To:   HONORABLE MAYOR AND                   From:   Jim McBride

                        CITY COUNCIL                                                       

 

   Subject:   SEE BELOW                                               Date:   October 15, 2003

 

Council District: 3

 

SUBJECT:     REVISION OF THE FACILITY USE AGREEMENT FOR EVENTS CONTRACTED AT THE CONVENTION & CULTURAL FACILITIES

 

 

RECOMMENDATION

 

Adoption of a resolution approving revisions to the Facility Use Agreement between Convention & Cultural Facilities clients and the City.

 

 

BACKGROUND

 

The City’s form Facility Use Agreement contains the terms and conditions that govern the clients use of the Convention and Cultural Facilities (CCF), which include the Convention Center, Civic Auditorium, Parkside Hall, Center for the Performing Arts, and Montgomery Theater.  Revisions to the form Facility Use Agreement were last approved by the City Council in June 1999. 

 

 

ANALYSIS

 

In recent years, CCF and the Convention and Visitors Bureau have experienced an increase in the number of clients that have requested substantive changes to the language in the form Facility Use Agreement (Agreement).  The Director of Conventions, Arts and Entertainment is authorized to negotiate and execute the form Agreements with the clients and may modify terms where appropriate as long as the changes do not increase the City’s potential exposure to liability.   While some of the proposed changes requested herein may increase the City’s exposure to liability, the Department believes the changes are critical to the success of bringing business to San José. 

 

Adjustment of Facility Use Fee and Meeting Space and Director Review and Fee Adjustment:

 

Current language in the Agreement authorizes the Director to adjust the Facility Use Fee based on actual use of space at the Facility and actual use of hotel room nights.  In negotiating terms for use of the Facilities, our clients have expressed a desire to budget total facility use fees in advance and object to the possibility of incurring additional costs.  In practice, these types of adjustments have been very rare.  This section has been deleted from the revised Facility Use Agreement.

 

Indemnity and Waiver of Claims: 

 

Existing language in the Agreement requires the Client to indemnify and hold the City harmless from any and all claims resulting from client’s acts or omissions or the acts or omissions of client’s officers, agents, employees, contractors, exhibitors, registrants or other persons attending an event, except for such claims arising from the “active” negligence or willful misconduct of City.  Clients continually object to the word “active” and have asked that it be eliminated in both the indemnity and waiver of claims provisions of Section 7.   The revised Facility Use Agreement includes these changes.

 

Interruption of Event/Unavailability of Facilities/Force Majeure:

 

The ability to cancel events without penalty of paying liquidated damages is limited to circumstances beyond the control of the City or the Client (such as strikes, fire, casualty, Acts of God, national emergency, governmental directive to City, or by default of a prior occupant).  The ability to initiate such a cancellation is currently limited to the City.   Since the events of September 11, 2001 took place our clients have expressed a strong desire to have the same ability to cancel their events under such circumstances without obtaining the prior approval of the Director.  The revised Facility Use Agreement now gives both the Client and the City the right to terminate the agreement for circumstances beyond the control of either party.

 

Waiver of Breach:

 

The existing Agreement states that waiver by City of any breach of any term, covenant, condition or provision by client shall not be deemed to be a waiver by City of any subsequent breach by client.  Clients have asked that this provision be made mutual.  A mutual waiver of breach provision is included in the revised Facility Use Agreement.

 

In addition to the changes that affect the City’s liability, changes to language in the following areas serve to clarify the City’s intent and/or provide more flexibility:

 

·        Separation of Rules and Regulations from the Facility Use Agreement

·        Clarification of client’s ability to assign or transfer its interest in the Agreement

·        Clarification of client’s opportunity to cure events of default

·        Clarification of scheduling language

·        Clarification of City’s exclusive services

·        Clarification of City’s obligation to notify client of the unavailability of the Facilities, equipment or services

 

Sample agreements from other convention centers including San Francisco/Moscone Center, Anaheim Convention Center, Santa Clara Convention Center, Georgia World Conference Center, Orange County (Florida) Convention Center and Reno Convention Center and the Professional Conference Management Association’s White Paper on contract negotiations indicate that it is common practice for convention center operators to include the aforementioned changes. 

 

The Department is currently in negotiations with Avon for an event in 2004 that will bring approximately 4,000 people downtown and generate and estimated $2.5 Million in delegate expenditures. Avon has indicated that they will not bring their business to San José if we are unable to accommodate the changes requested. In addition, the Department has experienced similar challenges in negotiations with Intel, Microsoft, Borland and CMP Media.  These groups also have the potential to bring a great deal of business to the Convention Center and the downtown business community.  In order to remain competitive and capture greater market share, it is necessary to amend the Facility Use Agreement accordingly.  A copy of the Agreement, highlighting the proposed changes, is attached to this memo.

 

These changes should address most of the concerns expressed by clients with the existing Agreement.  However, there may be times when circumstances warrant bringing additional requests forward for City Council approval.

 

 

COORDINATION

 

This memorandum has been coordinated with the City Manager’s Office, the Risk Management Office and the City Attorney’s Office.

 

 

PUBLIC OUTREACH

 

Not applicable.

 

 

COST IMPLICATIONS

 

Revision of the terms of the Facility Use Agreement is consistent with the June 4, 2003 Mayor’s Budget Message directing the Manager to provide the Convention and Visitors Bureau with the necessary flexibility to successfully book meetings in today’s highly competitive convention market. 

 

 

CEQA

 

Not a project.

 

 

JIM McBRIDE, Acting Director

Conventions, Arts and Entertainment

 

Attachment