That's a very fair question, and one that we asked ourselves internally as we prepared our strategic plan in January. The fundamental principle in our plan and in our presentation to GIC earlier this month is that "The Status Quo is Not An Option". Every organization needs to reinvent itself on a regular basis, and we clearly needed a new model if we were to earn the privilege of continuing to manage these iconic venues. The easy part of the answer is that we have an amazing team of skilled veterans and new faces. They are passionate about customer service and our new model. Our client and patron survey feedback clearly demonstrates that the team is consistently delivering outstanding convention and entertainment experiences.
In my recent presentation at GIC I outlined our proposed governance model, eliminating HECFI as a separate organization and having it integrated within the City to optimize economic development through a closer affiliation with Culture, Tourism, and Ec. Dev.. This allows us to be fully aligned with community and private sector partners to create the best balance of programming and revenue generation. Each key area would have an Advisory Committee to guide the direction of the organization. A major part of our mandate has always been economic stimulation; our contribution has been estimated as high as $190M annually, but even if it were half that it is a major contributor to the City's hotels, restaurants, retail, and other service industries.
A critical piece to the new plan is the reduction of subsidy's provided by the City to run the venues. To clarify, the City's investment, should be broken in to 3 portions: Capital, Utilities, and Operating Subsidy. The RFP reponses have confirmed that for the most part the City will be required to continue support for Capital, and for Utilities regardless of which group manages the facilities going forward. These costs represent more than half of the annual total costs of the facilities. It really nets down to the annual operating savings that bidders can bring to the table and the real savings to the City and taxpayers. We have a new streamlined organization in place (from 65 to 53 full time union and non-union employees), and have achieved significant cost containment which will result in a reduction to taxpayers of approximately $1.7M since 2010. Our plan includes a further reduction of $1.3M over the next 5 years.
City staff are compling final bid comparisons to determine the real net savings to the City compared to the presentations made at GIC. For example, some of the costs currently assigned by the City to HECFI such as the approximately $450,000 annually for IT, Finance, HR, and Legal services will not be saved if a 3rd party takes over the facilities as these costs are made up of a very small portion of several people's jobs, therefore there will be no staff reductions or savings realized by the City.
We are in a unique position in Canada as the only City with 3 very significant venues downtown under one management team. That gives us the flexibility to attract business that uses 2 or more venues simultaneously e.g. Country Music Week, large conferences, and trade shows. These events would otherwise not come to Hamilton. It also allows us to minimize 'dark nights" by having a variety of venues to book events and entertainment based on size or space availability. For example we book up to a dozen concerts per year in the Convention Centre that we would otherwise pass on. We regularly have events booked in all venues on a given night bringing thousands of people to the downtown area. The single operator model provides the most flexibility to maximize events.
City success stories of newly opened hotel rooms, the addition of the McMaster Medical facility, new major employers in the City, all day GO service, and the development of new retail and condominum facilities downtown, bodes very well for our future revenue growth. Our plan also includes an expanded revenue model and an aggressive exploration of partnership opportunities to refresh the facilities. I believe this aggressive new model will put us in a favourable position when compared apples-to-apples with the proponents' net savings and benefits to Hamiltonians. As a City managed solution it also puts us in the optimum position to serve our community's interests, and to leverage further revenue generation and cost reduction opportunities through synergies with existing City departments and agencies. As a result, our inclusion as a City Department will lead to savings for the taxpayer and will ensure that the interests and needs of City Council are paramount.
I am extremely proud of the progress that the team has made to date and their complete support for "Status Quo is Not An Option". I am very excited about the prospect of executing our plan as a City managed solution following the upcoming discussions at GIC and Council in September.
John
Better late than never, good to know all his staff will NOT lose their jobs, as they apparently have better things to do. I hope Carmens gets the Convention Centre and Live Nation the rest.
ReplyDeleteBe careful how you interpret John's words. I am reluctant to jump into this issue but there is much which has been badly "cast" around HECFI. I served on the Board from 1990 to 1996. The operating subsidy for the three facilities has not substantially changed in 15 years. It is around $2.8 million. This is actually a measure of efficiency as, considering inflation, the subsidy should have grown to $4.4 million. In fact, adjusting for inflation, the three facilities are operated on less subsidy than the City first paid to Hamilton Place when it opened. Another measure of efficiency.
ReplyDeleteThe Spectator has jumped on a bandwagon to say the "true" subsidy is closer to $6.5 million. HECFI does not pay for capital improvement or energy costs. But, in fairness, neither does the Library or Fire Department or Police. I don't think it is fair to use one method for one department and another method for other departments.
This exercise/RFP process has been launched in the name of reducing the taxpayer subsidy. Regardless of the proponent, there will be little reduction in the energy or capital "subsidy." On the operational subsidy, John has noted that HECFI is charged back for some services it receives from the City. These are fractions of staff jobs. For instance, HECFI might be charged one day per week of an Accounts Receivable clerk at the City. The City will lose the ability to charge that portion of the salary to another agency so will have to cover the full cost of the job in its budget. The person will not see their work reduced by one day a week - other work will be assigned. These are not HECFI workers.
Finally, especially when it comes to the Convention Centre, staff have been hampered in generating revenue. If someone is considering holding a banquet and is getting quotes from both the Convention Centre and a private facility, staff are NOT to be aggressive. If the contract is awarded to Carmen's, it will not face this constraint. Yes, it should be able to generate more revenue (which staff could also have done if the constraint were not in place). I wonder how long it will take before other private facilities start to complain?
Excellent insight Marvin. I always find your posts and knowledge helpful.
ReplyDeleteSal
"I wonder how long it will take before other private facilities start to complain?"
ReplyDeleteI guess they will have not to complain to but themselves for not submitting a bid in response to the RFP.
I almost think this underscores how ridiculous this while thing is. Why shouldn't staff be aggressive in getting new business? In fact, they owe it to the taxpayers to be aggressive. If a private company cannot compete, then so be it- perhaps they are not competitive enough and not in the right line of work.
ReplyDeleteIf staff time is no longer allowed to charge back, then the new work they get to make up for the time they would be doing HECFI things, is still time well spent and valuable- no?
Or, you could have built in language that continues to permit these chargebacks, as part of the deal.
When there's a will........
Hertel makes some good points. However, over half of city staff do not have a performance contract in place.
ReplyDeleteHECFI might not agressively chase the catering business, but they are can certainly "paper the room" when they don't sell many tickets to a concert. Who do you think gets the handouts?
ReplyDeleteAnd remember when the councillors lunches made news for tripling in cost from 10K to 30K. Guess who took over the catering contract?
Yup, you got it. Who needs to be agressive.
John Hertel has a point. Let's see the real numbers after you move aside the dumb founded impressions and glitter.
ReplyDeleteSorce
Having three venues that you can pitch at a mega-event is a unique proposition, but can be overstated as a game-changing strategic advantage? Based on HECFI history, that appears to be good for perhaps two events a year. And there's always another jurisdicition with a competitive edge of its own. Hamilton hosted the Juno Awards in the space of seven years, but has been SOL on that count for the last 11 years. (Major sports coups are rarer still: Hamilton hosted the Brier on 2007, 1991... and 1949.)
ReplyDeleteStarting to think that a donkey could run Copps Coliseum and Hamilton Place and turn a profit.
The Convention Centre is another matter entirely. It's aging, is hampered by its limited square footage but has no ability to expand on site, has a fixed overhead (high labour costs and ballooning hydro bills), competitors have been multiplying like weeds since shortly after it opened (including the local hotels that HECFI wants more of) and the era of large conventions has seemingly gone the way of job security. Business jargon and evasive double-speak will not remedy these things.