Convention Center Convention Center AuthorityAuthority

Republican Policy Group Republican Policy Group PresentationPresentation

February 23February 23rdrd 2015 2015

ContentsContents

Introduction to the Convention CenterIntroduction to the Convention Center Description of each entity Description of each entity

– RI Convention Center AuthorityRI Convention Center Authority– RI Convention Center & Parking RI Convention Center & Parking – Dunkin’ Donuts CenterDunkin’ Donuts Center– Veterans Memorial Auditorium Veterans Memorial Auditorium

Areas of Concern Areas of Concern Moving Forward Moving Forward

IntroductionIntroduction

Picturing the Convention Center Picturing the Convention Center AuthorityAuthority

4 Parts to the Organization 4 Parts to the Organization

– Administrative Layer at the Top Administrative Layer at the Top Convention Center Convention Center AuthorityAuthority

– 3 Distinct Venues 3 Distinct Venues Convention Center & Parking Convention Center & Parking Dunkin’ Donuts Center Dunkin’ Donuts Center Veterans Memorial AuditoriumVeterans Memorial Auditorium

Introduction (Continued) Introduction (Continued)

Convention Center & Parking ComplexConvention Center & Parking Complex– Construction completed in 1994Construction completed in 1994– Issued $225 million debt to fund construction in 1991Issued $225 million debt to fund construction in 1991– Sold additional $98 million for hotel & parking buildSold additional $98 million for hotel & parking build

•Legislation created the Convention

Center Authority in 1987

Introduction (Continued)Introduction (Continued)

Dunkin’ Donuts Center Dunkin’ Donuts Center – Built in 1972Built in 1972– Convention Center Authority Purchased Convention Center Authority Purchased

from the city of Providence in 2005from the city of Providence in 2005 Spent $28.5 mm to buy Spent $28.5 mm to buy Spent $64.0 mm to renovateSpent $64.0 mm to renovate

Westin Hotel Westin Hotel – Sold hotel in 2005 for $90,085,000Sold hotel in 2005 for $90,085,000– Proceeds used to retire debt Proceeds used to retire debt

Introduction (Continued) Introduction (Continued)

Veterans Memorial AuditoriumVeterans Memorial Auditorium– Construction began in 1927 but wasn’t Construction began in 1927 but wasn’t

completed until 1950completed until 1950

– RI State Properties Committee approved RI State Properties Committee approved the transfer of the VMA to CCA in 2008the transfer of the VMA to CCA in 2008 Annual lease payment of $1 per year Annual lease payment of $1 per year DOA pays portion of expenses DOA pays portion of expenses

RI Convention Center RI Convention Center AuthorityAuthority

Administrative Head of the Administrative Head of the Corporation Corporation – FunctionFunction

Manage and operate the convention center Manage and operate the convention center complex, parking facilities and the Dunkin’ complex, parking facilities and the Dunkin’ Donuts CenterDonuts Center

Management oversight of the Veteran’s Management oversight of the Veteran’s Memorial Auditorium in conjunction with the Memorial Auditorium in conjunction with the Department of Administration Department of Administration

– Currently, under a 5 year lease agreementCurrently, under a 5 year lease agreement

RI Convention Center RI Convention Center AuthorityAuthority

Authority employs and pays for Authority employs and pays for multiple management companiesmultiple management companies– SMG Management SMG Management

Convention Center -- $375,000Convention Center -- $375,000 Dunkin Donuts Center -- $100,000Dunkin Donuts Center -- $100,000

– Professional Facilities ManagementProfessional Facilities Management Veterans Memorial Auditorium Veterans Memorial Auditorium Management & Centralized Service Fee--Management & Centralized Service Fee--

$247,000$247,000

Note: Some positions may have changed due to the new Administration

Convention Center AuthorityConvention Center Authority

Office CompositionOffice Composition– 4 full time employees and 1 part-time 4 full time employees and 1 part-time

FY 2015 Cost for salaries $626,000FY 2015 Cost for salaries $626,000

– Total FY 2015 Budget:Total FY 2015 Budget: $3,035,909$3,035,909

Note:Note:– This portion of the company does This portion of the company does NOTNOT

generate revenue generate revenue Overhead/Administrative cost Overhead/Administrative cost

– Staff & Board Member Parking Expense -- Staff & Board Member Parking Expense -- $66,700$66,700

Convention Center & Convention Center & ParkingParking

Largest Segment of the Authority Largest Segment of the Authority

Largest profitable area of the Largest profitable area of the Authority Authority – Parking Garage generates most profitParking Garage generates most profit

Total Earned: FY 2015: $2.5 million Total Earned: FY 2015: $2.5 million

Convention Center & Convention Center & ParkingParking

Departments & Expenses to Keep in Departments & Expenses to Keep in MindMind– Executive – $323,000Executive – $323,000– Finance -- $361,000Finance -- $361,000– Sales -- $658,000Sales -- $658,000– Operations -- $2,582,000Operations -- $2,582,000

Automobile Allowance for 7 DirectorsAutomobile Allowance for 7 Directors– $29,050 expense $29,050 expense

Dunkin’ Donuts CenterDunkin’ Donuts Center

Second Largest Venue Second Largest Venue

Operates at a Loss Operates at a Loss – FY 2015: -$300,000FY 2015: -$300,000

On total revenue of $7.8 million On total revenue of $7.8 million

Duplicated ExpensesDuplicated Expenses– Overhead/Management/OperationsOverhead/Management/Operations

Dunkin’ Donuts CenterDunkin’ Donuts Center

Departments & Expenses to Keep in Departments & Expenses to Keep in MindMind– Executive – $451,000Executive – $451,000– Business Services -- $242,000Business Services -- $242,000– Marketing -- $199,000Marketing -- $199,000– Operations -- $2,265,000Operations -- $2,265,000

Automobile Allowance for 4 DirectorsAutomobile Allowance for 4 Directors

Veterans Memorial Veterans Memorial AuditoriumAuditorium

Smallest Segment of the AuthoritySmallest Segment of the Authority

Claims Profitability In ReportsClaims Profitability In Reports– Projects a $64,000 profit for FY 2015Projects a $64,000 profit for FY 2015

Expense Assistance from the State Expense Assistance from the State – Additional $250,000 of expenses are Additional $250,000 of expenses are

paid by the state paid by the state

Veterans Memorial Veterans Memorial AuditoriumAuditorium

Expense Assistance Expense Assistance – The Lease Agreement requires the The Lease Agreement requires the

Department of Administration to pay a Department of Administration to pay a portion of some expenses portion of some expenses Snow removal -- $7,000Snow removal -- $7,000 Water & Sewage -- $33,800Water & Sewage -- $33,800 Electrical -- $90,000Electrical -- $90,000 Gas -- $120,000Gas -- $120,000

Result Result – VMA would operate at a loss if these VMA would operate at a loss if these

expenses were paid by Authority expenses were paid by Authority

Veterans Memorial Veterans Memorial AuditoriumAuditorium

ExpensesExpenses– Most expenses unrelated to Direct Most expenses unrelated to Direct

Events Events Direct expenses relating to events: Direct expenses relating to events:

$362,000$362,000 Administrate Expenses: $562,000Administrate Expenses: $562,000

Management Company Management Company – PFM cost : $247,000PFM cost : $247,000

ConcernsConcerns

Lease & Agreement Lease & Agreement Debt Service & Annual AppropriationsDebt Service & Annual Appropriations Lack of Efficiency MotiveLack of Efficiency Motive Departmental DuplicationDepartmental Duplication Management Company Redundancies Management Company Redundancies Additional Areas of ConcernAdditional Areas of Concern

Lease AgreementLease Agreement

Pursuant to a “Lease & Agreement” Pursuant to a “Lease & Agreement” signed 11/1/1991 & 11/30/2005signed 11/1/1991 & 11/30/2005– CCA leased the Convention center CCA leased the Convention center

facilities to the statefacilities to the state State is obligated to make lease payments State is obligated to make lease payments

“in an amount sufficient to pay the “in an amount sufficient to pay the operating expenditures of the Authority and operating expenditures of the Authority and the debt service” the debt service”

Subject to annual appropriations by the GASubject to annual appropriations by the GA

Prior to the Lease Prior to the Lease AgreementAgreement

Bond Liability Bond Liability – State was not liable for bondsState was not liable for bonds

““obligations issued by the Authority do not obligations issued by the Authority do not constitute a debt or liability or obligation of constitute a debt or liability or obligation of the state” the state”

– Security of DebtSecurity of Debt ““Bonds are secured solely from the pledged Bonds are secured solely from the pledged

revenues or assets of the Authority”revenues or assets of the Authority”

Debt Service Debt Service

Initial Debt Issued Initial Debt Issued – November 1991: $225 millionNovember 1991: $225 million– July 1993: $98 million July 1993: $98 million

Debt RemainingDebt Remaining– As of June 30As of June 30thth 2013: $237,770,000 2013: $237,770,000

Annual AppropriationsAnnual Appropriations

General Assembly Funding the CCAGeneral Assembly Funding the CCA– Debt Service: Estimated $23 million Debt Service: Estimated $23 million

annually annually – RICAP: FY 2015: $2.387 millionRICAP: FY 2015: $2.387 million

Capital Project ExpensesCapital Project Expenses Varies with the year Varies with the year

Appropriations to Date (already paid)Appropriations to Date (already paid)– Debt Service: $419,765,000 (nominal) Debt Service: $419,765,000 (nominal) – RICAP: $33,296,000 (nominal)RICAP: $33,296,000 (nominal)

Future RequirementsFuture Requirements

Debt Service Debt Service – Principal Remaining: $220,330,000Principal Remaining: $220,330,000– Interest Remaining: $111,380,000Interest Remaining: $111,380,000

Total Public Funding (Paid and Future)Total Public Funding (Paid and Future)– $786,286,789 $786,286,789

Fully tax-payer funded Fully tax-payer funded Originally, the state had no obligation to pay Originally, the state had no obligation to pay

these bondsthese bonds

Efficiency Motive?Efficiency Motive?

Since the GA funds for operations, is Since the GA funds for operations, is there a motive to be efficient?there a motive to be efficient?– Where is there a need to cut down on Where is there a need to cut down on

duplicative departments or functions?duplicative departments or functions?– Where is there a need to contain salary Where is there a need to contain salary

expenses?expenses?– Where is the need to streamline costs Where is the need to streamline costs

and compete? and compete?

Department Duplication Department Duplication

Convention Center Convention Center & Parking& Parking– Executive: Executive:

$323,000$323,000– Finance: $361,000Finance: $361,000– Sales:$658,000Sales:$658,000– Operations: Operations:

$2,582,000$2,582,000

Dunkin’ Donuts Dunkin’ Donuts CenterCenter– Executive: Executive:

$451,000$451,000– Business Services: Business Services:

$242,000$242,000– Marketing: Marketing:

$199,000$199,000– Operations:Operations:

$2,265,000$2,265,000

•Event income for Convention Center is $9.0 mm

•Event income for the Dunkin’ Donuts Center is $4.5 mm

•Both have similar executive/operational expenses.

•Both use a management company

SMG Worldwide SMG Worldwide SMG offers SMG offers

– Dedicated national sales and marketing systemsDedicated national sales and marketing systems– National contracts to help facilitate bookingsNational contracts to help facilitate bookings– A network of Directors to share leads and client A network of Directors to share leads and client

informationinformation– Lead generationLead generation– Proprietary client databaseProprietary client database– National tradeshow exposureNational tradeshow exposure– Telemarketing programsTelemarketing programs

http://smgworld.com/convention-center-http://smgworld.com/convention-center-services/services/

Concerns (Continued)Concerns (Continued)

Why employ 11 (potentially more) Why employ 11 (potentially more) director level positions and spend director level positions and spend $722,000 annually for a management $722,000 annually for a management company? company?

The Authority would go bankrupt without The Authority would go bankrupt without yearly cash infusions of public money.yearly cash infusions of public money.

Lack of competitive framework.Lack of competitive framework.

Moving ForwardMoving Forward

Renew the call for greater Renew the call for greater transparencytransparency

Pressure the lax budgetary ideology Pressure the lax budgetary ideology

Request additional information Request additional information