1. Convention Center Authority Republican Policy Group Presentation February 23 rd 2015

2. Contents Introduction to the Convention Center Introduction to the Convention Center Description of each entity Description of each entity –RI Convention Center Authority –RI Convention Center & Parking –Dunkin’ Donuts Center –Veterans Memorial Auditorium Areas of Concern Areas of Concern Moving Forward Moving Forward

3. Introduction Picturing the Convention Center Authority Picturing the Convention Center Authority 4 Parts to the Organization 4 Parts to the Organization –Administrative Layer at the Top  Convention Center Authority –3 Distinct Venues  Convention Center & Parking  Dunkin’ Donuts Center  Veterans Memorial Auditorium

4. Introduction (Continued) Convention Center & Parking Complex Convention Center & Parking Complex –Construction completed in 1994 –Issued $225 million debt to fund construction in 1991 –Sold additional $98 million for hotel & parking build Legislation created the Convention Center Authority in 1987

5. Introduction (Continued) Dunkin’ Donuts Center Dunkin’ Donuts Center –Built in 1972 –Convention Center Authority Purchased from the city of Providence in 2005  Spent $28.5 mm to buy  Spent $64.0 mm to renovate Westin Hotel Westin Hotel –Sold hotel in 2005 for $90,085,000 –Proceeds used to retire debt

6. Introduction (Continued) Veterans Memorial Auditorium Veterans Memorial Auditorium –Construction began in 1927 but wasn’t completed until 1950 –RI State Properties Committee approved the transfer of the VMA to CCA in 2008  Annual lease payment of $1 per year  DOA pays portion of expenses

7. RI Convention Center Authority Administrative Head of the Corporation Administrative Head of the Corporation –Function  Manage and operate the convention center complex, parking facilities and the Dunkin’ Donuts Center  Management oversight of the Veteran’s Memorial Auditorium in conjunction with the Department of Administration –Currently, under a 5 year lease agreement

8. RI Convention Center Authority Authority employs and pays for multiple management companies Authority employs and pays for multiple management companies –SMG Management  Convention Center -- $375,000  Dunkin Donuts Center -- $100,000 –Professional Facilities Management  Veterans Memorial Auditorium  Management & Centralized Service Fee--$247,000

9. Note: Some positions may have changed due to the new Administration

10. Convention Center Authority Office Composition Office Composition –4 full time employees and 1 part-time  FY 2015 Cost for salaries $626,000 –Total FY 2015 Budget:  $3,035,909 Note: Note: –This portion of the company does NOT generate revenue  Overhead/Administrative cost –Staff & Board Member Parking Expense -- $66,700

11. Convention Center & Parking Largest Segment of the Authority Largest Segment of the Authority Largest profitable area of the Authority Largest profitable area of the Authority –Parking Garage generates most profit Total Earned: FY 2015: $2.5 million Total Earned: FY 2015: $2.5 million

13. Convention Center & Parking Departments & Expenses to Keep in Mind Departments & Expenses to Keep in Mind –Executive – $323,000 –Finance -- $361,000 –Sales -- $658,000 –Operations -- $2,582,000 Automobile Allowance for 7 Directors Automobile Allowance for 7 Directors –$29,050 expense

14. Dunkin’ Donuts Center Second Largest Venue Second Largest Venue Operates at a Loss Operates at a Loss –FY 2015: -$300,000  On total revenue of $7.8 million Duplicated Expenses Duplicated Expenses –Overhead/Management/Operations

16. Dunkin’ Donuts Center Departments & Expenses to Keep in Mind Departments & Expenses to Keep in Mind –Executive – $451,000 –Business Services -- $242,000 –Marketing -- $199,000 –Operations -- $2,265,000 Automobile Allowance for 4 Directors Automobile Allowance for 4 Directors

17. Veterans Memorial Auditorium Smallest Segment of the Authority Smallest Segment of the Authority Claims Profitability In Reports Claims Profitability In Reports –Projects a $64,000 profit for FY 2015 Expense Assistance from the State Expense Assistance from the State –Additional $250,000 of expenses are paid by the state

18. Veterans Memorial Auditorium Expense Assistance Expense Assistance –The Lease Agreement requires the Department of Administration to pay a portion of some expenses  Snow removal -- $7,000  Water & Sewage -- $33,800  Electrical -- $90,000  Gas -- $120,000 Result Result –VMA would operate at a loss if these expenses were paid by Authority

20. Veterans Memorial Auditorium Expenses Expenses –Most expenses unrelated to Direct Events  Direct expenses relating to events: $362,000  Administrate Expenses: $562,000 Management Company Management Company –PFM cost : $247,000

21. Concerns Lease & Agreement Lease & Agreement Debt Service & Annual Appropriations Debt Service & Annual Appropriations Lack of Efficiency Motive Lack of Efficiency Motive Departmental Duplication Departmental Duplication Management Company Redundancies Management Company Redundancies Additional Areas of Concern Additional Areas of Concern

22. Lease Agreement Pursuant to a “Lease & Agreement” signed 11/1/1991 & 11/30/2005 Pursuant to a “Lease & Agreement” signed 11/1/1991 & 11/30/2005 –CCA leased the Convention center facilities to the state  State is obligated to make lease payments “in an amount sufficient to pay the operating expenditures of the Authority and the debt service”  Subject to annual appropriations by the GA

23. Prior to the Lease Agreement Bond Liability Bond Liability –State was not liable for bonds  “obligations issued by the Authority do not constitute a debt or liability or obligation of the state” –Security of Debt  “Bonds are secured solely from the pledged revenues or assets of the Authority”

24. Debt Service Initial Debt Issued Initial Debt Issued –November 1991: $225 million –July 1993: $98 million Debt Remaining Debt Remaining –As of June 30 th 2013: $237,770,000

25. Annual Appropriations General Assembly Funding the CCA General Assembly Funding the CCA –Debt Service: Estimated $23 million annually –RICAP: FY 2015: $2.387 million  Capital Project Expenses  Varies with the year Appropriations to Date (already paid) Appropriations to Date (already paid) –Debt Service: $419,765,000 (nominal) –RICAP: $33,296,000 (nominal)

26. Future Requirements Debt Service Debt Service –Principal Remaining: $220,330,000 –Interest Remaining: $111,380,000 Total Public Funding (Paid and Future) Total Public Funding (Paid and Future) –$786,286,789  Fully tax-payer funded  Originally, the state had no obligation to pay these bonds

27. Efficiency Motive? Since the GA funds for operations, is there a motive to be efficient? Since the GA funds for operations, is there a motive to be efficient? – Where is there a need to cut down on duplicative departments or functions? –Where is there a need to contain salary expenses? –Where is the need to streamline costs and compete?

28. Department Duplication Convention Center & Parking Convention Center & Parking –Executive: $323,000 –Finance: $361,000 –Sales:$658,000 –Operations: $2,582,000 Dunkin’ Donuts Center Dunkin’ Donuts Center –Executive: $451,000 –Business Services: $242,000 –Marketing: $199,000 –Operations:$2,265,000 Event income for Convention Center is $9.0 mm Event income for the Dunkin’ Donuts Center is $4.5 mm Both have similar executive/operational expenses. Both use a management company

29. SMG Worldwide SMG offers SMG offers –Dedicated national sales and marketing systems –National contracts to help facilitate bookings –A network of Directors to share leads and client information –Lead generation –Proprietary client database –National tradeshow exposure –Telemarketing programs http://smgworld.com/convention-center-services/

30. Concerns (Continued) Why employ 11 (potentially more) director level positions and spend $722,000 annually for a management company? Why employ 11 (potentially more) director level positions and spend $722,000 annually for a management company? The Authority would go bankrupt without yearly cash infusions of public money. The Authority would go bankrupt without yearly cash infusions of public money. Lack of competitive framework. Lack of competitive framework.

31. Moving Forward Renew the call for greater transparency Renew the call for greater transparency Pressure the lax budgetary ideology Pressure the lax budgetary ideology Request additional information Request additional information