The city of Newton is looking at options for management of the Meridian Center, a conference and event center constructed on E. Broadway by the city and opened in July 2011. That very well could mean severing ties at the center with Kemper Sports, a company that has managed the building since it opened.
It’s a move brought on by COVID-19 and increased competition in the event center industry.
"The situation has changed," McElroy said. "COVID has changed, our market has changed. The center’s mission needs to grow and change over time to meet the need of the community."
McElroy told city commissioners this week that demand for center usage is starting to come back — though, due to social distancing considerations, the city and center are refusing some larger bookings.
"We now know our niché," McElroy said.
However, the city is considering a change — namely to avoid paying management fees to Kemper Sports. The city paid $65,000 in management fees in fiscal year 2020.
"During the first nine years of operation the center exceeded expectations by hosting hundreds of conference, meetings, social events and wedding each year," wrote Kelly McElroy in a memo to members of the Newton City Commission.
Owned by the city, the 15,000-square-foot facility has been operated by Kemper Sports — and managed by Michael Lunsford — since it opened. According to McElroy, the center has generated an average of $3.5 million in tourism revenue for the Newton community each year.
The last year, however, has been difficult as COVID-19 has forced the cancellation of events.
The city has put about an extra $35,000 from economic development funds into the operations of the Meridian Center.
According to public information officer Erin McDaniel, assistance from the city has varied, but in recent years the city has put $50,000 into an equipment reserve fund and used the economic development fund to pay $100,000 for operations.
Also, in an 18-month time span, three other event venues opened within the city, meaning more competition for the Meridian Center.
"Increased competition forced the center to find ancillary streams of revenue to continue meeting expectations of financial performance and reduce operational funding by the city," McElroy said.
That meant the creation of events by center staff, catering events outside the building and selling freezer/take-and-bake meals to the general public.
This has other business owners concerned, Lunsford and Valentine D’Souza of Kemper Sports acknowledged.
"Growing concerns about the center entering into areas previously served by other local vendors, coupled with the negative financial impact of the COVID-19 pandemic, has made it necessary to examine how the center will operate moving forward," Lunsford and D’Souza wrote in a memo to the city.
That memo outlined four goals for renegotiating a management agreement not set to expire until 2027. The first: "Solve PR issues of competing with local business outside of our core business." Other goals are reducing operation funding to allow for capital investment, providing "best in class service" and maintaining or increasing the economic impact of travel and tourism in Newton.
The organization offered four different "tiers" of service — ranging from the status quo to becoming a building rental facility only, eliminating all food service and other services as well.
Those options were first presented to the city commission this week — and was met with a general attitude of rather than select a level of service, sever ties with Kemper.
"My concern moving forward with Kemper is that they are building in their management fees and other fees going forward so that our compensation, it seems, will just increase," said Mayor Leroy Koehn. "I just don’t have a handle of how much we will be subsidizing that facility going forward. ... I do not see us coming out a winner, on any level, with this."
The proposal, which could mean savings for the city as early as next year, does have annual increases to management fees on an annual basis, which city staff called an industry standard.
The commission has directed city staff to investigate how the city could begin managing the center on its own — defining what services would be offered and staffing needs.
"We have to get an organizational model that works for us," McElroy said. "... We would want to operate it as a break-even and as, just like the airport, an enterprise fund."
And, the city will need to negotiate with Kemper to end the agreement for the Meridian Center while preserving a working relationship with Kemper, which also manages Sand Creek Station, a golf course constructed by the city.
"Kemper has been an outstanding partner," McElroy said.
The city will continue to contract with Kemper for management of Sand Creek Station Golf Course.