Two firms seek PAC management contract

competing with

Two companies – one of which specializes in hotels, not arts venues – are competing for the contract to manage the Burnsville Performing Arts Center.

VenuWorks – the Iowa-based arena, theater and convention-center firm that has managed the PAC since it opened in January 2009 – is being challenged by St. Paul-based LHR Hospitality Management, whose portfolio runs to hotels, resorts, restaurants and golf courses.

So far, VenuWorks is winning, though the City Council will have the final say.

A committee that evaluated proposals from and interviewed each company is recommending that the contract stay with VenuWorks. The committee consists of five city staffers, including City Manager Craig Ebeling and Chief Financial Officer Heather Johnston, and three members of the PAC’s citizen advisory commission.

Officials are revealing little about the recommendation, on which the full commission will vote April 10. Its recommendation will then go to the council.

If LHR gains favor with council members, it could signal a desire to attract more meeting business in the city’s ongoing effort to reduce the PAC’s annual operating losses.

“I think that one proposer is definitely an entertainment promoter,” Council Member Mary Sherry said in an interview, referring to VenuWorks. “And the other group, their focus is on hospitality. They each look at the BPAC through a different lens.”

Sherry said she welcomes LHR’s ideas: “I think that it is refreshing to see that there is someone who wants to look at this in a different way.”

Sherry said she’s surprised the company even responded to the city’s request for proposals to manage the center. VenuWorks’ current contract, its second as the PAC’s management firm, expires at the end of this year.

“Right out of the gate, no one ever expected anybody to come in with a proposal other than VenuWorks,” Sherry said, adding that arts-facility management is a narrow-niche business.

Two principals in LHR are Burnsville residents: Joel Cairy, executive vice president and chief operating officer, and Mike Tozier, chief financial officer.

The company has more than 30 years in the hospitality business and has been affiliated with more than 300 hotels nationally and internationally, according to its website.

In 2011, LHR owned or managed 820 hotel rooms, the company says. It generates nearly $22.7 million in annual revenues.

The two companies are competing for a contract that carried a management fee of $131,000 in 2012.

Mindful of public scrutiny of the PAC, whose construction many citizens opposed as too costly, council members insisted on having a chance to interview the companies, in addition to the interviews already done by the RFP committee.

The council could decide on April 16 to schedule interviews, possibly in a joint session on April 23 with the Performing Arts Center
Advisory Commission.

Council Member Dan Kealey said he wants the benefit of having questioned the applicants before taking a vote he’ll have to defend later.

“This is a $20 million facility,” Kealey said at the council’s March 12 work session, where he raised the interview topic. “This is a major decision in the life of that facility. It was a very controversial facility to build.”

“It was controversial,” Sherry said at the work session. “We don’t want to inflame any more controversy. So I think we want to make it clear we’re being very deliberate about this and we’re very, very careful about it.”

The public won’t, however, get to see copies of the companies’ submittals before the council votes, City Attorney Joel Jamnik said.

State law classifies them as private, and they can’t be released until after the vote, he told the council.

Under the request-for-proposals process, the council isn’t obligated to choose the least expensive proposal.

“This is a request for proposals, not a request for bids,” Johnston said in an interview. “So there’s a fair amount of consideration you can bring into the process.”

The PAC suffered steep losses in its first two years but rebounded to hit pre-opening forecasts of annual operating losses of $350,000 or less.

Operating losses totaled $285,747 in 2012, compared with $304,853 in 2011, the city reported.

Total operating expenses were $1.23 million last year, and nonoperating expenses were $699,678, according to the city.