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HomeMy WebLinkAbout6/25/2008 - STAFF REPORTS - 1.B. FpA�M`SA ;O Ri u m *T C'�L/FORN�P• CITY COUNCIL STAFF REPORT DATE: June 25, 2008 LEGISLATIVE SUBJECT: APPROVING ADDENDUM TO THE EXISTING MANAGEMENT AGREEMENT A4806 WITH SMG FOR THE PALM SPRINGS CONVENTION CENTER AND ADDENDUM TO THE EXISTING MANAGEMENT AGREEMENT A4992 FOR BUREAU OF TOURISM AND VISITORS CENTER. FROM: David H. Ready, City Manager BY: Assistant City Manager— Development Services SUMMARY In 2003 the City retained the services of SMG, a private management company, to manage and operate the Palm Springs Convention Center and the Bureau of Tourism. These agreements each provided for initial terms of five years and one five-year renewal. The current Agreements will expire on June 30, 2008. The Convention Center/Tourism, Council Subcommittee (Pougnet/Mills) met with tourism stakeholders to discuss the renewal option and SMG's performance under the current contract. The Stakeholders' recommendation was to proceed with the extension option. Final goals and certain legal modifications in form remain to be made and will be presented later to the Council for approval. RECOMMENDATION: 1, Approve Addendum to existing Agreement No. A4806 with SMG for management of the Palm Springs Convention Center. 2. Approve the Addendum to existing Agreement No. A4992 with SMG for management of the Palm Springs Bureau of Tourism and Visitor Center. 3. Authorize the City Manager to execute all necessary documents. STAFF ANALYSIS: Since 1992, the City has delegated the responsibility for the management and operation of the Palm Springs Convention Center to a private management company with f2cr/iS E25 / - 6 . City Council Staff Report June 25, 2008 -- Page 2 SMG Management Agreements Renewal experience and expertise in the management, operation, and marketing of such facilities. In 1998, the City Council also delegated the operation and management of the Bureau of Tourism and the Visitors Center. In 2003 the City of Palm Springs entered into new Agreements for management of these operations. The City's Agreements with its current management company SMG expires on June 30, 2008. Each of these Agreements may, by its terms, be extended once for an additional five (5) years, at the City's sole option. A City Council subcommittee (Mills/Oden) met with approximately 15 members of the hospitality community to solicit feedback on stakeholder satisfaction with SMG, and it was determined that renewal of the agreements would be appropriate. Additionally, the stakeholders' suggested that SMG's "room night" goals for the Convention Center should be determined on an annual basis — with input from the Tourism stakeholders as a recommendation to the City Council. Convention Center A copy of the Addendum to the Management Agreement for the Palm Springs Convention Center is attached. In addition to the exercise of the City's option to extend the Management Agreement, the principal business terms of the Addendum are as follows: Term. The "Term" of this Addendum shall be effective at expiration of the current term on June 30, 2008 and shall expire at the close of business on June 30, 2013, unless terminated pursuant to the provisions of the Management Agreement and this Addendum. The Term may be extended once for five (5) years, at the City's sole option, by giving Consultant written notice of City's election to extend this Addendum at least one hundred eighty days (180) prior to the date of termination. Contribution. As a condition of entering into the Management Agreement in 2003, SMG made a "Contribution" to the City in the amount of four hundred thousand dollars ($400,000). In exchange for the Contribution, City provided Manager with a ten-year interest-free promissory note ("Note"). The Contribution was to be used to market the Facility, and was amortized over ten (10) years such that, should the Management Agreement remain operational for a total of ten (10) years, the City has no obligation to reimburse SMG for the Contribution. The Management Agreement was in effect for five (5) years prior to the execution of this Addendum. The Parties agree that if this Addendum remains operational for the entirety of its five (5) year term, City has no obligation to reimburse SMG for the Contribution. If this Addendum is terminated prior to June 30, 2013, repayment of the Note shall be governed by Section 1.7 of the Management Agreement. Management Fee. The agreement set an annual management fee to be paid to SMG which was $225,000 in 2003 and in the current 2008 fiscal year is set at $192,474. Going forward, SMG's management fee for the first year of this extension will be the City Council Staff Report. June 25, 2008 -- Page 3 SMG Management Agreements Renewal current base fee plus a Consumer Price Index increase of 3.1% based upon the City's accepted CPI formula; "All Urban Consumers for Los-Angeles-Riverside-Orange County, California for the prior twelve month period ending March 31, 2008 ". This establishes the base management fee for the 2008-09 fiscal year at $198,440.00. The base management fee for the remaining four years of this extension will be determined by City Council and SMG at a later date. Public Meeting Requirements. SMG shall attend at least two meetings per year with the City Manager and local Tourism stakeholders to: (a) discuss any new sales programs proposed by Manager or identified by Manager as being of interest to the City or City stakeholders; and (b) to discuss any other upcoming programs or events identified by Manager as being of interest to the City or City stakeholders. SMG will provide a corporate representative to attend these meetings and will likely correspond to a City Council Study Session presentation. Bureau of Tourism In addition to the exercise of the City's option to extend the Management Agreement, the principal business terms of the Addendum to the Bureau of Tourism Agreement are as follows: Term. The "Term" of this Agreement shall be effective on July 1, 2008 and shall expire at the close of business on June 30, 2013, unless terminated pursuant to the provisions of the Management Agreement. The Term may be extended once for five (5) years, at the City's sole option, by giving Consultant written notice of City's election to extend this Agreement at least one hundred eighty days (180) prior to the date of termination. Public Meeting Requirements. Same as above for the Convention Center. FISCAL IMPACT: The Tourism Addendum is cost neutral under the current contract provisions and the Convention Center Addendum represents a CPI increase of$5,966 over the current fiscal year. Thomas J. Wi(son Assistant City Manager City Council Staff Report June 25, 2008 -- Page 4 SMG Management Agreements Renewal David H. Ready, Esq. Ph.D. City Manager Approved as to form: Douglas C. Holland, City Attorney Attachments: 1. Addendum to existing Agreement No. A4806 with SMG for management of the Palm Springs Convention Center 2. Addendum to existing Agreement No. A4992 with SMG for management of the Palm Springs Bureau of Tourism and Visitor Center �°�pp`M Spy i2 e U yi k ti �A CCLounie µ CITY COUNCIL STAFF REPORT DATE: June 25, 2008 LEGISLATIVE SUBJECT: APPROVING ADDENDUM TO THE EXISTING MANAGEMENT AGREEMENT A4806 WITH SMG FOR THE PALM SPRINGS CONVENTION CENTER AND ADDENDUM TO THE EXISTING MANAGEMENT AGREEMENT A4992 FOR BUREAU OF TOURISM AND VISITORS CENTER FROM: David H. Ready, City Manager BY: Assistant City Manager— Development Services SUMMARY In 2003, the City retained the services of SMG, a private management company, to manage and operate the Palm Springs Convention Center and the Bureau of Tourism. These agreements each provided for initial terms of five years and one five-year renewal. The current Agreements will expire on June 30, 2008. The Convention Center(Tourism Council Subcommittee (Mills/Oden) met with Tourism stakeholders to discuss the renewal option and SMG's performance under the current Contract. The Stakeholders' recommendation was to proceed with the extension option, with certain modifications, which are outlined below. RECOMMENDATION: 1. Approve Addendum to existing Agreement No. A4806 with SMG for management of the Palm Springs Convention Center- 2- Approve the Addendum to existing Agreement No. A4992 with SMG for management of the Palm Springs Bureau of Tourism and Visitor Center. 3. Authorize the City Manager to execute all necessary documents. STAFF ANALYSIS: Since 1992, the City has delegated the responsibility for the management and operation of the Palm Springs Convention Center to a private management company with experience and expertise in the management, operation, and marketing of such ITEM NO. `�' City Council Staff Report June 25, 2008 -- Page 2 SMG Management Agreements Renewal experience and expertise in the management, operation, and marketing of such facilities. In 1998, the City Council also delegated to them the operation and management of the Bureau of Tourism and the Visitors Center. In 2003, the City of Palm Springs entered into new Agreements for management of these operations. The City's Agreements with its current management company, SMG, expires on June 30, 2008. Each of these Agreements may, by its terms, be extended once for an additional five (5) years, at the City's sole option. A City Council subcommittee (Mills/Oden) met with approximately 15 members of the hospitality community to solicit feedback on stakeholder satisfaction with SMG, and it was determined that renewal of the Agreements would be appropriate. Additionally, based upon that stakeholder meeting, it was suggested that the formula for calculating SMG's "room night" goals for the Convention Center should be determined on an annual basis, with input from the Tourism stakeholders as a recommendation to the City Council. Convention Center A copy of the Addendum to the Management Agreement for the Palm Springs Convention Center is attached. In addition to the exercise of the City's option to extend the Management Agreement, the principal business terms of the Addendum are as follows: Term. The "Term" of this Addendum shall be effective at expiration of the current term on June 30, 2008, and shall expire at the close of business on June 30, 2013, unless terminated pursuant to the provisions of the Management Agreement and this Addendum. The Term may be extended once for five (5) years, at the City's sole option, by giving Consultant written notice of City's election to extend this Addendum at least one hundred eighty days (180) prior to the date of termination. Contribution. As a condition of entering into the Management Agreement in 2003, SMG made a "Contribution" to the City in the amount of four hundred thousand dollars ($400,000). In exchange for the Contribution, City provided Manager with a ten-year interest-free promissory note ("Note"). The Contribution was to be used to market the Facility, and was amortized over ten (10) years so that, should the Management Agreement remain operational for a total of ten (10) years, the City has no obligation to reimburse SMG for the Contribution. The Management Agreement was in effect for five (5) years prior to the execution of this Addendum. The Parties agree that if this Addendum remains operational for the entirety of its five (5) year term, City has no obligation to reimburse SMG for the Contribution. If this Addendum is terminated prior to June 30, 2013, repayment of the Note shall be governed by Section 1.7 of the Management Agreement. Management Fee. The agreement set an annual management fee to be paid to SMG, which was $225,000 in 2003, and in the current 2008 fiscal year is set at $192,474. Going forward, SMG's management fee for the first year of this extension will be the 0000n.2 City Council Staff Report June 25, 2008-- Page 3 SMG Management Agreements Renewal current base fee plus a Consumer Price Index increase of 3.1% based upon the City's accepted CPI formula: "All Urban Consumers for Los-Angeles-Riverside-Orange County, California, for the prior twelve month period ending March 31, 2008." This establishes the base management fee for the 2008-09 fiscal year at $198,440.00. The base management fee for the remaining four years of this extension will be determined by City Council and SMG at a later date. Public Meeting Requirements. SMG shall attend at least two meetings per year with the City Manager and local Tourism stakeholders to: (a) discuss any new sales programs proposed by Manager or identified by Manager as being of interest to the City or City stakeholders; and (b) to discuss any other upcoming programs or events identified by Manager as being of interest to the City or City stakeholders. SMG will provide a corporate representative to attend these meetings and will likely correspond to a City Council Study Session presentation. Bureau of Tourism In addition to the exercise of the City's option to extend the Management Agreement, the principal business terms of the Addendum to the Bureau of Tourism Agreement are as follows: Term. The "Term" of this Agreement shall be effective on July 1, 2008, and shall expire at the close of business on June 30, 2013, unless terminated pursuant to the provisions of the Management Agreement. The Term may be extended once for five (5) years, at the City's sole option, by giving Consultant written notice of City's election to extend this Agreement at least one hundred eighty days (180) prior to the date of termination. Public Meeting Requirements. Same as above for the Convention Center. FISCAL IMPACT: The Tourism Addendum is cost neutral under the current Contract provisions and the Convention Center Addendum represents a CPI increase of$5,966 over the current fiscal year. Ti omas J. WiNon ss ntCi anager City Council Staff Report June 25, 2008-- Page 4 SMG Management Agreements Renewal David H. Ready, City Manager Attachments: 1. Addendum to existing Agreement No. A4806 with SMG for management of the Palm Springs Convention Center 2. Addendum to existing Agreement No. A4992 with SMG for management of the Palm Springs Bureau of Tourism and Visitor Center ADDENDUM TO THE MANAGEMENT AGREEMENT FOR TIIE PALM SPRINGS CONVENTION CENTER This Addendum to the Management Agreement for the Palm Springs Convention Center is made and entered into as of the close of business on June 30th, 2008, by and between the CITY OF PALM SPRINGS, a municipal corporation ("City") and SMG, a Peamsylvania general partnership ("Manager"). RECITALS WHEREAS, City and Manager entered into the Management Agreement for the Palm Springs Convention Center with a tern of five (5) years, effective from July 1, 2003 to the close of business on June 30, 2008 ("Management Agreement") pursuant to which Manager manages, operates, promotes and markets the Palm Springs Convention Center ("Facility"); and WHEREAS, the Management Agreement provides that the term may be extended once for five (5) years at the City's sole option, provided that City is fully satisfied with Manager's perfornance under the Management Agreement and City determines that it is in the best interest of the City to approve an extension for such time; and WHEREAS, City desires to exercise its option to extend the Management Agreement for an additional five (5) years, with an optional five (5) year extension at the City's sole option, and Consultant desires to accept said engagement; and WHEREAS, City and Manager now desire to make certain modifications to the Management Agreement which shall be effective during the term of this Addendum. 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 Exercise of Option. The Management Agreement provides that the tern of the Agreement expires at the close of business on June 30, 2008, and may be extended once for an additional five (5) years, at the City's sole option, by giving Manager written notice of City's election to extend the Management Agreement at least one hundred eighty (180) days prior to the Anniversary Date. The Parties hereby agree that the City has provided sufficient notice of its intent to exercise its option under the Management Agreement, and the Parties therefore waive said one-hundred and eighty (180) day notification requirement. 2. Exercise of Option. The City hereby exercises its option to extend the Management Agreement for an additional five (5) years. 3. Term. The "Term" of this Addendum shall be effective at the close of business on June 30th, 2008, and shall expire at 5:00 p.m. on June 30, 2013, unless terminated pursuant to the provisions of the Management Agreement and this Addendum. The Tern of this Addendum may be extended once for 'Cave (5) years, at the City's sole option, provided that City is fully 581 G79 I satisfied with Manager's performance under the Management Agreement and this Addendum, and City determines that it is in the best interest of the City to approve an extension for such time. City shall extend the tenn by giving Manager written notice of City's election to extend this Addendum at least one hundred eighty days (180) prior to the date of termination of the Addendum. 4. Contribution. As a condition of entering into the Management Agreement, Manager made a "Contribution" to the City in the amount of four hundred thousand dollars ($400,000). In exchange for the Contribution, City provided Manager with a ten-year interest- free promissory note ("Note"). The Contribution was to be used to market the Facility, and was amortized over ten (10) years such that, should the Management Agreement remain operational for a total of ten (10) years, the City has no obligation to reimburse Manager for the Contribution. The Management Agreement was in effect for five (5) years prior to the execution of this Addendum. The Parties agree that if this Addendum remains operational for the entirety of its five (5) year teen, City has no obligation to reimburse Manager for the Contribution. If this Addendum is terminated prior to June 30, 2013, repayment of the Note shall be governed by Section 1.7 of the Management Agreement. 5. Base Fee. For services performed by Manager during each fiscal year of this Addendum, the City shall pay Manager the annual Base Fee, payable at the rate of one-twelfth (1/12) of the per annurn compensation per month, within thirty (30) days of the monthly billing provided by Manager for such services. For fiscal year 2008-2009, the Base Fee shall be $192,474 plus an amount equivalent to the annual percentage increase recorded in the Consumer Price Index (`CPI") — All Urban Consumers for Los-Angeles-Riverside-Orange County, California for the prior twelve month period ending March 3151, not to exceed five percent (5%). The 2008-2009 Base Fee is subject to and contingent upon funds being appropriated therefore by the City Council. If such appropriations are not sufficient to fully fiord the 2008-2009 Base Fee, such Base Fee shall be equal to the amount appropriated by the City Council. In the event there is no increase, or if there is a decrease, in the CPI for such period, the Base Fee will not increase and will remain at the same amount of the previous year. The City Council shall adopt a calculation, prior to the end of fiscal year 2008-2009, to be used to determine the Base Fee for each subsequent year of this Addendum. 6. Meeting. Requirements. Manager shall hold two (2) meetings per fiscal year with City's Authorized Representative, and the invitees of City's Authorized Representative, to: (a) discuss any new sales programs proposed by Manager or identified by Manager as being of interest to the City; and (b) to discuss any other upcoming programs or events identified by Manager as being of interest to the City. Manager must provide a corporate representative to attend the entirety of each such meeting. 7. Except as expressly provided herein, all other terms and conditions of the Management Agreement shall remain in full force and effect. [SIGNATURE BLOCK ON NEXT PAGE) 5816791 � 0 0 0 '1P IN WITNESS WHEREOF, the Parties hereto 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: Janis Thompson, City Clerk APPROVED AS TO FORM: Douglas C. Holland, City Attorney 581679 1 (� } ADDENDUM TO THE AGREEMENT FOR TOURISM SERVICES This Addendum to the Agreement for Tourism Services ("Tourism Agreement") is made and entered into as of the close of business on June 30th, 2008, by and between the CITY OF PALM SPRINGS, a municipal corporation ("City") and SMG, a Pennsylvania general partnership ("Consultant"). RECITALS WIIEREAS, City and Consultant entered into the Tourism Agreement with a term of five (5) years, effective from July 1, 2003 to the close of business on June 30, 2008 pursuant to which Consultant promotes and markets Palm Springs as a tourist destination in addition to managing and operating the Visitor Center as defined in the Tourism Agreement; and WHEREAS, the Tourism Agreement provides that the term may be extended once for five (5) years at the City's sole option, provided that City is fully satisfied with Consultant's performance under the Tourism Agreement and City determines that it is in best interest of the City to approve an extension for such time; and WHEREAS, City desires to exercise its option to extend the Tourism Agreement for an additional five (5) years, with an optional five (5) year extension at the City's sole option, and Consultant desires to accept said engagement; and WHEREAS, City and Consultant now desire to make certain modifications to the Tourism Agreement which shall be effective during the term of this Addendum. 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 Exercise of Option. The Tourism Agreement provides that the term of the Tourism Agreement expires at the close of business on June 30, 2008, and may be extended once for an additional five (5) years, at the City's sole option, by giving Consultant written notice of City's election to extend the Tourism Agreement at least one hundred eighty (180) days prior to the date of termination of the Tourism Agreement. The Parties hereby agree that the City has provided sufficient notice of its intent to exercise its option under the Tourism Agreement, and the Parties therefore waive said one-hundred and eighty (180) day notification requirement. 2. Exercise of Option. The City hereby exercises its option to extend the Tourism Agreement for an additional Five (5) years. 3. Term. The "Term" of this Addendum shall be effective at the close of business on June 30`4, 2008, and shall expire at 5:00 p.m. on June 30, 2013, unless terminated pursuant to the provisions of the Tourism Agreement, as amended, and this Addendum. The Term of this Addendum may be extended once for five (5) years, at the City's sole option, provided that City M406 1 is fully satisfied with Consultant's performance under the Tourism Agreement and this Addendum, and City detennines that it is in the best interest of the City to approve an extension for such time. City shall extend the tern by giving Consultant written notice of City's election to extend this Addendum at least one hundred eighty days (180) prior to the date of termination of the Addendum. 4. Meeting Requirements. Manager shall hold two (2) meetings per fiscal year with City's Authorized Representative, and the invitees of City's Authorized Representative, to: (a) discuss any new sales programs proposed by Manager or identified by Manager as being of interest to the City; and (b) to discuss any other upcoming programs or events identified by Manager as being of interest to the City. Manager must provide a corporate representative to attend the entirety of each such meeting. 5. Except as expressly provided herein, all other terms and conditions of the Tourism Agreement, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, the Parties hereto 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: 13y: James Thompson, City Cleric APPROVED AS TO FORM: Douglas C. Holland, City Attorney 582406 1 0© 0 01 C `l