SUBJECT: APPROVAL
OF THE AMENDED AND RESTATED BANQUET FACILITY AGREEMENT WITH THE ROTARY CLUB OF
SAN JOSE
FOR USE OF THE FOURTH STREET GARAGE BANQUET FACILITY
Council District: 3
SNI: University
Approval of the Amended and Restated Banquet Facility Agreement (“Amended Agreement”) with the Rotary Club of San Jose (“Club”) for use of the banquet facility at the parking garage located at 44 South Fourth Street for no more than 50 Wednesdays and four optional events each year for 35 years.
BACKGROUND
The City and the Redevelopment Agency of the City (the “Agency”) working together developed a 750-space parking garage located at 44 South Fourth Street in San José, with a banquet facility (“Banquet Facility”) on the seventh floor. Prior to commencing construction of the Banquet Facility, the Agency and Club entered into an agreement entitled “Agreement to Contribute Funds” whereby Club agreed to contribute towards the construction of the Banquet Facility to ensure that the Banquet Facility would be built and made available to the general public, including the Club and other community organizations.
On June 22, 1999, the Club entered into an agreement with the City entitled “Banquet Facility Agreement” to use the Banquet Facility each year for up to (i) 50 Wednesdays, and (ii) four optional uses for events that were consistent with Club’s purpose, commencing with the completion of the Banquet Facility. At the time the original Banquet Facility Agreement was entered into, it was agreed that the City and Club would enter into a subsequent facility use agreement once the City took over the actual operation of the Banquet Facility which would give Club the opportunity to address issues of food service, quality, and cost with the Director of Conventions, Arts, and Entertainment (“Director”). At the time, the parties assumed that the City would operate the Banquet Facility. Accordingly, the Banquet Facility Agreement did not discuss what would happen if the City hired a contractor to operate the Banquet Facility on the City’s behalf. As a consequence, the parties have negotiated significant changes to the original Banquet Facility Agreement resulting in the Amended Agreement attached which supersedes in its entirety the Banquet Facility Agreement.
The Amended Agreement does not address the Club’s proposal for the naming of the Banquet Facility and pre-function room. The Clerk’s Office referred Club’s proposal to the Arts Commission and it will review Club’s proposal at its May 14, 2003 meeting. City Council Policy 7-5 (Naming of City-Owned Land and Facilities) outlines the procedures for the naming of facilities such as the Banquet Facility. In summary, the policy establishes a process in which proposed names are submitted to the Clerk’s Office, which refers it to an appropriate commission for review and recommendation. The commission then returns its recommendation to the Clerk’s Office for placement on the City Council agenda for Council consideration.
Initially, the purpose for the Club’s pledge to contribute money to the Agency was to secure a downtown banquet facility for its weekly meetings. But since then, the Club expressed concern that parking and catering expenses could become prohibitively priced during the City’s next economic boom. Therefore, staff concurred with Club’s request to include provisions in the Amended Agreement regarding facility use, parking, and catering expenses for the term of the Amended Agreement. These provisions are described in more detail below.
Term of the Amended Agreement
Consistent with the original Banquet Facility Agreement, the Amended Agreement gives the Club exclusive use of the Banquet Facility for up to 50 Wednesdays each year between the hours of 11:00 a.m. and 3:00 p.m., and up to four optional uses each year, for 35 years.
Facility Reservation Deposit; Fees and Charges; and
Security Deposit
While the original Banquet Facility Agreement stated that the Club would provide a $10,000 reservation deposit and pay the applicable facility use fees and parking fees at the then current rates established for all Banquet Facility users, the terms of the Amended Agreement are summarized below:
Facility Reservation Deposit – Neither the City nor its operator shall require Club to post a facility reservation deposit.
Fees and Charges – Use of the City’s audio-visual equipment at the Banquet Facility will be provided free of charge to Club if Club’s members complete the City required training on the use and operation of City’s audio-visual equipment or demonstrate to the satisfaction of the Director the ability to properly operate City’s equipment. For any other services, such as the cost of labor in connection with providing Club with audio-visual services or network and telecommunications services, Club shall pay the applicable costs and charges at the then current rates in effect as set by the City Council for Banquet Facility users.
Security Deposit – The Amended Agreement provides that the City or its operator may charge Club a security deposit for Club’s four optional uses in an amount not to exceed $10,000.
Parking Fees
The original Banquet Facility Agreement committed to reserve 135 parking spaces for Club’s use for its Wednesday lunches and during its optional uses. The Amended Agreement provides that Club members will pay the Council-approved rate for Banquet Facility users of $3 for the first two hours of parking. For the term of the Amended Agreement, the rate for Club member parking may be increased by up to 15 cents per year for the Wednesday lunches. The Agency and Department of Transportation (DOT) will conduct annual surveys to recommend adjustments to the Council-approved downtown parking rate, and a discounted rate for Banquet Facility users. From a business perspective, a discounted parking rate is critical to the success of the Banquet Facility.
For Club’s optional uses, Club members will pay no more than double the rate charged members for parking during their Wednesday lunches. Club members parking in excess of two hours will be charged the then current rate in effect for all Banquet Facility users for the extra time.
Attached to the Amended Agreement is a parking operations plan that describes how the DOT will:
· ensure availability of 135 parking spaces during the Club’s Wednesday lunches and optional uses;
· expedite entry/exit from the garage; and
· invoice the Club for parking.
Quality and Price of Catering
Services
The Amended Agreement provides that nothing in the Amended Agreement is
intended to require City to subsidize the cost of the Club’s lunch buffet. The Amended Agreement gives Club the
opportunity to participate in the selection process for City’s operator, and
specifies some of the criteria that will be used when selecting the successful
proposer. These include that the
proposer will provide Club a lunch buffet with at least two hot entrees, and a
variety of specified side dishes, at a price consistent with prudent business
practices and the Club’s long-term commitment to use the Banquet Facility for
thirty-five (35) years and up to fifty (50) Wednesdays each year.
In addition, the Amended Agreement provides a formula for determining Club’s lunch price and a process for resolving price disputes, should they arise, between City, Club, and the proposed operator in the process of the City’s negotiation of the agreement with the proposed operator. The Amended Agreement provides that, if City, Club and operator are unable to agree on the price of Club’s Wednesday lunch buffet, the formula used shall be the cost of food multiplied by three. This formula is intended to take into account all of the operator’s costs in providing the buffet lunch, including taxes, gratuities, and labor.
The cost of food for the duration of the new
agreement will be calculated by averaging the cost of food incurred by the
existing Operator for the 45 days immediately preceding the expiration of the
existing agreement if the successful proposer is the existing operator. If the successful proposer is a new operator
for the first 45 days of the new agreement, the cost of food will be based on
the previous Operator's cost of food.
Thereafter, the actual cost of food incurred by the new Operator will be
the cost of food used for the remainder of the agreement. In either case the cost of food will be
increased (or decreased) annually by the CPI.
In the event that the Club, the proposed operator or the City is able to demonstrate that the cost of food multiplied by three is no longer a valid industry standard, the parties agree that the then current formula for setting a catered lunch buffet will be substituted. Club members who select coffee service only will pay no more than fifteen percent of a Club member’s price for the Wednesday lunch buffet.
Should the City determine to operate the Banquet Facility directly, the provisions described above regarding the nature of the lunch buffet and the cost setting formula will apply to the City.
Facility Use Agreement
In the event that the City decides to operate the Banquet Facility, the parties have agreed that the Club will execute a Facility Use Agreement (“FUA”) in substantially the form attached to the Amended Agreement. The attached FUA is the City’s current standard facility use agreement used for single event users of the San José McEnery Convention Center and cultural facilities. The FUA has been modified slightly to reflect the terms and conditions of the Amended Agreement and Club’s long-term commitment to use the Banquet Facility for 35 years. For example, the FUA was modified to reflect the discussion above regarding facility use fees, reservation deposits, and other charges. Also the FUA is silent as to waiver of claims and limitation of City’s liability, which are standard provisions in the existing FUA with single event users.
Not applicable.
This memorandum has been coordinated with the City Manager’s Office, City Attorney’s Office, the Redevelopment Agency, and the Department of Transportation.
Although the Mayor’s Budget Strategy memo does not refer to facility use agreements, approval of the Amended Agreement is consistent with the general principles of that memo.
Exempt, PP03-04-129
JIM McBRIDE
Acting Director, Conventions, Arts and Entertainment