REPORT TO COUNCIL
SUBJECT
Title
Action on the Santa Clara Convention Center FY 2024/25 2nd Quarter Financial Status Report
Report
COUNCIL PILLARS
Promote and Enhance Economic, Housing and Transportation Development
Enhance Community Engagement and Transparency
Promote Sustainability and Environmental Protection
BACKGROUND
On February 5, 2019, the City of Santa Clara approved an agreement with Global Spectrum L.P. dba Spectra Venue Management (Spectra) to operate the Santa Clara Convention Center (SCCC). Spectra began management of the SCCC on March 18, 2019. In November 2021, Spectra merged with Oak View Group (OVG) but continues to operate under the same legal entity.
Staff is transmitting OVG’s SCCC status report to City Council for compliance with agreement terms.
DISCUSSION
This Report to Council transmits OVG’s SCCC Financial Status Report for the 2nd quarter ending December 31, 2024 (attached). This report is unaudited and, therefore, subject to change.
OVG’s report provides an overview of the SCCC’s financial, operational, and strategic performance for the second quarter for FY 2024/25.
The financial summary of the report indicates that OVG exceeded net income goals by $104,911, netting $282,117 rather than the projected gain of $177,206. This was a result of implementing operational cost control measures. Gross revenues and total events hosted were lower than projected due to the postponement or cancelation of eight events since the start of FY 2024/25. This decreased revenue was offset by lower expenses.
The rolling forecast included in the report is the Q2 estimate of financial results for the fiscal year based on the number of ‘definite’ events and events in the pipeline. Definite events are booked events with an executed license agreement for use of the SCCC (inclusive of services such as food & beverage, IT support, audio/video [AV], etc.) and an executed hotel agreement for room nights, as applicable. Events in the sales pipeline are the prospects highly likely to book and host their event in the fiscal year. This is included to provide a more accurate forecast of SCCC revenues moving forward. While the forecast currently demonstrates a gain of $844 at the end of the fiscal year, it only provides a financial snapshot of a specific point in time. The forecast regularly fluctuates depending on daily sales activity including but not limited to, changes in the number of incoming leads, the number of new short-term bookings (events that can book within a six to nine-month window), and the number of cancelations or rescheduled events.
In comparison to the same reporting period in previous fiscal years, OVG forecasted a year-end loss of $480,581 for FY 2022/23 and a year-end loss of $124,662 for FY 2023/24. Each fiscal year closed with net incomes of $2.4M and $2.5M respectively. OVG’s current forecast presents a year-end gain of $844, which shows a slight improvement compared to the Q1 forecast. This is mainly due to the inclusion of events in the sales pipeline.
OVG expects a steadily improving financial outlook over the next two quarters. As of December 31, 2024, the Center, in collaboration with its partners Levy and the DMO, had 159 active prospects in the SCCC pipeline. The partners issued contracts for 86 events (tentative) during the quarter and secured contracts for 98 events (definite). Of the159 active prospects in the SCCC pipeline, it is projected that 10 will be booked and consumed by the end of the fiscal year. Based on current projections, revenues for the remainder of FY 2024/25 are expected to result in a $294,280 loss, bringing the overall projected profit for the fiscal year to $844.
Financial Summary
|
|
|
|
|
Quarter Ended December 31, 2024 |
Quarter Ended December 31, 2023 |
|
|
Budget |
Actual |
Overage (Underage) |
Budget |
Actual |
Overage (Underage) |
|
Gross Revenue |
$4,555,433 |
$4,026,860 |
($528,573) |
$3,902,446 |
$5,535,047 |
$1,632,601 |
|
Total Expense |
$4,378,227 |
$3,744,743 |
($633,484) |
$3,893,918 |
$4,672,472 |
$778,554 |
|
Net Income |
$177,206 |
$282,117 |
$104,911 |
$8,528 |
$862,575 |
$854,047 |
In summary, for the 2nd quarter ending December 31, 2024, OVG reported a net operating gain of $282,117, compared to a net operating gain of $862,575 for the 2nd quarter of FY 2023/24. The results for December 31, 2023, were not typical. There were two one-time events that generated over $1.6 million in unbudgeted revenue in FY 2023/24.
Total revenues for FY 2024/25 2nd quarter were $4,0263,860, or $528,573 less than the budgeted revenues of $4,555,433. Total expenses for FY 2024/25 2nd quarter were $3,744,743 or $633,484 less than the budgeted amount of $4,378,227. Additionally, OVG recognized $66,504 of other revenue in the 2nd quarter primarily from cancelation fees and interest income.
The difference in event bookings between the two periods was minimal, with FY 2024/25 hosting two fewer events than the prior year. Expenses in the 2nd quarter 2024/25 were lower than 2nd quarter 2023/24. Net income for the quarter was $282,117, compared to $862,575 in the previous year
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.
FISCAL IMPACT
The net operating gain incurred by the Convention Center for the 2nd quarter FY 2024/25 is $282,117. This amount does not include any fiscal impact related to TOT, TID, and/or sales tax activity. Any funds generated from operations are allocated and programmed in the Convention Center Enterprise Fund for operations and capital improvement projects as part of the annual budget process
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Note and file the Santa Clara Convention Center Financial Status Report for the 2nd Quarter ending December 31, 2024, as submitted by Oak View Group (OVG).
Staff
Reviewed by: Kenn Lee, Director of Finance
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. SCCC Activity Report for 2nd Quarter FY 2024/25