The management company in charge of three of the city’s most popular entertainment venues can’t lose money on the deal, but is incentivized to bring in big-name, popular acts.
During a recent Mobile City Council pre-conference meeting, Chief of Staff Colby Cooper told Councilman John Williams the administration has decided to extend the contract with SMG for the Mobile Civic Center and the Arthur Outlaw Convention Center and send out a request for proposals for the management of the Saenger Theatre.
The city purchased the Saenger from the University of South Alabama in 1999 and managed the facility through the Centre for the Living Arts.
The CLA operated the theater for most of the time the city owned it. The city managed the theater from March 2013 to September 2013, losing $60,000 during that time. Finance Director Paul Wesch said the city paid the CLA at least $200,000 per year for management for the facility. The cost was likely more than that.
“We wanted to get out of it,” Wesch recalled.
In March 2013 the city entered into an agreement with SMG for management of the theater, using the $200,000 loss as a baseline. As part of that initial three-year deal, which is set to expire in October, payment of a management fee to SMG was contingent on the theater losing less than $200,000 per year.
“If SMG loses $200,000 or more a year, they get no fee,” Wesch said. “If they lose less than $200,000 they get a fee based upon the difference.”
The agreement paid SMG half of the difference between whatever the theater made or lost in a given fiscal year and the $200,000 loss the city paid to manage the facility previously, Wesch said.
For example, in 2014 SMG lost $46,806 on the Saenger Theatre. That figure is about $153,000 less than the loss experienced before they took over management. Therefore, in fiscal year 2014 SMG received half, or roughly $77,000 in management fees.
SMG’s performance at the Saenger has increased each year of the contract. The theater saw a loss of only $31,000 in fiscal year 2015, resulting in a management fee of more than $84,000.
Wesch said the city benefits with the success of SMG at the Saenger.
“On its face it sounds like they’re losing less money, but getting more money,” Wesch said. “My impression is when the city bought the Saenger, they did so because they felt it was an important city service and you lose money on every service. We wanted to spend as little as possible on this city service.”
If $200,000 is used as the baseline, then each year since 2013 the city has spent less on the theater, even though more money has gone to SMG’s fee. In 2014, the city spent roughly $123,806 and in 2015 the city spent $115,000 total.
SMG has been able to turn a profit thus far in fiscal year 2016. Through March 31, the Saenger is $23,344 in the black. If the fiscal year were to end now, SMG would get a $100,000 management fee, plus 25 percent of the profits, or about $105,000. The total cost to the city would be roughly $83,000.
Sam Voisin, a regional vice president with SMG, said the company intends to submit a proposal, if and when the city requests it.
“We’re going to stand on what we’ve accomplished there,” he said. “There’s a lot of activity.”
Through its management deal for the Civic Center, SMG gets $225,000 in management fees, regardless of how it performs financially, plus 5 percent of the food and beverage sales, according to its 2008 contract. SMG also has the right to 12.5 percent of any revenue exceeding $1 million at the Civic Center.
The Civic Center is losing an estimated $1.8 million a year in operating costs. In addition, it’s not compliant with the federal Americans with Disabilities Act. In order to bring the building up to code, the city would have to spend $20 million to $30 million, according to one estimate.
Last year, Stimpson aimed for April 2016 as a closure date for the 62-year-old venue. The announcement was met with consternation by Mobile residents and parading societies. Coincidentally, four high-profile events including an Elton John concert were scheduled for early 2016. Last November, after the bookings, Stimpson announced the proposed closure had been postponed to 2018.
But since, few high-caliber shows have been announced. Voisin said that’s a product of the concert industry and not some big mystery.
“Large acts take years to get back into the market,” Voisin said. “It’s not an overnight thing.”
Even though Stimpson backtracked on the closure date, Voisin said SMG is still working to book shows.
“While it’s good news, we have not let our foot off the gas,” he said.
Booking an event is harder than it used to be, Voisin said, compared to the 1970s, for instance, citing the casinos along the Mississippi Gulf Coast and an increase in artists’ fees have made it more difficult.