Recommend approval to authorize the City Manager to execute a contract with Oak View Group (OVG) for venue operations and management of the new arena. In 2018, the City issued a request for proposals (Event #6488) for a phased contract that allows the City to enter into separate agreements to provide design assistance of the new arena, management of the existing Civic Center, and operations and management of the new arena. Three proposals were received. The highest rated proposal was submitted by OVG.

In April 2019, City Council approved the first phase of the contract with OVG for design-assist services of the new arena. In August 2019, Council approved the second phase of the contract with OVG to provide management services at the existing Civic Center. The City Manager is now recommending the Mayor and Aldermen approve and enter into the third phase of the contract with OVG to provide operations and management services of the new arena. Approval is needed now, prior to completion of the arena, to allow OVG to develop marketing and sponsorship strategies, begin building its operations team, and start negotiations for tenants and acts at the new arena, which is scheduled to open in February 2022.

The arena operations and management contract with OVG minimizes financial risk for the City by making OVG responsible for all operations and routine maintenance costs of the new facility. In addition, OVG will pay the City rent, share the revenue, and pay the City a capital contribution totaling $5 million.

The rent schedule follows: income as follows:

• Year 1: $0 base rent
• Year 2: $0 base rent
• Year 3: $50,000 base rent
• Year 4: $50,000 base rent
• Year 5: $100,000 base rent

OVG will also pay to the City the following percentage rent:

• 20% of Net Operating Income between $1,000,000.01 and $1,500,000
• 33% of Net Operating Income between $1,500,000.01 and $2,000,000
• 50% of Net Operating Income greater than $2,000,000.01

The term of the contract is 10 years. However, the City has the option to terminate the contract for any reason after five years. Thus, it is effectively a five-year contract with the option to extend for an additional five years. Under this agreement, 75 percent of arena operating expenses will be performed by certified Disadvantaged Business Enterprises (DBE). OVG will be contractually bound to meet their proposed DBE participation goals, which will be verified by the City’s Office of Business Opportunity. The City will be responsible for capital improvements at the facility costing more than $5,000. Lastly, OVG will provide the City with a $5 million grant for investment in the facility at the City’s discretion. If the City terminates the contract prior to the completion of the 10-year term, then the City would refund a pro-rata share of the grant funds.

Approval

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