Convention Center Authority Republican Policy Group Presentation February

Convention Center Authority Republican Policy Group Presentation February 23 rd 2015

Contents n Introduction to the Convention Center n Description of each entity – RI Convention Center Authority – RI Convention Center & Parking – Dunkin’ Donuts Center – Veterans Memorial Auditorium n Areas of Concern n Moving Forward

Introduction n Picturing the Convention Center Authority n 4 Parts to the Organization – Administrative Layer at the Top § Convention Center Authority – 3 Distinct Venues § Convention Center & Parking § Dunkin’ Donuts Center § Veterans Memorial Auditorium

Introduction (Continued) • Legislation created the Convention Center Authority in 1987 n Convention Center & Parking Complex – – – Construction completed in 1994 Issued $225 million debt to fund construction in 1991 Sold additional $98 million for hotel & parking build

Introduction (Continued) n Dunkin’ Donuts Center – Built in 1972 – Convention Center Authority Purchased from the city of Providence in 2005 § Spent $28. 5 mm to buy § Spent $64. 0 mm to renovate n Westin Hotel – Sold hotel in 2005 for $90, 085, 000 – Proceeds used to retire debt

Introduction (Continued) n Veterans Memorial Auditorium – Construction began in 1927 but wasn’t completed until 1950 – RI State Properties Committee approved the transfer of the VMA to CCA in 2008 § Annual lease payment of $1 per year § DOA pays portion of expenses

RI Convention Center Authority n Administrative Head of the Corporation – Function § Manage and operate the convention center complex, parking facilities and the Dunkin’ Donuts Center § Management oversight of the Veteran’s Memorial Auditorium in conjunction with the Department of Administration – Currently, under a 5 year lease agreement

RI Convention Center Authority n Authority employs and pays for multiple management companies – SMG Management § Convention Center -- $375, 000 § Dunkin Donuts Center -- $100, 000 – Professional Facilities Management § Veterans Memorial Auditorium § Management & Centralized Service Fee--$247, 000

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

Convention Center Authority n Office Composition – 4 full time employees and 1 part-time § FY 2015 Cost for salaries $626, 000 – Total FY 2015 Budget: § $3, 035, 909 n Note: – This portion of the company does NOT generate revenue § Overhead/Administrative cost – Staff & Board Member Parking Expense -- $66, 700

Convention Center & Parking n Largest Segment of the Authority n Largest profitable area of the Authority – Parking Garage generates most profit n Total Earned: FY 2015: $2. 5 million

Convention Center & Parking n Departments & Expenses to Keep in Mind – Executive – $323, 000 – Finance -- $361, 000 – Sales -- $658, 000 – Operations -- $2, 582, 000 n Automobile Allowance for 7 Directors – $29, 050 expense

Dunkin’ Donuts Center n Second Largest Venue n Operates at a Loss – FY 2015: -$300, 000 § On total revenue of $7. 8 million n Duplicated Expenses – Overhead/Management/Operations

Dunkin’ Donuts Center n Departments & Expenses to Keep in Mind – Executive – $451, 000 – Business Services -- $242, 000 – Marketing -- $199, 000 – Operations -- $2, 265, 000 n Automobile Allowance for 4 Directors

Veterans Memorial Auditorium n Smallest Segment of the Authority n Claims Profitability In Reports – Projects a $64, 000 profit for FY 2015 n Expense Assistance from the State – Additional $250, 000 of expenses are paid by the state

Veterans Memorial Auditorium n Expense Assistance – The Lease Agreement requires the Department of Administration to pay a portion of some expenses § Snow removal -- $7, 000 § Water & Sewage -- $33, 800 § Electrical -- $90, 000 § Gas -- $120, 000 n Result – VMA would operate at a loss if these expenses were paid by Authority

Veterans Memorial Auditorium n Expenses – Most expenses unrelated to Direct Events § Direct expenses relating to events: $362, 000 § Administrate Expenses: $562, 000 n Management Company – PFM cost : $247, 000

Concerns n Lease & Agreement n Debt Service & Annual Appropriations n Lack of Efficiency Motive n Departmental Duplication n Management Company Redundancies n Additional Areas of Concern

Lease Agreement n Pursuant to a “Lease & Agreement” signed 11/1/1991 & 11/30/2005 – CCA leased the Convention center facilities to the state § State is obligated to make lease payments “in an amount sufficient to pay the operating expenditures of the Authority and the debt service” § Subject to annual appropriations by the GA

Prior to the Lease Agreement n Bond Liability – State was not liable for bonds § “obligations issued by the Authority do not constitute a debt or liability or obligation of the state” – Security of Debt § “Bonds are secured solely from the pledged revenues or assets of the Authority”

Debt Service n Initial Debt Issued – November 1991: $225 million – July 1993: $98 million n Debt Remaining – As of June 30 th 2013: $237, 770, 000

Annual Appropriations n General Assembly Funding the CCA – Debt Service: Estimated $23 million annually – RICAP: FY 2015: $2. 387 million § Capital Project Expenses § Varies with the year n Appropriations to Date (already paid) – Debt Service: $419, 765, 000 (nominal) – RICAP: $33, 296, 000 (nominal)

Future Requirements n Debt Service – Principal Remaining: $220, 330, 000 – Interest Remaining: $111, 380, 000 n Total Public Funding (Paid and Future) – $786, 286, 789 § Fully tax-payer funded § Originally, the state had no obligation to pay these bonds

Efficiency Motive? n Since the GA funds for operations, is there a motive to be efficient? – Where is there a need to cut down on duplicative departments or functions? – Where is there a need to contain salary expenses? – Where is the need to streamline costs and compete?

Department Duplication n Convention Center & Parking – – Executive: $323, 000 Finance: $361, 000 Sales: $658, 000 Operations: $2, 582, 000 n Dunkin’ Donuts Center – Executive: $451, 000 – Business Services: $242, 000 – Marketing: $199, 000 – Operations: $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 n SMG offers – – – – Dedicated national sales and marketing systems National contracts to help facilitate bookings A network of Directors to share leads and client information Lead generation Proprietary client database National tradeshow exposure Telemarketing programs http: //smgworld. com/convention-center-services/

Concerns (Continued) n Why employ 11 (potentially more) director level positions and spend $722, 000 annually for a management company? n The Authority would go bankrupt without yearly cash infusions of public money. n Lack of competitive framework.

Moving Forward n Renew the call for greater transparency n Pressure the lax budgetary ideology n Request additional information