Sudbury Community Arena Operating Agreement
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Background In 2017 the Sudbury Community Arena is budgeted to generate $1,099,357 in revenue and expenses totaling $1,485,386, resulting in a levy impact of $386,029. For the years 2014 through 2016, the Sudbury Community Arena has had an average net municipal cost of $541,482. The City of Greater Sudbury has an agreement with 1930178 Ontario Limited (Sudbury Wolves Hockey Club) relating to the use and occupation of the Sudbury Community Arena. The agreement expires May 31, 2022. The agreement provides the following rights to the Sudbury Wolves Hockey Club: use of the arena ice surface, spectator area, dressing rooms, media and video room and common areas during all OHL events exclusive use of a Club dressing room, office spaces, storage and souvenir shop, corporate suites and club lounge and arena concessions allocated ice for practices at no charge priority bookings for home games on twenty (20) Friday nights exclusive rights to sell all advertising inside the arena (ice logos, rink boards, illuminated panels, etc.) with the club receiving 100% of advertising revenues responsible for the management and operation of Club Suites, Club Lounge and Club Seating programs with the club retaining 100% of revenues concessions and pouring rights and liquor license responsibilities rights to develop opportunities to bring non-hockey or non-OHL events to the Arena, subject to separately negotiated event contracts exclusive use of Sudbury Arena parking lot ninety (90) minutes prior to all home games) seventy (70) annual parking passes issued to the Club As per the agreement the Sudbury Wolves Hockey Club is responsible for the following: responsible for the cleaning and minor maintenance of areas where the club has exclusive use of (Club Lounge, Club Seating, Club dressing room, concessions, offices, etc.) all expenses relating to hockey operations staffing costs for all operations within the Corporate Suites, Club Lounge, Club Seating and concession operations costs for paid duty officers and first aid/medical personnel Under the current agreement the City of Greater Sudbury is responsible for the following: all utilities for the arena box office operations including staffing costs for ticket sellers hosting services including staffing costs for host staff maintenance of the ice surface including all staffing costs building maintenance, cleaning of common areas and capital upgrades event management functions The City of Greater Sudbury receives the following under the current operating agreement*: a game fee of $589.77 + HST for games with >3,500 attendance; game fee of $825.69 + HST for games with <3,500 attendance ticket fee/redemption fee of $1.47 per ticket a concession operating fee of $1.37 per ticket for OHL games a concession operating fee of $1.37 per ticket sold for non-OHL events; a concession operating fee of $0.26 where there are alcohol restrictions a credit card processing fee of 3% for tickets paid for by credit card * 2016-2017 rates Proposal to Amend Operating Agreement The City has received a proposal from 1930178 Ontario Limited (Sudbury Wolves Hockey Club) to expand upon the existing operating agreement relating to use of the Sudbury Community Arena. The proposal includes taking over full management of the Sudbury Community Arena, including responsibilities for event management and box office services. The proposal notes the recommendations contained in the recent Feasibility and Business Case Assessment for a Proposed Sports and Entertainment Centre with regards to a private facility operator (http://agendasonline.greatersudbury.ca/index.cfm?pg=feed&action=file&agenda=re port&itemid=1&id=1124). This report notes the following rationale for retaining a private facility operator: more access to the entertainment and event promotion/agent industry revenue maximization management efficiencies and cost containment more effective branding and marketing separation of municipal responsibility and influence The proposal advocates for the Sudbury Wolves Hockey Club to take on the full responsibility for all revenues and expenses related to the operation of the Sudbury Arena in exchange for a guaranteed amount from the City and the potential for revenue sharing for new revenues that the Sudbury Wolves may realize. The proposal also suggests that the financial viability of the local National Basketball League of Canada franchise recently purchased by the club is predicated on being able to further operate the facility. The proposal states that the annual impact to the City levy will be reduced through a revised operating agreement. The Sudbury Wolves Hockey Club would assume the responsibility of the Sudbury Community Arena operations. The Club would take full responsibility for all revenues and expenses associated with the operation of the arena, which on average has experienced losses of $541,482 over the past 3 years. The City would contribute one half of these losses in the amount of $270,741 and all risk will be taken on by the Club. Furthermore, the Club is proposing that the Club would provide the City 10% on every dollar of revenue generated in excess of $1,190,225. This amount represents the average annual revenue of Sudbury Community Arena operations for the past three years of $919,554 plus the $270,741 which the Club is contributing towards the facility. Proposal Review A meeting was held with representatives of the Sudbury Wolves Hockey Club to gain clarity and further discuss the proposal received. The Club confirmed that all unionized personnel at the Sudbury Community Arena would continue to be employed by the City and would continue to perform their duties as contained in their job descriptions and continue to be covered by the terms and conditions of the relevant collective agreements. These employees would report to the City’s Manager of Arenas but provided day-to-day direction by representatives of the Sudbury Wolves Hockey Club. The City would continue to own the fleet of ice resurfacers and pay Fleet for the machines through an internal recovery. The Club has indicated that they would like to continue use of the City ticketing software. Further examination on if this contract can be assigned is required. The Club has also stated they would prefer to continue to make use of the City’s information technology equipment (computers) and network. All other equipment and furnishings would remain property of the City and returned to the City at the end of the amended operating agreement. The City has also identified the following items which would need to be included as part of any proposed amended agreement: the need to provide 24 hours per week of prime ice time during the hockey season to local minor sports associations currently using the Sudbury Community Arena, at rates established by the City’s User Fee By-Law the need to provide the facility to community events such as the annual Canada Day Multi-Cultural event and Remembrance Day ceremony as per current City arrangements the need to honor any existing Facility Agreements already in place for future events The need to honor any hold dates for potential future events the Club would need to honor the commitment of hosting the 2018 Telus Cup at the Sudbury Community Arena If Council directs staff to amend the existing use and occupation agreement with the Sudbury Wolves Hockey Club, the following would also form part of negotiations: requirements for performance securities in the form of a bond or letter of credit development of financial audits and controls development of performance standards, building audits to ensure for the preservation of City assets and equipment Health & Safety requirements Recommendation The following recommendation is presented to Council for consideration: THAT the City of Greater Sudbury amends the existing use and occupation of space agreement with 1930178 Ontario Limited (Sudbury Wolves Hockey Club) on the basis of the proposal outlined in the report entitled "Sudbury Community Arena Operating Agreement", dated May 31, 2017 and subject to the negotiations of terms and conditions required for the safe and effective operation of the Sudbury Community Arena. This would see the Sudbury Wolves Hockey Club take on full responsibility of all revenues and expenses identified in the report related to the operation of the Sudbury Community Arena. Additional responsibilities for event management and box office services would be part of the amended agreement. Considerations identified in the report would also form part of any revised agreement. It is recommended that an incremental approach for the transferring of management of the Sudbury Community Arena functions takes place over a five month period, with full transfer of management functions effective January 1, 2018. Any savings proposed would not be fully realized until full transferring of responsibilities has occurred. If the resolution is not passed, there would be no changes to the existing agreement with the Sudbury Wolves Hockey Club. The Club could perform event promotion functions, including the new National Basketball League of Canada franchise events, through separately negotiated event contracts, as per the current agreement with the Club. Next Steps If Council directs staff to amend the existing use and occupation agreement with 1930178 Ontario Limited (Sudbury Wolves Hockey Club), Leisure Services would work with Legal Services and other appropriate departments on the amended agreement, subject to successful negotiations. The transferring of Sudbury Community Arena management functions would take place over a five month period, with the full transferring of management functions effective January 1, 2018. If the existing use and occupation agreement with the Club remains unchanged, separate event contracts would be negotiated for any non-OHL events, including National Basketball League of Canada events that the Club may undertake. .