Title
AMENDMENT NO. 3 TO THE INTRUST BANK ARENA MANAGEMENT AGREEMENT BETWEEN SEDGWICK COUNTY AND SMG.
Presented by: Ron Holt, Assistant County Manager.
RECOMMENDED ACTION: Approve the amendment to the agreement and authorize the Chairman to sign.
Body
On August 1, 2007 the County entered into an agreement with SMG, a Pennsylvania general partnership, to provide pre-opening consulting services for the INTRUST Bank Arena and management services for the INTRUST Bank Arena and the Kansas Coliseum Complex.
The agreement contains separate requirements for SMG (1) to provide services during the pre-opening period while the new arena was being planned, designed and constructed; (2) to provide management services for the Existing Facility (i.e., Britt Brown Arena - if the County elects to continue to use it as an event venue, all Pavilion facilities and other facilities that are part of the Kansas Coliseum Complex); and, (3) provide management services for the INTRUST Bank Arena being constructed in downtown Wichita.
The Original Agreement was amended as follows:
1. On August 13, 2008, the County and SMG agreed to Amendment # 1, adjusting provisions pertaining to the Operating Expenses, Transition Period, Transition Services, and Management Term pertaining to the "Existing Facility" which is no longer owned or operated by either the County or SMG; and
2. On October 28, 2009, the County and SMG agreed to Amendment # 2, relating to the "Existing Facility" which is no longer owned or operated by either the County or SMG.
This Amendment further amends the Original Agreement with respect to the New Facility as follows:
1. Section 3.2 "Management Term and Renewal," subsection (b) and (c) are deleted in their entirety
(b) The Management Term for the New Facility shall commence when it hosts its first event that is open to the public (anticipated to be October 1, 2009) and will continue through December 31st of the fifth (5th) full year thereafter, unless earlier terminated pursuant to the provisions of this Agreement. The parties will confirm in writing the commencement date of the Management Term promptly after its commencement.
(c) The parties may, in their sole discretion, mutually agree to extend the term of this Agreement for an additional five-year period commencing at the end of the Management Term for the New Facility set forth in Section 3.2(b) above. Notwithstanding the foregoing, if the County receives more than One Million Seven Hundred Thousand Dollars ($1,700,000) in the aggregate during the New Facility's Management Term pursuant to Section 4.3 hereof, then this Agreement shall automatically renew for such additional five (5) year period.
and replaced with the following new subsection 3.2 (b):
(b) The Management Term for the New Facility shall continue through 2014 and be extended for a period of six years commencing January 1, 2015, and ending on December 31, 2020. In the event the County receives more than Eight Hundred and Fifty Thousand Dollars ($850,000) in the agreement between January 1, 2015, and December 31, 2019, a period of five (5) years, pursuant to Section 4.3 of the Original Agreement, and as amended by this Agreement, then the Agreement shall automatically renew for an additional five (5) year period commencing on January 1, 2021 and ending December 31, 2025. The parties may, in their sole discretion, mutually agree to extend the term of this Agreement for an additional five (5) year period at any time prior to the expiration of this Agreement.
2. Section 4.3 "Fees With Respect to the New Facility" is amended as follows:
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(a) With respect to the operation of the New Facility during the Management Term and Renewal Term, if any, SMG will be solely responsible for any Net Operating Losses incurred at the New Facility in any such Fiscal Year as provided herein. As compensation to SMG for providing the services herein specified for the New Facility during the Management Term and any Renewable Term, during each such Fiscal Year (or portion thereof) SMG shall be entitled to the compensation described in subsections (ii) and (provided there is sufficient Net Operating Profit) (v) below and the Net Operating Profit in each such Fiscal Year (or portion thereof) shall be distributed to the parties in the following order of priority:
(i) First, to the extent that SMG has funded any Net Operating Losses at the New Facility in any prior Fiscal Years as provided herein, Net Operating Losses shall be distributed to SMG until SMG has fully recouped such funded losses.
(ii) Second, the next (or first, if there is no distribution under subsection (i) above) $450,000.00 of Net Operating Profit shall be retained by SMG.
(iii) Third, the next $450,000.00 of Net Operating Profit shall be retained by the County.
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(a) With respect to the operation of the New Facility during the Management Term and the Renewal Term, if any, SMG will be solely responsible for any Net Operating Losses incurred at the New Facility in any Fiscal Year as provided herein. As compensation to SMG for providing the services herein specified for the New Facility during the Management Term and any Renewal Term, during each such Fiscal Year (or portion thereof) SMG shall be entitled to the compensation described below.
(i) First, to the extent that SMG has funded any Net Operating Losses at the New Facility in any prior Fiscal Years as provided herein, Net Operating Profits shall be distributed to SMG until SMG has fully recouped such funded losses.
(ii) Second, the next (or first, if there is no distribution under subsection (i) above) $400,000.00 of Net Operating Profit shall be retained by SMG.
(iii) Third, Net Operating Profit in excess of $400,000.00 shall be divided in equal shares (50/50) between the County and SMG.
Subsections (a) (iv) and (a) (v) are hereby deleted in their entirety:
(iv) Fourth, to the extent that the County expends funds to pay for Capital Improvements and/or Capital Equipment purchases pursuant to Section 5.8 hereof in any prior Fiscal Year in excess of Two Hundred Fifty Thousand Dollars ($250,000.00), Net Operating Profits shall be next distributed to the County to cover the amounts in excess of $250,000.00 spent by the County on such improvements and equipment purchases. Notwithstanding anything to the contrary contained in this Agreement, the following items shall not count as Capital Improvements and /or Capital Equipment purchases for purposes of determining amounts expended by the County for which it may receive reimbursement pursuant to this subsection (iv): (A) any structural elements (e.g., the roof to the New Facility) and/or any major systems servicing the New Facility (e.g, HVAC and electrical), unless the cause for such expenditure is directly due to SMG's breach of its obligations under this Agreement, (B) expenditures that are covered under applicable manufacturer's warranties for any such item, except to the extent that recovery under such manufacturer's warranty is adversely affected by SMG's breach of its obligations under this Agreement, and /or (C) any such items that were originally included in the capital budget for the construction of the New Facility, but were not purchased in connection with the completion of the New Facility. (v) Any Net Operating Profit in excess of the amounts covered in subsections (i) through (iv) above shall be allocated sixty percent (60%) to the County and forty percent (40%) to SMG.
3. Section 5.10 "Funds for Emergency Repairs" is hereby amended as follows: the first "with" in the first sentence is deleted and amended with the word "without". The rest of this section remains unchanged.
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SMG shall have the right to act, with the consent of the County, in situations which SMG reasonably determines to be an emergency with respect to the safety, welfare and protection of the general public, including spending and committing funds held in the operating account(s) of each Facility, even if such expenses are not budgeted; provided, however, (i) with respect to the Existing Facility, SMG shall have no obligation under any circumstance to spend or commit funds other than funds then available in the Existing Facility account(s) for any such purpose, an d(ii) with respect to the New Facility, if such emergency expenses are for Capital Equipment and/or Capital Improvements, SMG shall have no obligation under any circumstance to spend or commit funds other than funds then available in the New Facility account(s) for any such purpose. Immediately following such action, SMG shall inform the County of the situation and the action(s) taken, and the County shall pay into the appropriate account(s) the amount of funds, if any, spent or committed by SMG pursuant to this Section 5.10 in excess of budgeted amounts for (i) the Existing Facility or (ii) Capital Equipment and/or Capital Improvements for the New Facility.
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SMG shall have the right to act, without the consent of the County, in situations which SMG..
4. New Section 5.11 "Event Promotion Fund" shall read as follows:
In the interest of attracting events to the INTRUST Bank Arena that might not otherwise appear without additional financial inducement on the part of SMG, there is hereby created an "Event Promotion Fund." SMG agrees that commencing January 1, 2015, it will provide $200,000 for this fund. Such funds shall be held in a segregated account and cannot be used for any other purpose than to attract shows or events that would likely not come to the arena absent said financial inducement, including such shows or events as to which SMG may serve as promoter or co-promoter. Proposals by SMG to use funds in the Event Promotion Fund must receive prior approval by the County's Contract Administrator, which approval will not be unreasonably withheld. Money expended from the Event Promotion Fund will be shown as expenses for said events and if the event makes a profit, the profit will be included in the new income. The Event Promotion Fund will be in place for a period of three (3) years and ending on December 31, 2017, unless the parties mutually agree to extend said fund beyond the original three (3) year period. At the end of each calendar year, any deficit in the fund below $200,000 will be restored by the County in order to begin the following year with the full amount of funds. If at the end of the three (3) year period the parties do not agree to extend the fund for any additional period of time, the fund will be made whole and the proceeds in the fund will be returned to SMG.
5. Section 5.8 "Capital Improvement; Capital Equipment" is hereby amended as follows: the second sentence is deleted
With respect to each of the Existing Facility and the New Facility, the obligation to pay for Capital Improvements and Capital Equipment purchases shall remain with the County and will not be considered Operating Expenses. The annual plan submitted pursuant to Section 6.2 for each such Facility shall include SMG's recommendation for Capital Improvements and Capital Equipment purchases to be accomplished during the year and shall be accompanied by an estimate of the cost of all such items and projects and a request that the County budget funds therefore. The County shall retain the discretion to determine whether and to what level to fund Capital Improvements and Capital Equipment purchases to each such Facility, except that with respect to the New Facility, SMG and the County shall mutually agree upon the Capital Improvements and Capital Equipment purchases to be funded by the County in any Fiscal Year during the Management Term and any Renewal Term for the New Facility (which agreement shall be at each party's sole discretion, not to be unreasonably withheld). If requested by the County, SMG, or others engaged on its behalf, shall perform, direct and supervise Capital Improvements and Capital Equipment purchases which are authorized in writing by the County or included in any annual plan approved by the County pursuant to Section 6.2. Any reasonable expenses incurred by SMG in performing, directing and supervising Capital Improvements and Capital Equipment purchases shall be billed by SMG to the County and paid by the County within thirty (30) days thereafter.
the second sentence is replaced with
With respect to each of the Existing Facility and the New Facility, the obligation to pay for Capital Improvements and Capital Equipment purchases shall remain with the County and will not be considered Operating Expenses. The annual plan submitted pursuant to Section 6.2 for such Facility shall include (a) a five year capital improvements/capital equipment program, (b) SMG's recommendation for capital improvements and capital equipment purchases to be accomplished during the year, and (c) and an estimate of the cost of all of such items and projects and a request that the County budget funds therefor. The County shall retain..
6. Except as amended by this agreement, all of the terms and conditions of the Original Agreement shall remain unaltered and in full force and effect and hereby ratified and confirmed in all respects, as hereinabove amended. Any reference in the Original Agreement, or in any instrument, documents or consideration executed or delivered pursuant to the Original Agreement to "this Agreement," "hereof," "hereto," and "hereunder," and similar references thereto shall be deemed and construed to be a reference to the Original Agreement and as amended by this Amendment No. 3.
Financial Considerations: As outlined above, the contract modifies the net operating income received by the County, as well as provides for an Event Promotion Fund. Refer to the attached contract for details.
Legal Considerations:
Policy Considerations:
Outside Attendees: AJ Boleski, General Manager, INTRUST Bank Arena - an SMG managed facility; and, Joe Romano, Senior Regional Vice President, SMG Worldwide Entertainment and Convention Venue Management
Multimedia Presentation: