A bit of risk sharing is bringing new life and more profits to the embattled Fresno Convention Center.
City Hall and the center's management firm last year took a gamble on a business plan that calls for the city to assume more risk in the promotion of concerts.
City Hall … downtown … gamble. Wasn't that how Fresno got into a financial mess in the first place?
Well, this time the formula is paying off.
City officials say the co-promotion of selected events over a six-month period has produced more than $200,000 for city coffers. None of the 10 events was a money-loser, they say. The concert by Tool, an alternative-metal group, in March made more than $70,000 for the city.
City officials once thought they would be lucky to make that kind of money in a year.
"We're very pleased," City Manager Bruce Rudd says. "We hope this will help get people reacquainted with the Convention Center and what we're doing downtown."
Council Member Lee Brand, who spent much of 2013 in a mini-war with Convention Center officials, says these early returns suggest the place is no longer in a death spiral.
"It's a victory for taxpayers," Brand says.
The Convention Center's trials are no secret. The nearly 50-year-old complex of entertainment venues and meeting halls has struggled to keep pace with the times.
The huge Save Mart Center at Fresno State is like a magnet for big-name acts. The nearby American Indian casinos have the cash to buy just about any performer they want. The digital revolution has changed the nature of personal entertainment.
The Convention Center was hobbled with aging facilities, considerable bond debt and a City Hall whose own money woes put it in no mood to help. The result was an annual city subsidy of about $8 million and a center unlikely to be a catalyst to Mayor Ashley Swearengin's downtown revitalization efforts.
City officials have long stewed about what to do. They hired Pennsylvania-based SMG in 2004 to manage it, but the results were mixed. Brand last summer decided, in his words, "to rattle everyone's cages."
Brand, chairman of the council's three-member audit and finance committee, used that authority to dig into the Convention Center-SMG contract. At the top of his agenda was wringing more savings out of the center's operations and making more money from its buildings.
Rudd and Convention Center General Manager Bill Overfelt, an SMG employee, already had been chewing on the co-promotion idea. Brand's threats spurred the talks.
There are variations to co-promotion, but the Convention Center's model is a sharing with promoters of certain net revenues. Overfelt says there are four main sources in the mix: food/beverage, ticketing commission, rent and facility fee.
In a co-promotion deal, Overfelt subtracts his operating costs from food/beverage proceeds. Half go to the promoter, half to the city.
He does the same thing with rent. Overfelt uses this example: Selland Arena rent for a concert might be $50,000. His set-up and clean-up costs might be $15,000. Of the remainder, $17,500 goes to the promoter, $17,500 to the city.
Overfelt says Ticketmaster handles tickets. Ticketmaster sends a portion of each sold ticket as a commission. This is divided between promoter and city.
The facility fee is $3 per ticket. The city charges a $1 arts/parks fee on all entertainment tickets. That buck is taken off the top, leaving $2. Half goes to the promoter, half to the city.
There are other factors. For example, let's says a promoter has the receipts to prove the show was a money-loser even with revenue-sharing. Overfelt says he can give the promoter the city's share of, say, the rent to soften the blow.
Overfelt also says he won't do co-promotions on every show.
In the old days, Overfelt says, the city kept all these revenues. The promoter would sink or swim largely on ticket sales.
In promoters' eyes, Overfelt says, the Convention Center already had two strikes against it — an aging facility, and no shortage of alternative venues locally and in the Valley. Forcing promoters to shoulder all the risk, he says, convinced many to go elsewhere.
"If the act doesn't come here, I get zero," Overfelt said. "And downtown gets no activity."
Gary Bongiovanni, editor-in-chief of Pollstar, the Fresno-based trade publication for the concert industry, says co-promotion is "not uncommon in today's world, especially in secondary-market buildings. It mitigates some of the risk for the promoter. You don't make any money on a building if it's dark."
Then what took City Hall so long to join the 21st century?
City policy, Overfelt says: "You make more money if you keep everything."
Politics will dictate how Convention Center profits are spent. They could be used to cushion Overfelt's budget should revenues fall short elsewhere. They could be spent on the estimated $8 million of renovations the center needs. They could land in the general fund, reducing the center's annual subsidy.
City officials have been bitten by the entrepreneurial bug. Brand says an energy audit shows the center could, with an initial investment of about $600,000, lead to $500,000 in annual savings on the power bill. He says it's only a matter of time before increased foot-traffic leads to higher advertising income inside and outside the complex.
Rudd looks at the bigger picture of downtown revitalization. Traffic is expected to return to Fulton Corridor. Uptown is blossoming. A new general plan and development code are on the horizon.
The Fresno Convention Center's success with co-promotion, Rudd says, "is one more step in the right direction."
The reporter can be reached at (559) 441-6272 or email@example.com. Read his City Beat blog at fresnobee.com/city-beat.
"We're very pleased. We hope this will help get people reacquainted with the Convention Center and what we're doing downtown." — City Manager Bruce Rudd