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  ITEM 1.       
City Council Workshop
Meeting Date: 08/15/2017  
Submitted For: Tom Duensing Submitted By: Tom Duensing, Assistant City Manager
Department: City Manager's Office  

Subject
GILA RIVER ARENA FISCAL YEAR 2016-2017 OVERVIEW
Presented By:       Tom Duensing, Assistant City Manager
Guest Presenter:  Chuck Steedman, AEG Facilities, Chief Operating Officer
Guest Presenter:  Dale Adams, AEG Facilities, Gila River Arena General Manager
Purpose and Recommended Action
The purpose of this presentation is to provide a fiscal year 2016-2017 summary of the activities at the Gila River Arena.
Background
The City of Glendale is the owner of the Gila River Arena (Arena) located at 9400 West Maryland Avenue in the heart of the Sports and Entertainment District.  This state-of-the-art, multi-purpose facility and was opened for business on December 26, 2003. Gila River Arena is home to the National Hockey League’s Arizona Coyotes.  Additionally, the Arena hosts concerts with some of the biggest names in the music industry and other events with a seating capacity of approximately 18,000.
 
In October 2015, the City issued a Request for Proposal (RFP) for management of the Gila River Arena. Through this competitive process, AEG Facilities, operating as AEG Management Glendale, LLC, was selected to manage the Arena on the City’s behalf in April 2016.  AEG Facilities is a stand-alone division of AEG that owns, operates and consults with more than 100 venues worldwide including the KeyArena in Seattle, the Staples Center in Los Angeles, the Barclays Center in Brooklyn, the Mercedes Benz Arena in Berlin, Germany, and the O2 Arena in London, England.
 
Through a comprehensive transition process, management of the Gila River Arena by AEG Facilities began on July 1, 2016.  Management responsibilities include sales, marketing, operational, managerial, and maintenance support services for the Arena and the ancillary Arena parking facilities controlled by the City.  Particularly, AEG Facilities is responsible for the agreement with the Arizona Coyotes and secures other musical acts and events in order to fully utilize the facility.  The terms of the agreement include management fee payments of $5.6 million to fund the operations of the facility.  These payments are then offset by a distribution of year end operating revenue less operating expenses, or EBITDA.  This “profit-sharing” arrangement was estimated to be $523,000 for fiscal year 2016-2017.  Actual profit-sharing data for fiscal year 2016-2017 is not yet available.
Analysis
Fiscal Year 2016-2017 Recap
Fiscal year 2016-2017 was AEG’s first year managing the Gila River Arena, and overall, the activity exceeded initial estimates.  Despite the number of concerts held was similar to the prior year, the number of tickets sold was the highest since fiscal year 2009-2010.  Additionally, the average paid ticketed attendance was the highest in the history of the venue.  Key factors in the increase in revenue and overall activity at the facility include bringing back the Professional Bull Riders, an event that broke all previous records for gross sales in the State of Arizona; repeating the World Ventures event; and hosting the 2016 Kellogg’s Tour of Gymnastic Champions.  It is important to note that upon the arrival of AEG in July of 2016, there were only four non-hockey dates confirmed at the facility (two which were held by AEG).  Since beginning management of the Arena, a total of 45 events have been booked, of which 20 are now booked for the 2017-2018 Fiscal Year.
 
Although the City owns the Gila River Arena and therefore is responsible for the Arena capital investments, AEG works very closely in development of an annual capital budget and a long-term capital plan for the facility.  In fiscal year 2016-2017, the City appropriated a capital budget totaling $1.9 million.  This allowed the City and AEG to catch up on needed capital repairs and preventative maintenance projects.  Those projects included a number of technology and security improvements which immediately enhanced both the customer experience and the overall security of the venue.
 
AEG is also responsible for the agreement with Levy Restaurants, the Arena food service provider.  AEG has been working closely with Levy to enhance the overall customer food service experience which translates into additional revenue for the facility.
 
Assumptions Moving Forward
Fiscal year 2017-2018 has seen an increase in concert activity for July.  It is anticipated that non-hockey activity will slow down slightly this Fall and pick up slightly in early 2018.  Subsequently, it is anticipated that a decline in business will be realized and is associated with the “cycle” of touring that peaked this year.  However, despite Feld Entertainment staying at the downtown venue and their Monster Jam shows being held at the University of Phoenix Stadium, other competitive family show events popping up over the next couple years will be sought.
 
Promotions and planning will be a priority in marketing and placement of the venue and its proper placement among the top venues and markets in the United States.  Creating the story behind this venue and the great area of entertainment surrounding the facility should continue to move the Arena to new levels of activity.
 
Although the venue will age, with proper preventative maintenance and capital investment, the Arena should maintain its integrity for years to come and remain the anchor facility for the Westgate Entertainment District.
Previous Related Council Action

On September 13, 2016, the first year of AEG Arena management, Council approved the FY2016-17 Capital Improvement Plan and authorized release of funds to AEG Management Glendale, LLC.

On April 26, 2016, Council approved the award of RFP 16-13 to AEG Management Glendale, LLC for Arena Management Services.

Community Benefit/Public Involvement
Effective management of the Gila River Arena results in increased revenue for both local business and the City.  The current AEG philosophy is to bring vitality to both the Arena and the Westgate Entertainment district.  This has a direct impact on the area’s quality economic development efforts.
Attachments
Item 1 PPT

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