LA WATCHDOG--It is not government’s obligation to provide services, but to see that they are provided. – New York Governor Mario Cuomo
The Los Angeles Convention Center reported an operating surplus of over $10 million for the fiscal year ending June 30, 2017, a significant turnaround from the deficits that were incurred when the Convention Center was managed by the City of Los Angeles prior to December of 2013. (Photo above: Los Angeles Convention Center.)
Of this $10 million, the Convention Center will transfer $3.1 million to the City to pay for the Convention and Tourism Development Department, to cover $1 million of the $3.5 million Staples debt service payment, and to reimburse various City departments for their services.
The balance of the surplus, other than $1 million that was directed to the Convention Center’s Reserve Fund, was reinvested in the facility through its Capital Improvement and Alteration and Improvement initiatives.
Underlying this metamorphosis from a drag on the City’s budget to a profitable enterprise that is generating record revenues is the implementation of a public private partnership orchestrated by Miguel Santana, the City’s former City Administrative Officer.
In December of 2013, the City entered into a five year management agreement with Anschutz Entertainment Group where AEG would operate the Convention Center.
Since that time, AEG has generated $27 million in operating surpluses, reinvested $12 million in building improvements, established a $7 million Reserve Fund, and contributed millions to the City’s budget. The Convention Center is also contributing almost $700 million to the local economy through increased utilization of the facility that resulted in over 300,000 booked hotel nights and increased spending in DTLA and the rest of the City and surrounding communities.
For its services which included rationalizing the parking situation through improved systems, increasing the contribution from the food and beverage operation, and ramping up security, AEG received a management fee of only $350,000 and an incentive fee of a like amount. This is a bargain at two or three times the money paid to AEG.
Of course, AEG is benefitting from the economic activity at LA Live, Staples, and the Microsoft Theatre where it has invested billions as a pioneer in rejuvenating DTLA.
While many criticized the outsourcing of the management of this valuable City asset, all of the over 100 City employees that worked at the Convention Center continued to have jobs with the City or AEG or retired with very generous City pensions.
This public private partnership that is providing outstanding service to its many stakeholders and generating millions for our cash starved City is an excellent example of why the City needs to investigate other outsourcing arrangements. This would include the repair and maintenance of our streets, sidewalks, parks, and urban forest; vehicle maintenance; street cleaning; the Zoo; information technology; and numerous other services, both large and small.
While the City’s unions will go ballistic over the thought of any outsourcing, this may free up valuable resources to devote to other priorities, including, but not limited to, the homeless and affordable housing.
This sure beats another tax increase for hard working Angelenos.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council. He is a Neighborhood Council Budget Advocate. He can be reached at: firstname.lastname@example.org.)