|June 9th Testimony to City Council
It is the belief of the Urban Renewal Authority and the City Council 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(Hunden report) shows there has been a significant decrease in number of conventions and trade shows and the attendance at these events. This report mirrors the national trend as reported in a Brookings report.
Both the Hunden report and a statement on page 18 of the Convention Center annual report say the average attendance for a convention is 300 people. The existing facility easily handles conventions in the range of 600 to 900 people. So, why does Pueblo need a larger Convention Center?
Global Spectrum, the managing company of the Convention Center, under the terms of the contract with the Urban Renewal Authority, in force through December 31, 2006 had no specific incentive to market and contract for conventions and trade shows that would bring to Pueblo “New Money”. The compensation plan to Global Spectrum under that contact was:
The Management fee was $60,000 annually.
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 design in two parts. The first part generated an incentive pool. The second part determined the amount Global Spectrum Actually earned.
Incentive fee pool based on gross revenues.
Earned Incentive fee based on amount of deficit.
The gross revenues for 2006 was$1,309,900
The operating deficit was $326,180
The annual incentive fee was $30,875 + management fee $62,000= $92,875
The actual amount in checks written to GS during 2006 was $120,888.
The as described above give 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 conventions and trade shows from the outside into Pueblo.
Compensation to GS is divided into two parts, Fixed Management 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 GS 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 GS 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 GS should not have received an incentive fee.
Since the total gross revenues exceeded $1,400,000 the amount payable to GS should have been $120,000 for the fixed management fee. The actual amount in checks written to GS during the year 2007 was $153,560.
The new contract anticipates an expansion to the Convention Center and/when and if this happens the contract will be renegotiated.
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, especially banquets which bring in the most revenues but also cost the most to run.
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 GS($120,888) for a total of $447,068 and for the year 2007 the deficit was $352,179 plus the amount paid to GS of $153,560 for total of $505,739.
Most municipalities that own a Convention Center/Event Center manage the facility themselves. This saves the $120,000 plus GS overhead. GS is over charging the Pueblo CC for insurance. Global Spectrum with the blessings of the URA is padding both the usage and revenues of the CC by promoting Mixed Martial Arts fights, the most violent and gory events available to the public.
The URA claims the Riverwalk is a big attraction for convention attendees. Typically, conventions are not held during the summer months. There is seldom an overlap of the CC and Riverwalk activities.
There are only 269 hotel rooms within walking distance of the CC.
Pueblo is somewhat remote from large population centers, that makes the cost of transportation for a company sponsored convention an important consideration . The larger the convention the less likely they will come to Pueblo, even if the expansion existed.
The Convention Center expansion cannot be justified for one client, Loaf-and-Jug.