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MOTION ACCEPTING SMG STOCKTON BUSINESS PLAN FOR FISCAL YEAR 2015-2016
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RECOMMENDATION
It is recommended that the City Council accept, by motion, the Fiscal Year 2015-2016 Business Plan submitted by SMG Stockton (Attachment A).
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Summary
SMG operates four downtown entertainment venues in Stockton: Stockton Arena, Stockton Ballpark, Bob Hope Theatre, and Oak Park Ice Arena. The Facilities Management Agreement with SMG requires submission of a detailed Business Plan which is attached for consideration and approval.
DISCUSSION
Background
On January 25, 2011, the City Council approved a Facilities Management Agreement with SMG for the operation and maintenance of four downtown entertainment venues in Stockton: Stockton Arena, Stockton Ballpark, Bob Hope Theatre, and Oak Park Ice Arena. The Fiscal Year 2015-2016 Business Plan is the fifth annual Business Plan submitted by SMG.
Present Situation
The SMG Facilities Management Agreement requires SMG to prepare and submit an annual Business Plan for City comment and approval. The Business Plan should clearly provide the SMG strategy for managing, operating, maintaining, marketing, and promoting each facility for the upcoming fiscal year. This Business Plan includes an updated annual budget, cash flow projection, and capital improvement project recommendations. This staff report provides a synopsis of the business plan.
The current contract with SMG expires on February 16, 2016 but provides an ability for the City to extend the term for an additional five years. SMG has been a good partner operating through one of the most difficult times in Stockton and through a major downturn in the industry. In addition there is a $500,000 reimbursement due to SMG if the contract is not renewed for the additional term. We will be conducting a third party review of the operations with a focus on any contract improvements that could be made in the extension of the contract.
Operating Performance
For the third consecutive year, Pollstar Magazine has recognized the Stockton Arena as a Top 200 venue worldwide, and Venues Today magazine ranked the Arena as the No. 4 venue (of its size) in California. While the national trend of touring shows continues to shift away from concerts and more into multi-day music festivals, SMG has taken advantage of the increased demand for country music. SMG booked several country artists, such as Dierks Bently, Brantley Gilbert, and Willie Nelson. These events sold out or were near capacity at the Arena and Bob Hope Theatre. In addition, the popularity of family shows has continued to grow. SMG has increased its lineup of these family shows including Disney, Sesame Street, World Wrestling Entertainment, and Harlem Globe Trotters. In FY 2014-15, family shows have surpassed all prior year attendance numbers. These events have reduced the impact of lower than budgeted attendance at other music and sporting events.
SMG continues to work with local promoters to market the venues. In FY 2014-15, 40% of SMG Stockton shows were promoted by local promoters, 25% were regional, and 35% were national. In FY 2015-16, SMG expects to hold 158 events at the Bob Hope Theatre and the Arena and host approximately 320,000 patrons. Gross ticket revenue is estimated to be $5 million.
SMG is working with Visit Stockton to attract United States sanctioned figure skating competitions at the Oak Park Ice Arena, and continues to work with organizations and local groups to rent out the facilities. The Oak Park Ice Arena is currently home to several youth and adult sports groups including the Stockton Colts Hockey Program, Stockton Figure Skating Club, adult hockey and curling leagues, and is improving the Learn to Skate Program. The Oak Park Ice Arena is visited by 30,000 people annually.
SMG manages the Stockton Ballpark operations to ensure the ballpark is secure and operational. As scheduling allows, SMG may program additional events at the ballpark. The Ports will host approximately 86 home games at the Stockton Ballpark and 30 non-game events such as multi-day youth tournaments. The Ports games and youth tournaments draw out-of-town teams and visitors to Stockton each year.
Economic Impact
Events at the four venues impact the City’s economy in several ways. Those include local jobs, hotel stays, and sales tax revenues. SMG Stockton employs 574 full and part-time employees to operate all four venues. Over 70% of these employees live in Stockton and over 90% live in San Joaquin County. Many of the employees have been with the venues since opening night and have worked their way up from a part-time employee to management. The venues give local residents the opportunity to learn about and gain job experience in entertainment which can start a national or international career in sports, concessions, or entertainment.
The entertainment venues bring thousands of people downtown during events. The Bob Hope Theatre and Arena alone are projected to bring more than 320,000 people to downtown Stockton for sporting events, concerts, and family shows. Even the local community events such as Food Truck Frenzy, graduations, and private rentals of the facilities bring thousands of people downtown.
Ticketmaster reports that 60% of attendees are from the Stockton-Modesto area, and the other 40% are from the secondary markets of Sacramento, Merced, Sierra Foothills and the East Bay. That means more than 128,000 people will drive more than an hour to Stockton for an event. That draw has a citywide impact on businesses as out-of-town visitors may shop, eat, and drink at local restaurants and bars, stay at hotels, and pay for parking and gas before returning home. In 2014, SMG partnered with Visit Stockton to attract multi-day events such as the National Baton Twirling Championships and the National Roller Derby Championships. These two events generated nearly 3,000 hotel night stays, and nearly $1.5 million in economic impact to hotels, restaurants, and other local vendors. It is estimated that the financial benefit to local businesses will be $2.3 million in FY 2015-16. Businesses benefit from visitors spending the night in hotels, purchasing gas and supplies, or patronizing bars and restaurants. The total impact to the City including wages and benefits, event revenue, and the financial benefit to the community from events at the Arena and Bob Hope Theatre is estimated to be $17.4 million. In addition, the Ports host several multi-day events such as youth baseball tournaments per year. These events draw out-of-town teams and spectators, creating additional hotel stays and patronage to downtown businesses. As a comparison to these financial benefits, the operating subsidy for all four venues is $2.9 million.
Community Partnerships
The City Council has directed SMG to engage the community with the venues through the provision of a wide variety of events and activities and by promoting community involvement. Entertainment venues can strengthen the community with a management commitment to community engagement and enhanced educational opportunities. SMG Stockton sponsors local non-profits, schools, and community organizations through various activities. SMG will recruit a minimum of two interns each semester. The internship program is hands on and allows interns to gain a complete understanding of the sports and entertainment industry. SMG provides fund-raising opportunities for non-profit organizations with half of the food and beverage staff during Arena events provided by non-profit agencies who receive a portion of concession sales for each event they work. In FY 2014-15, these non-profit organizations received nearly $47,000. SMG Stockton encourages staff to become personally and professionally involved in local business organizations and non-profit organizations by volunteering time and personal resources. SMG strives to promote the positive aspects of Stockton. Seven of SMG’s employees are Certified Tourism Ambassadors through Visit Stockton.
The Bob Hope Theatre and Stockton Arena host graduations, film events, holiday skates, blood drives, job fairs, high school sporting events, cultural events, and art and music showcases. SMG makes the venues accessible for non-profits, foundations, and schools, encourages private business rental of the facilities, and strives to provide affordable and beautiful venues for training programs, trade shows, corporate parties and conferences.
Accomplishments and Objectives
The business plan highlights SMG’s activities in FY 2014-15 and goals for FY 2015-16.
FY 2014-15 Highlights:
• 150 events held at the Arena and Bob Hope Theatre with estimated attendance of 310,000, attendance at the Oak Park Ice Arena is approximately 30,000 per year, and the Ports host an average of 86 home games per year, and 30 non-game events which include several youth baseball tournaments
• Multiple sold out or near capacity events at the Bob Hope Theatre
• StocktonCon event at the Arena expanded by a day and attendance nearly doubled to over 13,000
• Water savings project at the Stockton Ballpark resulting in reductions of up to 50% of normal water usage
• Free public skate days at Oak Park Ice Arena to benefit the community
• Stockton Ports and Stockton Thunder worked with Stockton Unified School District to provide incentives for youth programs with free event tickets
• Partnered with community groups raising nearly 8,000 gently used coats and blankets, and new socks for those in need
• Worked with over 25 local community based organizations to increase community involvement in the entertainment venues
• Replaced lighting at the Stockton Ballpark to be in compliance with new state laws
• Installed new point of sale system to ensure Payment Card Industry (PCI) compliance
FY 2015-16 Goals:
• Host 158 events and welcome more than 320,000 patrons to the Bob Hope Theatre and Stockton Arena and more than 30,000 patrons at the Oak Park Ice Arena
• Increase programming at the Stockton Ballpark like the International Soccer Match
• Increase programming at the Oak Park Ice Arena such as the Learn to Skate Program and add additional youth hockey tournaments
• Work with Visit Stockton to place bids to host United States sanctioned figure skating competitions
• Promote Stockton as a key destination for sports, entertainment, and meetings/conferences by providing a lineup of events which showcase diverse activities
• Create a positive awareness of SMG Stockton Venues and their events
• Actively seek additional long-term tenants to fully utilize the Arena
• Continue relationships to attract national and championship events and to promote the venues and market
• Raise awareness of new sponsorship opportunities on local, regional, and national levels
• Maximize functionality of www.stocktonlive.com to promote all sales outlets
• Increase number of e-blasts promoting the venues and upcoming events for a total of over four million emails
• Address deferred maintenance and repair projects including safety and security upgrades
FINANCIAL SUMMARY
The draft SMG Operating Budget is submitted as part of its Business Plan and is included in the City’s Proposed Budget for FY 2015-16. The business plan included a request of approximately $1.0 million in Capital Improvement funding. Public Works evaluated this request along with other citywide projects and proposed that $295,000 be allocated in FY 2015-16. The projects included in the City’s Proposed Capital Improvement Plan (CIP) for Fiscal Years 2015-2020 include funding for the Venues’ Ballpark, Arena and Oak Park Upgrades and Maintenance Programs along with HVAC repairs at the Bob Hope Theatre.
SMG estimates that its FY 2015-16 subsidy requirement for operation of all four venues will be $2,860,965. An allocation of $289,000 is needed for City administrative costs, internal service fund charges, and a possessory interest tax payment for the Stockton Ports. Additionally, the CIP project funding is also budgeted in the Entertainment Venues (086) fund, bringing the total subsidy for operations, administration and capital to $3,445,000.
Attachment A - SMG Stockton Business Plan 2015-2016