by Mike Sharkey
Staff Writer
SMG and the City are on the verge of entering into another long-term agreement, giving SMG sole management rights to many of Jacksonville’s entertainment, meeting and sporting venues.
The resolution currently in front of City Council calls for a couple of amendments to the current contract between the City and the facilities management group. First, SMG will lose a year off its current contract. In return, however, the new contract will run from Oct. 1 through Sept. 30, 2008. And there is also a provision that would renew the contract again, this time through March 31, 2013.
Bob Downey, general manager for SMG, believes the contract proposal is a direct reflection of the City’s impression of the job SMG has done over the past decade and, in particular, the past year given the circumstances of Sept. 11 and subsequent economic downturn.
“I think it’s tied to our performance to date,” said Downey, adding that producing positive financial results the past year has been difficult at best. “We have a good track record with our major tenants and they are happy with our performance.”
The City entered into its original agreement with SMG in 1992, with its major tenants being the Gator Bowl, Metro Park and Veterans Memorial Coliseum. At the time, SMG was responsible for securing, staffing and managing athletic contests and concerts in the Coliseum and college football games, including the annual Georgia-Florida game and the Gator Bowl game, in the football stadium.
In 1994, shortly after the city was awarded a National Football League franchise, the contract with SMG was extended and Alltel Stadium became SMG’s primary tenant and revenue producer. The current contract was renewed again in 1999 with no automatic renewal periods, hence the proposed contract.
The City could have opted to search for a new management firm but that would have involved a potentially lengthy process. Requests for proposals would have gone out with all interested parties responding. Those bids would have been scrutinized by several City entities with an eventual winner chosen. In SMG, the City had a management company it is happy with, already in house and under contract.
“We had one more year on the current contract and we had to decide if we wanted to go through RFPs or renew the contract with SMG,” said Shari Shuman, deputy director/treasurer for the City. “We are at the stage of having a new arena and baseball park and we did not feel that a new promoter was in the best interest of the City. SMG is doing a good job and we did not want to go through signing a new contract when we were opening the ball park and arena. You need your management team on board when you are doing the promoting.”
Shuman said another aspect also played a role in the City’s decision to renew with Philadelphia-based SMG rather than open the process.
“Recently, there has been a lot of consolidation in their industry and there aren’t many venue management firms out there,” said Shuman.
Downey said SMG is looking forward to the two new, Better Jacksonville Plan-inspired venues. After suffering a very difficult year in which staff was cut and other budget adjustments were made, Downey said SMG is eager to fill the $34 million ball park and $130 million arena.
“It will be a welcome challenge,” he said. “The arena will be a much more appealing venue for larger touring acts. We had another year left on our contract and it will be shortened by a year. But that will get us on line with opening the new arena. If this gets approved, and that’s not a foregone conclusion, then we will be in position to market the new arena. We have to sell the club suites and formalize deals with prospective events.”
Downey said at this stage it is impossible to actively pursue specific acts and events for the new arena. Considering an exact completion date has yet to be determined — the latest date is November 2003 — committing a date in the new arena to a big musical act would be risky. Downey said no matter when the arena actually opens, don’t look for any Earth-shattering concerts or athletic events right away.
“Typically, in the opening of a new building, you do a soft opening,” said Downey. “It’s usually geared for the locals to come see the arena and gives you time to work out the kinks. You don’t open a brand new arena with the Rolling Stones. You take a month or two to work out the kinks.”
The new contract calls for SMG to make $550,000 a year with an incentive clause that’s a complex combination of the gross marketing revenues, the Consumer Price Index and several other factors. Basically, SMG stands to make about $150,000 a year above and beyond the base figure provided SMG sells a preset percentage of club suits and luxury boxes and books more than the minimum number of events per venue.
Downey said SMG will work hard to meet any incentive clauses, especially since the past year was difficult and the next year will also be a tough sell until the arena actually opens.
“We had over $1 million in events that didn’t happen in the aftermath of Sept. 11,” said Downey. “Also, the larger increase in security costs and the slow economy all combined. But we cut our operating expenses by that same $1 million. We did not have to ask for any extra funding from the City.”