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Large losses projected at convention center

Monday, Oct. 15, 2012 9:31 PM
Last updated Tuesday, Oct. 16, 2012 12:25 AM
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Net operating losses are certain in the first few years the Augusta Convention Center is open, but an increase in events could reduce them, according to a new report.

Financial projections prepared by Augusta Riverfront LLC Presi­dent Paul Simon and released Mon­day by city officials show the soon-to-open convention center, also known as the TEE Center, with a projected operating loss of $887,203 in its first year, when only 13 events are booked.

Simon, whose company shares management with Morris Commu­ni­ca­tions Co., the owner of The Augusta Chronicle, provided the report in advance of Tuesday’s scheduled vote on several contracts and other legal documents governing operations at the convention center.

Augusta Riverfront, which has a 50-year contract to run the adjoining Marriott and conference center downtown, was designated by an Augusta Commission vote several years ago to operate the convention center.

Simon’s projections, which he characterizes as “conservative,” reflect just $67,125 in sales revenue from renting the hall and other services associated with the 13 events. That’s far less than the $359,422 in labor costs, $344,902 in utilities and $158,208 for insurance and operating and administrative fees.

All told, projections place gross operating profit at a loss of $730,994 for the year – a loss of $887,203 if insurance and fees are included.

A separate schedule of revenues from the sale of meals and food, also included in Simon’s report, reflects an operating loss of $24,308 from food sales at the 13 events.

As Simon and Augusta Conven­tion and Visitors Bureau officials have said, the benefits to the city don’t come from revenue from the center but from visitor spending. Simon’s report includes a CVB chart estimating $8.7 million in visitor spending in the first year from 13 conventions.

For comparison, Simon included a chart of operating results at Savannah’s Inter­national Trade and Convention Cen­ter. Even with rental revenue projections of $891,107 from July 2012 to June 2013, the chart shows Savannah projecting an operating loss of $912,478 during the 12-month period, though it will pay about $3.5 million in operating expenses to run the facility.

There is hope to earn revenue off Augusta’s center. Another report shows the city’s revenue from catering increasing to $146,612 if more events were held and banquet food sales doubled. Together with increased parking deck and center rental income, losses under that scenario would shrink to about $656,000, according to the report.

Saying “we’re too far down the path to be second-guessing things,” commission member Jer­ry Brigham said he was surprised at the cost to operate the center, which will be funded partly by the city’s general fund.

“Nobody really expected those kinds of losses, I don’t think,” he said.

Commissioner Wayne Guil­-
­foyle said he wanted to know where the revenue would come from to make up the losses, and he repeated a request for an operations manual. Simon said in his report that he was waiting on the contractor to turn over manuals from the center’s various systems.

Bill Lockett, a commissioner more skeptical about the project, has made a request to put management of the complex out for bids.

“My position has not changed; we are not getting the very best deal,” he
said. “I think we could go back with another (request for
proposals) and see what the other vendors are saying.”

In other business Tuesday, the commission will hold a 3:30 p.m. work session to review bids from possible third-party administrators if the city goes self-insured for employee health insurance. The commission is expected to vote later in the day on City Administrator Fred Russell’s recommendation about which to select.

Another matter on the agenda is to approve the refinancing of about $95 million in water and sewerage bonds.

The package might also include issuing about $30 million in bonds to complete renovations at the municipal building and construct a $7 million building for the information technology department nearby, according to Russell.

Lockett said he supported the remodeling project, with the $30 million in debt to be repaid from the city’s next special purpose local option sales tax package.

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OpenCurtain
10049
Points
OpenCurtain 10/15/12 - 10:46 pm
4
1
Promises to be interesting Tuesday Night

Comments based on update @10:02 PM

A few commissioners are on record as NOT happy with sucking another $.8 Million out of the budget. It has to come from some place and $$ is tight already.

This can be made a winning situation, if enough commissioners vote to OPEN BIDS key parts.

Realistically the predicted 17,500 attendees for 2013 represent about $800 to $1000 per an attendee and about 3000 rooms nights. Having looked at the list there are some good small shows booked. But most currently are not High roller types.

Important to remember
This was all started years ago, by commissioners not even still around. But their poor planing is still costing us a lot of pain. Currently I understand 3 commissioner have serious concerns and are pushing as much as they can. But they may be are out voted if every commissioner ever manages to show up at once.

OpenCurtain
10049
Points
OpenCurtain 10/15/12 - 10:40 pm
4
1
The 2013 Current Lined up so far.

Georgia Association of Chiefs of Police
HRW Distributions
Mary Kay Career Conference
East Center Georgia Changes EMS Conference
ESi WebEOC Conference
Augusta Tattoo Festival
Georgia Society of Association Executives
National Wild Turkey Federation
Most Worshipful Prince Hall Grand Lodge of Georgia
Georgia Sheriff's Association
Georgia Association of Housing and Redevelopment Authority
ESi Ironman of Augusta
Georgia Nurses Association

palmetto1008
9782
Points
palmetto1008 10/15/12 - 10:47 pm
8
1
Not "high roller types?"
Unpublished

Not "high roller types?" THis is such a surprise. I think more tatto coventions will fix that.

countyman
19048
Points
countyman 10/15/12 - 10:54 pm
4
5
Palmetto1008.. Look at the

Palmetto1008.. Look at the clients of ESI headquarted in downtown Augusta on Broad street.
http://www.esi911.com/esi/index.php?option=com_content&task=view&id=33&I...

The article doesn't mention how those 10k-12k(13 events) people have to sleep, shop, & eat somewhere in Augusta. The additional foot traffic will draw higher quality businesses downtown. The developer of the construction at 901 Broad(9 apts; 4k sq. ft. commercial space), and Holiday Inn Express(Regency Inn) are two examples.

Little Lamb
43803
Points
Little Lamb 10/15/12 - 11:21 pm
8
0
Cut Your Losses

The city would have fewer losses if they do not approve Paul Simon's proposed deal. Just do the deals one rental at a time. Don't give Simon's LLC the monthly stipend.

Little Lamb
43803
Points
Little Lamb 10/15/12 - 11:23 pm
6
0
How Much

Okay, Open Curtain, you gave us the event holders' names. Now give is the rent each one is charged.

That's the dirty little secret. Each one is paying a different price for the same service.

dichotomy
30358
Points
dichotomy 10/15/12 - 11:23 pm
5
3
Personally I think what we

Personally I think what we have here is ANOTHER money sucking loser of a millstone hung around our necks. Our politicians stick us with this thing and then go "oh, we didn't know we might lose a $million a year above and beyond making the bond payments". Way to go all of you who love to vote for SPLOSTs. You let our mathematically challenged clowns talk you into ANOTHER loser. So when they raise our taxes AGAIN to pay for operating this elephant just call another one of you pro-SPLOST buddies and y'all get together and kick each other's arse all night. If you don't have a buddy call me. I'd be happy to kick it.

dichotomy
30358
Points
dichotomy 10/15/12 - 11:31 pm
8
3
You know, I'm thinking we

You know, I'm thinking we would be better off to cut our loses right now. Board up the doors, turn the power off, let it stand empty, and just make the construction bond payments. We would probably lose less money in the long run.

Insider Information
4009
Points
Insider Information 10/15/12 - 11:35 pm
9
1
How much is Paul Simon paying

How much is Paul Simon paying the commissioners?

rebellious
20127
Points
rebellious 10/16/12 - 12:03 am
9
1
Wrong Approach

First and foremost, everybody needs to understand we now own a Convention Center. That being said, there are a couple of things worth considering, Commissioners.

First, as a non-downtown business owner, quit pitching to me the economic impact to Augusta Businesses from a convention center. The benefits will fall to Hotels, Restaurants, Bars, Taxi and Limo companies, and other businesses that cater to the itinerant conventioneer. Hats off to them for their potential boom in business and the benefit to their employees. And I am sure they may expand and add a few jobs here and there, but I don't think Augusta will blossom like Charlotte N.C. did in the 80's due to this one venue. So don't tinkle down my back and tell me it's raining, anymore...

Second. If there are 13 events, then you staff the place for 13 events. Not for 24/7/365. The entertainment venues which have cropped up like mushrooms after a rainy week along Washington Road have adopted that approach. Keep the night light on when not in use, the A/C at bare minimum, no need to clean the cobwebs every day. Got a big convention coming, hire temporary employees, double up on OT, pull the covers off the furniture and knock the dust off chandeliers. Fire back up the pilot lights on the ovens and have a blast. When the event is over, moth ball it and shut er down.

$359,422 in labor costs, $344,902 in utilities and $158,208 for insurance and operating and administrative fees. That is $862,532 for the year. That is $2363 a day!
Labor = $984.71 per day
Utilities = $944.93 per day
Insurance must be paid, but it isn’t broken out, but I am very curious as to what the Operating and Administrative Fees will be.
So if we gave every event (all 13 of them ) a 5 day window even knowing many are probably weekend only, let’s see how that would work out:
13 events
5 days each
65 days of active use for the Convention Center. Now the math
Labor 65 days @984.71 per day = $64,006.15
Utilities 65 days @ $944.93 per day = $61,420.45
Op and Admin ….Who knows.
If you add in all of the Op and Admin, which I believe can be shared somehow with the Hotel under some contract, the total is $219,628.45. Take away the Revenue of $67,125 and you get a first year loss of $152,502.45. I can buy that, being that we are already here.

But let’s manage this thing like a business. Hey I just got a brainstorm. Call Lewis Blanchard and ask him to help. He has one of those entertainment venues and made a ton of money from the Peebles Campaign.

Insider Information
4009
Points
Insider Information 10/16/12 - 12:17 am
7
0
What is the going price for a

What is the going price for a commissioner's vote?

rebellious
20127
Points
rebellious 10/16/12 - 05:53 am
5
0
Insider

I don't know. how much you got?

Techfan
6461
Points
Techfan 10/16/12 - 06:05 am
8
0
"What is the going price for

"What is the going price for a commissioner's vote?" Ask Matt Aitken. Hasn't Augusta hosted a tattoo festival previously? If so, is the same one? The question is not how many bookings the TEE has, it's how many new bookings because of the TEE center. If these events are only being shifted from other existing venues, the TEE is not increasing revenues even near the amount projected.

Tullie
2930
Points
Tullie 10/16/12 - 07:19 am
9
0
Seriously?

Saying “we’re too far down the path to be second-guessing things,” commission member Jer­ry Brigham said he was surprised at the cost to operate the center, which will be funded partly by the city’s general fund.

“Nobody really expected those kinds of losses, I don’t think,” he said.

You didn't expect those kinds of losses, you were surprised at the cost to operate the center? Yeah...me too!!!

Don't that just give y'all a warm fuzzy feeling to hear that kind of talk now?

It just astounds me that they have the nerve to make statements like that.

OpenCurtain
10049
Points
OpenCurtain 10/16/12 - 07:35 am
2
1
Little Lamb

contact me...
for some additional info

F4therTime
4656
Points
F4therTime 10/16/12 - 08:52 am
7
1
Dear South Augusta Taxpayer
Unpublished

Bend over

signed, anyone that gets a contract for services in Augusta...

Riverman1
79077
Points
Riverman1 10/16/12 - 07:59 am
9
1
Major points

Major points. Most of the events have come here using EXISTING VENUES. Some would have come anyway using existing venues. Secondly, the OCCUPANCY RATE for the center is dismal. Average occupancy rates for convention centers are much higher. But we went over all this ad nausea before it was built due to the promises of another hotel, Laney Walker pay-off and enough pie in the sky to feed us all.

However, the Marriott makes money no matter the rental fee for the center. Taxpayers pay that. See the problem here? They can let anyone use the center for nothing, yet pocket all the money for the food and rented rooms.

Like I said, everyone really knew all this was going to happen. Dr. Heywood Sanders explained it even though he wasn't allowed to speak to the Commission. I repeated often his research.

Riverman1
79077
Points
Riverman1 10/16/12 - 08:21 am
5
1
Rebel, yeah, to you and me,

Rebel, yeah, to you and me, turning down the power makes sense, but they are not paying the bill. They can use the kitchen for anything they want 365 days a year. They can let groups that are not officially using the TEE...well, use it. Worry about the power bill is the last thing on their mind.

bdouglas
4385
Points
bdouglas 10/16/12 - 08:47 am
4
0
Turn down the power?! That

Turn down the power?! That air has to be exchanged like 9 times an hour! You can't do that with the power off! (c;

@Rebellious: I applaud your efforts and agree with you in principle, but those numbers would be way off. I'm pretty sure that yearly cost is just that, a projected yearly cost. Dividing it down to a daily average and saying it would cost X amount of dollars per day for a convention is very inaccurate. $984.71 a day per labor when most of those folks are probably making at leas $10-12/hr, and a convention is likely a 10+ hour day for them. That gives you 9 employees at the minimum for a convention, and we know that's way off. And you're bound to use 4 times the electricity when ovens, multimedia and all the lights are running. None of that makes it any less of a poor plan, just pointing out it's not quite as black and white as coming up with a daily average.

OpenCurtain
10049
Points
OpenCurtain 10/16/12 - 09:48 am
4
0
Rounded off available TEE figures

Yes I have read the TEE CTR Management Agreement's numerous pages Articles 1 to 10 (dated Oct. 24, 2012) Plus other materials, which contain 7 schedules that break down the $$$.

The agreement is not balanced. It leans way to far in the direction of the MANAGER (operators) and every few sections it more or less says the OWNER (the Taxpayers) will be responsible all screw ups, not the group running it?

I understand:
* legally the previous commissioners approved this deal.
* legally it would cost the taxpayers even more to break the contract.
* the proposed operational costs were roughly 1/3 (300k vs 900k) of what we see now.
* the taxpayers are on the hook for this sugar coated honey wagon like it or not.
* it is NOT to late to fix the proposed caterer deal though and save the taxpayers some real money.

What can the commissioners do?
We need the county commissioners to read this beast, table the agreement until a re-write of this agreement is made using County Lawyers and the Manager/operator this time, not just those running the operation.

We need to support those Commissioners on record wanting to fix this mess. Not all of them are the bad guys.

Some have their hip waders on working their way through this sugar coated honey wagon deal to fix it as best it can be done.

Plus If the any of the responsible parties run for election again remind everyone they hosed us.

SOME ROUNDED OFF FIGURES

RETURN ON INVESTMENT (ROI)
2013 Tee Sales __________ $382,400.00
Attendees______________ $ 17,500.00
----------------------------------------------
TEE CTR. ROI per Attendee + $21.85
plus SPLOST Hotel taxes (what ever those are per night)
using Educated WA, lets say $30.00 ROI
====================================

2013 PROFIT & LOSS
Sales ____________ $382,450.00
Expenses __________ $1,293,900.00
------------------------------------------
LOSS -$911,450.00
Maybe the 911 is a warning
===============================

ESTIMATED 2013 ECONOMIC IMPACT

Using the OPERATORS figure of $8,667,800.00 dumped into the DOWNTOWN economy and Businesses. Based on 17,500 attendees spending on average $495.30. with 2/3's will likely be hotel room focused costs (surprise). In the end about $100 reaches the street.

So using $495.30 as an average, times a higher number of attendees would be misleading since the only revenue the taxpayers only recover via Tee rental fees and Sales Taxes and SPLOST fees. DOWNTOWN Businesses are making the $$$ renting rooms, selling food, drinks and store shopping purchases.

OPPS! almost left out the handling fee the MANAGER charges which skims a percentage off the top.

ROUNDED #'s
Either way Taxpayers are on the hook for $911K a year until a magic number is reached. (their own figures)

Magic Number:
$911K / $30.00 (ewag) = we need over 30, 400 MORE attendees per year just to break even on the TEE CTR expenses. Using their own estimates they need 22 MORE bookings per year, 35 booking of a average of 1350 attendees each.

Do I see the number of attendees increasing ------ Yes

Do I see this years down the road breaking even in 10 years --- A Good Chance

Do I see over $8.5 million more of taxpayer $$$ being pumped into the TEE -- Yes.

Do I see other hidden costs costing the taxpayers more -- OH Heck Yes.

But do I see this Sugar Coated Honey Wagon making money ??? There lays the rub. NO.

Count all the loses that have to be recovered and add in all the income estimates, we may not see a profit until around 2029 if then.

Way Too people have their fingers in this pie.
An the Taxpayers only get the sugarcoated honey wagon.

More to come.

Insider Information
4009
Points
Insider Information 10/16/12 - 09:26 am
2
0
Math Problem

At an 8 percent sales tax rate, how many years will it take just to break even?

Riverman1
79077
Points
Riverman1 10/16/12 - 09:35 am
3
1
Projected Losses Been Hidden?

Where have these recently disclosed projections of losses been hiding?

Little Lamb
43803
Points
Little Lamb 10/16/12 - 09:53 am
2
0
First Sentence

I won't bother to post it here, but go to the top and read Susan McCord's first sentence. Does anything ring fishy there? It would seem to me that you are going to have more interest in this building when it is new than later on. It's brand new, you can smell the freshness, the Convention Bureau is gung-ho and marketing like crazy. Interest will wane as the facility ages.

F4therTime
4656
Points
F4therTime 10/16/12 - 09:54 am
1
0
Insider...
Unpublished

Let's put it this way...none of us posters will be around if that ever happens...

Little Lamb
43803
Points
Little Lamb 10/16/12 - 09:58 am
2
0
Sheer Corruption

From the story:

A separate schedule of revenues from the sale of meals and food, also included in Simon’s report, reflects an operating loss of $24,308 from food sales at the 13 events.

This is shameful. There is no way taxpayers should pay for the food for the conventiongoers.

Commissioners, tear up Riverfront LLC's catering proposal. Shame on you if you pass it.

The convention organizers should be allowed to handle food any way they see fit, and they need to pay for it in full. Riverfront does not need to be involved in food for the conventioneers unless they successfully bid directly with the convention organizers with no city intervention.

OpenCurtain
10049
Points
OpenCurtain 10/16/12 - 10:14 am
3
0
Little Lamb - See if the AC

will post Schedule #3 details of a document dated Oct 12, 2012.
It provides the details the info you requested.

It is part of a larger document (public by law) sent to lots of politicians and admin bureaucrats.

Insider Information
4009
Points
Insider Information 10/16/12 - 10:26 am
3
0
Two possibilities

1) The commissioners are stupid.

2) The commissioners think we are stupid.

Brad Owens
4098
Points
Brad Owens 10/16/12 - 10:51 am
3
1
Riverman1

Joe Bowles, Wayne Guilfoyle and Bill Lockett have been asking for the annual plan for months and this is why they have not been given it. The losses are three times what the public has been led to believe.

Al Gray, Lori Davis and I have been right about this all along, now we see that in plain black and white. I mean out of journalistic integrity the AC had to print this story.

But let me be clear, the main reason this document was produced was because we left them no choice but to produce it if they wanted any chance of getting six votes.

I went to the last "working session" and demanded that the tax payers see numbers before any agreement was passed. I asked Mr. Simon directly why no cost runs or cost projections had been included so far and he said that no one had asked for them (Joe and Wayne would disagree with that I am sure). Then Simon said AFTER it was passed they would give them the numbers in the first 45 days.

So in other words, it's like one of those fancy restaurants where they don't put prices on the menu, but you can be sure that the sticker shock if they did would affect your ordering.

Feels good to be proven 100% right on the TEE Center debacle so far.

More to come,

Brad

Augusta resident
1368
Points
Augusta resident 10/16/12 - 12:08 pm
5
0
I just hope ya'll log this

I just hope ya'll log this into your memory when they say they need to raise our property taxes again. I have it written down next to the $500,000 parking study, x-mart fine and court cost, Villages at Riverwalk, fancy hairdoo , SPLOST and TSPLOST. There's a reason I don't vote for incumbents. Oh yeah, one more idea. Let's reduce trash pick up to twice a month but charge the same.

Riverman1
79077
Points
Riverman1 10/16/12 - 11:30 am
4
1
Brad, good work. Open

Brad, good work. Open Curtain, do you recall the lawsuit against the TEE by Ira Davis before it was built? Anyone recall what it was about and is there a link?

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