The city of Fort Smith will enter into contract negotiations with Oak View Group (OVG) to manage the Fort Smith Convention Center. OVG representatives presented their management proposal to the Fort Smith Board of Directors at a study session Tuesday night (July 14).
In their proposal, OVG said it would make an initial investment of $500,000 in the center. That investment would go to mutually agreeable revenue producing facility upgrades, including the installation of a full-service kitchen with the capability of preparing a plated dinner for 1,500 people. If the kitchen, which representatives from OVG said was the most needed to bring in more revenue, costs less than the $500,000, remaining monies would be used to fund other improvements agreed upon by the city.
The proposed investment would have OVG investing upon contract signing for a 10-year potential term, with $50,000 per year paid back and amortized over the term.
“The investment pay back will be considered an operating expense. If for any reason the total agreement is less than 10 years, the City will pay back the unamortized portion of the investment,” the proposal said.
According to company provided information, OVG Facilities provides “venue owners and operators with customized services that addresses the specific needs of their entertainment, sports, performing arts, conference and expo, civic, and city venues.” The company provides strategic planning and consulting services as well as private management of public facilities.
OVG approached the city about managing the convention center in spring 2019. In June 2019, the group presented to the board.
Later in 2019, the city released a request for proposals for a company to manage the convention center. Several interested parties submitted proposals. Of those, OVG was chosen.
The proposal calls for the city to pay OVG an $8,500 a month fee, which is subject to annual Consumer Price Index increases beginning in 2021. Other commissions and incentives would be included. The initial contract would be for three years with up to seven optional one-year extensions with the city being the party able to choose whether to end the contract, according to the proposal.
OVG representatives estimate they can increase the number of events at the convention center to more than 300 a year by the third year of management, representatives told board members Tuesday. They estimate they can raise revenues significantly and cut expenses leading the way to the convention center cutting their net loss to under $150,000 by the third year.
The convention center brought in $912, 661 in total revenue in 2019, a 9.49% increase from the $833,546 generated in 2018, said Tim Seeberg, general manager, when presenting the convention center’s annual report June 9. Convention center expenses rose marginally in 2019. Expenses last year came in at $1.611 million, up .13% from the $1.608 million in 2018.
“With the overall expenses increasing by only a fraction and almost 10% revenue increase in 2019 along with overall tightening of the budget, we were able to reduce the operating subsidy (from the city) by $77,000, almost 10%,” Seeberg said.
Even though the convention center needed $77,000 less in subsidized help from the city in 2019, the city still budged the $777,000 to the center. What wasn’t used went into the convention center’s fund balance. The center now has approximately $750,000 in its reserve account, Seeberg said.
The COVID-19 pandemic will greatly affect revenues from the convention center in 2020. It was closed from March 17 to May 31 with 43 events cancelled. The convention center reopened June 1, though only events with 50 or fewer people are allowed.
“This all sounds good,” said Director George Catsavis said during Tuesday’s study session. “What is the timetable now? When could this happen?”
City Administrator Carl Geffken said it would take as long as is necessary to “enter into a good contract.”