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.