Convention Center funding plan released; 1% lowered in year 6

The 1% prepared food tax is estimated to generate $1.8 million a year in A&P funds, which would be used by the A&P Commission exclusively to operate and enhance the Fort Smith Convention Center. The Convention Center is in need of a new revenue stream to replace 10 years of state funding that has been in place until this year. Fort Smith voters on November 8 will choose whether or not to approve a proposed 1% tax on prepared foods purchased by Fort Smith visitors and citizens to fund the city’s $40 million Convention Center.

If the tax is approved, management of the Fort Smith Convention Center will become the responsibility of the seven-member Fort Smith A&P Commission, instead of the City of Fort Smith. The City of Fort Smith will still own the building, but the A&P will become the exclusive operators of the facility. The A&P Commission’s 6-Year budget framework lists six general categories of expenses that the $1.8 million would cover:
• Operations—ranging from $950,000 in Year 1 to $800,000 in Year 6
• Increased Parking –budgeted $350,000 per year until $0 in Year 6
• Lower Rates—budgeted $100,000  per year
• Concert & Show Productions—budgeted $100,000  per year
• Repair, Replacement & Emergency—ranging from $250,000  to $300,000 per year
• Marketing & Ticketing—budgeted $50,000  per year

A&P Executive Director Claude Legris said the budget framework was developed with a priority on expenses that improve the Convention Center experience for customers, both existing and new.

“All our budget priorities are about creating the most efficient and competitive facility possible, while giving customers what they have told us they want. Based on customer feedback, we have placed a priority on developing more parking, lowering rental rates, and bringing in a diverse slate of concerts and shows to supplement the entertainment that promoters already bring to the Convention Center.

“The A&P Commission is also committed to keeping the facility in top, competitive condition, so we have dedicated significant funds each year for ongoing upgrades, repairs and replacements, in addition to unforeseen repairs that we could incur.”

The remaining funds, $50,000 a year, are allotted to increased marketing and investing in a ticketing system for Convention Center events. The ticketing system will serve as a new revenue source for the Center.

Goal: Reduce the Tax
One notable feature of the 6-year budget framework is that the Year 6 budget for 2017 has been calculated at a .75 tax rate instead of a 1 percent. Fort Smith Mayor Sandy Sanders, who is chair of the Fort Smith A&P Commission, said the Commissioners agree on a goal of being able to reduce the prepared food tax rate by one-fourth after five years.

“It’s not a certainty,” Sanders explained, “but the A&P Commission feels it should be our stated goal to increase efficiency and business to the point that we can eventually reduce our funding needs. We think with new leadership, new operations and some major investment in capital between now and then, that is a distinct possibility by Year 6.”

Framework for Now
Legris said the 6-year budget is at this point just a framework, and that a detailed line-item budget will be developed after voters approve the tax.

“What we have here are the broad strokes, accounting for our budget priorities so the voters can see why we do in fact need that full funding for at least the first five years. Details will be determined and prioritized after we have the funding. At this point, there are many areas of the budget that are dependent on input from a new Chief Operating Officer.”

The COO replaces the former Convention Center Director position, and requires deep experience in facility operations. The COO would report directly to Legris, who as executive director of the A&P would retain primary responsibility for the Convention Center’s marketing and budget.

Legris explained, “When we hire the Convention Center’s new Chief Operating Officer, that person will bring extensive convention center experience and a strong background of success in increasing operation efficiency and competitiveness in facilities of this size and quality. The Commission wants that detailed budget to be developed with the close involvement and feedback of the new COO, once that person has had a chance to fully assess our Convention Center’s operations and needs. We do not want to tie the new COO to a detailed 6-year budget and rate scheme developed without their input; that would be wasting the experience we specifically are hiring the COO to provide.”

Operations
For 2012, the A&P Commission developed two separate operations budgets for the Convention Center—one containing fixed expenses plus enhancement and improvement items for if the prepared food tax is approved, and an “austerity budget” for the City to run the Convention Center if the tax does not pass. This 6-year budget framework uses the higher operations budget, Legris explained, since that budget is only applicable if the tax is passed.

“Essentially, the Operations category on this budget framework is to close the gap as we work towards increasing revenue and generating more business for the Center,” Sanders said. “This is based on a very conservative estimate of efficiency increases. We opted to go that direction because there are so many outside factors we cannot control, starting with the national economy and including what will happen to the convention and events industry in the next few years. We opted to project a very conservative estimate of growth. We’d rather under-promise and over-deliver than be faced with the opposite.”

Parking
Sanders said 47 percent more parking for the Convention Center will be created by purchasing the former Flowers Bakery lot across the street from the Center, for $1.5 million, paid out over 5 years. Additional costs associated with parking beyond purchasing the property include environmental remediation and demolition of the bakery building, and construction of a 164-space parking lot.

“That’s one of the top things we’ve heard customers request,” Sanders said, “more parking! With this funding, we can provide that and have it completely paid off in five years.”

Lower Rates
In the A&P Commission’s plan, $100,000 per year would be allocated for lowering rental rates. A detailed rental rate scheme is on hold for now, but Legris said the biggest rate priorities are making the Center more affordable for local nonprofits and giving the Center the ability to negotiate discounted rates for major pieces of convention or event business.

“Negotiation over rates is flexibility our competitors already have that we don’t, partly because their facilities already have funding from prepared food taxes in their cities,” Legris said. “We need that capability to stay competitive with them for the major conventions and events that have the most economic impact for Fort Smith. This funding makes that level of competition possible for the first time.”

More Concerts and Shows
Currently the concerts and shows that are held at the Fort Smith Convention Center are put on by promoters who book acts at the facility, not sponsored or chosen by the Center itself. With the increased funding the Convention Center could choose and book several acts a year for its own entertainment series, Sanders said.

“We’d like to supplement the theater and concert events currently held at the Convention Center with additional shows that appeal to different groups in the community, ideally at lower ticket prices. They won’t all be country acts, or gospel, or Broadway or rock or hip-hop, but rather a varying line-up each year so we can give all Fort Smithians more opportunities to enjoy the facility.”

Repair and Replacement
After operations and parking, the largest budget category listed is for Repair and Replacement  expenses, as much as $300,000 depending on the year.

“We have an astounding facility here, a real asset to Fort Smith’s economy and image, but it requires a significant ongoing investment in maintenance and upgrades to stay competitive and maximize its potential,” Legris said. “It’s a beautiful facility that is now more than 10 years old, and some of the equipment being used is much older, yet we are bidding for conventions against new facilities around the state. For efficiency and competitiveness, there are some systems, equipment and amenities that are going to have to be replaced or repaired in the next few years. That’s just a fact.”

Identified expenses range from smaller ongoing purchases like replacing seating as it sees increased use to major capital expenses such as replacing thousands of yards of carpet throughout the facility.

This category is larger also to account for unforeseen expenses that may occur. “You have to plan in the budget for what you cannot anticipate, or there will be no money to pay for it when it’s suddenly needed,” Sanders said. “It’s a matter of being fiscally responsible by thinking ahead.”

Marketing and Ticketing
Finally, $50,000 per year would support increased marketing and purchase of a ticketing system. The marketing will include development and maintenance of a content-rich Convention Center website (the facility’s website is currently hosted within the City of Fort Smith site) and increased advertising in strategic publications and online sites for convention planners from other parts of the state and region. Increased targeted marketing should translate into increased business, Sanders said.

Legris said purchasing a ticketing system will allow the Center to generate money from ticket sales itself, instead of contracting with services like Ticketmaster for a fee. “This funding will help us add product line and grow the revenue,” Legris explained. “It’s truly an investment.”

100% for the Center
The A&P Commission’s 6-year budget does not include a once-proposed “Opportunity Fund” that would have channeled a portion of the Center’s revenues to community projects. Legris said based on public feedback, the Opportunity Fund suggestion was taken off the table entirely.

“It is important to be clear,” Legris said. “100% of the revenue from the 1% and from revenue generated from events will support the Convention Center to make it stronger, more competitive, more efficient and more valuable to the citizens it serves. The funding is not going to any outside projects. Every dime will go to helping the Convention Center bring more new money into Fort Smith and to providing affordable space and increased entertainment for our citizens to enjoy.”

A Change in Leadership
All these changes to the Convention Center are paired with one overriding change: new leadership under the Fort Smith Advertising & Promotion Commission.

“It’s our belief that an independent, marketing-based organization such as the Advertising & Promotion Commission is the best entity to run the Convention Center,” Legris said. “The A&P Commission is steeped in hospitality experience—that is our industry and our priority. We know conventions, we know events, we know running facilities of this size, we know budgets, and we definitely know how to give excellent customer service. Ultimately, the citizens of Fort Smith are our top customers and should be the best representatives our Convention Center could have as they talk about it with their networks. We intend to spend the next five years helping citizens feel that way by delivering under our new management a first-rate Convention Center that makes all of us proud.”