Complete Wachovia Arena contract released
By Steve Mocarsky
Times Leader Staff Writer
WILKES-BARRE TWP. – The company hired to manage Wachovia Arena has provided a complete copy of its management contract that guarantees the company a minimum of $2 million over the next 10 years.
The Luzerne County Convention Center Authority initially provided The Times Leader with a copy of the contract with SMG on June 13, but all dollar amounts and percentages were blacked out. The authority claimed that information was “confidential (and) proprietary.”
The Times Leader last week filed an appeal with the state Office of Open Records, asserting that the state Right to Know Law does not allow redaction of a financial record of a public agency even if it contains proprietary information. A copy of the appeal was faxed to the authority.
Two days after the appeal was filed, SMG sent a copy of the complete contract delivered to the newspaper.
In a letter accompanying the copy, arena general manager Rebecca Bonnevier wrote that because SMG manages 219 facilities in the United States and around the world and terms and conditions in agreements with facility owners might vary from city to city, “we felt that the outstanding deal provided to the (arena authority) in Wilkes-Barre was proprietary and, if publicized, could potentially be harmful when SMG negotiates contracts in other cities.”
Bonnevier wrote that it was and still is the belief of SMG that the redacted information is not subject to disclosure under the Right to Know Law.
“However, without waiving our rights in future circumstances, and since SMG does not want to cause any harm or negative publicity to the (arena authority), we have determined to provide you with an un-redacted copy of the agreement,” Bonnevier wrote.
Bonnevier said company officials would appreciate “sensitivity to the competitive disadvantages to us” in publishing the terms of the agreement.
Melissa Bevan Melewsky, an attorney with the Pennsylvania Newspaper Association, has said that private companies dealing with a public agency “have to realize that with that relationship, there’s a certain amount of accountability attached for the expenditure and disbursement of public funds.”
“That money doesn’t magically become secret because it’s being paid to private individuals,” she said.
SMG is paid in several ways
According to the contract, SMG will be paid in several ways.
The company will receive a $200,000 “fixed fee” for 2009. That fee will change each year by the percentage change in the federal Consumer Price Index.
The fee appears to be a reduction from the previous contract, which required the authority to pay $180,000 in 2000; $204,000 in 2001; and $222,000 in 2002. The fee then changed by the percentage change in the Consumer Price Index, which increased 1.9 percent in 2003; 3.3 percent in 2004; 3.4 percent in 2005; 2.5 percent in 2006; 4.1 percent in 2007; and 0.1 percent in 2008.
Based on the CPI increases, SMG’s fixed fee for 2008 should have been about $258,000.
SMG will also receive an “incentive fee” equal to 2 percent of operating revenues, but capped at $50,000 annually.
In the previous contract, SMG received 7.5 percent of all net operating income between $500,000 and $816,000; 15 percent of all net operating income between $816,000 and $1.1 million; and 25 percent of all net operating income in excess of $1.1 million.
Net operating revenues in 2007 were $829,408. Under the old contract, it appears the incentive fee would have been $124,411 for that year. Under the terms of the new contract, the incentive fee for 2007 would have been only $50,000 because of the cap.
The contract also requires SMG to make a “capital contribution” in the amount of $200,000 for “capital improvements and capital equipment purchases relating to food and beverage operations” at the arena. If SMG’s contract is terminated ahead of schedule, the company is to be reimbursed for the contribution on a pro-rated basis.
And the contract requires that SMG deposit $100,000 into an “At Risk Event Fund” to be used for “promoting and developing new event activity” at the arena. The authority and SMG must agree on how the money is to be used, but if neither party responds within 10 days to the other party’s request to use some of the money, it can be used as requested.
Half the net profits – up to $100,000 – from each event promoted or developed through the fund will go back into the fund. And SMG gets to keep all the money – if any – still in the fund at the termination of its contract.
The authority at its May meeting also awarded SMG a 10-year contract to be the exclusive food and beverage provider at the arena. The contract takes effect after the current food and beverage contract with Aramark expires on Nov. 13.
Times Leader Staff Writer
WILKES-BARRE TWP. – The company hired to manage Wachovia Arena has provided a complete copy of its management contract that guarantees the company a minimum of $2 million over the next 10 years.
The Luzerne County Convention Center Authority initially provided The Times Leader with a copy of the contract with SMG on June 13, but all dollar amounts and percentages were blacked out. The authority claimed that information was “confidential (and) proprietary.”
The Times Leader last week filed an appeal with the state Office of Open Records, asserting that the state Right to Know Law does not allow redaction of a financial record of a public agency even if it contains proprietary information. A copy of the appeal was faxed to the authority.
Two days after the appeal was filed, SMG sent a copy of the complete contract delivered to the newspaper.
In a letter accompanying the copy, arena general manager Rebecca Bonnevier wrote that because SMG manages 219 facilities in the United States and around the world and terms and conditions in agreements with facility owners might vary from city to city, “we felt that the outstanding deal provided to the (arena authority) in Wilkes-Barre was proprietary and, if publicized, could potentially be harmful when SMG negotiates contracts in other cities.”
Bonnevier wrote that it was and still is the belief of SMG that the redacted information is not subject to disclosure under the Right to Know Law.
“However, without waiving our rights in future circumstances, and since SMG does not want to cause any harm or negative publicity to the (arena authority), we have determined to provide you with an un-redacted copy of the agreement,” Bonnevier wrote.
Bonnevier said company officials would appreciate “sensitivity to the competitive disadvantages to us” in publishing the terms of the agreement.
Melissa Bevan Melewsky, an attorney with the Pennsylvania Newspaper Association, has said that private companies dealing with a public agency “have to realize that with that relationship, there’s a certain amount of accountability attached for the expenditure and disbursement of public funds.”
“That money doesn’t magically become secret because it’s being paid to private individuals,” she said.
SMG is paid in several ways
According to the contract, SMG will be paid in several ways.
The company will receive a $200,000 “fixed fee” for 2009. That fee will change each year by the percentage change in the federal Consumer Price Index.
The fee appears to be a reduction from the previous contract, which required the authority to pay $180,000 in 2000; $204,000 in 2001; and $222,000 in 2002. The fee then changed by the percentage change in the Consumer Price Index, which increased 1.9 percent in 2003; 3.3 percent in 2004; 3.4 percent in 2005; 2.5 percent in 2006; 4.1 percent in 2007; and 0.1 percent in 2008.
Based on the CPI increases, SMG’s fixed fee for 2008 should have been about $258,000.
SMG will also receive an “incentive fee” equal to 2 percent of operating revenues, but capped at $50,000 annually.
In the previous contract, SMG received 7.5 percent of all net operating income between $500,000 and $816,000; 15 percent of all net operating income between $816,000 and $1.1 million; and 25 percent of all net operating income in excess of $1.1 million.
Net operating revenues in 2007 were $829,408. Under the old contract, it appears the incentive fee would have been $124,411 for that year. Under the terms of the new contract, the incentive fee for 2007 would have been only $50,000 because of the cap.
The contract also requires SMG to make a “capital contribution” in the amount of $200,000 for “capital improvements and capital equipment purchases relating to food and beverage operations” at the arena. If SMG’s contract is terminated ahead of schedule, the company is to be reimbursed for the contribution on a pro-rated basis.
And the contract requires that SMG deposit $100,000 into an “At Risk Event Fund” to be used for “promoting and developing new event activity” at the arena. The authority and SMG must agree on how the money is to be used, but if neither party responds within 10 days to the other party’s request to use some of the money, it can be used as requested.
Half the net profits – up to $100,000 – from each event promoted or developed through the fund will go back into the fund. And SMG gets to keep all the money – if any – still in the fund at the termination of its contract.
The authority at its May meeting also awarded SMG a 10-year contract to be the exclusive food and beverage provider at the arena. The contract takes effect after the current food and beverage contract with Aramark expires on Nov. 13.
