Fiscal Year 2019 Year End Financial Outcome for Five Flags Civic Center Copyrighted
September 3, 2019
City of Dubuque Consent Items # 26.
ITEM TITLE: Fiscal Year 2019 Year End Financial Outcome for Five
Flags Civic Center
SUMMARY: City Manager transmitting information related to the Fiscal
Year 2019 year-end financials of Five Flags Civic Center.
SUGGESTED DISPOSITION: Suggested Disposition: Receive and File
ATTACHMENTS:
Description Type
FY19 Year End Financial Outcome for Five Flags- City Manager Memo
MVM Memo
Staff memo Staff Memo
SMG Memo Staff Memo
FY 19 Year End Financial Supporting Documentation
Dubuque
THE CITY OF �
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TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: FY2019 Year End Financial Outcome for Five Flags Civic Center
DATE: August 29, 2019
Leisure Services Manager Marie Ware is transmitting information related to the Fiscal
Year 2019 year end financials of Five Flags Civic Center.
The City has contracted with SMG since 2004 to manage Five Flags Civic Center. The
approved management agreement set up a benchmark. This benchmark and the
formula defined in the agreement are used in the submission of the budget each year
and the establishment of the actual budget for each year of operation.
In the fiscal year's between FY 2006 to FY 2018 SMG management has beat the
benchmark each year by amounts between $5 up to $68,123. Recently, FY 15 saw
SMG beat the benchmark by $17,873, FY 16 by $219, FY 17 by $5 and FY 18 by
$50,584.
Over the past six months HR Cook has shared information with Marie Ware about
performance of events during the polar vortex, utility costs related to the same polar
vortex, repairs to the facility due to the age that they were experiencing and other items
that were affecting the bottom line that related to the benchmark. Some of the
maintenance expenses SMG incurred were related to items the City has budgeted to
replace but has been waiting in case the facility is replaced.
HR met with Marie Ware and me in April and shared his costs savings measures and
aggressive booking to recover prior to year-end. Through the efforts of HR and his staff
in a few short months they were able to take a projected forecast of missing the
benchmark by $60,000 down to at the end of FY 19 $17,565.
Over the course of the entire private management agreement from FY 2005 up to and
including FY 2019, SMG has beat the benchmark by a total of $174,490.
A funding source for the shortfall of$17,565 was identified. This shortfall was covered
by savings from the new truck purchase for Five Flags Civic Center ($5,339) and the
savings from a replacement truck purchase for Grand River Center ($12,226).
���.1.lLt}'t'j�,'1 �t,uy����,
Mic ael C. Van Milligen
MCVM:jh
Attachment
cc: Crenna Brumwell, City Attorney
Teri Goodmann, Assistant City Manager
Cori Burbach, Assistant City Manager
Marie L. Ware, Leisure Services Manager
HR Cook, Five Flags Civic Center General Manager
2
Dubuque
THE CITY OF �
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TO: Michael C. Van Milligen, City Manager
FROM: Marie L. Ware, Leisure Services Manager
SUBJECT: FY 2019 Year End Financial Outcome for Five Flags Civic Center
DATE: August 27, 2019
INTRODUCTION
The purpose of this memorandum is to share information related to the FY 19 fiscal year
end financials of Five Flags Civic Center.
BACKGROUND
The City has contracted with SMG since 2004 to manage Five Flags Civic Center. The
approved management agreement set up a benchmark. This benchmark and the
formula defined in the agreement are used in the submission of the budget each year
and the establishment of the actual budget for each year of operation.
The benchmark is the amount the City sets for SMG of property tax needed to operate
Five Flags Civic Center. SMG is challenged to spend less than the benchmark, thereby
reducing the amount of property tax support needed. The benchmark is calculated by
taking total expenses less earned revenue for the Civic Center, to get the property tax
support. This calculation was completed in the beginning by taking the average actual
property tax support spent in FY 2002, 2003, and 2004 ($682,091) and then increased
annually by an inflation factor.
SMG's goal is to come under the benchmark but if the benchmark is not met, according
to the management agreement, the City must pay any amount over the benchmark.
SMG's incentive to meet and beat the benchmark gives them $0.50 of every dollar
under the benchmark.
The first year (FY 2005) of management actual expenses were higher due to transition
of employees. There were additional costs related to unemployment insurance, vacation
payouts, and prior year expenses that did not count against the benchmark.
In the fiscal year's between FY 2006 to FY 2018 SMG management has beat the
benchmark each year by amounts between $5 up to $68,123. Recently, FY 15 saw
SMG beat the benchmark by $17,873, FY 16 by $219, FY 17 by $5 and FY 18 by
$SQ584. The chart below shows in green Ne benchmark se[ dunng [he budge[ pmcess
in green and SMG's pertormance in [ha[ year in blue rela[ed ro Ne benchmark.
SMG Property Taz Support Compared to Benchmark
19
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5550.000 $60Q�00 5fi50.000 $]00.��0 S]50.004 5800,000 5850.000 b904.000 5950,000
BenMmerk ■ SMGPmpertyTaeSuppoh
DISCUSSION
As[he adminis[raror of Ne managemen[ mntrac[for Five Rags Qvic Cen[er I mee[
mon[hlywi[h General Manager, HR Cook. A[[hese mee[ingswe reviewbookings, even[
successes, opera0ons, repairs, capi[al [ertnsand more. On a mon[hly basisSMG
shares Neirfinancial s[a[emen[wiN me aswell as[he Budge[and Finance Direc[or
Jenny Larson and Budge[ ManagerJen Raber.
Over[he pas[sixmonNSHR hasshared informa[ion wi[h meabou[pertortnance of
even6 dunng Ne polarvortex, u[iliry msYs rela[ed ro Ne same polar wrtex, repairs ro
2
the facility due to the age that they were experiencing and other items that were
affecting the bottom line that related to the benchmark. Some of the maintenance
expenses SMG incurred were related to items the City has budgeted to replace but has
been waiting in case the facility is replaced. During my nine years with the city
managing this contract I have not seen all of these happened concurrently and affect
the bottom line as they have. Due to these factors HR shared with me there is a
possibility they might not make benchmark in this fiscal year.
HR met with us in April and shared his costs savings measures and aggressive booking
to recover prior to year-end. Through the efforts of HR and his staff in a few short
months they were able to take a projected forecast of missing the benchmark by
$60,000 down to at the end of FY 19 $17,565. HR shares in more detail in the attached
letter the issues encountered this fiscal year and efforts made to address the projected
shortfall.
SMG as well as the City do not take lightly the missing of a benchmark. As explained
earlier when SMG does not meet the benchmark the city pays the amount over the
benchmark. Over the course of the entire private management agreement from FY
2005 up to and including FY 2019, SMG has beat the benchmark by a total of$174,490.
General Manager HR Cook will be presenting further details in his Fiscal Year End
Annual Report to the Council at the September 3, 2019 City Council meeting and will
have further information and explanation in his presentation which is also a part of a
City Council agenda item.
BUDGETIMPACT
A funding source for the shortfall of$17,565 was identified. This shortfall was covered
by savings from the new truck purchase for Five Flags Civic Center ($5,339) and the
savings from a replacement truck purchase for Grand River Center ($12,226). Bids for
both vehicles came in under budget due to extremely good government fleet pricing at
the time of project bid. Budget and Finance Director Jenny Larson approved of this
funding source.
ACTION REQUESTED
This memo is for informational purposes only to share details of the FY 2019 Year End
Financial Outcome for Five Flags Civic Center.
cc: HR Cook, Five Flags Civic Center General Manager
Jenny Larson, Budget and Finance Director
3
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FIVE FLAGS
C E N T E R
19J9�3019 �
Memorandum
August 28, 2019
To: Marie Ware, Manager
Leisure Services
City of Dubuque
From: H.R. Cook, General Manager
Five Flags Center
SMG
Re: Five Flags Benchmark Subsidy Shortage FY 19
Marie,
Per our previous conversation regarding the financial benchmark of Five Flags Civic Center, you will find
our final financial report for FY19 showing us missing the Operating Subsidy Benchmark by$17,656.
While we are disappointed in missing the benchmark for the first time since 2004, we feel this number is
justified due to circumstances that have not been experienced before at Five Flags Center including
major unbudgeted repairs and an abnormally cold period during our busiest part of the year for shows.
During the fiscal year Five Flags Center experienced several major repairs to our roof, HVAC system,
overhead doors and required technology upgrades that were originally scheduled as Capital
Replacements but had been deferred pending decisions made about the future of Five Flags Center.
These major repairs fall outside of the SMG contract offiscal obligations of daily repairs to the facility
and were not anticipated nor budgeted for. The air handling units for the theater, main offices and
arena all underwent major repairs including replacement of compressors, major coolant leaks, computer
processing boards and fan units. The continuous arena roof leak repairs, unbudgeted walk-in cooler and
freezer and overhead door replacements resulted in a negative impact to our operating budget of over
$22,000.
Most of our major revenue generating events are presented in the months of January, February and
March. The severe cold, snow and ice this year had a major impact on attendance to many of these
events. Though we had scheduled more shows during these months compared to FY 18, due to the
severe weather many of our patrons, especially those who lived in outlying cities and the elderly did not
attend the events. Five Flags saw a decrease of over 11,000 patrons from FY18 to FY19 during the
months of January, February and March tied directly to the weather. Our electrical and gas usage during
the four cold months also increased resulting in $11,793 higher expenses than budgeted for typical
winter months. Supplies and overtime labor to maintain the constant barrage of snow and ice
occurrences had a negative impact beyond what was budgeted.
As of April 2019 we were forecast to miss benchmark by over$60,000. With expense savings such as
hiring freezes,elimination of non-essential purchases and travel along with aggressive bookings of
Morgan Wallen, Nelly and Garden Brothers Circus in May and June, we were able to reduce subsidy to
$17,565 over the allocated benchmark. I have highlighted Pages 1 and 3 of our June Financial Statement
showing the variances of the aforementioned expenses. Our benchmark subsidy for FY19 was$920,395
with final Net Income Loss of$937,960 as shown on Page 3 resulting in $17,565 over benchmark.
I am available to answer any questions that you may have regarding operational issues at Five Flags
Center. Though I cannot predict the weather patterns for Dubuque for this season,we have taken
some steps to help spread out our major events over a longer period of months so hedge our bets on
severe weather occurrences.
i
FIVE FLAGS CENTER
For The Period Ending June 30, 2019
The City Of Dubuque issued their Period 13 numbers with a ($428.53)difference in administrator and Copying/Reproduction
expenses. Reducing our loss by the same amount. Pages affected are 1, 2, 3, 4, 12-13, 32, 33-37, 38,46-47.
Income Statement:
Month:
1,
* We ended ahead ofJune's monthly budgeted net loss by$109,511. 1
* Overall expenses are down $31,232. I,
* Revenue is up$78,279. 'I
* Direct Event Income was more than budgeted income by$23,113.
*Total Ancillary Income was more than budgeted ancillary income by$37,432. �
* Other Event Income was more than budgeted other event income by$18,260
* One circus and three concerts were held in June that were not budgeted. I
Year-To Date: '
i
* Actual YTD Adjusted Gross Income is less than the YTD budgeted income by$47,528. I
* Actual YTD Total Indirect Expenses are more than the YTD budgeted expenses by$16,119. �
* Repairs & Maintenance and Supplies- ($20,804) - Increased costs associated with maintaining a 40 year old building, 0
in addition to additional ice removal supplies, over what was budgeted. ',
* Utilities-($11,793) -Unbudgeted Utility hike and colder than normal temps. I
* Actual YTD net loss is greater than the YTD budgeted net loss by$63,647. �
Budget
* We are over the Budget at years end by$63,647. �
I
Benchmark: �
* We are over the benchmark at years end by$17,565.
Benchmark Calculation
The Benchmark was set according to section 4.2 (I) of the Management Agreement with the City of Dubuque
and was calculated using the CPI-U of May 31, 2018 of 2.8%.
Benchmark for FY19 is $920,395.
8/20/2019 at 4:30 PM An SMG Managed Facility 1
Five Flags C enter/SMG
Financial Statements Year to Date Higl�lights ��
For tl�e Twelve Mouths Ending Juue 30,2019
Year to Date Year to Date Piror YTD i�
Actual Budget Variance Actual Variance
Attendance 87,821 92,782 (4,961) 99,042 (11,221)
Number of Performances 279 229 50 270 9
Event Days 355 282 73 342 13
Gross Ticket Sales 1,762,079 1,718,111 43,968 1,909,158 (147,079)
Direct Event lncoine 125,990 205,269 (79,279) 209,490 (83,500)
Ancillary Income 185,813 172,767 13,046 146,333 39,480
Other Event Incoine 170,395 152,000 18,395 203,872 (33,477)
Total Event Incoine 482,198 530,036 (47,838) 559,695 (77,497)
Other Operating Inconie 47,810 47,500 310 40,655 7,155
Adjusted Gross Incoine 530,008 577,536 (47,528) 600,350 (70,342)
Indirect Expenses (1,467,968) (1,451,849) (16,ll9) (1,445,092) (22,876)
Net Incon�e(Loss)From Operations (937,960) (574,313) (63,647) (844,742) (93,218)
8/20/2019 at 4:30 PM An SMG Managed Facility 3