RI Convention Center ‘must do better,’ report says

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PROVIDENCE, R.I. (WPRI) – Republican state lawmakers delivered a stinging indictment of the Rhode Island Convention Center Authority on Wednesday, arguing that poor management of its facilities is costing Rhode Island taxpayers millions of dollars a year.

The House of Representatives’ eight-member Republican Policy Group, chaired by Rep. Patricia Morgan of West Warwick, said a months-long investigation uncovered a host of problems at the quasi-public agency, which runs the convention center, the Dunkin’ Donuts Center, the Veterans Memorial Auditorium and two parking garages.

“The Convention Center Authority can and must do better,” the GOP lawmakers said in their preliminary report, released Wednesday.

“What is our state trying to achieve with its investment in the R.I. Convention Center Authority?” they asked. “If, as its mission statement depicts, the goal is to create the maximum amount of economic stimulus at the lowest possible public cost, then we conclude it is not fulfilling that objective.”

Kim Keough, a spokeswoman for the authority, said the agency was reserving comment until it receives the report.

Some of the problems identified by the Republican lawmakers stretch back to the authority’s creation in 1987 by the General Assembly. Two years after that, as the debate over financing the project raged, its then-chairman was quoted as saying: “This won’t cost the taxpayers one dime.”

He was wrong.

Morgan estimates that when all is said and done Rhode Island taxpayers will wind up spending $780 million to pay off the Convention Center Authority’s debt. On top of that, the report says that under the terms of the authority’s 1991 lease deal with the state, taxpayers are also responsible for covering its annual operating deficits.

Management of the authority’s facilities has been largely outsourced to two private companies, SMG Holdings Inc. and PPAC-owned Professional Facilities Management Inc. But the GOP report argues they “bear little to no repercussions for low revenues, missed profit targets, or mismanagement” under the terms of the lease.

The Republicans offer eight recommendations in the report they said they hope “will begin an open, transparent restructuring” of the Convention Center Authority. Those include developing a new marketing plan, setting goals for personnel, renegotiating union contracts and containing costs across the board.

The report says the authority’s facilities are vacant 60% of the time. “Although the Convention Center does provide economic impact at its current rate of bookings, we believe, by trimming costs and insuring more competitive pricing, it has the ability to deliver much more,” it says.

The Republicans also argued salaries at the convention center are too high, citing housekeepers paid $17 an hour plus health and retirement benefits as well as banquet servers paid $50,000 to $80,000 a year. “There are thousands of wait staff in our state who work for much less money over longer hours and more days,” said Rep. Justin Price, R-Richmond. “It makes no sense that the Convention Center is paying these inflated salaries.”

In the 2013-14 fiscal year, the authority said it booked 254 events at the actual Convention Center, 135 events at the Dunk and 62 events at the Vets. In its annual audit, the authority said the facilities’ performance “continued to be impacted by the Rhode Island economy” but “the future is brighter.”

Looking back, the report says the original 1980s proposal for a 45,000-square-foot exhibition space costing $100 million ballooned into a 100,000-square-foot space costing more than $200 million. The cost to acquire land for the facility was exceptionally high, according to the report. One contract for $39,000 in hazardous waste removal wound up costing $3.9 million.

The scope of the authority’s holdings has changed over the years.

A hotel originally built as part of the project was sold in 2004, but around the same time the authority purchased the Dunk from the city of Providence and made $64 million in renovations there. The agency began leasing the Vets in 2008, and last year state lawmakers ordered it to build a new $43-million parking garage next to the Garrahy courthouse.

The Convention Center Authority posted an operating loss of $11.5 million in the 2013-14 fiscal year, roughly as large a shortfall as it ran in the previous two financial years, according to the authority’s annual audit. A study commissioned by the authority said its facilities generated $143 million in economic output during 2013.

To cover expenses, the authority receives an annual transfer from taxpayers. In the 2013-14 fiscal year, the transfer was just under $25 million; in 2012-13, it was $23.6 million. The authority’s outstanding debt totaled $350 million as of June 30, 2014 when interest is included.

“Right now, the Convention Center Authority is a leaking ship with bad management practices,” said Rep. Anthony Giarrusso, R-East Greenwich. “Taxpayers have been bailing them out for years; now it’s time for the Authority to start pulling their own weight and begin to plug the holes.”

The House GOP report also raised the specter that Rhode Island taxpayers may be on the hook for even more money through the Convention Center Authority – from unfunded retirement promises.

The report points to a paragraph in the agency’s most recent audit: “The Authority’s legal counsel has determined that it is reasonably possible that the Authority could be responsible for funding the unfunded pension obligations attributable to SMG’s labor force, past and present, who are beneficiaries of the union-sponsored multi-employer defined benefit plans to which SMG contributes.”

The audit contains no estimate for how large that pension liability would be. Morgan has speculated that the authority’s directors may have created the liability by requiring SMG to provide “benefits they did not want to offer.” She has also said the authority has refused to provide copies of its union contracts to the GOP policy group.

House Republicans have held up the huge cost of the various Convention Center Authority projects – which were driven in part by the late Pawtucket Red Sox President Jim Skeffington – as a reason for state leaders to be cautious as they consider a proposal for a subsidized minor-league ballpark in Providence.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

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