LA WATCHDOG-The Department of Recreation and Parks does not have the management team or financial resources to operate the 5,800 seat Greek Theatre as an Open Venue for the next two years (the 2016 and 2017 seasons) despite the General Manager’s confidence in the Department’s capabilities.
Under an Open Venue arrangement, Rec & Parks would “maintain control of the programming calendar while providing ope n access to all promoters on a non-exclusive basis.” According to a Report from the General Manager to the Board of Recreation and Parks Commissioners for its meeting on Wednesday, April 15, this arrangement would increase the Department’s net revenue from $2 million in 2014 under its current exclusive management contract with the Nederlander family that expires on October 31, 2015 to between $3 and $4.8 million in 2016.
But this new found money relies on the bogus assumption that the Department has the ability to operate the Greek Theatre as well as the big boys, including Live Nation, the world’s largest live entertainment company, or a joint venture consisting of Nederlander and its partner, Anschutz Entertainment Group.
Under the Open Venue option, Rec & Parks will need to hire a General Manager to oversee the operation of the venue, an Operations Manager to coordinate the production of the shows, and a Booking Manager to schedule the acts. Needless to say, these three individuals will have to have considerable industry experience which will be expensive. There is also a need for a backup organization staffed by personnel familiar with the live entertainment industry.
Rec & Parks will also need to hire an event staffing company, arrange for security services and parking, and enter into a Food and Beverage Concession agreement. But this will not be easy given the City’s convoluted contracting protocols and the City Council’s crony politics.
The Department will also have to purchase Venue Management Software that is essential for the successful operation of the Greek Theatre, from the scheduling of events to the coordinating the production of shows to the handling the finances. Needless to say, this is a scary prospect given the City’s past experience with technology and systems.
Rec & Parks is also expecting a financial windfall of $4.8 million if 70 events are held. ($3 million if there are only 50 events.) However, $1.5 million of this amount is scheduled for capital improvements, lowering the net to $3.3 million.
There may also be additional expenses, including those for management and the supporting staff. These will not be miniscule given the need for qualified and experienced people, including qualified techies to install, maintain, and operate the Venue Management Software.
While the General Manager has not provided us with a detailed income statement, it appears that once the net revenue of $4.8 million is adjusted for out of pocket expenses, the net is significantly below the minimum guaranteed rent of $3.5 million and $3 million proposed by Nederlander/AEG and Live Nation, respectively.
Furthermore, the Department has not addressed how our cash strapped City will fund the $19 to $25 million of non-revenue producing capital improvements that are needed for a new stage roof, to replace the seats, to renovate the concessions, to repair the terraces, and to expand the VIP space.
Rather than proceeding with the Open Venue alternative, the Commissioners should direct the Department to extend the existing contract with Nederlander (amended to include AEG) for one year until October 31, 2016, but only if the rent is increased to $4 million. This increase is more than justified since Nederlander/AEG will not be responsible for significant capital expenditures.
At the same time, the Commissioners should direct the Department and its industry and financial advisors to prepare a new Request for Proposal (“RFP”) that addresses the deferred maintenance incurred under Nederlander’s watch (a serious bone of contention), the desired improvements to the facility, and a preventative maintenance program that will maintain the facility in good to excellent condition over the next twenty years.
Furthermore, the review of the RFP’s should be reviewed and analyzed in an open and transparent manner so that we will not have another donnybrook between the Department and the local community.
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The Commissioners should also direct the General Manager to hold an open house at the Greek Theatre so that neighbors and other concerned citizens can get a better understanding the issues concerning the facility, including its finances, the Department’s plans and goals, the condition of the building and its systems, and the status of the RFP.
The Department of Recreation and Parks is a landlord, not an operator. The prospect of higher revenues is not worth the risk as the Department does not have the management or financial resources to operate or modernize the Greek Theatre.
As we all know, the grass on the other side is not always greener.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])
-cw
CityWatch
Vol 13 Issue 31
Pub: Apr 14, 2015
