Soccer complex scores with deal - Morgan Hill Times: City Local Government

Soccer complex scores with deal

City awards contract to reduce flat payments – betting on ad revenue, which was $0 last year

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Posted: Thursday, October 4, 2012 3:58 pm

Under a new agreement between the city of Morgan Hill and the operator of its outdoor sports fields complex, the city could end up gaining either a windfall of new revenue, or lose exactly half the funds it projected receiving from the facility in coming years.

But the City Council is poised to take the risk that a new concessionaire arrangement will pay off and bring even more users to the Outdoor Sports Center as they voted 4-0 to approve the amended payment structure two years into the existing five-year contract Wednesday. Rich Constantine was absent.

The financial benefit to the city depends on how successful the Morgan Hill Youth Sports Alliance - the nonprofit manager of the facility on Condit Road - will be at rolling out a new marketing plan, according to MHYSA president Jeff Dixon.

“The city could get more money (from MHYSA) than they would have gotten” under the existing payment schedule, Dixon said.

The city signed a contract with the nonprofit Morgan Hill Youth Sports Alliance to run the 38-acre complex of artificial and natural turf soccer fields in 2010.

As the facility operator, the MHYSA is responsible for maintaining the facility, scheduling field use for soccer and other sports, and collecting fees from patrons.

The organization pays the city a quarterly fee that has increased over the last two years, topping out at a total of $130,000 per year, or 15 percent of annual revenue - whichever is greater - starting in the current fiscal year, according to the contract signed in 2010.

However, the council approved a contract amendment proposed by MHYSA to instead pay the city $65,000 per year, plus 15 percent of revenue from advertising, sponsorships, grants, camps and clinics.

City staff will write up the contract amendment for final approval at a future council meeting.

Although that kind of “secondary” revenue has been virtually nonexistent at the Outdoor Sports Center the past two years, Dixon said the MHYSA is “aggressively pursuing” more advertising dollars, and some big-name sponsorships for the facility or its events.

That effort includes selling advertisements to local businesses in the form of banners displayed throughout the facility, and Dixon expects to announce that campaign to potential advertisers this week. For the fiscal year that ended July 1, the Outdoor Sports Center did not generate any revenue from advertising or sponsorships.

Plus, the MHYSA is currently working with the San Jose Earthquakes, Univision, and the California Youth Sports Association - the regional soccer league that uses the Outdoor Sports Center more than any other patrons - to help the MHYSA gain more advertisers and sponsors, or even sponsor the facility themselves, Dixon said.

At Wednesday’s meeting, Councilmember Gordon Siebert wondered about the impact to the city’s budget if advertising, sponsorships and other secondary revenue from the Outdoor Sports Center remain out of sight. The new agreement would require the city to amend its budget to reflect a loss of $65,000 half the expected revenue from the facility for each of the next three years.

“It bothers me to write off that ($65,000) for three years with no guarantee for the 15 percent” of secondary revenue brought in by the fields, Siebert said by phone from Pennsylvania at Wednesday’s meeting. “It’s 15 percent of zero as the history of the past two years shows.”

Dixon added that MHYSA’s original projections about the facility in 2010 did not show significant revenue from advertising and sponsorships to start rolling in until the third year of the contract, which started July 1.

City staff also said under the new agreement, the Outdoor Sports Center could still be run and used frequently at no cost to the city.

Mayor Steve Tate noted that if the city itself was running the Outdoor Sports Center, operation costs to the tune of $600,000 or more would fall on the general fund’s shoulders.

Plus, the fear over the potential lack of advertising revenues gives the city an incentive to work with MHYSA to gain those dollars, said Councilmember Larry Carr. He said his primary concern with the MHYSA is that the Outdoor Sports Center gains more field rentals and be available to a variety of local users - which he said has been accomplished in the last two years.

“We’re in a better place today” at the Outdoor Sports Center, Carr said. “Now it’s time to grow the marketing side of it. We’re giving them the confidence that (those revenues) can grow as well.”

City staff recommended the council approve the new payment agreement after the parks and recreation commission evaluated the proposal and the Outdoor Sports Center’s performance over the last two years.

Field use has increased during that time, but the MHYSA has not reached a goal of ensuring at least 60 percent of use is for local residents. Instead, about 40 percent of total field hours have been used by local users, with the other 60 percent used by regional users.

Dixon said that is because the most common use for the facility - regional soccer tournaments - take up most weekends, when substantially more fields and hours are available than on weekdays. During a weekend soccer tournament, the facility generates between $4,000 and $7,000 in field rental revenue.

City staff added that MHYSA has made a “reasonable effort” to include more local users the last two years.

The MHYSA has operated the Outdoor Sports Center at a financial loss the last two years - of about $58,000 in 2010-2011 and about $21,000 in 2011-2012.

That was mainly due to higher-than-expected costs for water for field irrigation, Dixon said.

The organization, however, is encouraged that it cut its losses in half after the first year, and for the current year which ends June 30, 2013, Dixon anticipates an “incredible amount of revenue” from still-increasing field rentals and marketing.

The MHYSA proposed the new payment agreement in June, because they knew their third-year payments to the city were set to increase substantially to $130,000 - a rate that Dixon didn’t think was sustainable for the Outdoor Sports Center operations.

“We expect to move toward profitability by this year,” Dixon said.

Part of the MHYSA’s proposal in 2010 was to bring a wider variety of users to the sports fields, including even non-sports uses. The organization is currently working on a bid to the U.S. Dog Agility Association to host a national competition in October 2014, Dixon said.

The Outdoor Sports Center has traditionally been use predominantly for soccer leagues and tournaments. In the last two years, new field users include rugby, football, flag football, ultimate Frisbee, lacrosse and even special events such as this summer’s No Bull BBQ Cookoff.

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  • Dave Payne posted at 7:28 pm on Tue, Oct 9, 2012.

    Dave Payne Posts: 2

    Mr. Dixon's phrase is perfectly acceptable American English, which I'm sure you'll have to admit, is a convention after all. Yes, our friends across the pond stopped using the past participle "gotten" around the time Jamestown was being settled. It's admittedly not the best use of the magnificent language we share, but Shirley, really, must you take such an arcane and pretentious shot at a quote that was not prosaically submitted by the speaker and thus extrapolate a fallacious syllogism? Please, let me invite you to come visit us and see the accomplishments and advancements of our youth that we together as a community are providing by getting "more kids in more sports".

  • Tigger24 posted at 11:28 am on Tue, Oct 9, 2012.

    Tigger24 Posts: 1

    The guys at MHYSA are working way more than 70-80 hour weeks. There have been a number of improvements and some setbacks.

    For those who are bashing the finances, the reason the city approved it is most likely due to the
    City of Morgan Hill TOT being up 30% (Tourism Occupancy Tax) from 2010.
    And that was achieved in an ever tightening economy.

    Holiday Inn Express was originally against MHYSA but are now singing their praises and fully on board due to their increased revenues for overnight stays.

    That is what Jeff Dixon, grammar aside, is referring to when he says the cIty could get more money.

    We have this amazing gem right in our backyard and I for one am glad the MHYSA guys are local residents that are putting in so much effort for the benefit of our community.

  • Shirley posted at 5:13 pm on Mon, Oct 8, 2012.

    Shirley Posts: 24

    “The city could get more money (from MHYSA) than they would have gotten” under the existing payment schedule, Dixon said.

    This grammatically incorrect statement, might just be an insight to one of the problems here.

  • thermopylae posted at 12:29 pm on Sun, Oct 7, 2012.

    thermopylae Posts: 41

    And the city is begging for money to maintain the city's infrastructure while it is wasting money on a sports field.

    It is clear what the politicians priorities are.

  • Frank Manocchio posted at 7:20 am on Sun, Oct 7, 2012.

    Frank Manocchio Posts: 47

    The Council put the MHYSA in charge over the objections of the hotel and business owners in the area. The
    ancillary business was already happening and those who understood business plans were concerned with the sketchy financial projections.
    It is a doubious assertion that tournaments may have been cancelled due to the economy, although it could have very well affected the ancillary businesses take, as participant may have gone home instead of staying overnite.
    The Council also instructed the MHYSA to return with a financial report on their progress after a specified period (6 months/year?) and they received the equivalent of "my dog ate it ".

    In spite of their good intentions, the MHYSA have not met their projections, and are running a serious deficit, due in large part to their failure to wait 2 years to implement a marketing plan. The numbers speak for themselves.

  • voice of reason posted at 8:33 am on Sat, Oct 6, 2012.

    voice of reason Posts: 1

    Let’s look at the forest through the trees. These “guys” are long-time MH residents that live and breathe for the success of the Sports Center.

    They ARE small businessmen - you know, the ones that are paying taxes to support their less fortunate brothers, sisters and children experiencing difficulty with keeping roofs over their heads and food on the table; and they’re working 60-70 hours per week with the dream of creating success. MHYSA is not looking to rip off the taxpayers. It like other small businesses see the glass half full and are striving to make Morgan Hill THE destination for Field Sports.

    It’s not just about some soccer fields in which the City is investing. The Sports Center helps boost our city’s economy, if only 8-10 days per month. Ask the local lodging facilities that look forward to full vacancy on tournament/event weekends. Ask MacDonalds, Carls Jr, Jack-In-The-Box and the Subway’s in town whose lines go out the door on those Saturday and Sunday’s….and Chevron, Shell and Safeway along with Las Palmas and the other local eateries that benefit from a few thousand additional patrons that visit our City during these events. I’ll bet there’s even been some Harley’s, Ford’s and Honda’s sold resulting from out-of-town visitors cruising the lots during their downtime over 3 days. We even see kids dressed in uniform showing up at places like St. Cats in order to ask for that spiritual edge on Sunday before they enter the field of battle, dropping their tithe in the collection baskets.

    ….and yes Councilman Carr, now is the time to begin the marketing phase, after the wrinkles have been ironed out and the facility is prepared to host sports teams from all over the State and beyond. 0 X 15 = 0, but these guys are hardworking, dedicated people striving to flourish and I am confident they will not let you down. Their deficit as a start-up has been cut in half in two years during the worst economy since the Great Depression, so let’s offer the support they need. Kudo’s to the City Council that has that same dream for our city.

  • Buzz posted at 9:42 pm on Fri, Oct 5, 2012.

    Buzz Posts: 27

    The city really should get out of the business of gambling with taxpayers' money. If this deal were negotiated by a professional business person (s)he would have been fired. Only in the public sector is this kind of incompetence tolerated. Why??

  • 1derguy posted at 8:30 pm on Thu, Oct 4, 2012.

    1derguy Posts: 71

    Even if the MHYSA fills the place every weekend the income is $360K, give or take a few bribes. There is no way these fools could pay MH what they agreed to. Pull the plug on these idiots and don't risk anymore money that doesn't belong to you. These guys in charge of the MHYSA are professional businessmen. You're not as smart as them, and that's OK. Cut your losses and move along. Try to do better next time.

  • Frank Manocchio posted at 6:12 pm on Thu, Oct 4, 2012.

    Frank Manocchio Posts: 47

    "I'll gladly pay you Tuesday for a hamburger today." Councilman Siebert, you can start pencilling in those $65K losses. It looks like they haven't met any of their stated projections and, now, want to pass the risk onto the community. What reason is there to believe that they will meet this new goal of additional advertising revenue? No, Council menber Carr, 2 years ago was "the time to grow the marketing side of it."

    Let me see if I understand this correctly, the taxpayers are going to subsidize the "outsiders" (the 60%) an additional 65K per year above our bond obligations, to use a faciliity that was, ostensibly built for the community.

    Perhaps the Council can make up the shortfall from their settlement proceeds of the RDA lawsuit against the State Controller.

    Finally, who was doing the negotiation for the City? As Councilmember Siebert noted: “It’s 15 percent of zero as the history of the past two years shows.” Staff should have played hardball and demanded at least 50% of zero.