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HomeMy WebLinkAbout06/17/2008, BUS 3 - TOUR OF CALIFORNIA FINANCIAL SUPPORT ® 1� l council McmyDaz 6-17-08 ac en bA Pwpont mNu Jrzr CITY O F SAN LUIS O B ISPO FROM: Betsy Kiser, Parks& Recreation Director Prepared By: Linda Fitzgerald, Recreation Manager SUBJECT: TOUR OF CALIFORNIA FINANCIAL SUPPORT CAO RECOMMENDATION 1. Approve, in concept, a request by the San Luis Obispo Local Organizing Committee to continue the City's involvement with the Amgen Tour of California for 2009. 2. Appropriate an additional $20,000 from the General Fund in the 2008-09 Budget to cover the estimated shortfall in community fund raising efforts to support the activities needed to again bring the 2009 Tour of California stage finish to San Luis Obispo. DISCUSSION Background San Luis Obispo has been a stop on the Amgen Tour of California(Tour) since the inaugural year in 2006. The Tour is a world-class cycling event, held in February, which brings thousands of followers along a 600 mile route. Stage 4 of the Tour, the "Queen Stage," begins in the Monterey/Seaside area and follows scenic Highway 1 to the finish in San Luis Obispo. San Luis Obispo has hosted the finish of that stage for the past three years and also was a Stage Start city in 2006. It needs to be noted that San Luis Obispo has been the smallest Finish city (in population) on the Tour for the past two years. The San Luis Obispo area has long been a focal point for cycling along the Central Coast. Not only has the City hosted the Tour of California for the past three years, but it also is a stop on the Jeep King of the Mountain competition, held at the Madonna Inn. Likewise, the City is home to the SLO Criterium, an event run by local cycling enthusiasts. This past year, Team High Road, an international professional cycling organization that competed in the 2008 Tour, moved its home base to San Luis Obispo, providing locals with an opportunity to see pro cyclists training nearby. One of the benefits received from being a host city for the Tour is the international exposure given to the race and to the cities along the way. The Stage 4 leg was the most watched televised segment of the Tour of California in 2007 and 2008, according to statistics received from Versus, a cable network that televises pro cycling events. In addition, the downtown area has benefited from tourism activity as a result of hosting the Tour. In the first year that the Tour was in San Luis Obispo, the Downtown Association's event coordinator determined the spillover of spectators from the event into Farmer's Market in mid- February was as large as a summer Thursday night. Although dampened by rain the past two j V • Tour of California Financial Support Page 2 years, thousands of spectators visited San Luis Obispo during the Tour's stop and many stayed in local hotels and visited local businesses. The tangible long-term benefit in tourism is difficult to measure but the exposure both from spectator visits and international television coverage can only help to boost tourism in the community and surrounding areas. While this "boost" is unlikely to offset event costs to the City, it will benefit the broader local tourism industry. Current Situation A local organizing committee (LOC) comprised of City and Chamber of Commerce staff and volunteers from the community is responsible for the planning, organizing, staffing and fundraising for the Tour's arrival each year. For the first two years, sufficient funds were raised by the LOC through community donations and sponsorships to cover the "direct" cost of hosting the Tour—hotel rooms-for event support staff, meals, public relation services, transportation for volunteers, and waste management. That was not the case in 2008. Each year, the requirements for hosting a Stage Finish have become more significant, with the costs of fulfilling these requirements being passed onto the host cities. For the 2008 event, housing and feeding the event staff were added to the package and higher costs were incurred by the LOC to provide dinner for the riders. In 2008, the LOC fell short of its fundraising efforts by $20,000 and relied upon savings from the previous year's sponsorships ($5,756), a Promotional Coordinating Committee grant of $7,500, and an allocation from existing City resources of $6,500 to cover the $37,300 in direct costs needed to host the event. These additional funding sources were available on a one time basis and are not necessarily available for subsequent years. In addition to the event costs above, the City incurred direct costs and lost revenues last year of $19,400 for police, fire and public works overtime ($9,000), lost parking revenue ($7,200) and waived recreation facility rental and fire permit fees ($3,200). Lastly, the City committed significant staff resources for event organization, planning and oversight in virtually all areas of the City's operations: Police, Fire, Parks & Recreation, Public Works, Administration, City Attorney, Risk Management and Information Technology. While there were no net added costs for this, the significant staff time allocated to this effort was not available for other City activities. Due to these ever increasing responsibilities and costs, a reorganized LOC prepared a proposal in response to the recently released Request for Proposal (RFP) for the 2009 Tour, with the intent of either becoming a Stage Start (less expensive than a Stage Finish) or a Stage Finish with conditions that would limit the LOC's financial liabilities. Upon receipt of the proposal, Anschutz Entertainment Group (AEG), underwriters for the event, contacted the LOC and expressed a desire for San Luis Obispo to remain as a Stage Finish. They offered to work with the LOC to reduce costs to bring the event back to the community. At this time, San Luis Obispo is being considered as the Stage 4 Finish. AEG is adding more cities and dates to the Tour and in doing so is moving the finish date to a Wednesday rather than a Thursday. Other logistical aspects are still being discussed but the newly estimated cost to host the Stage 4 Finish is $35,000 (not including other direct and indirect costs as discussed above). The LOC believes it will be difficult to fund this cost solely with sponsorships due to the slowed 3 —Z C Tour of Califomia Financial Support Page 3 economy and sponsorship restrictions placed on the LOC by AEG. Before moving forward with the proposal to again host the Tour in the City of San Luis Obispo, the LOC is seeking direction from the City Council on whether to provide additional resources and continue working with AEG for a 2009 Stage Finish, knowing that the ability of the LOC to raise sufficient funds could be limited. City Support Requested At this time, the Council is being asked to support the LOC's efforts to again hold the Tour of California in the City of San Luis Obispo in 2009; and,in the event that fundraising efforts in the community do not materialize as anticipated, to offset any shortfalls in an estimated amount of $20,000. The LOC will aggressively continue its efforts to raise funds to cover the cost of bringing the Tour to San Luis Obispo. The community benefits greatly from the amount of national and international exposure from the event. The Tour brings added tourism due to the number of people who stay in the area during the off season to watch the race and could return to San Luis Obispo at other times of the year. Added Perspective from Other Host Cities Staff was able to obtain information on what other Host Cities are experiencing with the Tour of California. Most have been hit with the added expenses involved with providing additional hotel rooms and other amenities at a cost of more than $50,000. Some have been successful in raising the necessary funding; others have been subsidized by the host city. In reports presented to the Santa Rosa City Council, their city made a direct contribution of $25,000 towards the cost of the Tour in 2006 and that amount increased to $45,000 in 2008. As of May 1, Santa Rosa had raised over $150,000 needed to host a Stage Finish and Stage Start for 2009. Santa Clarita has experienced total costs between $150,000 and $200,000 for the two years it has been involved as a Tour stop. They have been able to fundraise or obtain in-kind support for the event, but also have a City staff member devoted to supporting arts and events who has staffed the fundraising efforts. The City of Palo Alto acknowledged, as a host of the Prologue stage in 2008, that they had estimated their costs to be $195,000 and shared in the cost of providing the event with Stanford University. In all of the above cases, the cities offered to subsidize the shortfalls for the event that were not covered by fundraising efforts. The San Luis Obispo LOC was fortunate to be able to fundraise the direct costs of the event for the first two years, but in year three was unable to secure enough funding to fully cover what was needed for the day of the event. 3 -3 Tour of California Financial Support Page 4 Next Steps: Continued Negotiations and Event Debriefing/Planning If approval is given by Council to proceed, the LOC will continue to negotiate the best possible contract with AEG to host the 2009 Tour in San Luis Obispo and return to Council in July or August with a formal agreement. An aggressive sponsorship campaign will need to be developed to offset as much of the cost for the Tour as possible. Also, based on the number of incidents related to street closures and access to residences that were experienced during last year's Tour, due primarily to the inclement weather and communication issues, the LOC will focus additional efforts on the reduction of such occurrences. CONCURRENCES The Chamber of Commerce supports the City's involvement with the Tour of California_ FISCAL IMPACT The level of fiscal impact will be highly dependent upon the abilities of the LOC to obtain sponsorships, donation, and in-kind services to offset the costs for a Stage Finish. The LOC is committed to providing the best event possible, while keeping in mind there may be limited fiscal resources available. However, in the event that the LOC is unable to secure sufficient sponsorships to cover the requirements to be a Host City, the City is being asked to commit financial resources to offset shortfalls that the LOC is unable to cover through its fundraising efforts. The LOC will do its best, through an improved Sponsorship Plan, to secure what is needed to host the event. However, based upon what was raised by the LOC in 2008 ($15.000), it is anticipated that $20,000 will be needed to cover the remaining estimated host city cost of $35,000 for the 2009 event. With the economy on a downturn, there may be fewer discretionary funds available to support a special event such as the Tour of California. In the event that the LOC is unable to secure adequate sponsorships to support the event, even with the allocation of$20,000, staff still may have to return to Council to request additional funds to cover the costs associated with hosting the event. Support for this event is also an issue that ought to be reviewed with the newly forming Tourism Business Improvement District, as it begins to accumulate funds and promote tourism events. ALTERNATIVES 1. Authorize Submitting a Proposal Conditioned Upon Negotiating More Favorable Financial Terms with AEG. While the Council may be supportive of again hosting the Tour, it may be concerned with the proposed financial terms. In this case, the Council could direct staff to submit a proposal conditioned upon negotiations to limit the City's liabilities in the formal agreement. This could be in the form of sharing any net costs or a direct limit on 3-y C Tour of California Financial.Support Page 5 the City's financial commitment to $20,000 (or less, depending on Council direction). In this case, the staff will return with the results of the negotiations with the formal agreement approval in July or August. The likelihood of success with this approach is uncertain. In the event we are unsuccessful in negotiating better terms for 2009 under this option,we believe it will be important to inform the event organizers that the City will have to seriously re- evaluate its interest in hosting this event in the future. 2. Do Not Continue Hosting the Tour. The Council may determine that benefits of hosting the Tour of California do not offset the direct and indirect costs of doing so. In this case, the LOC will withdraw its application as a Host City. The burden of finding another Host City to complete the "Queen Stage" of the Tour of California will revert back to the event organizers. By not hosting the Tour, there would be a loss of future tourism exposure as a result of San Luis Obispo being dropped from the Tour. Unfortunately, the exact loss is difficult to determine, as economic impact data is not readily available specific to the day of the Tour. Residual effects from those visiting San Luis Obispo as a result of following the Tour are also difficult to pinpoint. Additionally, while hard'data is unavailable with regard to the value of the media exposure for host cities, one City (Santa Rosa) estimates that the advertising value received from the Tour approaches $700,000. This media exposure would be lost to the City of San Luis Obispo should the Tour not return. T:Council Agenda Reports/Parks and Recreation CAR/TOC 2008 shortfall 3 ��