Bemidji City Council initiates termination of VenuWorks contract

BEMIDJI -- Management of the Sanford Center is now in a period of transition.

On Tuesday night, Sept. 7, the Bemidji City Council voted to direct staff to terminate its contract with the Ames, Iowa-based company VenuWorks. The Sanford Center, a city-owned event facility just over a decade old, had been managed by VenuWorks since it opened its doors.

The motion to terminate the contract was made by Ward 3 Councilmember Ron Johnson and seconded by Audrey Thayer, the representative of Ward 1. Joining Johnson and Thayer in voting for the motion was Mayor Jorge Prince and Ward 2 Councilmember Josh Peterson.

Against Tuesday's motion were Wards 4 and 5 Councilors Emelie Rivera and Nancy Erickson, as well as At Large Councilmember Daniel Jourdain.

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The decision comes just weeks after the council voted down a proposal from the firm Conventions, Sports and Leisure, or CSL, to study the facility and the surrounding market. Earlier this summer, during a listening session regarding the Sanford Center , the council heard from several community stakeholders who said they would like to see a review of the efficiency of the facility's management.

Johnson made the motion having been a longtime opponent of VenuWorks. In April 2018, when the council voted to approve a new contract with the management firm through 2024, Johnson was the lone dissenting vote.

On top of citing the facility having an annual operating loss of several hundreds of thousands of dollars, Johnson has also referenced some organizations no longer being able to rent the facility because of rate increases and an incident several years ago involving the Sanford Center's executive director swindling money.

"We know what works there and what doesn't," Johnson said. "We have 11 years of experience doing successful events and concerts, and some poor events and mistakes. We also know that we used to have rates that would allow folks to rent the space for meetings, who now don't meet there because they've been priced out."

From the perspective of two newer council members, the move to terminate the contract was based on feedback from residents.

"The emails I have gotten, I have not received any from people saying 'we like VenuWorks,'" Thayer said. "I have not gotten it, not one email. But I have gotten emails saying we need better accessibility and we need to market better."

"From my constituents, there's no confidence in VenuWorks," Peterson said. "I think that's the question that has to be asked out of respect for everyone. For our constituents and the staff at the Sanford Center."

Erickson pushed back on the public feedback argument in her comments Tuesday.

"I hear things like 'people have no confidence in VenuWorks' and 'I don't like how they're performing,'" Erickson said. "I don't hear specifics. I don't hear, 'I couldn't rent there, it costs too much.' But it's a $73 million event center. Yes, it costs a lot to keep the lights on. So, on one hand, we hear 'we can't have deficits like this,' and at the same time, we hear 'it costs too much to rent.'"

In his remarks, Prince said he found the existing contract lacking in any mandates to ensure efficiency.

"I've read a lot of data about this, and the one thing that's troubled me greatly with VenuWorks is the contract with them does not encourage them to be efficient," Prince said. "There are additional awards for moving top-line revenue, and that's great. But if you're not making any money, you can drive that all you want and it's not going to get you where you want to go."

On the other side of the argument, council members who voted no said the process is happening too fast.

"We don't have our partners here, we didn't include them in this discussion," Rivera said. "I am very hesitant to move forward on this discussion without seeking input from our partners first, because any decision we make impacts BSU, their recruitment, retention and sales. We're requesting a vote without data, without a study. I think it's irresponsible. I feel like we need information and history so we are making an informed decision."

Jourdain, who was in favor of hiring CSL, said he wanted a study done to make an informed decision, too.

"To get a study done to see what is happening with the Sanford Center would be nice to have on hand," Jourdain said. "For me, I'd have to say no until I have a study in front of me."

Erickson also joined with Jourdain and Rivera on that argument.

"I need specifics before we let somebody go," Erickson said. "This is putting the cart before the horse. We don't have a study to substantiate what's wrong with it. I don't know why we don't do some investigation before we make this kind of decision."

In advising the council, City Attorney Al Felix said the contract does allow either party to terminate the contract with six months of notice to the other. However, Felix recommended caution, as with the vote being finished, it sets a process in motion that's difficult to reverse.

A six-month period will bring the city's work with VenuWorks to a close in February 2022. The termination of the contract finishes a major chapter in the facility's history.

VenuWorks was selected for the 193,000 square-foot facility when it opened. Over its decade in managing the facility, the firm saw several executive directors come and go.

The original director was Bob LeBarron, who helmed the Sanford Center from when it opened its doors in October 2010 through October 2011. He was then succeeded by Roger Swanson, who held the role until August 2012, when he was fired for violating VenuWorks' code of conduct.

VenuWorks then brought in Curtis Webb, who was in the position from late 2012 until April 2016, when he took a similar role at an event center in Illinois. In October, VenuWorks fired Webb after it had learned of financial discrepancies.

Following investigations, it was found that Webb had made fraudulent claims for reimbursements for expenses never actually incurred during his time with the Sanford Center, exceeding $37,000.

In February 2020, Webb was sentenced in Minnesota to 21 days days in jail , a $1,000 fine and restitution of roughly $37,200. Months earlier, in November 2019, Webb was sentenced to 100 hours of community service and ordered to pay restitution of $1,149 in Illinois.

In response to the situation, VenuWorks agreed to pay back $138,000 to the city of Bemidji.

After Webb had left Bemidji, Mike Cronin took over as executive director for a short period of time until August 2016, when VenuWorks brought in Jeff Kossow to oversee the facility. Kossow held the position until June 30, 2019, when he made a career change.

VenuWorks then named Tiffany Vickaryous-Hubbard, who has held the role since mid-2019.

The history of the Sanford Center extends back before VenuWorks was selected as the management firm, though. In 2006, by a vote of 2,227-2,182, Bemidji residents approved extending a half-cent sales tax to assist in the construction of the facility, then referred to as the Bemidji Regional Event Center.

Breaking ground in 2009, the Sanford Center was built to include an arena with more than 4,000 seats with attached conference space so it could be home to BSU's hockey programs and conventions, as well as concerts and other events. Since its opening, the Sanford Center has produced an economic impact of more than $17 million.

At the same time, the building has had an operating loss of more than $300,000 annually, which is covered by a yearly investment by the city. In 2020, the city made an operating investment of $450,000.

The city relies on property taxes to cover the investment and other maintenance costs. Several weeks ago, the council was informed that the facility needs nearly $1.4 million worth of maintenance and upkeep work.

During that meeting, the council discussed doing around $200,000 in maintenance in 2022, which, with other expenses, could drive a tax levy increase of more than 8% .

Because the Sanford Center was built as a facility for the northwest Minnesota region, city officials in past years have also advocated for a special use tax, such as a hospitality tax on restaurants or hotels, to capture more visitor dollars to generate revenue. Such a tax requires approval by the Minnesota Legislature.

In 2020, the city was looking to make a push for a hospitality tax during the legislative session, but the effort was derailed by the coronavirus pandemic.