by April Scheinoha
A workgroup has been appointed to negotiate with a firm to manage four Thief River Falls city properties. In a split vote, the Thief River Falls City Council approved appointing the workgroup to negotiate with VenuWorks. The matter was approved at the council meeting Tuesday, Aug. 6.
Voting in favor were Mayor Brian Holmer and council members Jason Aarestad, Mike Lorenson, Steve Narverud, Rachel Prudhomme and Don Sollom. Council member Curt Howe voted in opposition. Council member Jerald Brown was absent from the meeting.
An earlier vote to stop the possible negotiations failed by a vote of 2 to 5. Sollom and Howe voted in favor of stopping the possible negotiations. Holmer, Aarestad, Lorenson, Narverud and Prudhomme voted in opposition.
Those actions mean that Aarestad, Prudhomme and Sollom will negotiate with VenuWorks to manage Ralph Engelstad Arena, the Huck Olson Memorial Civic Center, the Multi-Events Center and the Thief River Falls Tourist Park. City Administrator Angie Philipp and City Attorney Delray Sparby were also directed to work with the negotiating parties.
That decision came a day after a Committee of the Whole meeting in which council members discussed a proposed contract brought forward by VenuWorks. The Iowa-based firm manages 50 venues in 21 markets. City leaders have been discussing working with VenuWorks since the summer of 2018. Further discussions commenced after former Arena Manager Missy Sletten resigned in June 2019.
As part of the proposed five-year contract, VenuWorks would promote and staff all events at the four sites for a base management fee of $96,000. That amount is subject to an annual increase of the previous year’s consumer price index, not to exceed 3% per year. The firm would also receive an incentive fee (bonus or revenue share) of 5% for year one, 10% for year two and 15% for all years thereafter. The latter fee would apply to revenues over a mutually agreed upon benchmark.
At the Committee of the Whole meeting, Sparby described the proposed contract in Thief River Falls as a boilerplate contract that VenuWorks probably sends out to prospective clients. After reading the proposed contract, Sparby made several suggestions. He noted that the city and VenuWorks needed to further define the control the city would have related to managing VenuWorks’ final budget. He also suggested listing who has control over purchasing equipment and how equipment failures would be handled in situations where events would need to be cancelled.
At the council meeting the following day, Sollom said he had talked to Bemidji City Council member Ron Johnson, who informed him that the City of Bemidji pays VenuWorks more than $200,000 per year to manage facilities on its behalf. Sollom added that Johnson indicated the firm operates the facilities at a deficit and has raised a Rotary Club’s fees by $20,000 in one year.
Aarestad replied that Sollom was relying on information from one council member. He indicated that the Bemidji City Council approved renewing VenuWorks’ contract by a vote of 6 to 1 with Johnson in opposition.
For her part, Prudhomme noted that VenuWorks has brought $19 million into Bemidji.
Holmer countered that hockey brings a substantial amount of revenue into that community.
Their discussion eventually led Aarestad to comment that VenuWorks would bring more business to stores, including the store owned by Sollom’s girlfriend, LeAnn Nelson.
Sollom replied that Aarestad had no right to bring Nelson into the discussion.
Afterward, Sollom referred to employee pay, noting that VenuWorks has had an almost 100 percent turnover in staff within the last two years. He said VenuWorks doesn’t pay its employees enough with the exception of the general manager, who is paid $140,000 annually.
Aarestad was in favor of seeing VenuWorks employees at REA. “I don’t want to see a city employee out there,” said Aarestad, who noted that the council doesn’t know how to run an arena.
Holmer replied that he doesn’t know how to run Falls Liquor or the Electric Department, but the council has the right people in those positions to manage those departments.
A night earlier, the council had a lengthy discussion about the proposal at its Committee of the Whole meeting. Sollom raised concerns about spending more than $96,000 annually for management of the four sites. He noted that, about a week earlier, Holmer referred to a deficit in the city’s proposed 2020 budget.
Sollom also referred to one or more council members apparently leading Sletten to resign.
Prudhomme replied that Sollom was waging a personal attack on his fellow council members.
“Who chases them out?” Sollom responded.
Prudhomme said Sollom’s statements seemed personal and didn’t concern his ward.
“My ward was perfectly happy with what was going on,” said Sollom, who referred to not having to pay a $96,000 bill. He then asked how much the city was paying for a manager to run the arenas in the past.
Philipp replied that the city paid about $100,000 annually, which included benefits.
VenuWorks plans to hire its own employees. If current city employees working at the arenas choose to continue working there, they would be employed by VenuWorks.
Otherwise, they would work in other city departments. Howe cited concerns, noting that moving employees from the arenas would raise the budgets of other departments.
Philipp replied there was one vacancy, and two employees were eligible for retirement in public works. She said city leaders plan to not fill those vacancies should they occur.
Howe responded that he had heard that statement in the past, but the city filled the position anyway.
Various city departments are short-staffed. Parks and Arena Foreman Mike Olson said the city struggles to find quality employees. He anticipated that the city would soon be advertising for employees to work nights and weekends at HOMCC for $10 an hour.
“They’re going to come out of the woodwork,” he said sarcastically.
Olson added that the city will soon be replacing the ice plant. He questioned who would be replacing it. Noting VenuWorks has employees specializing in such work, Olson said, “This is urgent. This is beyond urgent.”
Olson further noted that the council has been downsizing the number of staff for years.
Sollom agreed, noting that the council has been conducting business the wrong way.
Sollom’s other concerns centered on the incentive fee. “Why do we have to give them an incentive fee to have them do a good job?” asked Sollom, who noted that the city doesn’t give any other contractor working for the city an incentive.
Prudhomme replied that the bottom line is that REA is an underused facility and an arena isn’t a government function. She added that taxpayers paid council members per-diem rates to negotiate with the Norskies. She said Sletten was great handling the ice schedule, but Sletten wouldn’t have known how to run a Zamboni if no one showed up. Prudhomme added that former City Administrator Larry Kruse had encouraged Sletten to hold a new event every other month, but Prudhomme noted Sletten failed to do so.
Like Sollom, Howe raised concerns about the amount of money the city would provide to VenuWorks if it hired the firm. He referred to a $900,000 deficit in the city’s proposed 2020 budget and how VenuWorks was talking about constructing a full-service kitchen near the Imperial Room.
“We’re not doing a kitchen now,” Philipp replied.
Howe went on to say that this contract was being considered due to the possibility of hosting concerts at REA. “This is a hockey arena. Ralph Engelstad would roll in his grave,” he said.
Aarestad replied that VenuWorks has indicated concerts wouldn’t work. If any concerts were held there, Aarestad recalled that VenuWorks representatives referring to holding possibly one concert.
VenuWorks representatives also referred to holding additional events that would bring more people to the community, Prudhomme noted.
Sollom wanted to know much money VenuWorks planned to raise to reduce the city’s deficit for running REA and HOMCC. Currently, the city has an annual deficit between $400,000 and $500,000 to run the arenas.
Narverud said the Public Works Committee has discussed with city partners about spreading out the city’s recreational activities. Narverud said plans are for others to handle city tennis and baseball. As part of this plan, he said that Community Education would take over day camps. Narverud indicated that the city may still host the volleyball league.
Narverud noted this was another way to save the city money. At the same time, he said, “It’s not $96,000, folks.”
Several council members referred to the need to act soon. Hiring an interim arena manager was suggested, but council members finally came to a consensus to appoint a workgroup to investigate the matter further and negotiate with VenuWorks.
Holmer said, “We’ve got to do something here, guys.”
The following evening, the council approved appointing the workgroup.