handle catering and concession services. These can be provided by the company itself or outside vendors.
The city-owned Convention Center loses money year in and year out. City Hall subsidies keep the Center afloat.
The city’s FY 2019-20 budget says the Convention Center’s anticipated deficit this year is $747,200. “The shortfall will be covered entirely by the city,” says the budget.
These subsidies have generated considerable political heat over the years. That’s why the proposed compensation to ASM Global figures to be of interest to the City Council on Thursday.
The proposed compensation package includes these items:
1.) The management fee to ASM Global would remain at $145,000 per year. There would be a 2.5% annual increase beginning in FY 2020-21.
2.) There would be an incentive fee for both catering and concession services in the amount of $7,500 per $100,000 of net income from each operation. Net income would be defined as gross revenue from operations less direct and indirect costs as stated on the audited financial statements.
3.) The city will fund a co-promotion fund of $50,000 annually.
4.) ASM Global will continue to pursue naming rights deals. City Hall has final approval of any such deals.
5.) An advisory board will be reestablished. The board will meet on an as needed basis to review Convention Center operations.
6.) The city will fund a marketing position through the Fresno-Clovis Convention & Visitor’s Bureau. The city will contribute a maximum of $100,000 annually.
7.) Special event parking revenue from the Convention Center parking garage will be passed through to ASM Global to support operations and reduce the city’s subsidy.
8.) ASM Global will provide marketing and booking services for entertainment events at Chukchansi Park. The city and ASM Global will share equally any net proceeds from these events. The Quan-Sumpter report adds: “With the new ownership of the baseball franchise, the city will be actively pursuing events.”
9.) The city retains the right to request the removal of the general manager with 30 days’ notice.
10.) ASM Global will update the City Council on the status of Convention Center operations. This will happen at least once a year.
The report from City Manager Quan and Assistant City Manager Sumpter suggests that the Administration expects some pushback from the Council on the proposed deal.
The report tries to get ahead of the curve by tackling a question that has bedeviled City Hall for the better part of two decades, dating back to the Alan Autry era early in this century.
“In conducting due diligence,” the report says, “Staff considered whether there is a financial benefit if the City were to manage the FCEC (Convention Center) in-house.”
The report says the city will save about $2.3 million in this fiscal year if the Center is operated by ASM Global.
The city ran the Convention Center when Autry took office in January 2001. Autry almost immediately began exploring whether it would be wiser to have an outside firm handle day-to-day operations while leaving oversight to the Mayor, City Manager and City Council.
The ensuing debate was long and often heated. Everyone recognized that a thriving Convention Center would be pivotal to the successful revitalization of Downtown. The pressure to keep Convention Center operations with city employees was intense. In early 2004, the city finalized the deal with SMG.
The Quan-Sumpter report retrieves old financial figures to show that the city-run Convention Center from 2001 through 2004 was losing on average several million dollars a year. In other words, the current general fund subsidy to the Convention Center is substantial, but it could be a lot bigger.
Then there is possibility that the SMG/AEG Facilities merger, thus creating ASM Global, will generate new energy at the Convention Center.
The challenge is certainly formidable.
The regional market for live entertainment and meeting/convention facilities has gone in directions few could have anticipated 25 years ago, let along 50-plus years ago when the Convention Center opened.
The rise of Indian gaming is just one example of the forces of creative destruction at play in this market.
According to a company news release, ASM Global is be headquartered in Los Angeles, with key operations in West Conshohocken, PA., a suburb of Philadelphia.
The news release says of ASM Global: “The company will operate a diversified portfolio of arenas, stadiums, convention centers and performing arts centers, with more than 310 venues across five continents.”