Fort Smith, firm to enter talks on managing venue

FORT SMITH — The city of Fort Smith is moving forward in its efforts to have an outside venue management and event programming company manage the Fort Smith Convention Center.

The Fort Smith Board of Directors heard a proposal from the Oak View Group, a company based in Los Angeles, during a study session on Tuesday. The city administration will negotiate a contract with the company.

The convention center is managed by the Fort Smith Advertising and Promotions Commission, City Administrator Carl Geffken said before the study session. A city employee, Tim Seeberg, serves as the general manager of the venue.

The city is considering have an outside company like the Oak View Group come in to manage the convention center, Geffken said, to see if there is a way to run it more efficiently.

“It’s just … the city’s continued path of examining what the city has done in the past, and are there different, better ways that can provide better service, more service at the same cost, or do the same with less cost,” Geffken said. “It’s just … constantly evaluating what we do.”

Geffken previously said that the city subsidizes the convention center with $777,000 per year from the general fund. What the center does not spend goes into its fund balance for future projects.

Seeberg said during a Fort Smith Board of Directors study session June 9 that the convention center had record revenue for a sixth-consecutive year — taking in $912,661 during fiscal 2019, a 9.49% increase over the $833,546 total for 2018. This includes rental income and revenue from the sale of beverages, concessions and catering.

The convention center measured a series of events that equated to an out-of-town dollar impact, or money spent directly in the Fort Smith area, of more than $7.29 million, according to Seeberg. This resulted in $189,700 going to the city in sales-tax revenue.

The center also saw “an incremental increase” in expenses during 2019 compared with 2018, Seeberg said. This was a difference of 0.13%, rising to over $1.61 million. However, the increase in revenue, as well as cost control, resulted in a reduction of $77,042, or 9.9%, in its operating subsidy.

City Director Neal Martin described the center as a “loss leader,” with the city spending money to generate economic activity.

In a memo to the Board of Directors, Geffken wrote that the Oak View Group approached the city about the management of the convention center back in the spring of 2019. Shura Garnett, current senior vice president of convention centers for OVG Facilities, a subsidiary of the Oak View Group, made a presentation to the board on June 25, 2019.

Later that year, Geffken wrote, the city released a request for proposals for a company to manage the convention center. The Oak View Group was ultimately chosen after several firms expressed interest and the proposals were submitted and reviewed.

The presentation of the proposal on Tuesday was carried out by Garnett; Sims Hinds, senior vice president of development for OVG Facilities; and Maria Rainsdon, general manager for the Grand Junction, Colo., venues for OVG Facilities.

Hinds described OVG Facilities as “very entrepreneurial.” The company’s list of clients it manages encompasses nine conference and convention centers, 20 arenas, seven theaters and amphitheaters, five stadiums and five multipurpose complexes throughout the country. Its scope of services includes pre-opening services, grand opening coordination, operations and engineering, ancillary services management, guest services, ticketing services, administration and finance, sales and marketing, and event and booking management.

Among the things OVG Facilities proposes for the Fort Smith Convention Center, Hinds said, are a commitment to customer service, bringing in more events such as concerts, conventions and trade shows, and monetary investment.

“We’re the only company in our industry that consistently invests money in the facilities that we’re asked to operate, and our proposal to you has us investing over $500,000 in building out the kitchen so we can significantly increase your revenue, thereby significantly decreasing the operating losses that you’ve been subsidizing,” Hinds said.

Garnett said OVG Facilities saw a great opportunity to bring in-house food and beverage to the convention center.

“We do that for a variety of reasons,” Garnett said. “Quality of what we serve is uppermost in our mind, but secondarily, it is a huge source of revenue to your convention center, and to your bottom line, that you’re missing out on, and it can significantly reduce your operating shortfall.”

Garnett said that for a $500,000 investment, OVG Facilities could build out a full-service kitchen that could prepare and serve up to 1,500 people. The company believes, conservatively, that this would increase the convention center’s net food and beverage profit from $100,000 in the first year to $300,000 or more by the third year, which would be a continued trend.

In regards to the transition in management of the facility, Hinds said OVG Facilities is “very sensitive” to the people who already work there.

Something that OVG Facilities would do in a contract with the city is work through a detailed transition plan that would include how the employees are talked to and treated, as well as other facets, to try to make the changeover “as seamless as possible.”

Thirteen city employees work at the convention center, Geffken said Wednesday. In the event that the city signs a contract for the Oak View Group to manage the facility, Geffken said, these employees would usually become employees of the company, but they could remain city employees depending on what the city decides.

Garnett said OVG Facilities estimates that it can increase the number of events at the convention center to over 300 a year by year three, 2022. It also estimates increasing the amount of total revenue during that time, to the point where, by 2022, the net operating income, or loss, would be brought down to $145,443.

OVG Facilities’ financial proposal, according to Garnett, is a term of three years with seven optional, single-year renewals for a total of 10 years. The company’s $500,000 investment for the kitchen is upon the signing of a contract for a 10-year potential term, with $50,000 being paid back per year and amortized over the term. The pay back will be considered an operating expense. The city would have to pay back the unamortized portion of the investment should the total agreement be less than 10 years.

The financial proposal also comes with a monthly base fee of $8,500 that, beginning in 2021, will be subject to annual Consumer Price Index increases, Garnett said. In addition to other incentive fees, OVG Facilities will be paid a 25% commission on all sponsorships sold and a one-time, up-front payment of $25,000 as an “event solicitation fund.” However, the company is willing to negotiate alternatives to this financial proposal.