The future of Mayo Civic Center

Rochester City Council Update – November 28, 2018

In lieu of a Council Update video on Facebook I am just going to write a post as there was only 1 public hearing at our meeting on the 28. I also stayed after until past 11 to watch a Planning & Zoning meeting as there were a couple items of personal interest. Here is a synopsis of my comments and thoughts.

I began my comments by basically saying the City of Rochester was unwilling to make needed changes for 40+ years and now we do have to take action on some issues. You are seeing this in the Community Development Department, national searches for the best staff, increased oversight and transparency, and changes at the Mayo Civic Center & Experience Rochester. I believe that staff is largely doing a good job and will still have a role in a future organization if they so choose. Our job it to keep them engaged and alleviate fears. That said the Brad Jones / Stevan Kvenvold era is over and it will never return.

Ed Hruska rightfully recused himself from all discussion as he has a substantial conflict of interest. Kudos to him for doing the right thing.

The city council took 5 actions on Wednesday.

  1. Direct the City Administrator to initiate the process to transition the governance and operations of the Mayo Civic Center and Experience Rochester to a singular entity governed by a new board of directors.
  2. Direct the City Administrator to work closely with the existing employees from both organizations with the primary goal they remain employed with the new entity or the City in another capacity.
  3. Authorize the City Administrator and Human Resources Director Direct staff to negotiate employee programs to ensure continuity of service through the transition and provide financial assistance for employees not employed by the City or new entity after the transition as outlined below:
    1. Employee program to incentivize them to remain with the MCC during the transition.
    2. Employee separation program for those not employed with the entity or City following the transition (if any)
  4. Direct the City Administrator to return on December 10, 2018, with information to include, but not be limited to:
    1. Full time line for execution
    2. Composition of board seats based on industry best practices
  5. Return with a timeline to make the necessary changes to the Rochester Amateur Sports Commission (RASC) Contract

Note that I added the 5th one by amendment. I am not expecting major changes with that organization, however they are currently funded through Experience Rochester and will need to either be part of the new organization OR have a separate contract. My issue was not to change anything, but rather to produce a timeline to get to the answer before changes are in place in 2020. I expect we will have an annual performance based contract with RASC, since their performance tends to be very good, I don’t think much will change.

In general both myself & Nick Campion tried to force the issue around some of our core values. We had different approaches but really the decision was delayed until later. Here is what I personally was after:

  1. Transparency – The new oversight organization must have to comply with the Minnesota Government Data Practices Act. This was not the case under Brad Jones & Stevan Kvenvold.
  2. Strong Conflict of Interest Policy – The organization & members can not direct public resources or data to their private or competing organizations. This was not the case under Brad Jones & Stevan Kvenvold.
  3. The members of the board overseeing the public tax dollars, convention bureau, Mayo Civic Center, and  must be appointed by the Mayor & Council. This was not the case under Brad Jones & Stevan Kvenvold.

Nick Campion tried to accomplish this by ensuring the this oversight board was public, which I was fine with. Randy Staver and Mark Hickey strongly opposed this. I tried to introduce an amendment to add this direction to staff but created confusion because we probably can’t appoint to a corporate non-profit. While public boards are by definition non-profit, the use of the “non-profit” just created confusion. By consensus we proceeded with these 3 principles as understandings, but I think they will face strong opposition from Mark Hickey & Randy. Until, of course, Mark is gone…

Ultimately any plan that does not address these 3 items is destined to be a repeat of the mistakes of the past.

My reason for going down this path is that I am looking to achieve 3 things from the Mayo Civic Center in the future.

  1. Avoid the massive increases in projected losses.
  2. Keep the venue accessible for local events.
  3. Remove the financial risk from the city budget.

The hardest part about #1 is there are many ways to cut expenses, but if it only makes the venue less usable that is not a solution. If the only goal is to make money we lose the value of a civic center. Finally there may be some ways that we can reduce the operating subsidy using internal resources. The issue is that we still accept all the risk in an area that is not our core competency.

It is well understood that civic centers are money losers in all but the most extreme cases. While the oversight and tax dollar allocation must be public the actual operations could be public or private. While the actions take don’t specify either, I would expect that the eventual outcome will include a privatization on at least some of center sales & operations. The reality is that only a private contractor can achieve #3.

Additionally a group with private connections to programing can get past some of the limitations on entertainment options that currently exist. Typically this includes 75 mile rules. What this means is that if there is a performance in the Twin Cities, nearby Casinos, or the 2 neighboring college towns, the acts can’t come here. Many private operators are able to bring in their own events.

I think one person who certainly didn’t help was some folks wanted us to avoid changes because it might impact current jobs and employees. Because I don’t want to mislead anyone I made clear that this can not be the consideration. We are not a jobs program. I strongly believe in helping employees who have done a great job for us. When RPU ended coal burning at Silver Lake Plant we were able to make sure that every single employee landed on their feet, many still with RPU. My goal will be to achieve the same here. That said we can’t promise that.

40+ years is a long time to go with out making meaningful changes in a community as it grows. I saw how poor the long term city budget looked this year. This is one of many steps the newer administration is taking to right the ship. The rats that got us here have jumped ship and that is really unfair to some people doing good work.

5 comments

  1. Mike, great comments. I’m a City employee. I’ve talked to one of the custodians that works at the Mayo Civic Center. He’s been with the city for many years. He’s not in a management position. He’s pretty nervous what’s going to happen as I would be if I was in his position. My question or questions to use does anyone know the track record of the management company that may come in and take over. If the employees are hired by this company do they keep there same salary? Do they get health insurance? Is there a retirement plan for them? If a management company takes over why can’t the City of Rochester keep the employees on staff at the Civic Center? Can’t the City budget for that?
    I know this is a lot of questions and I’m guessing on December 10 most of these questions may be answered.
    My last question is. We all work hard for the City. Is this going to be a common practice of the City to hire a Management Company everytime a City Division loses money? Example , Golf Division , City Pools… Just to name a few.
    I like to believe we are part of a family working for the city. We care about what’s going to happen to our family at the Civic Center. Thanks for taking the time to read my email. Thank you for all you do for the people of Rochester.
    Dave Brudwick

    1. Dave,

      Thank you for the comments. I will try to give you honest answers. We won’t know which management company or what conditions until we get some proposals and even then we might not get proposals which meet our needs. Honestly when it comes to pay and benefits it would be different. I would suspect there could be similar or higher pay, benefits would probably not be as good, more flexibility, and far more advancement opportunities. I don’t want to paint a picture and say it wouldn’t be different. That said is is hard to find labor in Rochester and those that know the facility will be valued. Thats why we are working hard to keep them around.

      When it comes to privatization, that is a different issue. I think there are things that we do that are our core competencies, parks, libraries, public works, public safety, utilities, etc. Also those that support them. Those areas are less likely to be done on contract, in fact in many cases we are trying to rely on more internal staff to replace consultants. Running a civic center is pretty unusual, golf is a sport that is shrinking significantly. City staff continues to grow with the community overall. My hopes is that those employees who want to stick with the city can find positions or train for others. We did pretty well for RPU. I want to do the same here.

      I can only promise to work hard for the employees, I can promise how this will end. This creates fear and I understand this. The only thing I can tell employees is go talk with the RPU folks on their experience, because they were just as fearful.

  2. Mr, Wojcik

    With all due respect I will have to disagree with a few of your statements.

    1. In item #5 in your amendment and comments, RASC might be doing well in your eyes, but they are still being funded by the 4.5 million in hotel taxes. Performance contract or not if you include them under your proposed new executive director it would save thousands with no real need for duplication of directors. (Doesn’t everyone keep saying this is about saving tax payer dollars)

    2.Next is your comment stating that you want to remove the financial risk from the city budget, believe it or not MCC will still be a city building and trying to push the responsibility to a private firm will not alleviate the risk from the city. As you stated “the oversight and tax dollar allocation must remain public, If the private entity continues as is, or increases the costs it will still come back to the city. No company is going to take the responsibility of absorbing the losses we see every year.

    3. Keeping the venue accessible for local events. Again as stated by you ” If the only goal is to make money we lose the value of a civic center”. Sorry to say it can’t be both ways.

    4. Last item mentioned is by going private it would eliminate the limitations on entertainment including the 75 mile thing. While this might be a small part of the problem, realistically the reason it is difficult getting shows here is that they just don’t sell, the public just doesn’t want to support this type of thing, very few of the shows that come here sell out and we do not have the seating needed to try and bring big acts in.

    In closing it is very sad that it seems everyone wants to continue to point fingers and blame others, some might say it is a deficit issue, others a revenue issue. The fact is many people have fault in this including the city council. The council has had oversight and the ability to change or modify how things have gone for many years now. They have continued to approve budgets they know will result in a deficit and have never put together a model for success.

    Where is the guidance, expectations, or support that is needed from the council? What a surprise that you now want to appoint an entity and still have not put any policy in place for success.

    Ultimately any plan that is tried to be put into place without a policy and direction that is needed will end up being a repeat of the past.

    Oversight, the Art Center is private and the city has had to bail them out, Civic Theater is private and the city has had to bail them out, and now the City has decided to spend 5-6 million in purchasing and deciding what to do with the Chateau Theater, let’s go ahead and put 25 million more into that and then directly compete with the Art Center MCC, and the Civic Theater. Then once it opens how much will that cost the city, I can guarantee you it won’t make a profit. Bottom line is we need to take care of the dedicated city staff and properties before subsidizing private entities and like it or not MCC will still continue to be a city property and taken care of by revenue and tax dollars public or not.

  3. Mr, Wojcik

    With all due respect I will have to disagree with a few of your statements.

    1. In item #5 in your amendment and comments, RASC might be doing well in your eyes, but they are still being funded by the 4.5 million in hotel taxes. Performance contract or not if you include them under your proposed new executive director it would save thousands with no real need for duplication of directors. (Doesn’t everyone keep saying this is about saving tax payer dollars)

    2.Next is your comment stating that you want to remove the financial risk from the city budget, believe it or not MCC will still be a city building and trying to push the responsibility to a private firm will not alleviate the risk from the city. As you stated “the oversight and tax dollar allocation must remain public, If the private entity continues as is, or increases the costs it will still come back to the city. No company is going to take the responsibility of absorbing the losses we see every year.

    3. Keeping the venue accessible for local events. Again as stated by you ” If the only goal is to make money we lose the value of a civic center”. Sorry to say it can’t be both ways.

    4. Last item mentioned is by going private it would eliminate the limitations on entertainment including the 75 mile thing. While this might be a small part of the problem, realistically the reason it is difficult getting shows here is that they just don’t sell, the public just doesn’t want to support this type of thing, very few of the shows that come here sell out and the tour groups do not return because of this. We also do not have the seating needed to try and bring big acts in.

    In closing it is very sad that it seems everyone wants to continue to point fingers and blame others, some might say it is a deficit issue, others a revenue issue. The fact is many people have fault in this including the city council. The council has had oversight and the ability to change or modify how things have gone for many years now. They have continued to approve budgets they know will result in a deficit and have never put together a model for success.

    Where is the guidance, expectations, or support that is needed from the council? What a surprise that you now want to appoint an entity and still have not put any policy in place for success.

    Ultimately any plan that is tried to be put into place without a policy and direction that is needed will end up being a repeat of the past.

    Oversight, the Art Center is private and the city has had to bail them out, Civic Theater is private and the city has had to bail them out, and now the City has decided to spend 5-6 million in purchasing and deciding what to do with the Chateau Theater, let’s go ahead and put 25 million more into that and then directly compete with the Art Center MCC, and the Civic Theater. Then once it opens how much will that cost the city, I can guarantee you it won’t make a profit. Bottom line is we need to take care of the dedicated city staff and properties before subsidizing private entities and like it or not MCC will still continue to be a city property and taken care of by revenue and tax dollars public or not.

    1. Randy,

      Thank you for all your time and comments here are a few responses.

      1) RASC has generated the hotel nights sufficient to generate tax revenue to pay their costs. They may very well be more efficient as part of this entity. If they are less efficient that will eat into their performance. My biggest point was to simply make it clear that we are not ignoring the issue.

      2) I expect that a contract with a private entity will limit the maximum loss. This is not currently the case.

      3) Anything that we do not include in a future contract is a likely lost event. Thus we need to specify how many events, when, and how in a future contract.

      4) Ultimately a private entity will lose their profitability if they can not activate the building.

      Lastly, nothing is final until we verify that we can get a viable operations contract. I expect to take all the lessons learned from RPU and apply it to make sure staff is treated fairly here.

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