SMG has provided management services for the Convention Center since it opened in 1991. SMG was originally selected through a competitive process. The County’s current agreement with SMG expires December 31, 2019. On September 20, 2016, the Board approved a motion to direct the County Administrator to negotiate revisions to that agreement in order for the County Commission to consider an extension of the agreement for a period not to exceed ten years.
MOTION A: When the Board directed that staff negotiate an extension, the Board recognized that due to the impending expansion of the Convention Center and the likely addition of the Northport Parking Garage to the responsibilities of SMG, new terms and conditions would have to be negotiated with SMG. In addition, the Board considered the September 20, 2016, memorandum from the County Auditor that recommended a significant amount of due diligence prior to negotiations with SMG for an additional term.
Pursuant to the County Auditor’s recommendations, staff performed extensive research and explored the County’s options relative to future management of the convention center, including consideration of the competitive marketplace, current and proposed changes to the convention center, SMG’s performance, and the future strategic direction of the CVB. Staff researched the market to analyze different convention center management options, compared the terms and conditions of convention center management agreements from across the country, and consulted with colleagues across the country who also oversee similar convention center operations.
Based on the research conducted, staff concluded that the best course of action would be to continue the County’s relationship with SMG. By the time the updated Amended and Restated Agreement (Exhibit 1) expires in 2029, the expansion and hotel projects will have been completed and operating for some time and the County will be in a much better position to consider all of its options.
The Amended and Restated Agreement was originally presented to and approved by the Board on October 9, 2018. The Board’s discussion on that item resulted in the inclusion of certain labor peace language and two options for an extension for an additional ten years upon election by the County or the Parties (depending on the option). Certain additional substantive changes were made during the course of continued negotiations, and therefore additional Board review and approval is appropriate at this time.
The proposed Amended and Restated Agreement has been updated from the 2009 Agreement to utilize current standard agreement language as well as to incorporate several material changes, including:
- Requiring that the financial terms of SMG’s contractual relationship with its affiliated subcontractor for food and beverages services (SAVOR) be approved in advance by the County, including clarifying the operation of the food service capital reserve fund provided for under the SAVOR contract (Section 7.1.2 and new Section 13.4);
- Contracting for provision of food services at the Emergency Management Center (EOC) during emergencies;
- Adding to SMG's management responsibilities both the expanded Convention Center space (when completed), and the Northport parking garage (when transferred to the Convention Center), at no additional cost to the County.
- Establishing management parameters for the operations of the Northport Parking Garage next to the Convention Center;
- Changing the calculations used to determine the annual incentive fee paid to SMG to both provide better management incentives and to protect the tax-exempt status of any future bond issuances or refinancing (newly modified Section 4.1.3);
- Providing for an optional ten -ear extension in the County’s sole discretion on the same terms and conditions, or a joint extension on negotiated terms and conditions (new Section 3.2 and modified Section 5.1, as directed by the Board during the October 9, 2018 meeting);
- Clarifying the scope of services to provide for a closer and more collaborative working relationship between the Greater Fort Lauderdale Convention and Visitor’s Bureau and SMG;
- Providing for a contemplated amendment to address the impact of certain construction activities on the performance of the contract (new Section 4.5 and Motion B);
- Increasing the CBE requirement to 40% on SMG for eligible services and adding a new CBE requirement of 15% on the food and beverage subcontract;
- Incorporating the recommendations of the County Auditor including updating processes and procedures to reflect best practices;
- Adding a labor peace requirement (new Section 20.22, as directed by the Board during the October 9, 2018, meeting); and
- Changing the foundational data for the Base Management Fee Consumer Price Index (CPI) escalator to provide a more appropriate basis for fee increases, which will result in a more moderate increase in the management fee over time (Section 4.1.2).
MOTION B: If approved, Motion B would authorize the County Administrator to negotiate an amendment to the Amended and Restated Agreement to modify the scope of services, management fee, incentive fee, and the timing of SMG’s required capital investment, to the extent appropriate, for certain time periods during which the ability of SMG to provide the full contracted scope of services at the Convention Center is expected to be materially impacted by certain construction activities relating to the County’s expansion of the Convention Center and construction of a headquarters hotel. |