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	ALERUS CENTER TASK FORCE Thursday, January 21, 2010 - - 5:00 p.m. - - Council Chambers Minutes Present: Gershman, Christensen, Bjerke, Glassheim, Hafner, McNamara, Rygg, Thompson. Absent: Bakken, Block, Emmons, Kreun. Gershman called the meeting to order at 5:20 p.m. 1. Review of Blackwell Study by Dr. David Flynn. Dr. Flynn stated that he had been asked to consider what factors could be included in a study to make it better, easier to understand and give conservative estimate of the economic impact from events. As part of this request he reviewed the study done by Dr. Blackwell several years ago and thought it would be helpful to the Task Force to review that study. Flynn gave a brief overview of the study and directed the committee to Table 2 which shows the gross impact that events at the facility held and to Table 3 which shows the net effect of the events once attendance has been reduced to account for the fact that some events held may have taken place in the past with facilities that existed prior to the Alerus Center. Christensen asked what the basis for property tax inclusion was. Flynn stated that the formula believes that having the events and activities leads to increased demand for property in Grand Forks, extra business for existing businesses, opening of new businesses, and increased value for property in Grand Forks. (McNamara joined the meeting) Christensen commented that then to validate the numbers a person could go back and look at new businesses that came in during that year and other items to test for accuracy. Flynn replied that you could do that retroactively, against prior years, but you would not be able to do that during the year that you were analyzing. Hafner commented that for instance, with football, there is an obvious increase in attendance, as well as concessions, beer sales and tailgating. Flynn stated that there is no way to get exact data to compare many of those factors between the Alerus Center and Memorial Stadium, as the information from Memorial Stadium is not available. The group discussed whether there was a need to do a new study, or if in reviewing this study more in depth it addresses the information that the group was looking for. Many members commented that they had never received a full copy of the study and that the only numbers reported out of the study had been the gross effects. Flynn stated that you may want to have the facility pay attention to the net effect for events, but would also encourage them to not rely on it solely, as there may be some events that would be very beneficial to the community, but may have no effect based on the study formula. He cited the H1N1 vaccination clinics as an example. Thompson asked whether East Grand Forks business impacts had been considered in the study. Flynn stated that they had not, it was restricted to business in the City of Grand Forks only. The group discussed whether it was valid to continue to focus on economic impact for justifying the facility and its events, and if so, what type of standards should be applied for managing it. Or, should economic impact be used more as a footnote, but not as a headline. Consensus was that there is an economic impact from the facility and if reported the recommendation would be to use net effects, not gross, so as to be as conservative as possible and that it should not be used to justify operations or events, but more as an additional item, possibly as part of year end presentation to show with other facility stats. The intent was that it could be a tool to help evaluate events and improve future success at the facility. Flynn commented that when this study was done the purpose was not to use it as a marketing tool, but for planning purposes, to assist staff with looking at events and seeing what has a greater effect on the community, and for use in year-end statements. He continued that there are some reservations about using it continually on an event by event basis, but that he could see how it could be used to evaluate whether we should do this or that. The group discussed whether it would be valuable to have Flynn design a model that the Alerus Center would be able to plug their numbers into annually and then would be easy for them to include in their annual report. The group discussed that part of the discussion still needs to be how to treat the ¼ % tax and is it revenue, as they have been treating it, or is it a subsidy and should be included in any loss that is reported. Gershman reported operating revenue and subsidy information for the old Civic Auditorium from its last several full years of operation. He noted that despite the fact that revenues were less than $200,000 each year, it received a $250,000 subsidy each year compared to the Alerus and the revenue they bring in we are now getting much more for any subsidy that they receive. It was noted that at the time the Alerus Center opened the ¼ % brought in about $250,000, but has now grown to about $380,000 per year. Gershman suggested that if the Alerus Center staff managed to the ¼% would be an acceptable level. The group discussed whether the ¼% should be accessed as part of regular operating revenue, or only in the event it appeared there would be a loss. Christensen commented that the Civic Auditorium operated with only a couple of full-time employees versus for the Alerus Center, we pay the management company $180,000 per year plus paying a full-time director salary and benefits each year, and numerous staff managers and should be receiving something for that expense. Christensen asked Dr. Flynn whether there were any modifications that he would recommend to the Blackwell study. Flynn replied that inflation updates would be appropriate, making adjustments to reflect that there is now a hotel attached as well as additional hotels in the City, that due to the economy leisure spending has been curtailed, and to review the event mix to see how it has changed from when the study was done. He stated that it doesn’t appear that the whole study should be redone, but an update could be done to make it more reflective of the current environment. Consensus of the group was to have the study updated by Dr. Flynn and to recommend to the Alerus Center Commission that updated study information be included as part of the annual report to City Council as long as they are providing a report. 2. Preliminary Discussion of Structure of Commission or Committee of Council. The group continued discussion on how to treat the ¼ %. Some concern was raised that tying staff to an amount of the ¼% may cause them to not look at events that would benefit the community but not generate revenue and to choose not to do any larger events that would have a high probability of a loss. Gershman suggested that if there was a large event could bring it to the City Council in Executive Session and detail the risk to get support for the event so that in the event there was a need for a subsidy Council would be prepared for that. Hafner commented that he believes that the community does need to be able to host large events and questioned whether there would be enough time to bring the potential event information to Council for discussion prior to having to commit. Council Members thought that they would have enough time, as Council meets every Monday and could also call a special meeting if needed. Christensen stated that his concern is that there needs to be more than three people, Alerus Executive Committee, that decide to obligate the City on a $865,000 deal especially when the action and any implication from that action is not always reported out to the Commission or City Council and that more communication to the larger bodies that will have to share the burden of that decision should be consulted at the front end of the decision. Thompson suggested that perhaps could label the ¼% as “community support” and then would be clearer that it’s not revenue generated from the facility and is more reflective of what it is. Christensen suggested that he believes that there may be ways to look at operations and cut some expenses and that it is possible to expense your way into a profit. McNamara commented that he had a call from a constituent looking at facility rates and they commented that Alerus Center is most expensive facility. Rygg concurred, and added that this is a very conservative region and people are not used to or accepting of being made to pay for table linens, room fees, etc and is why the CVB has needed to offer enticements to get some of the convention events to come to the Alerus Center. McNamara stated that he is in favor of looking further into Canad having an expanded role. Gershman stated that he believes the Task Force needs to come to a consensus on whether the Commission should still govern the Alerus Center and if so, then give them a recommendation and let them come up with the plan, and then perhaps ask for a report back within three months. McNamara stated that he believes that it would be better to give them a blueprint as we may be a more impartial group to look at who could better succeed in certain areas. Christensen stated that he would like to see the group make some recommendations on what the responsibilities are for the commission. He suggested that they should be tasked to not lose money and if they think they may then they have the responsibility to bring that to the Council beforehand; that they realize that this is a public entity and as such business should be conducted in an open manner; that they need to be responsive in adjusting to changes that occur, such as the attached hotel opening, the Ralph and Betty being in the market; and that they should work in a collaborative manner with the Canad and CVB including looking at not having overlap in duties and having good communication between the entities. The group discussed conference booking and whether there would be an issue for other hotels if a stronger relationship develops between the Canad and Alerus Center. It was noted that most other hotels realize that they are attached so will have some working relationship, that not everyone will choose to stay at Canad for Alerus Center events either due to personal preference or possibly price and this leads to increased business for all hotels in town. McNamara commented that you need to look at who has a larger stake and if did something like turn over catering and booking to the Canad staff, may get some better results as they have an incentive to make it work and be profitable. He added that he does not see a potential for the situation resolving itself between the parties that have not currently been communicating and believe that do need someone from outside to look at the situation and set up a system that would work better. Thompson commented that there has been a concern that many don’t believe that the City Council should run the Alerus Center and suggested that perhaps could put together a subcommittee of a couple from the Task Force and some from the Alerus Center Commission that could meet and work out a plan and bring it back to the Task Force. The group discussed that perhaps that would be a good way to begin the process and would like to hear from the Commission any thoughts they have on the process as well as involving someone from the Canad in any meetings. McNamara reiterated that need Council or Task Force involved to give a broader view than someone from inside the Alerus Center has. The group would still like to review more information on how the Canad operates at the Brandon, MB location. The group discussed the Alerus Center Commission and noted that it was established to be a seven member board to oversee operations at the Center, but that membership has dropped to five members due to resignations which have not been filled, and that actually only three members of the executive committee are involved in the actual running of the facility. McNamara stated that regardless of size or name of body, need to make it clear that they have no authority to obligate the taxpayer without first having Council approval. Consensus of the group was that the Commission and Alerus Center staff should know that they have no authority to take risks or spend funds outside the limits of their budget without coming to City Council for approval. More discussion ensued on whether the ¼% should be revenue, with most feeling that it should not be treated as revenue, but some expressing that it should be viewed as community support as a trade off for the benefit that it brings to the community. Some members stated that they would like to revisit the Venuworks contract and look at if there is an opportunity to consolidate some duties between the CVB, Canad, and Alerus Center, thereby eliminating some expense and making for a smoother event and better communications for customers. Thompson shared examples of how Altru boards that govern various business divisions of Alru operate. It was noted that each of those boards only has authority over the money in their entities budget and if there is a loss on operations then they may see action from the parent. The group discussed that with consensus being that the Commission only has ability to spend within their budget and challenge is how to reinforce that to them, but let them know that if there is an opportunity that they see in an event that could have a loss that they should bring this to the Council and explain not only the amount of the loss, but the reasoning as to what this event would bring to the community. Task Force members have invited the Commission members to the next meeting and would like to hear comments form them including their perception of the Canad relationship and any changes that they would suggest. The following meeting could receive more information from Canad on their Brandon operations and any other comments they would like to make. The Task Force discussed that another area for discussion is the pricing structure and that there may be more potential for events if some of the costs could be reduced. Rygg suggested that perhaps even just repackaging the way that the costs are presented to the client may help, as the itemization currently may lead to improvement. Gershman noted that it’s interesting that the convention business continues to grow despite the concerns on pricing and could potentially be better if we find a way to address the concerns in this area. The group discussed that perhaps it’s a good time to look at the overall set up and may be a time to look at a restructuring which could lead to future success. Christensen noted that part of that may be to look at difference between mix of events – do you do one event with 13,000 attendance but cost of $800,000 or do four events with attendance of 6,000 with cost of $200,000 each, your cost is same, but potential impact could be greater from 4 small events as you reach more people. Gershman commented that he had learned that due to the change in the music market and the increase of internet music options many performers are not making as much from music sales, so are going on tour and increasing concert costs to try and make up for the loss of revenue from other areas and need to keep that in mind when look at the concert industry. (Rygg left the meeting.) Bjerke made several comment: that it’s interesting we talk about all the conventions that we have, but now find out that we have to give them a subsidy to come here; don’t understand why we need to tell the Alerus Center that they have to work with the Canad; and that he believes that they receive the ¼% and that should be there to act as a base to cover any uncertainty or loss in an event and should budget without including that. McNamara added that he feels they should be looking at managing the facility so as to build up a reserve to use for future needs of the facility. Christensen agreed and added that if you really want them to stop having to come back to Council for more funds, they need to develop a reserve. He added that he feels it is very appropriate to ask the commission to impose a business type discipline on a facility that should be run like a business and hold managers accountable to stay within their budget. He cited the example of the Fargodome, which does bring in a profit and if have events that don’t work they analyze why they were not successful and make changes to address those factors for future events. Meeting adjourned at 7:35 p.m. Respectfully submitted, Sherie Lundmark Admin Spec Sr.