WHY CENTURY II SHOULD NOT BE PRIVATIZED

The City of Wichita has issued Request for Proposal (RFP) seeking a private firm to manage and operate the Century II Performing Arts and Convention Center. Here are several reasons why the privatization of Century II is not appropriate nor in the best interest of the community.

Century II History

Century II was funded and subsequently built through the passage of a special bond issue in 1961 with the promise that it would provide a venue for private and public gatherings, including the performing arts, conventions, trade shows, banquets, public exhibits and special events. As was stated in Century II﾿s original mission statement: "The City of Wichita recognizes the need for community access and for this reason the City offers, through subsidy, affordable rates, which encourage maximum use." For 36 years Century II has fulfilled this mission, enhancing the City's quality of life and creating community involvement through the performing arts and other organizations.

What is privatization?

As most publicly operated performing arts and convention facilities lose money, governing bodies who fail to recognize the offsetting financial, cultural and community asset that is created, engage private management companies at a cost less than the subsidy required to operate their facility. These private management companies charge rental and service rates so they can make a profit. In addition to paying rent, users are required to purchase services from the management company such as for box office systems and staffing, front of house personnel, security, etc., whether or not the user can provide them or does not need them at all. These expenses result in the doubling or tripling of the overall costs of using the facility.

Why it is not good for Century II

Private management of public facilities make sense when a facility is being underutilized by local organizations, when the governing body has little or no experience in operating these types of facilities or in markets where several venues compete for the same or new business. None of this applies to us. Century II is widely used by local, regional and some national presenters, as was part of its original mission. In fact in 2004, 82 local organizations rented Century II for one or more event(s). The increased costs would create financial hardships for many, especially among the not-for-profits. Private operators also place restrictions on local users that prohibit them from reserving dates far enough in advance as is necessary. In many cases, they reserve the right to evict local users on very short notice so that they may host a more profitable attraction. Some local users would be forced out and have to find other venues for their events. Others do not have that option. Any new business that a private operator would generate through their national connections would likely be offset by the loss of local users. Privatization would result in a change in Century II from being a facility whose purpose is to be community oriented to one that is profit driven.  

When the City of Wichita first proposed privatizing Century II in 2001, a groundswell of opposition arose from the community, causing City leaders to abandon this plan. Perhaps learning from that experience, City staff approached the three tenet organizations (the Wichita Symphony, Music Theatre of Wichita and Wichita Grand Opera) suggesting that they would receive special considerations if they lent their support to the privatization effort. The City offered the tenant groups input in the development of the RFP, but no control as to who would be selected to operate Century II. Despite the objections of nearly every local user and several City Council members, City staff proceeded to develop and issue the RFP. It seems curious that with so much opposition both internally and externally, and a similar reaction expected from the public as in 2001, City staff has continued to pursue the privatization option.

In response, the tenant organizations asked for information regarding the operation of Century II. The city has not provided most of the information requested.

Here are some interesting questions and observations that have arisen

The City began this process without knowing what the vacancy rate of Century II is. In other words, they did not know how much room for growth there is. Upon our request, they calculated the occupancy rate of the Concert Hall to be approximately 60% in 2004, with many of the available dates on less desirable early weekdays or on holiday weekends. Another 94 dates were unavailable to book events in the Concert Hall due to sound leakage from events in one of the other venues. Surprisingly, they do not keep track and thus cannot produce usage rates for the other venues in Century II, including the Expo Hall.

The City Manager claims the required Century II subsidy, the net cost to operate the facility, is approximately $2 million. The Wichita Eagle has reported that the subsidy is in the range of $700,000, a figure comparable to what the previous City Manager told us in 2001. We requested detailed current and historical financial information. The only information we received was a single line item indicating the total operating costs for Century II and the Expo Hall.

Even assuming the subsidy is as low as $700,000 and that vacancy rates for the other Century II venues are conservatively estimated at only 50%, is it realistic that a private operator can fill these other facilities enough times with rent-paying users to cover the operating deficit (less their management fee) and make an acceptable return on their investment without passing sizeable rent increases and service charges to local users who continue to rent Century II?

The City indicated that one of the motivations for pursuing private management arose from their belief that any applicant for the position as a City employee (the current structure) who is successful, will be recruited away after only a few years on the job. This is belied by the fact that, prior to the short term of the last Century II Director, the previous two Directors, both City employees, each served at least 15 years.

There are many examples throughout the country where privatization has created hardships for local users and ill will throughout communities. Among the other information requested from the City, but not yet provided, are examples where privatization has interfaced successfully with local users.

The City of Wichita has a long history, even responsibility, of supporting a wide variety of public, private and not-for profit businesses that help stimulate the economy. Providing Century II with a subsidy is consistent with this practice and simply makes sense given the sheer number of citizens who utilize the facility. The economic and intangible benefits to Wichita are several: a major facility for performances and events, their ensuing economic impact, and far more significantly, the secondary benefits created by bringing people into the Wichita/Sedgwick county area. The local organizations who are able to use Century II because of affordable rental rates and scheduling priorities contribute to the community﾿s quality of life, making Wichita a more attractive place for businesses to grow and/or relocate.

CONCLUSION

Given the public reaction when the possibility of privatization arose in 2001 and the City﾿s acknowledged effort to attract convention and tourism dollars by promoting what Wichita has to offer, it makes no sense to significantly change the very nature of what has been, without question, one of Wichita﾿s greatest success stories--Century II.