City Gives Concessions to Aid San Angelo Arena Football Team
A request to re-negotiate a contract between the City of San Angelo and Underwater Football, LLC, the parent company of the San Angelo Bandits arena football team, resulted in a significant profit loss for the City on Tuesday, which council members hope to compensate for as the team builds up steam.
Owner of the Bandits Randy Sanders signed a lengthy contract with the City in January 2013 that included rent, concessions, practice and attendance requirements, which he is hoping to adjust for 2014 due to losses Sanders incurred that were higher than anticipated.
"After this first inaugural season the Bandits had, they did have a loss overall throughout the season of about $138,000,” Angelica Pena, Civic Events Manager said in a presentation on Sanders behalf. “So they regrouped after the season to see if there was any way that the City could actually help or assist them to continue having their football team, but not losing so much money on their end.”
As part of the negotiation, Sanders is seeking to drop the rent of the coliseum from $1,750 per game to $750; to waive the minimum attendance requirement of 2,000 people; to remove the cost of utilizing the coliseum for practices—currently $50—completely; and that the city waive their percentage of concession sales for two games to allow the concessionaire to run promotions.
Last year, the City made approximately $12,000 profit off the contract with the Bandits after labor and other expenses were deducted. Approximately $5,000 of that stemmed from concession sales.
“If we look at what the Bandits are requesting, that would potentially give us about 79 percent decrease in revenue from last year,” Pena said. “That’s $6,000 lost in rent revenue, $1,320 for concession, $1,840 if we gave up concessions for two games…and $450 lost in practice revenue.”
In a recent meeting with the Civic Events Board (CEB), Sanders presented his request for 2014, which was met with a minor adjustment from the CEB staff. The CEB proposed to accept all changes, but to change the rent to $1,000 per game rather than the proposed $750. The CEB suggestions drop the City’s profit loss to 66 percent annually ($4,113), which an otherwise hesitant Council was more receptive to.
The loss of money was not agreeable to all, however, as Winkie Wardlaw compared the Bandits’ financial situation to the epic fail of the city’s hockey team several years back, on which the city took a roughly $438,000 beating.
“What does the ‘Underwater’ (from Underwater Football) stand for? Is that a financial reference?” councilman Wardlaw asked. “We all know…most of these sports franchises fail. And they fail because they’re unprofitable, and if you look at this, $138,000 lost in the first year,” he continued, “at some point in time, if this thing stops turning around, someone is going to stop feeding the company.”
Having helped in the litigation during the hockey deal, Wardlaw says he remembers all too well what happens when the City gets in bed with limited liability companies who have little or no assets, which are called shell corporations.
“The contract is unenforceable because as a shell, nothing bad can happen. They can say they want A,B,C and D, otherwise they’re going to walk,” Wardlaw said. In the case of the hockey team, the companies assets were pretty much null, meaning that after court costs, the City was left with a hefty bill. “The City of San Angelo was brutalized, and I don’t want to see that happen again,” Wardlaw said.
In contrast to the hockey team, which cost the City money on improvements to the coliseum and maintenance on the ice machine among other expenditures, the Bandits pose no cost to the City.
In an interview Thursday, Sanders clarified the financial status of his company in detail. “What was very misleading is, in that loss was the price that I paid for the team. People don’t realize when you buy a business, you buy a turf, you buy 55 helmets, you buy 55 shoulder pads, you buy medical equipment…so all of that goes into the first year…it (the loss) was more than we expected because our attendance was not [high],” he said, noting that a loss was anticipated as evidenced by his ownership of other teams.
Bringing up another concern with the contract re-negotiation, councilman Fleming stated, “The only thing I would have a problem with…they’re saying free on the practices, but it actually does cost us money to run the power…”
Pena explained that the Bandits intend to leave the AC off during practices and just run the lights in order to minimize costs. She further added, “There’s a lot of interest we have in the coliseum that’s going to make it hard to find practice for the Bandits in the coliseum.”
But the ability to fill practice time alone was not enough to satisfy Wardlaw, who had issue with the decreased rent on game days.
“I’m not against this contract, I am not against the football being played here, I am a football fan myself. The point I was trying to make is, if we’re going to get into these concessions, why wouldn’t we want to make him guarantee the payment of the rent? You guys are assuming that he’s going to pay the rent.” Wardlaw said.
Referencing the $7,500 loss the City Parks department took on River Fest, Fleming stated, “This is kind of a little different than what we had before the break,” he said. “We’re actually not going to lose money according to what they’re saying. We’re going to actually still make some money.”
Silvas added that hockey’s failure in San Angelo might be attributable to our location, stating “it doesn’t gel well [in west Texas]. But football is a totally different game, and if you’re bringing me $4,000 for my end of it as a profit, that’s $4,000 we don’t have…this meeting being publicized, I would urge the public to come out and see the game. $138,000 is his loss, it’s not my loss, the city’s loss.”
The concessions given to the Bandits are worth $8,000, and in the same ballpark as the $7,500 that the city lost on the inaugural River Fest last year.
Is the loss in revenue worth the touted economic benefits?
When asked whether she agreed that the $400,000 of economic impact compensated for the $7,500 loss on River Fest, Farmer said, “Absolutely, absolutely. The problem was, the staff, in the financial reporting that they gave us to look at, did not give us confirmed estimates of the estimated economic impact…I never heard where the $400,000 figure came from…usually we get those numbers confirmed from the Chamber.”
The estimated economic impact was included in Carl White’s presentation to Council on Tuesday. Following the meeting, White explained that the number he presented, $400,000, had come from the San Angelo Chamber of Commerce. The number is based upon out-of-town visitors during the two-day event with a margin of error added in to compensate for those who may not have stayed overnight or did not make purchases within the city during their stay.
White says that between 25 and 30 percent of the 7,000 in attendance at River Fest were from out of town, a number derived from registrations for the Color Up Run and washer pitching tournament. Conversely, the Bandits provided no numbers for economic impact in their request, however Pena stated that the average total attendance of a Bandits game was 1,100 people last year, with 1,200 present at the most-attended game.
There are currently no documented numbers of ticket sales to attendees from out-of-town, however Sanders says he is working on an economic impact report and can estimate out-of-town tickets sales based on convention.
“We did have out-of-town attendance. We have six games, where the people come in,” Sanders said. “We average about 200 to 220 tickets that we give to the opposing team, which they give to their families and stuff to go and see it. Across counter, we also sell probably another 150 per game.
“We are doing a economic impact right now. We went and looked at the economic impact that the [defunct San Angelo Stampede-Express] had whenever they were the team here, after about 7 years. They had an economic impact on the city of a little over $1 million [for a year]. What we expect to see is about 2/3 of that for right now, with the goal to put it well over $2 million before we’re all done. She was averaging about 2,800 people in the seats. We’re averaging right at 2,000. That’s what we expect to earn this year,” Sanders said.
During the City Council meeting Tuesday, Farmer called for an economic impact report to be included in future meetings. “Years ago…we used to receive what was called an expected revenue of economic impact,” Farmer said. “I would like to see us go back to at least showing what that expected revenue of economic impact is going to be…”
River Fest vesus Bandits
“All the council is in favor of the River Fest…The only thing that I was hesitant about and [what] I believe the council was hesitant about is the city subsidizing something 7,000 people attended,” Farmer said, emphasizing that Council didn’t want to use taxpayer dollars to subsidize an event not every taxpayer may enjoy, a reasoning echoed by all members of the Council.
As for the diminished profit, Farmer stated that the City is not in this to make money, but that they do like to break even. The Civic Events department, however does not receive general funds. Their budget and operations function on hotel occupancy taxes and revenues from events that the City hosts.
Some of that revenue will come from scheduled events, such as Bandits football games, and that money will either go into the general fund or be earmarked for certain uses within the department that generated the revenue.
“[Profits made from arena football games] goes into improvements for, first of all, the coliseum, but the Civic Events Board designates their budgets, their funds, and where those funds should be applied, what improvements are needed,” Farmer explains. “Right now, the coliseum needs a new roof…their profits that they get, go into maintaining that particular facility.”
“If we have a venue, such as the football, and they’re going to guarantee us a certain number of days…one the one hand we have the guarantee of contract and on the other hand we have hopefully, a new person in that job—that’s never done that job—thinking that she can fill those at the last minute. I’d rather have the contract and a reasonable guarantee that we’re going to fill that than say ‘this week we’ve got a football game, next week we don’t have anything and let’s try to find something to fill the coliseum on that date,’” Farmer said. “The chances of that happening are slim. I admire her optimism, but it’s still very slim.
Farmer says her confidence is not equal to Pena’s optimism, however Pena says her tenure is not related to the city’s ability to book events.
“We’re booking things whether or not we had a manager,” Pena said. “I’m not actively pursuing events, because that’s not part of what my duty. As a City employee, I cannot spend dollars on promoting and trying to get people to come to San Angelo, but the demand is there regardless. Whether I’ve been here for a year or a week, or six years, that wouldn’t have mattered. My tenure and how often we’ll book facilities, they don’t have a direct correlation.”
“It’s very real, the possibility of us losing money this year unless attendance goes up…if the Bandits are active in their promoting and their advertising and they actually have a lot more people in the coliseum, then we’re going to get more money off of that,” she said.
This year, Sanders says the Bandits are adjusting their marketing strategy to include more engaging advertisement. While the funds allocated for marketing will remain the same, Sanders says they intend to participate in more charity work to aid in promotion.
“It’s going to be about the same, the only difference is we have a little bit more name recognition and things like that than we did last year,” Sanders said. “Now that they know we’re here, all we have to do is get them to come out to the games. We will be doing charity work, we will be working with the schools, we’re trying to do work with Shannon Hospital, and we’re also trying to do some charity-based games.”
Randy Sanders is also the owner of Concho's Downtown. He also owns an antibacterial and a bus company locally. He says he intends to stay in San Angelo for the long-term, and that the City's decision to help him build his business will ultimately boost the city economically.