Thursday, March 01, 2007

Arena: Budget Must Match Bid Projections

Bolton's Success Will Be Judged on Matcing Pie-In-The-Sky Bid Numbers

SMG announced John Bolton as the new general manager for the BOK Center (arena) and the Convention Center. Bolton comes from SMG's Evansville, IN market, where he managed five facilities that are so minor, that they were barely mentioned in SMG's bid proposal to Tulsa's selection team.

To give you some perspective, the size of the Evansville convention center, cleverly named "The Centre," is roughly one-third that of the Cox Convention Center which SMG operates in OKC. Obviously, the Tulsa gig is a promotion for Bolton, so here's hoping he is one of SMG's rising stars. Why? Because he's going to have to be damned good to compete with two other SMG venues in the general area (OKC and Wichita) and still be able to meet the unbelievably (because I've never believed them) optimistic projections for the new arena and convention center.

You may recall that late in 2005, SMG was awarded the contract over arch-rival Global Spectrum. At the time, I was very skeptical of the process that was used to determine the best package. In fact, the process was so skewed, that Global Spectrum went to the unprecedented act of appealing the decision ; something they had never done before. During the appeal hearing, which I attended, then city councilor and now mayoral aide Susan Neal admitted that she looked not just at the numbers presented in the bids, but the "intangibles."

The day after SMG's bid was accepted, the Tulsa World reported:

"The city's calculations showed that SMG's combined cost projections for
operating the two facilities over five years would produce a net profit of
$4,835,043, but the combined cost projections for Global Spectrum indicated a
loss of $1,024,621." [11/05/05, Pg. A9]

A little later in the same story, the World wrote:
City Councilor Chris Medlock, a mayoral candidate, said after the news
conference that he hopes the city made the right choice.

"I've had concerns about sharing the same management team with Oklahoma
City and whether we'll get the priority necessary to make the investment the
citizens have made in this arena successful," he said.

LaFortune said SMG thinks Oklahoma City and Tulsa are two distinct markets
with only 10 percent in crossover sales.

Both Bill LaFortune and I are now out of office and Kathy Taylor occupies the mayor's office. However, Susan Neal is a central player in Taylor's administration, so Herronner doesn't get a pass on these projections. Mayor Taylor opted to continue the development of the arena without taking a time out to reassess the financials as Don McCorkell and I both promised to do, should one of us have been elected mayor.

I still have a stack of documents from each of the three entities that submitted bids [John Scott of the Tulsa Convention Center staff was the other]. I also still have audio of SMG's presentation to the bid selection committee explaining how they arrived at the numbers.

In asking for the appeal hearing, Frank Russo, who presented Global Spectrum's bid wrote to the city purchasing director [who oversaw the bid process for the city]:
"...we are very disappointed with the selection process. I have personally been
competing for private management contracts since 1988 and I have never filed a
protest, but this situation is different – it is not simply “sour grapes.” We
can’t help but feel that we were simply used to create the appearance of
competition. We remain baffled as to why the City seems to be acting against its
own best interests."

John Bolton deserves a chance to shine in his new job, and I for one, hope he does. However, SMG should not be given a renewal of their contract in five years, if the actual numbers look more like what Global Spectrum projected, falling short of SMG's questionable winning bid. If SMG doesn't perform, Mr. Bolton and SMG should be asked to move on.

Because of the controversy that surrounded the selection of his employer, SMG, nothing short of finishing in the black is acceptable. Good luck, Mr. Bolton!

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