Fresh off the heels of announcing the Alabama Shakes would be performing at the Saenger Theater on Dec. 8 and after a Sept. 9 meeting between City Councilors and SMG and Huka Entertainment officials, at least two councilors are still not sure the proposed agreement between the city and SMG for a three-year contract managing the Saenger Theater is best for the downtown landmark.
That could spell trouble for the Alabama Shakes and the Saenger if an agreement is not met before Oct. 1.
When the Centre for Living Arts turned the historic theater back over to the city in March, the administration set up a six-month budget. Also, several city employees were placed at the Saenger in order to help keep the doors open. That all ends soon.
The end of that six-month period is Oct. 1. If there is not a management company in place, then the city has two options — close the Saenger’s doors or add money to the budget for the city to manage the theater, according to city officials present at a meeting of the City Council’s Cultural Committee Monday afternoon. The mayor’s Chief of Staff Al Stokes raised the specter of the theater being shut down if a management deal is not in place at the end of this month.
By closing the doors, the city would miss out on not just the Alabama Shakes and the 15 other events booked before the end of 2013, but also four unnamed acts that Huka Entertainment secured on the basis they would be working with SMG. Still, during today’s meeting Councilors Bess Rich and John Williams still had doubts about the deal.
SMG was one of two companies that bid to manage the Saenger Theater. Huka Entertainment came aboard in a non-exclusive role with SMG to book shows at the theater. SMG, which manages the Civic and Convention centers, would only manage the theater’s day-to-day operations.
What made SMG the recommended choice of the city administration is that the contract is performance-based. That means the city would not put any more money into the Saenger than it already is and actually could create a situation in which the city could share any profits.
When the CLA was in charge of the Saenger, the city paid the group $200,000 annually. Based on that benchmark, the performance-based contract was created.
If SMG can’t decrease the $200,000 spent by the city each year for the Saenger, then it does not receive any performance money. However, SMG can keep half of whatever it saves the city, up to the first $200,000. SMG gets to keep 25 percent of any actual profit once the initial $200,000 in operation expenses are covered.
Based on numbers estimated by Sam Voisin, SMG Regional General Manager, the theater will still be losing money within a three-year period. However, the Saenger should slowly start to get better financially.
Voisin projected in the first year of management (from Oct. 1, 2013, to Oct. 1, 2014), there will be 64 shows or events at the theater. Those events would be attended by approximately 54,240 people and produce $261,808 in revenue. The revenue would offset the $430,364 in expenses, which would leave a net loss of $168,556.
Since that net loss is still less than the city’s current Saenger expense of $200,000, SMG and the city would split the $31,444 savings.
That means if SMG is approved to manage the theater and performs as expected, it will receive $15,722 as its fee and the city would pocket that same amount as a savings from the $200,000 originally budgeted.
The second year projections by Voisin see 67 performances with 57,841 attending. That would hopefully produce revenue of $286,578, with expenses totaling $441,879. The theater will still have a net loss of $155,301. If these numbers prove to be correct, then SMG will be paid $22,349 and the city would save that same amount from the original $200,000 budgeted.
The third year Voisin projected the Saenger to have 69 performances with 60,763 people in attendance. The revenue would be approximately $306,410, but the expenses would be $453,501. That would still result in a loss of $147,084, which would mean a savings of $52,916.
Councilwoman Bess Rich was skeptical of the projected expenses and that’s why she said she couldn’t support the proposed agreement just yet.
“Due to the length of the contract and because I think expenses with the Saenger will cost more than $430,364, I can’t support this yet,” she said.
Rich asked Voisin if SMG would consider a one-year contract, but he said that didn’t offer incentive.
“The problem with that is there is no benefit to improve the theater,” he said. “A performance-based contract has to be longer than a year because you need time to make improvements.”
Councilman John Williams said he had more questions from the meeting than answers.
“I would move the committee to not recommend this agreement,” he said. “There are too many questions still out there.”
Voisin said he would do everything to answer any questions.
Councilmen Fred Richardson and CJ Small threw their support behind SMG, while Councilman William Carroll, who represents the downtown district, remained mum. Councilwoman Gina Gregory had to leave the meeting early and City Council President Reggie Copeland was not in attendance.
President of Huka Entertainment A.J. Niland and Executive Director of Cultural & Civic Development Bobby Bostwick each offered support for SMG management over city management. Niland said the four acts ready to play the Saenger that Huka booked, will only come on the condition that the partnership between SMG and the city is ratified. He explained how a good manager makes the difference between booking at one venue over the other.
Huka at one point, Niland said, booked frequently at the Saenger Theater until the last switch in CLA management. He explained how issues with “holds,” or reserving dates for acts caused the pullback.
“When the CLA changed the management at the Saenger, we at Huka decided to take a break from booking because it was not run the way we would have liked,” he said. “There is a certain way that things are run in the business based on holds. If that’s messed with, then producers can’t run effectively. That’s what happened at the Saenger so that’s why we took a break. The Saenger is a great venue and it’s easy to book if the management is right.”
Bostwick, who oversees BayFest, said many acts do not want a city-managed venue, but would prefer a company like SMG running the Saenger.
“The acts know walking in, there is someone, or a company, who knows what to do and knows what’s done other places,” he said.
The council is expected to vote on the proposed agreement tomorrow.
Stokes summed up the councilors’ choice saying, “At the end of the day, you have to ask yourself if this is the best deal. If not, then it’s time to find the next deal.”
However, the next deal will have to be found in just 20 days if the council denies the agreement.