Informational Meeting

MINUTES Informational Meeting Tuesday, October 4, 2022 at 4:00 PM Carnegie Town Hall, 235 West 10th St., Sioux Falls, SD 57104 1. Call To Order Council Members Present: David Barranco, Sarah Cole, Rich Merkouris, Greg Neitzert, Marshall Selberg, Curt Soehl, Pat Starr Council Members Absent: Alex Jensen Council Chair Curt Soehl called the meeting to order at 4 p.m. 2. Committee/Commission Reports A. Homeless Task Force: Monday, October 3, 2022 (Council Members: Merkouris (Chair), Selberg, and Soehl) Council Member Rich Merkouris stated that the Task Force reviewed the first draft of possible recommendations from the Task Force. The list will be reviewed and refined over the coming months and eventually presented to the Council. 3. Councilor Remarks Council Member David Barranco spoke about the good work the Homeless Task Force is doing and highlighted some of the draft recommendations. 4. Presentations A. Ovations and ASM Global Management Agreement Renewal by Shawn Pritchett, Director of Finance Presentation: Approximately 20 minutes followed by discussion Pritchett began the presentation by providing historical background about ASM and their affiliation with the Events Center. He explained that ASM Global oversees all operations, maintenance, and bookings for the Events Center Complex, which consists of the Arena, Convention Center, and PREMIER Center. The contract with ASM was last renewed in 2018. ASM partners with Ovations, who serves as the food and beverage operator. In 2018, ASM assumed responsibility for maintenance of the Sioux Falls Stadium and was removed from management of the Orpheum Theater in 2019. Since 2014, ASM has seen nearly $98M in revenue at the combined facilities with $5M in net profits (including losses due to Pandemic) and attendance has exceeded 6 million total for over 6,000 events. The PREMIER Center is currently ranked #67 in the nation and #79 in the world. Pritchett reviewed combined financials, which show a decrease in revenue during the pandemic. Revenues began rebounding in 2021 and the management company expects to see figures meet or exceed pre- pandemic levels in the near future. He then discussed how revenues in excess of operating expenses are retained in an operating account which is held by ASM on behalf of the City. This provides for cash flow, reserve, and future improvements. The proposed agreement renewal contains numerous substantive non-economic changes, to include: updating the company name from SMG to ASM Global; removing references to the Orpheum; providing a provision for discontinuation of the Stadium (in addition to Arena); increased responsibility for R&M from $2,500 to $5,000; allowing for administrative approvals by email; eliminating the capital contribution; and, updating the insurance provision (eliminated 45 day requirement). The prior compensation structure included a base fee which ranged from $130K to $140.8K with a two percent escalator. Incentive fees included a $25K qualitative fee assigned by the City and graduated benchmarks. Pritchett noted that incentive fees, under the prior compensation structure, cannot exceed 115% of the Base Fee. Maximum compensation ranges from $279.5K in Year 1to $302.72K. Pritchett reviewed the actual management fees paid since 2015. The revised compensation structure, as provided for in the proposed contract renewal, includes: reducing the base fee approximately in half ($75K); doubling the qualitative incentive fee ($50K); leaning more heavily on revenue incentives and tiers; retaining a compensation maximum ($350K); adding a reduction factor to reduce quantitative incentives below net income of $900K; adding a revenue credit option; and, providing 3% escalators beginning in Year 2. Discussion followed about: equipment inspections; repair and maintenance challenges; mold; how non-country acts do financially; possible impacts of the new arena in Rapid City; the capital budget; the Events Campus Advisory Board; and, possible scenarios where contract negotiations would be re-opened. Pritchett next discussed the Ovations contract. He reviewed background information about the company and stated that ASM Global is the contract administrator. Highlights for Ovations’ work within the events complex include five-year sales of $33,442,525 and $13,308,631 in five-year commissions paid to the client. There have also been several innovative advances such as cashless operations, touchless transactions, tax-exclusive pricing, and continued investment in technology. Pritchett reviewed revenue history, which is similar in trends to ASM Global insofar as a sharp decrease was seen in 2020. Substantive changes to the contract include removing references to their former company name (Spectra); dropping any references to the Orpheum or Sioux Falls Stadium; increasing Ovations’ capital contribution from $300K to $600K; and defining the management charge and excluding it from commissions. Pritchett then reviewed the revenue share structure and highlighted forthcoming and ongoing changes in the delivery of food and beverage services by Ovations to patrons at the complex.  There were no questions or further discussion. 5. Public Comment There was none. 6. Executive Session A. Consulting with legal counsel or reviewing communications from legal counsel about proposed or pending litigation or contractual matters pursuant to SDCL 1-25- 2(3) A motion was made by Council Member Selberg and seconded by Council Member Neitzert to enter Executive Session at 4:53 p.m. Roll call vote to enter Executive Session. 7 Yes: Barranco, Cole, Merkouris, Neitzert, Selberg, Soehl, Starr; 0 No: (None). Motion Passed. A motion was made by Council Member Selberg and seconded by Council Member Merkouris to exit Executive Session at 5:10 p.m. Voice vote to exit Executive Session. 7 Yes: Barranco, Cole, Merkouris, Neitzert, Selberg, Soehl, Starr; 0 No: (None). Motion Passed. 7. Adjournment The meeting adjourned at 5:11 p.m. Thomas M. Greco, City Clerk