COUNCIL ITEM OF SPECIAL INTEREST - OPTIONS TO INCREASE PATRONAGE AT THE GLENDALE CIVIC CENTER
Staff Contact and Presenter: Erik Strunk, Director, Public Facilities, Recreation and Special Events
Staff Presenter: Diane Williams, Administrator, Civic Center
Purpose and Recommended Action
This item is follow up to a Council Item of Interest by Vice Mayor Hugh to review the current business model for the Civic Center and to discuss possible actions to increase patronage at the facility.
Background
In 1995, the City recognized that for a community of its size (185,919 residents), it had minimal public meeting space available for conferences, organizations, clubs and civic activities. To address this lack of meeting space, the City began studying the possibility of constructing a “Civic Center” on City-owned land between Glenn Drive and Palmaire Avenue from 57th Drive to 57th Avenue to be used for community meetings and activities, as well as City sponsored functions. It was further directed that the design of the center should be one that could serve as a focal point of downtown Glendale, include state-of-the-art audio and visual capabilities, and contain meeting space to accommodate several hundred people, including a catering facility, and smaller breakout rooms. In 1997, the City Council subsequently provided staff direction to move forward with the construction of the new “Civic Center”.
Design and construction took approximately two years, and the total cost of the new Civic Center amounted to $8,500,000. The 36,000 square foot facility first opened its doors to the public on December 31, 1999. In 2006, a second ancillary building, the 3,800 square foot “Annex”, was acquired and remodeled, resulting in nearly 40,000 square-feet of rentable space for corporate meetings, conferences, trade shows, graduations and a variety of social gatherings including weddings and proms. Since its inception, full catering services have been provided to Civic Center patrons upon request. These catering services have been provided by a private, full-service professional food and beverage firm via a separate, contractual agreement and have been competitively selected by the City (via a “Request for Proposal” - RFP).
In 2012, the Civic Center was awarded the #1 ranking for conference centers of its size by Arizona Business Magazine’s “Ranking Arizona: The Best of Arizona Business.” The Civic Center has received this prestigious award now for five years in a row (most recently in May 2016). This positioned the Glendale Civic Center to out-rank nationally known facilities such as Marriott’s Camelback Inn Resort, Loew’s Ventana Canyon in Tucson, and the Sanctuary Resort in Scottsdale. Glendale’s Civic Center is the only government-owned and managed venue on the list.
Analysis
There is no outstanding debt on either two buildings that comprise the Civic Center, and it is estimated that in the past 15 years, more than a million people have used it to participate in various events for which it was designed. A five-year statistical analysis shows that on average, the Civic Center hosts approximately 195 events annually that draw 56,306 persons to the downtown/Centerline area. Additionally, the Civic Center recovers 64% of its expenses through rental fees, services and commissions from the caterer.
It is important to note that the number of events a facility can accommodate is in direct correlation to the operating budget and staff that is in place to support and manage those events. The more employees available to service the guests, the greater the likelihood of increased revenue and patronage.
|
FY |
Visitors |
Actual Revenue |
Actual Expenditures |
General Fund |
Revenue Recovery |
FTE’s |
|
2011-2012 |
65,585 |
$406,211 |
$763,498 |
$357,287 |
53% |
6 |
|
2012-2013 |
53,392 |
$395,476 |
$647,938 |
$252,462 |
61% |
5 |
|
2013-2014 |
53,349 |
$408,309 |
$599,749 |
$191,440 |
68% |
4 |
|
2014-2015 |
57,517 |
$375,728 |
$541,919 |
$166,191 |
69% |
3 |
|
2015-2016 |
51,688 |
$328,163 |
$485,109 |
$156,946 |
68% |
3 |
|
5 Year Avg.: |
56,306 |
$400,359 |
$607,643 |
$224,865 |
64% |
4.2 |
Previous economic impact studies show that for each Civic Center attendee, approximately $67.00 per day in spending occurs in the downtown/Centerline area. A review of the Civic Center user demographics for FY 15-16 shows that the largest amount of revenue produced is from the corporate sector, followed by the social, education and association sectors.
Overall, the Civic Center competes with a variety of venues depending on the market segments that are booked. When competing against these venues, staff promotes value-added items such as complimentary parking in a covered parking garage, competitively-priced equipment such as staging and audio-visual, and menus. The staff also promotes the opportunity for exclusivity if a client is booking the entire ballroom or building. Additionally, the Civic Center is known as “ADA-friendly” and viewed as an ideal location for events seeking a single level facility. The Civic Center also has hearing-assistive devices available at no charge for use during an event.
As indicated earlier, the Civic Center is a full-service conference venue with a business model that includes the provision of catering (food and beverage) services by a professional food and beverage company. Currently, these services are provided by Arizona Catering, Inc. Under the term of the existing multi-year Council-approved agreement (C# -7369), the City is in year seven of the agreement and currently receives 14% of net revenue for all food sales and 15% for all beverages sold by the caterer. Since the approval of this exclusive contract in 2010, the City has received the following revenue:
|
Item |
2015 |
2014 |
2013 |
2012 |
2011 |
Total |
|
Net Revenue to City |
$41,259 |
$43,334 |
$42,894 |
$57,751 |
$50,792 |
$236,030 |
|
Gross Sales by Caterer |
$350,595 |
$403,086 |
$331,593 |
$412,884 |
$490,828 |
$1,988,986 |
Under the terms of the Agreement, the caterer has exclusive rights to all food and beverage sold at the Civic Center and the City receives a net percentage of these revenues as indicated above. This is a very common industry practice when compared to other municipalities and private sector venues that offer full-service conference center services. In exchange for the opportunity to earn revenue and operate as the exclusive in-house caterer, Arizona Catering, Inc., is responsible for all food and beverage licenses (i.e. - Maricopa County Health, state liquor license, sales tax licenses, etc.); the independent contracting of staff to prepare and serve food and beverage (i.e. - all HR functions and compliance with Federal and State employment law); the storage and preparation of all foodstuffs and beverages, expenses for maintenance and repair of the kitchen area and the equipment provided (i.e. - grease traps, pest control, etc.); all plates, utensils, cooking materials, serving trays, stemware, cook stoves, pots, pans, etc.; and for covering 50% of all utilities per month (i.e. - water, sewer, sanitation fees, electricity, gas, etc.) for the kitchen area. It is estimated that approximately $125,000 has been invested by the current caterer to make its efforts at the Glendale Civic Center a success.
Recommended Actions
The local Glendale economy continues to improve and along with it, there are several opportunities to further enhance revenue and patronage of the Civic Center.
Among the immediate concepts that have either been implemented or are pending action would include:
o 5% Growth Goal: The Civic Center has established a goal of increasing patronage at the facility by five percent each year, over the next five years. As the Center re-establishes its business plan to reflect the market demographic it can best service, it will also focus on generating more business at the facility. This will further fulfill the original objective of the Center to help create a more vibrant downtown, Centerline experience.
o Creation of Marketing Budget: With the recent City re-organization that took effect on July 1, 2016, the new Public Facilities, Recreation and Special Events Department (in which the Civic Center is organizationally located) now also includes the Glendale Convention and Visitors Bureau (CVB) and the Office of Special Events. With the re-alignment that has taken place, the CVB now incorporates the Civic Center in its promotional literature for all national and international marketing and advertising campaigns, including mention at all trade and tourism conferences and shows. Additionally, with the commitment of Proposition 202 Tohono O’odham gaming revenue shared with the City, $100,000 is specifically earmarked for CVB functions. Of this amount, $30,000 will be used to specifically develop much needed marketing collateral and additional advertising to encourage greater use of the Civic Center by residents and visitors. Because they are Proposition 202 funds guaranteed in the current City of Glendale agreement with the Tohono O’odham Nation, there will not be any impact to the General Fund.
o Staff Re-Assignment: Again, due to the recent city re-organization, new staff synergies can be expected to help increase business and patronage at the Civic Center. The Civic Center Administrator now oversees both Audio/Visual Services as well as the Civic Center. The reassignment of the Audio/Visual Services into the Civic Center organization will enhance the overall operation by providing the much needed expertise and assistance to potential clients in need of multi-media services for their event.
o New Maintenance Fund: The Civic Center is regarded as a first class event facility and needs to be maintained as such. Its appearance and reputation as a first-rate facility is central to repeat and new patronage. To compete with high quality hotels, country clubs and larger convention/conference centers in the valley, the Civic Center must offer first class amenities such as state-of-the-art audio-visual equipment and sound systems, and furniture for meetings and events which is comfortable, well-made, and able to withstand constant wear and tear. In an effort to better address this situation, in FY 16-17, an additional $15,000 was added to the Building Maintenance and Repair fund (which now totals $50,312). Although this amount will not adequately cover major capital items such has HVAC, the air walls, carpeting, wood repairs and roof and tile repairs, it does demonstrate a positive commitment by the City Council to “step up” needed repair work that can be handled on a routine basis. This in turn, will assist with the facility’s marketability and overall patronage.
o New User-Fee Philosophy: To stay competitive in the marketplace, it would be beneficial for Civic Center management to have the ability to negotiate room rental rates. Currently, staff is bound by Council-established fees. Allowing for a potential variable fee range would result in greater staff flexibility to adjust rental fees based on scope of a proposed event and market conditions. The ability to negotiate seasonal discounts would be extremely helpful with respect to increasing business for the “slower” summer months due to heat. This endeavor will occur as a part of the FY 17-18 budget process, which is slated to begin in March 2017. A new user-fee model will be created so as to maintain market competitiveness and capture new revenue currently not actualized.
o Allow Up To Six (6) Major Events at No Charge: Just as with the current, three-year pilot program to encourage more community use of the E. Lowell Rogers Amphitheatre and Murphy Park, it is recommended that upon the discretion of the City Manager and/or his/her designee, authority be granted to identify up to six (6) marquee community events per year (to be defined as an event with more than 500 persons in attendance) with no rental charge to the partnering client (excluding catering fees). Examples might include special city-initiated events in observance of cultural/ethnic celebrations, certain functions by local school districts, other government entities, or non-profit organizations with which the City has a working relationship, and/or special event functions of a public and non-commercial/religious nature. The intent is to increase community engagement and visibility. This would be done via written contract, and could not be done at the expense of any pre-existing, contract for use of the facility. With Council authorization, it would be done on a pilot basis for a three-year period, beginning January 1, 2017. It is estimated that if approved, the total cost of this option would amount to $50,000 in forgone revenue.
o New Annual Progress Report: With consensus of the above recommendations, staff is confident patronage and use of the Civic Center will increase. On an annual basis, staff will complete a progress report for Council to review and for further discussion. Meaningful metrics will be employed and an annual assessment conducted by the Parks and Recreation Advisory Commission will determine if additional measures should be recommended to the Council in order to increase patronage at the Civic Center. Should this prove not to be the case, a more in-depth analysis and recommendation regarding the current catering contract, city-ownership of the venue, and the potential for privatizing its functions will be conducted and presented to Council for consideration, as appropriate.
Community Benefit/Public Involvement
The Glendale Civic Center has been a significant economic engine for the downtown Centerline area for the past 16 years. It has provided a much needed, top-quality, meeting and banquet facility for Glendale residents, businesses and visiting clients; additional foot traffic to the immediate downtown area; and has been recognized as the “best facility” of its type and size in the State of Arizona - for each of the past five years - by its patrons. With direction, staff will endeavor to continue to improve upon the success of the Civic Center and work to ensure its long-term viability and positive impact for the greater Glendale community.
Budget and Financial Impacts
With the exception of any adjustment to user-fees (which will be determined as a part of the FY 17-18 budget process), and the potential provision of six major, rental-free events each year (estimated to be $50,000 in foregone revenue), the Civic Center revenues from catering should increase slightly as more patrons and events occur. It is estimated revenue derived from this source would increase by approximately 3% each year. It should also be noted that a change was made to the budget for FY 16-17 that includes $50,312 moved from the CIP budget to the Civic Center’s Building Maintenance and Repair account to facilitate needed maintenance and repairs (this was previously reviewed and approved by Council as part of the FY 16-17 budget process).
Summary
The Civic Center was built to provide top-quality meeting and banquet facility accommodations for the Glendale community and to encourage local economic growth. Staff is seeking guidance from Council on the recommendations included in this report to better assist in meeting the goals of increasing patronage and encouraging further economic growth in the community.