Profit-sharing in works for Events Centre

By JOHN MOORHOUSE Tuesday, November 18, 2008

While the finishing touches are still being put on the South Okanagan Events Centre, Penticton city council has agreed to a 20-year contract with its private sector operating company. Council voted unanimously Monday to enter an agreement with Global Spectrum Facility Management for operation of the events centre, Penticton Trade and Convention Centre and Memorial Arena. The city will continue to operate McLaren Park Arena. The actual contract is expected to be signed before the end of this month and will include four five-year terms. Jack Kler, the city‘s director of corporate services, said the contract calls for Global Spectrum to be paid a base management fee of $250,000 in 2009, which will be reduced to $200,000 plus a profit-sharing component starting in 2010.

A profit benchmark will be set late next year. The city will receive 80 per cent of all net revenue. Global Spectrum must pay the city $50,000 for not achieving the benchmark in any given year. Kler said the agreement will also eliminate the city‘s annual $700,000 operating shortfall for the convention centre and Memorial Arena. “That will be basically assumed by Global Spectrum. In other words, they will generate sufficient profits to take care of those subsidies,” he said. Although a $490,000 profit is predicted for the events centre in 2009, city administrator Leo den Boer emphasized there are no guarantees the end result will match that figure. It will be up to the new council to determine what to do with any net revenues which may result. The projected profit could be directed into general revenue or set aside for other special purposes. Plans also call for the $2 facility fee (added to ticket prices at the events centre) to be directed into a capital reserve fund to help pay for any future maintenance and other upgrades required for the SOEC. Coun. Garry Litke said the decision to go with a private sector firm was a wise one. He noted Philadelphia-based Global Spectrum operates about 65 facilities across North America, including nine in Canada. “When we first approved the building of the South Okanagan Events Centre, we knew it would be fiscally irresponsible to not hire a professional manager,” he said. “Without a professional management the other convention centre was costing Penticton taxpayers an increasing amount of money.” Litke admitted there have been some “growing pains” with its operation of the events centre. “There are a few complaints here and there, but I‘m sure they‘re all getting ironed out,” he said. City council can order an increase the amount of subsidized ice times available at the SOEC and Memorial Arena, if it so wishes. However, any increase in ice time subsidies for groups such as minor hockey would decrease the net revenue to the city.

Council‘s approval of the agreement came just two days after Saturday‘s municipal election, in which Mayor Jake Kimberley and Coun. Joanne Grimaldi failed to get re-elected. Kimberley reiterated his assertion that Penticton “won the lottery” with the Events Centre which gained almost $60 million in provincial grants and casino revenues. “It was my full insistence that we not cut corners,” he said. “Maybe I‘m feeling the brunt of that decision and recommendation, but… I didn‘t want a half-built facility, I wanted a world-class facility.”The mayor cited the upgraded score clock, which cost $960,000 - up from the originally-budgeted $740,000. However, the city‘s $36-million loan for the project will be paid off in 10 years.

Grimaldi noted the events centre is the largest capital project in Penticton‘s history. She bemoaned what she described as “rumours, innuendos and untruths” regarding the actual cost of the $78-million project. Grimaldi pointed to former mayor Maurice Finnerty who opened the Peach Bowl convention centre in the mid-1960s and then failed to get re-elected. “You do something good and it‘s remembered in retrospect, instead of at the polls at the time,” she said.