Liset Marquez, Staff Writer
Created: 07/28/2012 12:13:59 PM PDT

ONTARIO – Each year the city-owned Convention Center has operated at about a $1.6 million deficit, but the economic impact the city receives from the facility provides a greater return to its coffers, officials said.

City officials said they don’t necessarily view the $1.2 million figure and another $400,000 it invests for building improvements as a drain on the city’s general fund.

Instead, they view the 225,00-square-foot facility as a resource for the city’s economic growth and its potential to annually book 50,000 rooms.

However, the city doesn’t have an up-to-date analysis of the amount of money the events at the Convention Center create in sales, revenue and bed taxes.

Operations at the Convention Center in recent weeks have been in the spotlight after an investigative audit by the center’s operator, SMG World.

Four key officials at the center have departed after the audit’s finding. Bob Brown, the center’s general manager and CEO; Clemmie Taylor, director of operations; and Delana Grande, human resources manager, submitted their resignations last week to SMG World. Sue Dang, director of finance, was let go earlier.

An internal document sent to city officials hints at business misconduct and policy violations.

“We (chose) SMG worldwide because they are very business orientated and very responsible,” said Councilman Jim Bowman, who was on the council when the Convention Center opened in 1997.

Moving forward

The center’s 2012-13 budget projects a total revenue of $4.3 million, but includes spending of about $5.9 million. The deficit of $1.2 million has ticked up $207,920 from the 2011-12 budget.

“Across the nation, convention centers are not designed to make a profit,” Bowman said. “What they are is an integral component to become a destination. It’s all a jewel for a plan for success. The money’s made in retail sales, TOT (transient occupancy tax), sales tax.”

Officials also aren’t concerned about the deficit because the Convention Center is different than any other similar facility in the country in the way it is operated because the city’s Visitors Bureau is operated in conjunction with the center, Councilman Alan Wapner said.

Traditionally, visitor bureaus are operated by cities or a local nonprofit, Wapner said.

Ontario was no different when the Convention Center opened in 1997 and was run by the nonprofit Convention Center Corp.

City officials weren’t happy with the way it was operating and brought in SMG World.

The West Conshohocken, Pa.-based company has run conventions and facilities throughout the country, including the Long Beach Arena and the Palm Springs Convention Center.

Ontario’s original contract with SMG was to bring down the annual subsidy to the operations of the Convention Center. The city also pays a $150,000 management fee.

“The lower the subsidy, the higher their bonus – the operating deficit is primarily the operating budget of the CVB,” Wapner said.

Billing the center

The recently approved contract said that if SMG can keep its operating deficit to $1.3 million then its incentive would be $112,500.

Because there was a 2 percent increase in the deficit from the previous year, the incentive would only be $90,000.

Under the new contract, the city is requiring SMG to generate more hotel stays in the city.

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