2010-27372 ResoRESOLUTION NO. 2010-27372
A RESOLUTION OF THE MAYOR AND THE CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, APPROVING AND AUTHORIZING THE MAYOR
AND CITY CLERK TO EXECUTE AMENDMENT N0.1 TO THE MANAGEMENT
AGREEMENT BETWEEN THE CITY OF MIAMI BEACH, FLORIDA AND
GLOBAL SPECTRUM, L.P. FOR THE MIAMI BEACH CONVENTION CENTER,
COLONY THEATER, AND BYRON CARLYLE THEATER; AMENDING SECTION
8.4 (b) (3), ENTITLED "LETTER OF CREDIT;" AND FURTHER AMENDING
SECTION 8.4 (B) (2), ENTITLED "MESSE SCHWEIZ (M.S.) GUARANTEE."
WHEREAS, on September 10, 2008, the City Commission approved Resolution No. 2008-26888
which approved an agreement between the City and Global Spectrum, L.P. for the Management of the
Miami Beach Convention Center, Colony Theater, and Byron Carlyle Theater (the Agreement); and
WHEREAS, the Agreement was for an initial three (3) year term commencing on October 1, 2008,
and ending on September 30, 2011, with two (2) one-year renewal options, exercisable with ninety (90)
days prior written notice, at the sole and absolute discretion of the City; and
WHEREAS, pursuant to the Agreement, Global Spectrum guaranteed a Net Performance
Improvement, which is defined as the Required Improvement on the Fiscal Year (FY) 08/09 budgeted
net deficit of $1,492,134, which includes both the FY08/09 budgeted net operating deficit and includes
Executive Salaries and Benefits; and
WHEREAS, the Required Improvement in the executed Agreement over the net deficit of
$1,492,134 for each Contract Year of the initial term is as follows:
• FY 08/09 = $ 500,000
• FY 09/10 = $1,000,000
• FY 10/11 = $1,500,000; and
WHEREAS, the City Administration required Global to transfer the Convention Center bank
accounts from Citibank to SunTrust Bank; and
WHEREAS, the Administration recommends crediting Global $50,301.20 for unrealized interest
income as a result of the change in banking institutions; and
WHEREAS, the proposal amendment to the Agreement adjusts the Net Performance Improvement
by $50,301.20 in each year (of the initial term); and
WHEREAS, Section 8.4(b)(3), of the Agreement, entitled "Letter of Credit," is amended as follows:
3) Letter of Credit. Global shall provide an irrevocable Letter of Credit, in such form as
shall reasonably be approved by the City Manager, in the amount of $500,000 (the Letter of
Credit or LOC), to secure the "Net Performance Improvement," as defined below.
A. "Net Performance Improvement" is defined as the Required Improvement on
the Fiscal Year (FY) 08/09 budgeted net deficit of $1,542,435 $~,A°~4,
which includes both the FY08/09 budgeted net operating deficit and includes
Executive Salaries and Benefits.
B. Required Improvement over the net deficit of $1,542,435 Q',^~o4 for
each Contract Year is as follows:
(i) FY 08/09 = $ 500,000 (i.e., achieve Net Operating Loss of
$1,042,435 $992-x-34 or better)
(ii) FY 09/10 = $1,000,000 (i.e., achieve Net Operating Loss of 542 435
$494 or better)
(iii) FY 10/11 = $1,500,000 (i.e., achieve a Net Operating Loss P{e#it of
42 435 $7~6f or better); and
WHEREAS, Section 8.4 (b) (2), of the Agreement, entitled "Messe Schweiz (M.S.) Guarantee," is
amended as follows:
2) Messe Schweiz (M.S.) Guarantee. Global shall provide a Corporate Guarantee, on
behalf of M.S., in such form as shall reasonably be approved by the City Manager, in the
amount of $275,000 (M.S. Guarantee), for the City to draw upon if ,notwithstanding M.S.
"best efforts," as provided for in Sections 10.2(c)(3)(e)(1)and (2), M.S. fails to book and
actualize shows or events (as defined in Section 10.2(c)(3) hereof), as follows:
A. $a-2~-;A99 250 000 due to the City in event M.S. does not book and
actualize one M.S. produced/owned show or event by the end of the
sessr~ third Contract Year;
B. nr..,,#,#'#~nnnl x~ ~~ nnn •# m #h.~ nne ., nrr~ ~..ert/,,..,.,ert ~h..,., ,.r e.,e.,# #h~e# c~
Vn~+r /on rlec. nriherl in the nrnrnr•inn noronronh\ is nn# cn hnn Lor! onrl
~. r# .+I'~crJ by the nnrJ of #hn corn nrJ (`nr+#ro n# Veor AAIr1 /ii\ SAC r•~e~ nr~#
C r~r #hn coLn of nlori#v #hn nor#inc onLnn~~d nr#nn
~ '
Term .+nrJ (]Inhol droll n# he ci ihieni #n .env nennlfii i mrJer Con#inn
i
nrnr! ror!/n.unrar! ~. h..~u n n4 r•i rinn 4he Tcrm
C. $25,000 in event M.S. does not book during the initial Term one non-M.S.
produced/owned international show or event; this show or event may be
actualized at any time up to 24 months following the end of the Term
provided that, during such period, the Corporate Guarantee provided by
Global to secure this obligation remains in effect, unaffected by the
termination or expiration of this Agreement;
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby approve and authorize the Mayor and City Clerk to execute the attached
Amendment No. 1 to the Management Agreement between the City of Miami Beach, Florida and Global
Spectrum, L.P. for the Miami Beach Convention Center, Colony Theater, and Byron Carlyle Theater;
amending Section 8.4 (b) (3), entitled "Letter of Credit;" and further amending Section 8.4 (b) (2), entitled
"Messe Schweiz (M.S.) Guarantee."
PASSED AND ADOPTED this 1yth day of April , 2010.
ATTEST:
CITY CLERK
MAY R
JMG/HMF/mas
T:\AGENDA\2010\April 14\Consent\Global Amendment No.1 RESO.doc
APPROVED AS TO
COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution of the Mayor and the City Commission of the City of Miami Beach, Florida, authorizing Amendment No. 1 to the Management
Agreement between the City of Miami Beach, Florida and Global Spectrum, L.P. for the Miami Beach Convention Center, Colony Theater, and
Byron Carlyle Theater; amending Section 8.4 (b) (3), entitled Letter of Credit; and further amending Section 8.4 (b) (2), entitled Messe Schweiz
M.S. Guarantee.
Ke Intended Outcome Su orted:
Improve the convention center facility
Supporting Data (Surveys, Environmental Scan, etc.): The 2009 Community Satisfaction Survey reported more than two-thirds of
residential respondents, 69.2%, suggested the tourism industry in Miami Beach contributes "about the right amount" to the quality of life for
residents. Additionally, resident respondents said they attended events at the Miami Beach Convention Center on average 2.70 times per year.
Issue:
Shall the City Commission approve an amendment to the Management Agreement Between the City and Global Spectrum?
em
On September 10, 2008, the City Commission approved Resolution No. 2008-26888 which approved an agreement between the City and Global
Spectrum, L.P. for the Management of the Miami Beach Convention Center, Colony Theater, and Byron Carlyle Theater. Pursuant to the
Agreement, Global Spectrum guaranteed a Net Performance Improvement, which is defined as the "Required Improvement," on the Fiscal Year
(FY) 08/09 budgeted net deficit of $1,492,134 (which includes both the FY08/09 budgeted net operating deficit and includes Executive Salaries
and Benefits). The Required Improvement over the net defcit of $1,492,134 for each Contract Year is as follows:
• FY 08/09 = $ 500,000 (or a resulting net deficit of $992,134)
• FY 09/10 = $1,000,000 (or a resulting net deficit of $492,134)
• FY 10/11 = $1,500,000 (or a resulting net proft of $7,866)
Global Spectrum improved the Net Operating Loss for the facility by $345,792. However, as part of the year-end close-out, there were several
adjustments regarding interest income, transition expenses, acquisition of plasma televisions and other miscellaneous financial items, which
materialized throughout the 2008/09 fiscal year and were presented for discussion. You can find a detailed summary of all FY 2009 Adjustments
in Exhibit A. However, the year-end closeout reflected a revenue shortfall for interest earnings, a portion of which was due to the transfer of the
Center's bank accounts to SunTrust. Looking at the actual interest earned last year and the actual interest earned this year, there is an additional
shortfall of $50,301.20 that can be attributed to this issue. The City Administration agrees that the change in banks from CitiBank to SunTrust was
unforeseen and beyond the control of Global Spectrum. Therefore, the City Administration recommends issuing a credit to Global Spectrum for
this component of the interest shortfall. Issuing a credit for the variance would adjust the initial budget Global Spectrum was to improve upon from
an operating loss of $1,492,134 to an operating loss of $1,542,435. The adjusted Required Improvement for Year 1 would be an improvementto a
loss of $1,042,435, for Year 2 an improvement to a loss of $542,435, and for Year 3 an improvement to a loss of $42,435.The requirement for
Global Spectrum to make a $500,000, $1,000,000 and $1,500,000 improvement over the net deficit does not change. The adjustment is only to
the starting net deficit amount. Other adjustments are provided in the attached for your information. The Administration recommends the approval
of the amendment.
The Management Agreement also has a requirement for M.S., in partnership with Global Spectrum, within the initial term and subject to the
existing booking policies and commercial viability, to use best efforts to book and actualize, one (1) M.S. owned show or event ,and use best
efforts to book and actualize one (1) (non-M.S. owned) international show or event. Global Spectrum recently notified the City Administration that
despite best efforts from M.S. and Global Spectrum, due to the state of the global economy, they have not yet been able to book an M.S.
owned/produced show ornon-M.S. show. Therefore, Global Spectrum has requested the deadline, which requires them to book and actualize an
M.S. owned/produced show by the end of the second contract year (September 30, 2010) be pushed back to the end of the third contract year
(September 30, 2011). Essentially, this would require Global and M.S. to book and produce the M.S. owned/produced show by the end of the
initial contact term. If they do not achieve this, the penalty would be $250,000 paid to the City at the end of the initial term. The requirement for
the non-M.S. show would not change.
Adviso Board Recommendation:
The Finance Committee considered this item at their March 25, 2010, meetin and recommended in favor of the amendment.
Financial Information:
Source of Funds: Amount Account Approved
1
Financial Impact Summary: The proposed amendment adjusts the Net Performance Improvement by $50,301.20. Global Spectrum improved
the Net Operating Loss by $423,102.86 in FY 08/09. Therefore, Global Spectrum is required to pay the City $76,897.14, (either as a payment or a
deduction from their Line of Credit .
Ci Clerk's Office Le islative Trackin
Max Sklar
5i n-Offs:
Department Director ss'stant City Manager City Manager
~ I AM I B EAR H AGENDAOA E y 7/ _//y
m MIAMIBEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members of the City Commission
FROM: J ge M. Gonzalez, City Manger
DATE: April 14, 2010
SUBJECT: A RESOLUTION OF THE MAYOR AND THE CITY COMMISSION OF THE CITY OF MIAMI
BEACH, FLORIDA, APPROVING AND AUTHORIZING THE MAYOR AN DCITY CLERK TO
EXECUTE AMENDMENT NO. 1 TO THE MANAGEMENT AGREEMENT BETWEEN THE
CITY OF MIAMI BEACH, FLORIDA AND GLOBAL SPECTRUM, L.P. FOR THE MIAMI
BEACH CONVENTION CENTER, COLONY THEATER, AND BYRON CARLYLE THEATER;
AMENDING SECTION 8.4 (b) (3), ENTITLED "LETTER OF CREDIT;" AND FURTHER
AMENDING SECTION 8.4 (B) (2), ENTITLED "MESSE SCHWEIZ (M.S.) GUARANTEE."
ADMINISTRATION RECOMMENDATION:
The Administration recommends that the Mayor and Commission approve an Amendment to the
Management Agreement between the City and Global Spectrum.
BACKGROUND
On September 10, 2008, the City Commission approved Resolution No. 2008-26888 which approved an
agreement between the City and Global Spectrum, L.P. for the Management of the Miami Beach
Convention Center, Colony Theater, and Byron Carlyle Theater. The Agreement was for an initial three (3)
year term commencing on October 1, 2008, and ending on September 30, 2011, with two (2) one-year
renewal options, exercisable with ninety (90) days prior written notice, at the sole and absolute discretion of
the City.
Pursuant to the Agreement, Global Spectrum guaranteed a Net Performance Improvement, which is defined
as the "Required Improvement" on the Fiscal Year (FY) 08/09 budgeted net deficit of $1,492,134 (which
includes both the FY08/09 budgeted net operating deficit and includes Executive Salaries and Benefits).
The Required Improvement over the net deficit of $1,492,134 for each Contract Year is as follows:
FY 08/09 = $ 500,000 (or a resulting net deficit of $992,134)
• FY 09/10 = $1,000,000 (or a resulting net deficit of $492,134)
• FY 10/11 = $1,500,000 (or a resulting net profit of $7,866)
In the first year of the initial Term, to the extent the actual improvement achieved in the Fiscal Year is less
than the Required Improvement, asset forth above, the City will draw against the $500,000 Letter of Credit
(LOC) provided by Global for any difference between the Required Improvement and the actual
improvement. The contract also allows Global to bank or apply any excess improvement from year one to
any shortfall of their required improvement in year two (up to the value of their Incentive Pay). A copy of the
relevant section of the Global Agreement regarding Required Improvements is attached foryour reference.
As noted, the Line of Credit provides a venue for the City to collect if there are subsequent shortfalls on their
Required Improvements.
Global Spectrum Amendment No. 1
City Commission Meeting
April 14, 2010
Page 2 of 7
FISCAL YEAR 2008/2009 -OPERATIONAL HIGHLIGHTS
As you know, Global Spectrum officially assumed management responsibility for the Miami Beach
Convention Center (MBCC), Colony Theatre and Byron Carlyle Theater on October 1, 2008. Global
originally successfully transitioned 63 of the 77 full-time employees (81 %).
The transition of management was seamless and without any interruption to services. In fact, International
BoatBuilders' Exhibition and Conference (IBEX), the first event in the building following the transition, sent
Global Spectrum a letter commending them on their efforts and its contribution toward a successful show.
Global dealt with a significant power failure in Hall C during IBEX and successfully provided temporary
power for the show.
The MBCC operated at 61 % occupancy for fiscal year 2008/2009. This includes more than 659,970 people
in attendance at 109 events. The MBCC experienced very few cancellations as a result of the economic
downturn. However, several events reduced the amount of square footage being rented, which resulted in a
reduction in rental revenue. Additionally, service revenue (food and beverage, electric, A/V, etc) was lower
than anticipated. Simultaneously, Global Spectrum has been able to achieve significant savings in
insurance, energy management and "Green" initiatives, trash hauling, and event labor. They have also
been able to generate additional revenue in ATM fee and sponsorship/advertising agreements. These
measures have helped to offset the aforementioned revenue decreases.
The "Green" Initiatives implemented by Global Spectrum included "Step Up" program logos placed on light
switches and computers reminding employees to reduce energy when not in use; programming of major
mechanical control functions for energy reduction; single stream recycling program; and the purchasing of
green janitorial cleaning supplies, toilet tissue, paper towels and hand soap. They worked closely with
Centerplate to ensure that they are utilizing recyclable products in regards to utensils, disposable plates and
paper products. This effort has already yielded significant results; over 10 tons of recyclable materials were
diverted from landfills since October 2008. In December, January and February, Global reduced electrical
consumption by 32%, 23%, and 15% in each month respectively when compared to consumption for the
same month in the prior year. Global projects a savings of approximately $250,000 in electricity
consumption through the end of the current fiscal year.
Global Spectrum, in partnership with Messe Schweiz (MCH), developed new collateral material, which
outlines the business industry and related selling points strictly devoted to the European market. MCH also
launched additional web pages within their website that includes sales brochures and additional information
regarding the MBCC and the destination. This effort has resulted in four (4) new leads generated by MCH.
Since the transition, Global has also made a number of other changes/improvements. The following list
provides a highlight of those change/improvements:
• Developed and introduced fourteen (14) new Standard Operating Procedures to ensure safety
regulations and facility control standards are met.
• Set up a series of quarterly meetings with the users of the facility, as well as the service
providers of the building, to open the lines of communication among all interested parties.
• Created an enhanced Miami Beach Convention Center website,
www.MiamiBeachConvention.com, designed specifically for show organizers, exhibitors, and our
attendees.
• Created a monthly newsletter distributed throughoutthe local and regional business community.
• Developed an event organizer marketing guide. This guide educates potential clients about
grassroots marketing, cross promotions, public relations, sponsorships, and the MBCC in-house
advertising agency. Collaboration with event clients to promote events and the MBCC, including
front page article regarding the Miami International Boat Show in the SunPost, live morning
show opportunities for the Miami Tattoo Show on ABC10, cross promotions for the Original
Global Spectrum Amendment No. 1
City Commission Meeting
April 14, 2010
Page 3 of 7
Miami Beach Antique Show with the American Airlines Arena, and mentions in TradeShow
Week magazine.
• Quarterly senior citizens dances: Global Spectrum teamed up with Miami Beach Parks and
Recreation to host the first event in December with over 300 attendees. A total of four senior
events were hosted in the fiscal year.
• Established a relationship with Front Row Marketing to develop sponsorship revenue for the
MBCC. For FY/2009, the Miami Beach Convention Center has numerous strong leads and
realized $80,024.67 in sponsorship revenues.
• A major enhancement as it relates to marketing within the Miami Beach Convention Center is
our plasma screen project. This project entailed installing 17 plasma screens near high traffic
areas throughout the Convention Center. These screens have allowed us to provide our event
organizers and attendees' with valuable information regarding the schedule and location of
seminars and/or exhibits, information regarding local eateries and areas of entertainment and
will soon show the status of flight information from the Miami International Airport.
• Hosted a bridal showcase/open house on January 17, 2009. Invited area bridal industry
vendors, potential customers and hired a photographer to take pictures of the ballroom in a
wedding setting, which has been used in the newly developed social/catering brochure.
• Substantial direct marketing campaign targeting area corporations, charity organizations, third
party meeting planners.
• Detailed field verification inspections have been performed on all mechanical and electrical
systems/components in the facility. All preventive maintenance is being routinely scheduled.
• All funded fiscal year 2008-09 capital projects are in progress.
These activities resulted in the following Net Operating Income:
Oct -Sept
BUDGET Oct -Sept
ACTUAL Variance
Total Revenue $19,044,604 $16,866,474 $2,178,130
Total Ex enses $20,536,738 $18,012,816 $2,523,922
Net Operating
Income/ Loss
$1,492,134
$1,146,342
$345,792
Please note: Net Operating Income does not include transition costs ornon-operating (City) revenues or expenses
that are part of the MBCC Enterprise Fund.
Global Spectrum improved the Net Operating Loss for the facility by $345,792. However, as part of the
year-end close-out, there were several adjustments regarding interest income, transition expenses, and
other miscellaneous financial items, which materialized throughout the 2008/09 fiscal year and were
presented for discussion. These adjustments net out to a further adjustment to the "Actual" Net Operating
Income/Loss of $27,009.66. As such, Global's improvement is adjusted to $372,801.66, prior to any further,
negotiated credits (as explained below).
Interest Income
The year-end closeout reflected a revenue shortfall for interest earnings. There are two components to the
interest shortfall as compared to the budget that Global Spectrum discussed with the City. The first
compares FY2008's budgeted Interest Income figure of $113,000 and the actual interest earned of $56,549
for that fiscal year. This is a shortfall in FY2008 of $56,451, or close to half of what was budgeted. In
addition, the FY 2009 budget for interest income was increased from $113,000 to $132,250. Global
Spectrum requested a credit of roughly $75,701, which is the difference between FY2008 actual interest
earned ($56,549) and what was budgeted for FY2009 ($132,250). However, during their due diligence
period prior to contract commencement, Global Spectrum was provided an opportunity to review the
Center's FY 08/09 budget. As such, the City believes Global Spectrum had an opportunity during contract
Global Spectrum Amendment No. 1
City Commission Meeting
Apri114, 2010
Page 4 of 7
negotiations to test all assumptions, including projected interest earnings. For this reason, the City
Administration does not recommend authorizing a credit for this component of the interest shortfall.
The second component of the interest shortfall was due to the transfer of the Center's bank accounts to
SunTrust. Under the umbrella of the City of Miami Beach, there are certain restrictions for investment
opportunities within each account that were not present previously when the accounts were with CitiBank.
Looking at the actual interest earned last year and the actual interest earned this year, there is an additional
shortfall of $50,301.20 that can be attributed to this issue. The City Administration agrees that the change
in banks from CitiBank to SunTrust was unforeseen and beyond the control of Global Spectrum. Therefore,
the City Administration recommends issuing a credit to Global Spectrum for this component of the interest
shortfall.
In summary, the adopted FY 08/09 Convention Center budget included Interest Income projected at
$132,250. In comparing the actual interest earned in FY2008 and the actual interest earned in FY2009, the
variance is $50,301.20.
Issuing a credit forthe variance would adjust the initial budget Global Spectrum is to improve upon from an
operating loss of $1,492,134 to an operating loss of $1,542,435. The adjusted Required Improvement for
Year One would be an improvement to a loss of $1,042,435, for Year Two an improvement to a loss of
$542,435, and for Year Three an improvement to a loss of $42,435. It is important to note that Global
Spectrum's obligations as to the Required Improvement (Year one- $500,000; Year two - $1 million;
Year three - $1.5 million) are not impacted or changed.
Transition
Global Spectrum submitted a request for the City to absorb within the MBCC Operating Account expenses
associated with the transition of management from SMG to Global Spectrum. The City Administration did
not approve this request and, therefore, Global Spectrum will absorb these expenses. The attached
transition schedule details $237,620.35 of transition related expenses that have been paid from the MBCC
Operating Account. The MBCC Finance Department will now invoice Global Spectrum for $237,620.35 and
list this as a pending Account Receivable.
Plasma Televisions
On August 9, 2009, the City and Global Spectrum executed a Letter Agreement (see attached) whereby
Global Spectrum advanced funds for the purchase of plasma televisions for the MBCC to generate
sponsorship/advertising revenue. The advance totaled $199,635.06 for seventeen (17) plasma televisions,
media players, mounting equipment hardware, digital signal software and installation. Global Spectrum was
to be repaid for the advanced funds from the net revenue derived from advertising sales on the televisions
over three (3) years, up to $99,817.53 annually. All advertising revenue in excess of the $99,817.53 in a
single fiscal year would be considered operating revenue of the MBCC.
The City now owns this equipment, so these items will be added to the asset inventory list for the MBCC.
Additionally, in FY2010 the MBCC's repayment of the advance funding for the televisions and associated
equipment will be listed as an Account Payable from the MBCC Operating Account to Global Spectrum.
Prior Year Adjustments And Miscellaneous Items
In April of 2009, the City authorized a rent credit to the National Marine Manufacturers Association (Boat
Show) totaling $236,040 for rent overpayment from 2002 - 2005, contract years that pre-date the current
Agreement with Global Spectrum. The rent credit is to be issued in five equal installments of $47,208 from
2009 - 2013. The first installment was issued in 2009 and was recorded as a reduction to the Rent
Revenue on the Income Statement. The 2010 installment is listed on the attached Balance Sheet under
Current Liabilities, and the final three installments are also listed on the Balance Sheet under Long Term
Liabilities. The FY 2009 Net Operating Budget Improvement should also be adjusted for the Boat Show
Rent Credit, as these credits should have been posted prior to FY09-13.
Global Spectrum Amendment No. 1
Cify Commission Meefing
Apri114, 2010
Page 5 of 7
Additionally, the FY 2009 Income Statement shows Prior Year (FY 2008) Expenses and Revenue that were
realized in FY 2009. The FY 2009 Net Operating Budget Improvement should also be adjusted to reflect
these Prior Year Expenses and Revenues.
You can find a detailed summary of all FY 2009 Adjustments in Exhibit A.
Messe Schweiz (M.S.) Guarantee
The Management Agreement also has a requirement for M.S., in partnership with Global Spectrum, within
the initial term and subject to the existing booking policies and commercial viability, book the following:
1. Use best efforts to book and actualize, one (1) M.S. owned show or event during the initial
term of the Agreement.
2. Use best efforts to book and actualize during the initial term of the Agreement, which can
occur after the initial Term, one (1) (non-M.S. owned) international show or event.
Global Spectrum provides a Corporate Guarantee, on behalf of M.S., in the amount of $275,000 forthe City
to draw upon if, notwithstanding M.S. "best efforts," as provided for in the Management Agreement, M.S.
fails to book and actualize shows or events. The Management Agreement structures the M.S. Guarantee
as follows:
1. If M.S. does not book and actualize one M.S. produced/owned show or event by the end of
the second Contract Year then $125,000 is due to the City.
2. If the M.S. produced/owned show or event, which is required to be booked and actualized by
the end of the second Contract Year, is not booked and actualized by the end of the second
Contract Year or by the end of the third Contract Year an additional $125,000 is due to the
City.
3. If M.S. does not book during the initial Term one non-M.S. produced/owned international
show or event, an additional $25,000 is due to the City. This show or event may be
actualized at any time up to 24 months following the end of the Term provided that, during
such period, the Corporate Guarantee provided by Global to secure this obligation remains
in effect, unaffected by the termination or expiration of this Agreement.
Global Spectrum recently notified the City Administration that despite best efforts from M.S. and Global
Spectrum, due to the state of the global economy, they have not yet been able to book an M.S.
owned/produced show ornon-M.S. show. The execution of the Management Agreement coincided with the
worldwide recession, which contributed to their inability to book the show. Therefore, Global Spectrum has
requested the deadline, which requires them to book and actualize an M.S. owned/produced show by the
end of the second contract year (September 30, 2010) be pushed back to the end of the third contract year
(September 30, 2011). Essentially, this would require Global and M.S. to book and produce the M.S.
owned/produced show by the end of the initial contact term. If they do not achieve this, the penalty would
be $250,000 paid to the City at the end of the initial term. The requirement for the non-M.S. show would not
change.
This requirement was included in the Management Agreement in an effort to have M.S. produce another
show at the Miami Beach Convention Center that could grow and develop into an annual event similar to Art
Basel Miami Beach, not to collect on the financial penalty. It is anticipated that this type of recurring show
would have a greater long-term economic impact to the Convention Center and the City than any financial
penalty the City would collect. It is with that goal in mind that the City Administration recommends the
aforementioned amendment to the Management Agreement.
Glo6a1 Spectrum Amendment No. 1
City Commission Meeting
April 14, 2010
Page 6 of 7
MANAGEMENT AGREEMENT AMENDMENT
Based on the aforementioned, the Administration recommends amending the Section 8.4 (b) (3), entitled
Letter of Credit as follows:
3) Letter of Credit. Global shall provide an irrevocable Letter of Credit, in such form as shall
reasonably be approved by the City Manager, in the amount of $500,000 (the Letter of Credit or LOC), to
secure the "Net Performance Improvement," as defined below.
A. "Net Performance Improvement" is defined as the Required Improvement on the Fiscal Year (FY)
08/09 budgeted net deficit of $1,542,435 $',A°~4, which includes both the FY08/09 budgeted net
operating deficit and includes Executive Salaries and Benefits.
B. Required Improvement over the net deficit of $1,542,435 Q, ,,^~-,-~04 for each Contract Year is as
follows:
(i) FY 08/09 = $ 500,000 (i.e., achieve Net Operating Loss of $1,042,435 $89,434 or better)
(ii) FY 09/10 = $1,000,000 (i.e., achieve Net Operating Loss of 542 435 $49234 or better)
(iii) FY 10/11 = $1,500,000 (i.e., achieve a Net Operating P-re#it Loss of 42 435 $~0 or better)
The requirement for Global Spectrum to make a $500,000, $1,000,000 and $1,500,000 improvement over
the net deficit does not change. The adjustment is only to the starting net deficit amount.
Based on the aforementioned, the Administration also recommends amending the Section 8.4 (b) (2),
entitled Messe Schweiz (M.S.) Guarantee as follows:
2) Messe Schweiz (M.S.) Guarantee. Global shall provide a Corporate Guarantee, on behalf of
M.S., in such form as shall reasonably be approved by the City Manager, in the amount of
$275,000 (M.S. Guarantee), for the City to draw upon if ,notwithstanding M.S. "best efforts," as
provided for in Sections 10.2(c)(3)(e)(1)and (2), M.S. fails to book and actualize shows or events
(as defined in Section 10.2(c)(3) hereof), as follows:
A. $4;899 250 000 due to the City in event M.S. does not book and actualize one
M.S. produced/owned show or event by the end of the sect third Contract Year;
B.
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C. $25,000 in event M.S. does not book during the initial Term one non-M.S.
producedlowned international show or event; this show or event may be actualized at
any time up to 24 months following the end of the Term provided that, during such
period, the Corporate Guarantee provided by Global to secure this obligation remains
in effect, unaffected by the termination or expiration of this Agreement;
Global Spectrum Amendment No. 1
City Commission Meeting
April 14, 2010
Page 7 of 7
FINAL ADJUSTED (IMPROVEMENTS
The proposed amendment adjusts the starting Net deficit (from which Global must improve) by $50,301.20,
from $1,492,134 to $1,542,435. Global Spectrum ended the year with $1,146,342 in net operating loss,
adjusted by $27,009.66 (or a total of $1,119,332.34). The difference between Global's final, adjusted net
operating loss ($1,119,332.34) and the adjusted contracted loss ($1,542,435.20) is $423,102.86. The
required improvement is $500,000. Therefore, Global Spectrum is required to pay the City $76,897.14, less
any bad debt reserved for and subsequently collected (either as a payment or as a deduction from their Line
of Credit).
ADMINISTRATION RECOMMENDATION
The proposed amendments were considered and approved by the Finance and Citywide Projects
Committee. The Administration recommends that the Mayor and Commission approve an Amendment to
the Management Agreement between the City and Global Spectrum to reflect mutually agreed-upon
adjustments, as described.
JMG\HMF\MAS
T:WGENDA\2010Wpril 14\Consent\Global Amendment No.1 MEMO.doc