|Urban Renewal Authority/Global Spectrum Contracts
It is the Urban Renewal Authority’s and City Council’s belief that the expansion to the Convention Center will have a major impact on Pueblo’s economy. History indicates differently as their own paid for report shows there was a significant decrease in the number of trade shows and conferences and attendance at these events.
The Global Spectrum, managing company of the Convention Center, under the terms of the contract in force through December 31, 2006 had no specific incentive to market and contract for trade shows and conferences that would bring to Pueblo “new money”. The compensation plan to Global Spectrum was;
The management fee was $60,000 annually, payable in twelve(12) equal monthly payments of $5,000 each. The management fee was to be increased annually by the percentage increase of the Consumer Price Index.
In addition to the management fee Global Spectrum was to be entitled to an annual incentive fee based on the following plan; The incentive fee was designed in two parts. The first part generated an incentive pool. The second part determined the amount Global Spectrum actually earned.
Incentive Fee Pool
• 0% of first $300,000 of annual revenue plus
• 5% of next $400,000 of annual revenue plus
• 6% of annual revenues over $700,000
Earned Incentive Fee
• 100% of the incentive pool if the operating deficit was less than $250,000
• 80% of the incentive pool if the operating deficit was less than $250,000-350,000
• 0 incentive fee if the operating deficit was over $350,000
Example using 2006 numbers—Gross revenues $1,309,900
• $1,309,900-$700,000= $309,900X.06=$18,594
• Total incentive fee pool $20,000+$18,594=$38,594
2006 Earned incentive fee- operating deficit $326,180
• Management fee $62,000(includes CPI increases)
• Incentive fee $30,875
• Total $92,875 earned by Global Spectrum according to contract
The actual amount in checks written to Global Spectrum during 2006 was $120,887.91.
The plan as described above gives the primary emphasis on keeping the operating deficit below $350,000 and to a lesser degree to the increasing of gross revenues. There is no mention of incentives for bringing outside business into Pueblo. This plan promoted the use of local events, especially banquets.
A new contract between the Urban Renewal Authority and Global Spectrum was entered into and became effective January 1, 2007. This new contract also does not have any incentives to bring trade shows and conventions from the outside into Pueblo.
Compensation to Global Spectrum is divided into two parts, Fixed Management Fee and Incentive Fee.
The fixed management fee is $10,000 per month of which 20% shall be deferred until the end of the operating year. The deferred amount shall be payable to Global Spectrum only if it has generated $1,400,000(Fixed Management Fee Benchmark) or more revenue during such operating year.
In addition to the Fixed Management Fee Global Spectrum shall be entitled to receive an Incentive Fee equal to 20% of the revenues in excess of $1,489,000 per operating year. The total gross revenue for the year 2007 was $1,454,309. Since the gross revenues for 2007 did not exceed the amount of $1,489,000 Global Spectrum should not have received an Incentive Fee.
Since the total gross revenues exceeded $1,400,000 the amount payable to Global Spectrum should have been $120,000 for the fixed management fee. The actual amount in checks written to Global Spectrum during the year 2007 was $153,560.24.
In conclusion, both the original contract with extensions and the new contract offers no incentives to market and book conventions and trade shows but promotes the padding of gross revenues by placing an emphasis on local events. In addition, the events which include banquets and conventions/meals, bring in the most revenues but also show more expenses. Gross revenues has no real meaning for a business, it’s the bottom line that counts. The Convention Center has operated at significant deficits from the beginning. The deficit for the year 2006 was $326,180 plus the amount paid to Global Spectrum($120,888) for a total of $447,068 and for the year 2007 the deficit was $352,179 plus the amount paid to Global Spectrum($153,560) for a total of $505,739. The Urban Renewal Authority and Global Spectrum continue to mislead the people of Pueblo.