Saturday, May 17, 2008
SMG official has high hopes for success of downtown’s Chevrolet Centre.
YOUNGSTOWN — Though Mayor Jay Williams strongly urges city council to support the hiring of SMG, a company that operates more than 200 facilities worldwide, its members aren’t rushing to endorse it.
Williams, who recommended SMG on Friday, wants council to consider the deal as soon as its Wednesday meeting.
“We’ll try to take our time,” said Councilwoman Carol Rimedio-Righetti, D-4th and head of council’s finance committee. “If it takes a week or two, so be it. We need to digest this so we don’t have a bad contract like we had the last time.”
She was referring to the deal the city had with Global Entertainment Corp., an Arizona company, that ran the city-owned center from October 2005 to October 2007.
During that time, the facility lost about $280,000.
The city negotiated with SMG and Global Spectrum, both of Philadelphia, to help run the center.
Global Spectrum, which manages about 70 facilities, is not affiliated with Global Entertainment.
Williams praised both companies, but said SMG is a better fit for the city.
SMG tentatively agreed to sign a five-year deal with the city effective Jan. 1, 2009.
The company would start as soon as council gives the city’s board of control approval to hire SMG, Williams said. A contract would be approved shortly thereafter, he said.
SMG would waive its monthly fee through Dec. 31, and be paid only for travel expenses pre-approved by the city.
Effective Jan. 1, SMG would receive a monthly management and consulting fee of $6,667. It wouldn’t receive any commissions.
The city would keep the first $100,000 in net operating income from the center. SMG would receive a percentage of net operating income above the $100,000 mark.
Jim Grinstead, editor and publisher of Revenues from Sports Venues, and Conventions and Conference Facilities, two Nashville-based trade publications, said SMG is a “good company with a strong reputation. They perform for their customers. They can really help bring concerts and events to the building that you couldn’t get without them.”
Grinstead also praised the city for negotiating “a real good deal.”
As part of the deal, JAC Management Co., a Struthers business operated by Eric Ryan, would continue to run the center’s day-to-day operations as it has since October.
JAC receives $9,000 a month for its services. If SMG comes aboard, that fee would be reduced to $8,000.
The combined SMG/JAC monthly fee of $14,667 — $176,004 annually — is greater than the $12,500 monthly fee — $150,000 — the city paid to Global Entertainment.
But Global received about $200,000 a year in commissions on sales of advertising, club seats and luxury suites.
SMG and JAC would receive no commissions.
Also, the city expects to receive more than $200,000 annually from ticket sales after switching to Ticketmaster from GetTix.Net earlier this month. The city received none of the GetTix.Net surcharges and handling fees.
The city is receiving between 25 and 40 percent of ticket surcharges and handling fees from Ticketmaster based on the price of the tickets.
Through those two changes, the center’s financial bottom line would improve by about $350,000 to $400,000 annually, Williams said.
Robert Cavalieri, SMG’s senior vice president-business development, said he’s excited about his company’s potential to help operate the Chevrolet Centre.
He agreed with Grinstead’s assessment that SMG is providing a good deal to the city.
“As a company, we believe in our abilities,” Cavalieri said. “The base management fee is quite low. Our reward comes from doing a really good job and making the facility extremely successful.”
Global Spectrum officials said they were a bit surprised with the decision of the Williams administration to recommend SMG.
“We haven’t received any notification whatsoever” from the city about the decision, said John Page, the company’s chief operating officer. “We heard the rumblings and we reached out to the mayor to further explain our position.”
Also, the city never had “substantive discussions on finances” with the company, said Todd Glickman, its vice president of business development and client relations.
Williams said he received a letter Thursday from Global Spectrum that the company was willing to operate under the city’s parameters.
But with SMG’s proposal in hand, Global’s request to continue negotiating was too late, the mayor said.
Williams said SMG agreed to a better financial package than Global and mentioned other SMG benefits.
They include: SMG’s only business is management services, it has corporate executives located nearby in Pittsburgh and Cleveland, it agreed to a flat-fee payment, and its consulting service will allow the city to keep payroll costs at the center in check, Williams said.
Some council members expressed concern that they didn’t know the details of Global Spectrum’s proposal and not enough about SMG’s to make an informative decision by Wednesday.
Williams said the deal could wait a bit, but not too much longer, adding that SMG could pull its proposal. But that wouldn’t open the door for Global Spectrum, he added.
skolnick@vindy.com