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Convention Center Needs $69 Million Injection, Levi’s Hires New Concession Company

A consultant hired by the Santa Clara City Council said revamping the convention center so that it stops running at a deficit will take a $69 million investment.

For the past decade, the Santa Clara Convention Center & Visitors’ Bureau has lost money, costing the City roughly $10 million over that time. During a study session Tuesday night, Dan Fenton, Executive Vice President at Jones Lang Lasalle (JLL), told the Council that in order to get the Convention Center generating money, it needs to “increase destination appeal.”

The Council hired JLL, a Menlo Park-based property management company, to the tune of $170,000 in April last year to look into the Convention Center’s operations. The Convention Center has operated under the same contract since 1984. While the Convention Center is managed by the Santa Clara Chamber of Commerce, all its profits and debts are bore by the City.

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Ruth Shikada, Assistant City Manager said part of the problem is that the Center has no metrics for performance. In order to establish what kind of Convention Center the City wants to run, she said the City might need to terminate the management agreement.

“It is dated; it doesn’t have the more modern features of a more modern contract,” she said. “On a day-to-day basis, we really haven’t been reinvesting back into the building like we should have.”

In order to amp up operations, Fenton said a $5 million investment to bring basic functions—such as the electrical, heating and cooling systems and elevators—up to snuff is “critical.” Otherwise, he said, if the Convention Center starts to see more business, it runs the risk of “major systems not functioning.”

However, if the Council wants the Convention Center to do more business to ensure it starts operating in the black, Fenton said other major renovations—updating the restrooms, wall coverings, carpets and other cosmetic upgrades—are also necessary. Those upgrades will cost another $64 million.

There is no funding source for the upgrades. City Manager Deanna Santana said pushing the work back could escalate the cost.

“We are working against time,” she said.

Several members of the Council, City employees and Fenton referred to the situation with the Convention Center as a “puzzle.”  The City used to receive roughly $2.5 million annually from the land, but since the dissolution of redevelopment agencies in 2012, that is no longer true.

“That really puts a crimp in your business model even when the economy is good,” City Attorney Brian Doyle said.

To make the Convention Center viable, Fenton said it needs to host more citywide events as well as increase the amount of traffic coming through it, specifically those that require their attendees to stay in local hotels. Over the past few years, citywide events have been stagnant, roughly three a year. Fenton said that number should be between 10 and 20 a year; the City’s potential Convention Center users should be roughly 500, much higher than the 30 it has. However, Fenton said he expects to have 55 percent of the likely Convention Center users identified by the end of the fiscal year.

Sarah McDermott, a lobbyist with Unite Local 19—a union—said her group supports the project so long as the expansion extends “good quality” jobs to local workers.

“Growth can be great,” she said. “We have to make sure we are keeping workers in the forefront of this conversation.”

Fenton agreed with Council Member Patricia Mahan’s claim that convention centers are not usually money-makers on their own, so much as they drive economic activity of other sorts.

“I think there would not be the robust economic activity north of Bayshore if not for the Convention Center,” said Council Member Dominic Caserta.

Doyle said although he cannot “guarantee” anything, the goal is to have the remainder of the former RDA land sold by July 1, and Santana said the “big ticket” decisions—i.e., the finances of how to proceed—will likely come before the Council sometime between October and November. The City will receive about 10 percent of the sale proceeds.

Levi’s Stadium Concession Contract

Following the study session and Council meeting, the Santa Clara Stadium Authority Board agreed to change concession contractors at Levi’s Stadium.

The five-year contract with Centerplate was set to expire in April, but Jim Mercurio, Manager at the stadium, came before the board asking for its approval to change the contractor to Chicago-based Levy Restaurants.

Concession satisfaction rates have been trending down the last couple years, Mercurio said. The situation came to a head during last year’s U2 concert—which he called the “pinnacle”—when many concert-goers complained about the concession wait times and food availability.

One of the reasons Levy was the best choice for the contract, Mercurio said, was the company’s ability to maintain the City’s 48 percent share of concession revenue. Centerplate, conversely, was only able to offer a 20 percent share. Additionally, Levy was willing to pony up $22 million for capital investment projects over the 12 year contract.

That cash influx, Mercurio said, will allow the team to spend Levy’s money for improvements instead of the team’s money or the City’s money.

However, Mayor Gillmor called the length of the contract “scary,” noting how lauded Centerplate was when the Council awarded it the contract only to have that contract voided before its expiration. As for the percent of the concession revenue that comes back to the City, Gillmor said the board doesn’t have a clear sense of what that number looks like as it is.

“We have no idea what we have been making in concessions over the past four years,” she said. “You could tell us we were making 24 percent, 50 percent; we wouldn’t even know.”

The contract is the first to come under the purview of the City’s new worker retention ordinance, passed last year.

“It is important that we protect and retain these employees,” she said.

Mercurio agreed with the Mayor’s statement.

Doyle said the contract has provisions to terminate the contract if performance guidelines are not met, editorializing off topic that it is a “provision I would love to have in our agreement with the 49ers.”

Mercurio said no employee has been discharged without cause.

“There won’t be jobs lost,” he said.

The motion to approve the contract passed unanimously.

Council Members Teresa O’Neill and Pat Kolstad were absent.

The City Council will meet again 7 p.m. Tuesday, March 6; the Stadium Authority Board meets again 7 p.m. Tuesday, March 27. Both meetings will take place in Council Chambers at City Hall, 1500 Warburton Ave. in Santa Clara.

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