City council members say they want more details before considering changing the food-and-beverage vendor at the city-owned Covelli Centre.
The move, supported by the city’s administration, would replace Centerplate as the vendor with JAC Management, the firm headed by Eric Ryan, the center’s manager.
Ryan, the center’s executive director, said his company is ready to take over the food-and-beverage operations at the center as early as May 1.
The proposal was unveiled Wednesday to city council.
Council members said a decision this large shouldn’t be rushed, particularly because JAC has no experience as a food-and-beverage vendor at a facility the size of Covelli, and there isn’t a proposed contract to review.
City administrators pointed out that members of council have complained about the food-and-beverage contract, particularly the prices, for years, and now they have the opportunity to do something about it.
“We don’t have to do it,” said city Finance Director David Bozanich. “We’re acting on council’s wishes.”
“Don’t act like council is changing our minds,” Councilman DeMaine Kitchen, D-2nd, responded. “Don’t act like the conversation was continuous.”
Ryan added that it was his “understanding that council wanted to severe ties” with Centerplate.
A major problem with Centerplate is the company has an exclusive right to sell food and drinks at all Covelli Centre events but won’t do so at outdoor shows and several small events inside the facility, Ryan said.
Council President Charles Sammarone said he wants to see proposals from other companies before turning over the vending to JAC.
“What’s wrong with getting competitive proposals so we can evaluate them and honestly say this is the best one?” Sammarone said.
Council also wanted input from SMG, the national arena-management firm that assists JAC with the Covelli Centre’s operations.
Ryan said SMG fully supports the change.
Mayor Jay Williams said Wednesday’s meeting was to discuss proposals at the center and get council’s input.
But once again, the mayor reminded council members that they aren’t “involved in the day-to-day operations of the city.”
That is the responsibility of the administration, Williams said.
Under the proposal, the city would pay $467,762.32 to Centerplate to buy out the remainder of its 10-year contract, which expires September 2015.
The center currently is giving $9,026 a month to Centerplate as a repayment of the $1.2 million investment the company made at the center for equipment and materials in September 2005. The monthly payments were higher during the first few years.
If the city wants to, it could borrow money and repay a bank loan for the $467,762.32 it owes Centerplate over a seven-year period rather than pay that loan for a shorter period of time, Bozanich said.
That would increase the amount owed and include more interest payments, but it would reduce the amount of money paid by the center for equipment and materials to about $7,000 a month, Bozanich said.
“We’re not incurring new debt,” he said.
Besides the buyout cost, the center also would have to pay Centerplate about $25,000 to $50,000 in inventory expenses and $3,000 to transfer the liquor license, Ryan said.
But Centerplate owes the center $27,334.78 in unpaid commissions related to money unaccounted for from an alleged embezzlement scheme, Ryan said.
Two former Centerplate employees at the Covelli are facing criminal charges related to that missing money.
Centerplate is willing to leave and allow its employees to remain working at the center, Ryan said.
The timing for the change is perfect as the center is planning a number of outdoor events for the summer that would generate a profit for the facility if food and beverages could be served, Ryan said.
When the city signed a 10-year contract in September 2005 with Boston Culinary, which was bought out by Centerplate in late 2009, International Coliseums Co., then the arena’s management firm, estimated the deal would provide about $2.22 million annually in revenue.
The center received $194,563 from the sale of food and beverages last year and $275,170 in 2009.
Centerplate gives 27.5 percent of its profits to the arena. Ryan said he would increase that amount to 37.5 percent under the JAC deal.
Between the increased percentages and serving food and drinks at all center events, the proposed new contract would increase the facility’s revenue by $100,000 annually, Bozanich said.
Also proposed Wednesday was the construction of an amphitheater, to hold 2,500 to 3,500 people, behind the center at a construction cost of about $600,000 to $1 million.
The amphitheater would add 33 new events to the center with more than $400,000 in additional annual revenue, Ryan said. It would be ready for the summer of 2012.
Council members question how the city could afford such a facility.
Bozanich said council approved a budget that included $600,000 for development projects, split evenly between the economic development, water and wastewater budgets.
He added the $600,000 isn’t specifically for the amphitheater but could be used for that purpose.
Another meeting on how to finance the amphitheater, the specific costs, selling naming rights and a time frame for construction would take place soon, Bozanich said.
“One may be concerned how tight our budget is if we’re looking at” spending this money on an outdoor facility, said Councilman Mike Ray, D-4th.