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HomeMy WebLinkAbout6/6/2018 - STAFF REPORTS - 1.X. LMSAP .y ti W V N •roen°''s c'4440% �P CITY COUNCIL STAFF REPORT DATE: June 6, 2018 CONSENT CALENDAR SUBJECT: APPROVE AN ADDENDUM TO THE TOURISM AND MANAGEMENT SERVICES AGREEMENT WITH SMG FROM: David H. Ready, City Manager SUMMARY The City of Palm Springs contracts with SMG for management of the Palm Springs Convention Center and Bureau of Tourism. In 2013, the City Council approved the most recent Tourism and Management Services Agreement with SMG, which expires on June 30, 2018. This action would extend the current agreement through December 31, 2018, allowing staff and tourism stakeholders to finalize the Request for Proposal (RFP) process, which is currently underway. A recommendation for a new agreement will be forthcoming to City Council for consideration prior to the end of the year. RECOMMENDATION: 1) Approve an Addendum to the Tourism and Management Services Agreement with SMG extending the Agreement until December 31,.2018. 2) Extend the sunset date of the City Council Ad-Hoc Subcommittee for the Convention Center Tourism and Management Services Agreement until January 30, 2019. ANALYSIS: In 1992, LMI Corporation was chosen to provide Convention Center management services, when the City converted operations to a private company. In 2000, LMI was bought by the SMG Corporation and has continued operations through a series of negotiated agreements in 2003 (included Tourism), 2008 and 2013. The current agreement expires June 30, 2018. ITEM NO. City Council Staff Report June 6, 2018 -- Page 2 Addendum to Agreement for Tourism and Management Services SMG has been effective in their management of the convention center, maintaining high standards of service and maintenance of the facility while producing strong event levels, hotel room-nights and financial performance. The Bureau of Tourism has maintained a high profile for Palm Springs as a desirable destination for visitors and been a strong partner with hospitality industry stakeholders and the City in attracting visitors to Palm Springs. Based on the level of services provided, the City has retained SMG through a series of negotiated agreements as noted above, which have provided the City with increasing positive conditions and substantial capital investment from SMG to the City. The current SMG agreement provides for possible extensions of up to two (2) additional five (5) year terms at the City's discretion. Upon review by the City Council Ad Hoc Subcommittee for the Convention Center Tourism and Management Services Agreement (Mayor Moon and Councilmember Kors) and hospitality stakeholders, the group recognized that although the City has the right to negotiate a new agreement with the current vendor, an RFP process, offered to SMG and other qualified firms would be in the City's interest, ensuring the best terms, conditions and services prior to the negotiation of a new agreement. Importantly, this recognition was not a reflection upon the services provided by SMG, but rather a matter of policy. Moreover, there was consensus that SMG and the current team have been effective in the management of the Convention Center and Tourism marketing services provided under the current agreement. SMG has agreed to extend their agreement until December 31, 2018, and continue to provide Tourism and Management Services while the City completes the RFP process. The terms and conditions of the existing Agreement will remain in place, including the City benefit of monthly reductions of the amount of the SMG "Investment" of capital that remains outstanding. The term of the Addendum will include up to two (2) additional extensions if needed by the City, to complete the process with no interruption of services. FISCAL IMPACT: The monthly management fee to be paid to SMG ($19,203) is consistent with the existing Agreement and is included in the Proposed FY 2018-2019 Budget. During this additional time period, the City's capital repayment liability as outlined in the current agreement will be reduced by $25,000. David H. Ready, Esq., P Edward Z. Kotkin City Manager City Attorney Attachment: 1. Addendum to Agreement for Tourism and Management Services Attachment 1 ADDENDUM TO AGREEMENT FOR TOURISM AND MANAGEMENT SERVICES BY AND BETWEEN The City of Palm Springs, A municipal corporation AND SMG, A Pennsylvania General Partnership This "Addendum" to that certain "AGREEMENT FOR TOURISM AND MANAGEMENT SERVICES BY AND BETWEEN The City of Palm Springs, A municipal corporation AND SMG, A Pennsylvania General Partnership," (the "Agreement"), is made, entered into, and effective as of June , 2018, by and between the CITY OF PALM SPRINGS, a California charter city and municipal corporation ("City') and SMG, a Pennsylvania general partnership ("SMG"). RECITALS WHEREAS, City and SMG entered into the Agreement, dated on or about October 1, 2013 and identified by the City as "A6410;" and WHEREAS, the Agreement had a term of five (5) years, which term expires at the close of business on June 30, 2018; and WHEREAS, pursuant to the Agreement, SMG has managed, operated, promoted, and marketed the Palm Springs Convention Center and related facilities ("Management Services"), and also rendered administrative, promotional, advertising and marketing services intended to encourage tourist activities within the City, and to promote the City as a tourist destination ("Tourism Services"); and WHEREAS, the City did not extend the Agreement's term in accordance with its terms, and decided to allow the term of the Agreement to expire on June 30, 2018; and WHEREAS, since deciding not to extend the Agreement's term, the City has determined that it is the City's best interest to pursue a public bid process in relation to Management Services and Tourism Services, and thereby ensure the best terms, conditions and services; and WHEREAS, the City's determination to seek proposals from SMG and other interested firms represents a policy decision, based upon the twenty (20) year length of the relationship between the City and SMG, and does not reflect issues or dissatisfaction related to performance, or the quality of Management Services or Tourism Services; and WHEREAS, the City and SMG have no desire to modify their financial relationship in accordance with the Agreement throughout the term of this addendum, or any extension to that term; and 5.30.18 Addendum to Agreement for Tourism and Management Services City of Palm Springs—SMG Page 1 of 3 WHEREAS, City requires time beyond June 30, 2018 to research, develop and implement a process and documentation with respect to the procurement of Management Services and Tourism Services; and WHEREAS, the City estimates that it will complete the process by December 31, 2018; and WHEREAS, City and SMG, notwithstanding the expiration of the Agreement on June 30, 2018, and the City's decision to decline any five (5) year extension of the Agreement pursuant to Section 4 thereof, now desire to extend the Agreement for less time, pursuant to and consistent with Section 25.b. and 26.f. thereof; and WHEREAS, pursuant to the terms and conditions of this Addendum, SMG will provide Management Services and Tourism Services, under the terms and conditions reflected in the Agreement, until 5:00 p.m., Pacific Standard Time, on Monday, December 31, 2018 to provide continuation of services. NOW, THEREFORE, in consideration of the mutual covenants, conditions, and promises herein contained, the receipt and sufficiency of which is expressly acknowledged and confessed, the parties hereby agree as follows: 1. Notice of Extension of Agreement. Based upon the true and correct recitals reflected above and incorporated by this reference herein as the basis for this Addendum, the Agreement will be extended until the close of business, December 31, 2018. 2. Term. The "Term" of this Addendum shall commence at 5:01 p.m. on Saturday, June 30, 2018, and shall expire at 5:00 p.m., Pacific Standard Time, on Monday, December 31, 2018, unless terminated sooner pursuant to the provisions of the Agreement or this Addendum. The City and SMG may extend the Term of this Addendum on two (2) occasions, in such additional increments of time as may prove necessary to allow the City to complete its public bid and procurement process. Each additional extension after the expiration of this Addendum's Term shall be by mutual agreement, occasioned by City giving SMG not less than sixty (60) days' written notice, unless the length of that notice period is waived in writing by SMG, of a City decision to extend the Term of this Addendum. 3. Base Fee. For all Management Services and Tourism Services performed by SMG during the Term of this Addendum and any extension thereof, the City shall pay SMG the annual Base Fee, payable at the rate of one-twelfth (1/12) of the per annum compensation per month, within thirty (30) days of the monthly billing provided by SMG for such services. For fiscal year 2018-2019, the Base Fee shall be two hundred thirty thousand four hundred thirty-eight dollars ($230,438.00). 4. SMG Investment. Throughout the Term of this Addendum and any extension thereto, SMG shall continue, on a monthly basis, to reduce the amount that the City owes to SMG with respect to the Investment. Reductions shall occur on a 5.30.18 Addendum to Agreement for Tourism and Management Services City of Palm Springs—SMG Page 2 of 3 monthly basis in accordance with the Agreement, in the amount of four thousand one hundred sixty seven dollars ($4,167.00). The City shall continue to receive the benefit of these reductions as to the amount outstanding against the remaining balance of the Note that secures the Investment throughout the Term and any extension thereof. In the event that a successor management company is selected during the City's public bid process, it shall be the duty of the City or a successor management company to pay the balance of the Note during the Twelve Month Period. 5. Annual Report. The Annual report for FY 2018-2019 shall be furnished to later than ninety (90) days after the end of the Term of this Addendum and any mutually approved extensions thereof, but in no event later than 5:01 p.m. on Monday, September 30, 2019. 6. Relationship between Agreement and Addendum. Except as expressly provided herein, all terms and conditions of the Agreement shall remain in full force and effect by and between the parties. To the extent that there is any conflict or inconsistency between the Agreement and this Addendum, the terms of the Addendum shall prevail and supersede the Agreement. Capitalized terms of art in the Agreement shall have the same meaning in this Addendum unless otherwise specified and re-defined herein. IN WITNESS WHEREOF, the Parties executed this Addendum as of the day and year first above written. SMG, a Pennsylvania General Partnership CITY OF PALM SPRINGS By: By: David H. Ready, City Manager By: ATTEST: By: Anthony J. Mejia, MMC, City Clerk APPROVED AS TO FORM By: Edward Kotkin, City Attorney 5,30.18 Addendum to Agreement for Tourism and Management Services City of Palm Springs—SMG Page 3 of 3