The Plan to Save the SAGINAW CIVIC CENTER
The Logo for The Saginaw Civic Center
The financial crisis concerning the Saginaw Civic Center in many ways
crystallizes the on-going debate between government acting as a catalyst
designed to facilitate business activity, versus government taking on the
burden of actually operating a business entity that would be better off in
the hands of capable professionals.
That the Saginaw Civic Center is an important asset seems to draw universal
agreement. Apart from forming the core foundation to any notion of
downtown revitalization, it is a unique facility not unlike that of The
Palace of Auburn Hills, that provides international entertainment and major
events which draw patrons and service boundaries that extend far beyond
those of Saginaw County.
In a few short months, citizens of Saginaw County will be asked to pass a
tax levy through a 'special election' that is designed to keep the doors of
the Civic Center open. More importantly, however, the move would also
place the responsibility for operating & running the facility in the hands
of a private entity, fueled with a goal of making the Civic Center
profitable - something it has not achieved for nearly two decades.
The Money Pit
The City of Saginaw, following the failure to lift the limit of its
property tax cap last year, decided to cut funding to the Civic Center in
December after pouring a record $739,000 subsidy into the facility.
Moreover, back in 1988 the City was subsidizing the Civic Center to the
tune of $300,000. With similar losses being posted for every consecutive
year since, the entity has cost city taxpayers a deficit in the range of $6
million on the conservative side.
However, it is important to note that this is not unusual. Nationally, very
few Civic Centers or Civic Arenas are known to turn a profit. Even Madison
Square Garden costs the citizens of New York money to keep it open; yet,
such entities have been known to break even and even turn minimal profits,
such as is the case with Van Andel Arena in Grand Rapids.
Now the ball is in the court of the Saginaw County Board of Commissioners.
For the time being, the Board has levied a temporary 1- percent hike in the
hotel/motel tax in Saginaw County, raising the total to 5 percent. The
$280,000 generated by this tax increase is being used to keep the Center
open until the Special Election, tentatively slated for sometime in April
or May, even though the tax increase itself will run through September 30th.
The Saginaw County Building
Additionally, the responsibility for the Civic Center has been turned over
to a new Countywide Authority headed by Saginaw County Board attorney Peter
Jensen and consisting of the County Controller, County Treasurer, and two
non-County people, Lee Carpenter and Leon Turnwald.
Still, Jensen is quick to point out that the City is still running the
Civic Center. "Their employees are still in charge up until the millage,"
notes Jensen. "The County has no say over management of the facility, and
we have no reason to believe we could run it any better than the city has.
That's why we're looking at turning it over to private professionals."
According to Jensen, the County Board took the position of obtaining a
complete analysis in order to understand fully the scope of refurbishment
that needs to be accomplished. "Basically, we needed to look at the books
and determine the cost figures involved. It wasn't fair to go to taxpayers
for a millage without knowing this. Now that this process is complete, the
County Controller will be taking a proposal to the County Board in
February," explains Jensen.
More Studies, More Money
Officials hired the Detroit-based firm of Deloitte & Touche to complete a
feasibility study on the best way to rescue the 28-year old city-owned
arena. Publicly & privately financed, the report cost approximately $80,000.
Additionally, the firm of Spicer Engineering was approached to conduct an
engineering and feasibility study in order to determine the actual cost of
renovation.
"Basically, the Deloitte & Touche study said 'Yes, life is left in the
Civic Center," explains Jensen. "They said it represents a reasonable
investment. Frankly, I haven't had time to read the report but as I
understand from what I've been told, they said it was a viable structure
and made some recommendations that are consistent with the current function
of the building."
On January 17th, Spicer Engineering issued their report which recommended a
whopping $17 million in improvements, ranging from replacing the heating,
ventilation, and air conditioning systems, repairing the roof, and
replacing ice equipment, to the inclusion of $4 million for fancy
landscaping and an outdoor atrium.
At a minimum level, the Civic Center will require $7 million in repairs.
So why did the figure inflate by $10 million and are landscaping and fancy
atriums that important when considering a facility that is literally
fighting for its life?
"When you look at places like The Palace of Auburn Hills and The Silverdome
you don't see such things present at those facilities, so it is
questionable whether we need them in Saginaw," admits Jensen.
"Most entertainment acts look at the inside nature of the facility, not the
outside, and I believe that is true with people as well," continues Jensen.
"So I think this will be a point of contention, especially when going to
taxpayers to finance it."
"The Spicer Report goes through updating the seating, electrical, and
carpeting, and is a pretty complete report. Whether the County will take
all $17 million, frankly, I suspect we won't. But then, the philosophy of
the Building Authority has always been to do a top notch operation, and not
cut corners."
A Question of Management
Many insiders at the Saginaw Civic Center that I spoke with refused to go
on record with their statements, but tend to concur that one of the key
problems with the profitability of the Civic Center is due to its current
management, led by Civic Center Director
Clint Walker.
One major local promoter told me they would probably never book another
event at the Civic Center, having been promised certain items for a VIP
Party only to find them not provided for the day of the event.
Similarly, here at The Review, we regularly publish entertainment events of
all major venues throughout mid-Michigan, yet rarely receive press releases
concerning major concert events coming into the Civic Center. And when we
do, the information is often incomplete, lacking showtimes, ticket prices,
and other vital information.
Has anybody analyzed exactly why the Civic Center is losing money?
"I think Clint has done an outstanding job keeping the Civic Center going
without any improvements," answers Jensen. "I mean, Clint's had a boiler
that he's kept going forever."
A former county executive has his own theory. "The problem with the City of
Saginaw is that they can't afford to retain good people. Consequently, they
have a large turnover of personnel and you find a lot of second and even
third level management people rising to positions of power."
When asked about the current management of the facility, City Manager Reed
Phillips is also supportive. "I think Clint's done a fine job for what he's
had to work with. The staff costs at the Civic Center aren't that much
money, probably no more than $300,000 for about 10 employees."
Adds Jensen: "Frankly, we know the city couldn't run it and I have no
reason to believe that as a governmental entity the county can do any
better. That's why the County Board has required us as part of the
transaction to use private management firms,"
"You mentioned how Grand Rapids was being run fairly profitably, and one of
the bidders on the Saginaw Civic Center is SMG. The other private bidder
is Global Spectrum. These are two of the largest firms in the United
States, although SMG is much bigger than Global. If they can't handle the
job, I don't know who can. And if you read the Deloitte report, from what
I've been told, civic centers do not make profits, but they don't lose
$700,000 per year either."
According to Jensen, the way this management arrangement works is based
upon a sliding scale. If one year after coming into the picture they
Center loses $500-$650,000, they management firm would receive 25% of the
money they saved, all the way up 35% for any loss less than $400,000. And
if the Center makes money, they rebate the county $25,000. "There is a
financial downside for the private firms," notes Jensen, "and they do have
an obligation to make sure they operate it better than it has been."
But has anybody looked at simply selling the Civic Center outright? Is it
right for taxpayers to be paying money to private firms for simply
minimizing losses? When Pine Knob and the Palace were bought by the
Nederlanders, it took the financial burden completely off the shoulders of
taxpayers.
"How many private investors want to purchase a structure that needs
millions of dollars of repair, and besides, they all operate this way,"
answers Jensen. "SMG runs 71 Centers around the U.S. all bigger than the
Civic Center. Another major distinguishing factor that poses a problem is
that when acts come to the Palace, they aren't allowed to travel here on an
off night to do a show like they once could."
"If Garth Brooks is at the Palace and we wanted to bring him into Saginaw
at a lower rate, we couldn't do it because now they all have 100 mile
restrictions written into their contracts. The philosophy is 'why should
Garth come to you when you can go to him."
So What's Next?
The amount of millage that will be asked of taxpayers to finance
the Civic Center is still up in the air.
"That figure has to be hammered out," explains Jensen. "Last summer a .45
mill increase was bandied about, but one of the reasons the County Board
decided not to do anything was because that number wasn't based on anything
concrete. We didn't know where it was coming from or how much work needed
to be done."
"We're meeting with the Blue Ribbon Civic Center Task Force, and they play
an important role in this. They have an active interest in running and
pushing for the election, and the County Board has directed us to work with
them. We'll show them the Spicer Reports and give them the private bids
and let them review it. It will be curious to see whether they think SMG
or Global is better prepared to handle it. We'll also find out what they
think of the scope of work and how much they want done. Following that,
we'll review their comments and vote on what we think we're willing to
spend."
"The Controllers office puts the costs and bond counseling together. Both
outfits have good track records, but SMG has been in business of 13 years
and Global Spectrum has been around for 7 years. Global is owned by
Comcast and both are very capable."
Conclusions
That the Saginaw Civic Center is worth saving is without question.
As stated earlier, it serves a vital role in terms of fueling the area's
need for world-class entertainment.
And while the private companies will no doubt do a much better job running
the facility than has been true in the past, with stronger contacts to
major tours and shows, the issue ultimately comes down to whether people
wish to pay a small amount of money to keep the doors open and see their
favorite events locally, or whether they'd rather drive 80 miles south to
do so.
"There is a price with everything," notes Reed Phillips, "and it's
important not to lose perspective. For example, many people believe that
Heritage Theatre is the only important asset at the Civic Center, because
of the Broadway Play series and the like, yet one WWF event in the Civic
Center probably generates more revenue than the entire Broadway series put
together."
Adds Jensen: "You cannot really compare the Civic Center to the Palace
because it's like apples & oranges. The reason the Palace can draw strong
is because it sits with 4 million people around a 30 mile radius, so the
ability to fill it is easier than any event here, and they have more
latitude to cut deals with acts."
"I think the Civic Center is good for the community and I believe the Board
of Commissioners made a good decision," concludes Jensen. " The tax base
for the City has been reduced, the County is more diffuse, and the Civic
Center still represents a good, viable forum for ALL of Saginaw County. It
certainly serves the county to have this type of facility, and I am a
proponent of it."
"Up to now, the Civic Center may not have that strong a track record, but
what's important is that nationally known professionals have looked at this
facility and said 'yes, it can work.' And we're doing everything we can to
make it work."
"Every kid that goes to an ice show, or the theatre, or a tractor pull is
enriched by it, and when you look at the amount of shows that serve the
County as a whole, certainly it is not very expensive. "
"I think if we keep the increase under one mill, maybe .70 mill, we can
achieve our objective."
