To: HONORABLE MAYOR AND From: Kay Winer
CITY COUNCIL
Subject: CONVENTION CENTER RFP Date: November 14, 2003
AND REVISED TIMELINE
RECOMMENDATION
(b) Approval of revised timeline for the RFP process.
BACKGROUND
On September 30, 2003
staff presented a timeline for the Request for Proposal process for the San
Jose Convention Center and Cultural Facilities. At that meeting, Council requested that the RFP be brought back
to Council for review and approval, and directed staff to include input from various
community stakeholders including the Conventions Visitor’s Bureau and the South
Bay Labor Council. The
information in this memorandum responds to this directive and also highlights
some of the provisions from the attached draft RFP.
ANALYSIS
RFP TIMELINE, OPTIONS, AND
PROVISIONS
New Timeline
|
November 25, 2003 |
Council review and
approval of RFP |
|
|
December 1, 2003 |
Request for Proposal (RFP)
Distribution |
|
|
December 15, 2003 |
Mandatory Pre-proposal
Conference |
|
|
December 19, 2003, close of business |
Written questions due to
City |
|
|
January 15, 2004 |
Written responses
distributed by City |
|
|
February 23, 2004 |
RFPs due to City |
|
|
Week of March 8, 2004 |
Interviews with proposers |
|
|
Mid April 2004 |
Recommendation to Council
of preferred proposer for 30 day exclusive right to negotiate |
|
|
Late April 2004 |
Agreement Negotiations |
|
|
May 2004 |
Execute agreement |
|
|
July 1, 2004 |
Implementation of proposal |
|
RFP
Options
As stated in the previous memo to Council,
the RFP is structured so that firms have the following submittal options:
1. Convention Center with Auditorium and Parkside Hall
2. Performing Arts Facilities – individually or as a group (Montgomery, CPA, California/Fox)
3. All of the above
RFP
Provisions
Below are
highlights of some of the provisions included in the attached RFP:
Wage Policies
Both Living and
Prevailing Wage Policies and Requirements have been included as Appendix II of
the RFP. The proposer will be required
to prepare two separate five-year financial proformas for the Convention
and/or Cultural Facilities in the format provided in Exhibit D, (i) including
the wage policy requirements as described in Appendix II, and (ii) without the
wage policy requirements described in Appendix II. Classifications subject to
the Prevailing Wage Policy and the Living Wage Policy are included in Appendix
II of the RFP. The Council will have an
opportunity to make a decision when the proposals are received and reviewed on
whether or not to apply all or some of those policies.
Other Council Policies
As noted previously, and directed by Council, the following policies and existing agreements will be retained, and have been included in the RFP in Appendix III. The scope of work noted in the RFP is subject to these policies and agreements:
- No Lay-Off Provision of
the Competition Policy
The Competition Policy contains a “no lay-off” provision. In the event that this process results in the decision to have an outside contractor manage the Convention Center and/or other cultural facilities, the City will be responsible for transitioning approximately 100 employees to either the new contractor or to other employment opportunities within the City with no reduction in current pay. Staff is aware of this and will begin to develop the necessary plans in the event that the transition of these employees is needed.
· Theater booking guidelines (outlines what groups receive priority in selecting dates)
The purpose of the Theater Guidelines is to establish criteria for scheduling events at the Center for the Performing Arts, and Montgomery Theater.
The
Guidelines provide: (1) the eligibility and production requirements for each
tier, and (2) the scheduling timeframes for each tier. For example, a Tier 1 group at the Center
for the Performing Arts may tentatively book dates as far as 3 years in advance
of the Performing Arts Season (September - August), and must confirm the dates
no later than 9 months in advance of the Performing Arts Season. Tier 2 groups may submit tentative bookings
beginning 15 months in advance of each Performing Arts Season, and may
challenge Tier 1 groups for dates they are holding on a tentative basis up to
15 months in advance of each Performing Arts Season.
The California
Theatre is primarily designed as the home of Opera San Jose, which has first
choice of dates for its productions.
The guidelines are currently being drafted, and will establish criteria
for booking the remaining dates based on the number of production days and
performances.
· Convention Center Booking Policy (outlines what types of events can book long-term dates and short-term dates) - The booking policy for the Convention Facilities offers long-term priority dates to conventions and tradeshows that are international, national or regional in nature, have a significant impact in terms of hotel tax generated, and use a minimum of 500 peak or 1,500 total hotel room nights. These events attract out-of-town attendees that boost the local economy by bringing new dollars to San Jose. Second priority for date selection is offered within 18 months of the event based on the potential economic benefit and operating revenue to the City. Second priority events include conventions and tradeshows that use a minimum of 500 total hotel room nights, and multiple event-day, multiple-hall, local trade shows, consumer shows and community events. Single event-day and/or single hall local trade shows, consumer shows, and community events will be given third priority on dates and can be booked up to 12 months in advance for the Civic Auditorium and Parkside Hall, and up to 9 months in advance for the Convention Center. Dance concerts at the Convention Center can be booked up to 9 months prior to the event. All other events will be given dates on a space-available basis.
· Environment Procurement Policy (EPP)
The EPP has been included in this RFP as a requirement.
· Facility Use Agreement
The selected Contractor will be required to use the Council-approved new Facility Use Agreement. This new agreement was approved by Council on November 4, 2003, and incorporates many user-friendly amendments based on client feedback.
· Flexible Rate
The Council-approved flexible rate structures for facility use and garage parking will need to be retained by the selected proposal. In order to remain competitive and capture greater market share, it may be necessary to reduce rates to less than 50 percent of the established rates, including reducing them altogether, or to reduce rates within the one-year timeframe for short-term business.
In addition, when considering an event promoter’s request to reduce the flat parking rate, the operator will assess the event’s economic benefit, the projected number of parking spaces needed, and the demand for parking spaces at the convention center garage. For non-event days, the incremental rate will be in effect.
The City of San Jose will continue to own, operate, and collect revenues from the parking garage. In the event that there is a new operator, that entity will be entitled to recognize the revenues from the Convention Center Garage, consistent with current City practice.
Existing Service
Agreements
· Concessionaire contract
The first 5-year term of the City's concessionaire agreement expires January 2, 2005. The operator has the option to extend the agreement for an additional 5-year term, or search competitively for another concessionaire. The concessionaire is the exclusive provider for all food, beverage, and novelty services at the facilities.
· Network services contract
The network services agreement expires January 31, 2006. The network services contractor has the exclusive right to use the existing network infrastructure, but clients have the right to install and manage their own temporary networks. The network services agreement includes all network infrastructure, systems, and services necessary to provide high-speed local and wide-area network connectivity services that are made available for a fee to clients at or from the facilities through the SJCC Network.
l Utility Service Agreements
A generic utility service agreement has been included in the RFP appendices for review by the proposers. There are currently seven agreements in effect with different utility companies. These will be renewed for a one-year extension on June 30, 2004 in order to facilitate operations of the facilities in July 2004 when a final operator is selected.
l Convention and Visitors Bureau
The current agreement between the City and the Convention and Visitors Bureau will still be in effect in July 2004 when this process is scheduled to be completed and the selected proposer will begin operating the facilities. This agreement has been attached along with the other agreements noted above for review by the proposers.
l Custodial
Custodial services currently being provided at the Convention Center and Cultural Facilities consist of full-time City staff as well as contractors. All of these employees are subject to the Displaced Janitor Opportunity Act of 2001 (Appendix VI).
Structure of the RFP – Private Activity
The IRS, however, does recognize certain exceptions for qualified management agreements. In order to be a qualified management agreement, none of the compensation paid to the operator can be based on the profitability of the facility. Rather, the operator’s compensation must be based either solely on a fixed fee or upon a fixed fee and a percentage of gross revenues. The percentage of gross revenues varies depending upon the length of the agreement. For example:
ü Term is limited to lesser of 15 years or 80% of the useful life of the facility.
Ø At least 95% of the compensation is a fixed fee.
ü Term is limited to lesser of 10 years or 80% of useful life of facility.
Ø At least 80% of the compensation is a fixed fee.
ü Term is limited to 5 years and City must have right to terminate without penalty after 3 years.
Ø At least 50% of the compensation is a fixed fee.
Term of Contract
The Contract shall be in effect for five years from the date of the Notice to Proceed and terminable at three years at the City’s option, with the City option to extend for two 5-year terms.
STAKEHOLDER INPUT
The stakeholder input, in the form of a letter and draft RFP dated October 24, 2003, represented the collective suggestions from the following entities: The Convention and Visitors Bureau, the South Bay Labor Council, AFSME 101, Operating Engineers Local 3, Teamsters Union Local 281, IATSE Local 134, American Musical Theater of San Jose and hotel representatives from the Marriott, Hilton, and Fairmont. Subsequent to this information being received, staff had a follow-up discussion with the Convention and Visitors Bureau and the South Bay Labor Council on their input, during which time they stressed several important points including:
· Proposals be judged on how the facilities can be an important economic engine, i.e., that proposals not only be evaluated based on income generation, but on job creation, generation of TOT, sales tax, etc;
· Proposals be evaluated on how local community arts programming would be enhanced;
· Proposals need to explain how their firms would assist in "branding" the City of San Jose.
As a result staff has incorporated their suggestions in the following sections: Selection Process, Evaluation and Procedure Criteria as well as the Performance Standards and Measurements sections.
The information received also included input on local preference, options for different management models (i.e. Public Authorities and local multi-organization joint ventures), civil service employees, and sales and marketing issues. These points are discussed below:
Local Preference
The Convention and Visitors Bureau and the South Bay Labor Council proposed the following local preference be applied to this contract:
l Extension of a 5% preference for a local firm company or organization in evaluating proposals for award;
l The amount of the preference shall be equal to the amount of the percentage applied to the lowest proposal price from a firm other than a local firm, if the Proposer submitting the lowest proposal price is not a local firm.
l Definition of “ Local firm" shall mean a firm or organization with a fixed primary or branch office within a 25 mile radius of San Jose City Hall, located at (insert address) in the City of San Jose, and a majority of the work on the project will be performed by employees who are permanently assigned to such office prior to the City requesting proposals for the project and whose regular duties would include local work on other than city projects.
This proposal
differs substantially from the City’s existing local preference policy as well
as the direction that Council is currently considering. The differences occur both in how the
preference is applied as well as the definition of a "local firm."
Under the current City policy, the following applies to contracts:
l A proposer who has an office within the City of San Jose can claim status as a Local Business Enterprise (LBE). In the event that two or more proposals are determined to be similarly advantageous to the City, the City Council may use LBE status as a factor in the award of the contract.
l An LBE is defined as: "a business enterprise, including but not limited to a sole proprietorship, partnership, or corporation, which has a legitimate business presence in the City of San Jose. Evidence of legitimate business presence in San Jose shall include:
n Having a current San Jose business tax certificate; and
n Having either of the following types of offices
operating legally within the City of San Jose: contractor's principal business
office; or contractor's regional, branch or satellite office with at least on
full time employee located in San Jose."
Council is
considering changing the Local Preference Policy by giving a 5% preference in points
in the evaluation of RFP's. The Con-Vis/Labor Council proposal for local
preference would be applied differently.
Instead of a 5% preference being applicable to the point evaluation, it
would be calculated based on the price submitted by lowest
"non-local" firm. Since the
RFP will consider much more than a simple price, it is difficult to image how
such a percentage preference would be applied.
The Con-Vis/Labor Council
proposal defines “local” as within a 25-mile radius from City Hall. This would include many other jurisdictions
outside the City of San Jose. In
addition, the proposal contains a requirement that a certain number of workers
be employed by the "local" firm and that those workers be obligated
to work on the Convention Center contract.
An analysis has not been offered for this definition; therefore it is
difficult for staff to complete its own internal analysis.
Convention Authority
The input received
from the community stakeholders included reference to accepting proposals from
different management models such as an authority. Staff has included the following language in
the RFP in the Evaluation
Procedure and Criteria section to
address this input:
“The panel will consider different management models such as an
authority. In this case, the proposer
will need to provide detailed information on the organization and operations of
the model as well as an explanation of the advantages of using this model for
the operations of the Convention Center and Cultural Facilities.”
An example of an authority is the Arena Authority, which was established by the City Council in 1990, and operates as a non-profit corporation with a Board of Directors. In the case of the Arena Authority, it operates under a Master Operating Agreement and is responsible for managing the Arena under established standards and controls; provides regular financial and operating reports to Council; and oversees the disposition of operating and capital reserves associated with the facility. At the time that the Arena Authority was established, the facility was yet to be completed and funding was provided by the Redevelopment Agency for a period of time until the facility became fully operational. The annual budget is prepared by the Executive Director and approved by the Authority Board.
The non-profit public benefit corporation is a flexible entity that could be formed to serve a variety of purposes. At this point, the stakeholders have informed us that this “model” should be considered. Any response to the RFP that proposes such an operating model will need to provide greater detail for Council consideration.
Retention of Civil
Service Employees by a New Contractor
The stakeholder input also included
reference to the retention of Civil Service Employees. The groups inquired as to the ability of
existing civil service employees to be "leased" by an outside
management firm. This is unprecedented
on a large scale in the City, and would raise several legal issues including
workers compensation issues and liability issues related to supervisory roles
of City employees by non-City supervisory staff. In addition, overall operations and management costs of the
facilities would be at a higher cost for any proposer.
Sales and Marketing
Other
areas of input included sales and marketing of the facilities. The sales and
marketing element has been included under the Scope of Services section of the RFP as well as
under the
Existing Agreements section,
and clearly notes that there was a recent shift this year of shared marketing
and sales responsibilities between the City and the Convention and Visitors
Bureau. The current contract between
the City and ConVis is attached in Appendix III for the proposers to review.
PUBLIC OUTREACH
Input has been received from community stakeholders.
COORDINATION
This memorandum has been coordinated with the Department of Finance, and the City Attorney’s Office.
CEQA
Not a Project
Kay Winer
Deputy City Manager