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Speaking notes and News Coverage of Music Center Contract

I've posted the notes I used when I spoke Monday.  I follow that with the observations I passed to city staff concerning the management agreement.  Also local media outlets attended the council meeting.  I'll be posting links as I find them.  

Here is the WDTN report:  http://wdtn.com/2014/06/09/city-approves-company-to-run-huber-hgts-music-center/    Here is the WHIO.com report

Watch the video of the Council Meeting
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Tax Levy --- When I spoke it was concerning the tax levy although the news reports talk about the Music Center Management Contract. 
 
Council thank you for the opportunity to speak.  When deciding on the details of  November's tax levy, I recommend council choose a 2 year term. 
 
Almost immediately after I took office I started receiving questions that asked, "Will we really lose our parks and our senior center if we don't pass a levy?" and "Couldn't the cuts come somewhere else"?  I couldn't answer at that time but I expected as I became more familiar with the city programs, expenditures and revenues I would be able to provide knowledge based information and advice.  Now after six months as Mayor, I've come to conclusion that residents should have the opportunity to approve a 2 year, .25% levy. 
 
I've come to this conclusion because it appears as if council has locked in and guaranteed to pay for all the marginally supported projects like the $150,000 payment to the YMCA, the $100,000 Aquatic Center lawn mowing contract and later tonight the $225,000 contract to manage the Music Center.  It appears the only things available to cut are those highly supported by the community like money to mow the parks, operate the Senior Center, and pay our police and fire fighters.
 
I say it appears like these are the only places to cut because it is impossible to tell.  Council has been less than forthright in letting the public know how our money is being or will be spent.  For instance even though council continues to hype the $119,000 they spent on police cars because of the Aquatic Center's first year profit, when asked how the Aquatic Center did last year all you hear is there was a loss because of the bad weather.  You don't hear that the loss was $110,000.  And, it is impossible find this out by looking at the budget documentation or discussions presented at any public committee or council meetings.      
 
Even though tonight we know we will be locking in $225,000 of additional expenditures for the music center, we as the public have not been presented anything close to a full estimate of the other music center expenditures that will have to be added to next year's budget.   Today we don't have a single dime in the budget to advertise concerts.  We have not had a single public conversation of how we will pay for the food and beverage contracts or security.  We have an idea that the cost of booking a recognized band to play at our Music Center will be about $100,000 each band and we've heard it is standard to pay half the money months before the concert.  But we haven't had one serious committee meeting where we acknowledge that if we have just 10 bands come to play we will need $500,000 of free cash at least until the concert occurs and in total this adds an additional $1,000,000 of budget expenses.   
 
 For those residents that have asked me previously, I say it is still impossible to get the full picture of our financial situation from what council is willing to present publicly.  Even so there appears to be enough information to show that council has managed to wall off  their pet projects so that all or most of the cuts will have to come from the programs and services most of us believe are what makes a city thrive.  Up until now it was my assessment that if the levy didn't pass this November the only major consequence would be our reserves would be much lower than what fits the comfort level of a fiscal conservative.  But I still believed the city could provide at least one more year of all our services.  This would allow enough time to see  if it were possible to convince four of the current council members to start treating us with respect and start providing the kind of information needed to make good financial decisions. 
 
However, the more information that leaks out on how much money will be needed to make sure we can open the Music Center next year, the more I realize I am going to have to convince council to limit the levy to two years so that residents get a chance to choose the most responsible action.  I am still hoping tonight that three council members vote no on the proposed management contract which will allow me to veto the legislation and direct staff to compose a contract that shows our management company believes enough in our vision they are willing to work for a percentage of the profits and believes enough in their ability they are willing to commit to success or risk being fired.  Even if council makes the right vote tonight, without the two year levy the City will have to either drastically reduce services or not open the Music Center. 
 
I personally will never support a levy more than two years long until we get a council willing to show the taxpayer respect by producing a full and understandable accounting of how our money is being spent.  I also believe it is important that we open the music center next year and that we continue to provide those services our residents value.  So I am asking council to limit the term of the levy proposed in November to two years. 

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 Did you see there is a committee to recall the Mayor?  Did you see there is also a petition to  Stop any action to recall the Mayor of Huber Heights
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 Here are the comments I had concerning the contract.  You can find a copy the Contract and Exhibit A on the city website

I think my input would have been better if we knew more about the financial plan of the Music Center and I believe we should have had a serious discussion about how often we expected the center to be used and how much profit we expected or loss we are willing to accept.

As a side note in the committee meeting there was a lot of discussion that if we closed the Music Center then the management agreement would end.  Notice the first sentence is an "and" statement.  Typically in an "and" statement both conditions of the sentence have to be met in order for it to be "true".  In the second sentence it does give specific conditions that would make sure that the management company got paid.  So how I am interpreting what the attorney said last night is that we could declare the facility closed and that would mean that we wouldn't have to pay the management company for that season.  

For instance suppose one year we decided we didn't have enough money to open the facility and decided not to hold any events, in that case the contract would still be active but the management fee would not be earned. However, if the next year we held seven events and had enough people attend the events then we would owe the Management Fee.  This seems to be a logical way to interpret the contract language.  Read this section of the contract and see if you agree. 

This Agreement shall terminate upon the first to occur of:

v. Termination by the City in the event the city deemns it in its best 
interests to close the Facility and the Facility shuts down for two (2) full 
seasons. If the City reopens the Facility prior to the end of the 2nd full 
season and conducts more than six (6) events out of the Facility in any one 
season that attract at least 2000 people MEMI shall be used as the 
Manager for all of those events and shall be entitled to its fee for that 
season.

Here are the inputs I provided prior to the council meeting last night.

Contract
 
Section Comment
Paragraph 1. Contains a better listing of duties and responsibilities than previous versions.  This section still does not establish a standard that has to be met for any of listed duties, nor does it provide any means to reconcile poor performance.  Watch to see if these show up in other sections.
Paragraph 2. Look in other sections as to the means for terminating if standards are not met
Paragraph 3. A guaranteed payment amount is not appropriate and indicates a lack of confidence by MEMI that the facility will operate in the black.  Outside a few of the pre-operation documents and manuals all revenue to MEMI should be based on a percentage of Revenue above Expenditures
Paragraph 4 a. The $225,000 paid to MEMI is not listed as an expense yet the City doesn't even get to collect an equal amount from Net Profit before the 60/40 split occurs.  1st recommendation - Don't pay either the city or MEMI a set amount, base payments on % of net profit only.  Alternative 1:  Raise the city payment before split to $225,000.  Alternative 2 - Categorize the MEMI payment as an expense.
Paragraph 4 b. Facility Maintenance Fees are inappropriately categorized as Revenue.
Paragraph 4 b. Give examples of "rebates" that would qualify as revenue.
Paragraph 5 Confirms that Maintenance and Capital improvements are the city's expenses and the Maintenance Fee should not be categorized as revenue for the purpose of Net Profit.
Paragraph 6 a. ii States city can terminate for breach or violation.  Look for and list any standard / performance measure that could be breached.  Specific performance measures of interest would be either the expectation of certain profit or a floor on net losses.  Also, of interest would be the number of times the facility is used during the year.
Paragraph 6 Does this or any paragraph address the sale of the facility?
Paragraph 6 f. Typo MRMI should be MEMI
Paragraph 6 f. Unknown term Pavilion Facilities
Paragraph 6 f. Explain what the difference in responsibilities of an agent versus an independent contractor.
Paragraph 6 f. Explain the legal obligations of an agent compared to an independent contractor
Paragraph 6 f. Execute a conflict of interest agreement and an ethics policy
Paragraph 6 f. Examine the statement "It is the intent of the parties that MEMI will have sole authority over the operation and management of the Facility from and after the date of opening, subject to: (a) the terms of this Agreement; and, (b) applicable laws and governmental regulations"  In the context that the administration committee was briefed city is suppose to have final authority of all decisions.
Paragraph 9 Explain if the city will know the actual payment made to the artist.  What details will be provided for financial reports?
Paragraph 9 "which results in less expense and greater revenue to MEMI"  Is MEMI allowed to make a "profit" as a promoter before acting as a booking agent for the city?  (answer the intent of the question even if the terms "promoter" and "Booking agent" are used incorrectly)
Paragraph 9 Similar to above but specifically answer in the case where the performer is the Cincinnati Orchestra.
 
 
 
 
 
Exhibit A
 
Section Comment  
Pre - (a) Assuming the $225,000 payment is eliminated the initial creation of this item could be accomplished for a set fee.  
Pre - (b) Assuming the $225,000 payment is eliminated the initial creation of this item could be accomplished for a set fee.  
Pre - (e) This is a similar paragraph as paragraph d of the Operational Duties except this paragraph has MEMI acting as an agent.  Conflicts with the Contract paragraph 6 f  
Pre - (f) States the MEMI will be entering into material vendor/license agreements.  Is this on behalf of the city?  Which paragraph shows that the city has to agree to the agreements prior to MEMI entering into them?  
Pre - (h) Replacing broken furniture, fixtures and equipment is not listed as an expense.  
Pre - (k) Telecommunications is not listed as an expense and should be.  
Pre - (l) What type of conflict of interest arrangement or no mark up arrangement can be constructed to ensure that MEMI is not acting as a promoter independent of this arrangement and then booking the acts at the marked up rate.   
Pre - (l) What type of conflict of interest arrangement can be constructed to ensure that Huber Heights is paying a fair rate for acts either booked at multiple MEMI managed venues or for acts that are associated with each other but playing Huber and one of the other venues?  
Pre - (l) What is the arrangement for booking the Orchestra or other performing acts directly managed by MEMI?  
Pre - (O) Will on site supervision be required?  Will travel cost and per diem be chargeable to the city or will MEMI have to pay these out of their fee / percent of profits?   
     
Start up Assuming the $225,000 payment is eliminated the initial creation of some of these items could be accomplished for a set fee.  
Start up Computer software should be listed as an expense  
Start up Preventive Maintenance should be listed as an expense  
Fac Man Will any of these be required to be on site at the Music Center?  If so how frequently?  Will travel and per diem cost be chargeable to the city?  
Oper Duties Sections (d) (e) and (f) are similar to Pre sections (c ) (d) and (e) respectively.  However, they appear to have different implementations.  Why?  
Oper Duties (h) The impression given at the administration committee meeting is that the city will be approving each event.  However, this section is written so that the city approves the booking schedule and MEMI uses this as a guide to book specific events. MEMI's booking of specific events appears to be contradictory to what was briefed in the Administration committee.  For instance a booking schedule might say book a country band every forth Friday and Rock and Pop bands the other Fridays. 
Oper Duties (i) Are these employees of the city?  Give examples of employees that will need to be hired?  
Oper Duties (j) In the administration committee we were told MEMI would not be handling any money or financial transactions.  Which section of the contract shows this limitation?  Where is it stated the city will handle these responsibilities?  
Oper Duties (k) What kind of concurrence is required for the operating budget?  How would MEMI performance measures be affected (if there were any) if the city approves a budget that is less than the MEMI desired budget?  
Oper Duties (s) Materials, tools, machinery, equipment and supplies necessary for the operation of the Facility should be listed as expenses  
 
Watch the video of the Council Meeting

Its not related but it is fun:  Here is the link to the WDTN coverage of #HuberCouch
 

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