Council approves new deals for DPAC, DBAP

May. 06, 2013 @ 09:43 PM

Twin 5-0 votes by the City Council on Monday approved long-term contract extensions with operators of the Durham Performing Arts Center and the minor league baseball team that calls the Durham Bulls Athletic Park home.
The approval of the arts center contract came after City Manager Tom Bonfield negotiated a change to the original draft of the extension for the arts center that should net the city an additional $300,000 to use on the theater’s upkeep.
Mayor Bill Bell and Councilman Don Moffitt had questioned a profit-sharing deal that would have given operator PFM/Nederlander 70 percent of any annual net income that tops the $3 million mark.
Bonfield’s revision gave the operator 80 percent of the take above the $3 million mark. But it made up for that by sharply lowering a bonus the company otherwise would have gotten when annual income tops $2 million.
The original draft would have allowed PFM/Nederlander to keep $300,000 when the theater’s annual net tops $2 million. The two sides would have resumed profit sharing when the net exceeds $2.3 million.
As renegotiated, the city and operation will split the first $2 million of net income 60/40, the next $300,000 of income 70/30, and again split the take from $2.3 million to $3 million 60/40. The split increases to 80/20 for income above the $3 million mark.
DPAC’s income varies from year to year. It netted $3 million in fiscal 2009-10, $2.5 million in 2010-11 and $4.6 million in fiscal 2011-12.
The two sides until now have split the theater’s income on a straight 60/40 basis. Bonfield and his staff proposed a revision of the schedule to give PFM/Nederlander more of an incentive to deliver regular $3 million-plus annual results.
Bell and Moffitt said they were satisfied with the revised split.
“The new arrangement is a more fair split of the shares,” Moffitt said.
The ballpark lease was also quickly approved. It calls for the city to spend $12 million on an upcoming capital project that will include both catch-up repairs and improvements to the stadium.
The Bulls will cover any overrun for the project that goes beyond the $12 million cap.
City officials will borrow money to pay for the project but figure their government will be better off because the Bulls are committing themselves to spend up to $200,000 a year at the stadium on preventive maintenance and to pay all its operating costs.
Each year, that should net the city about $200,000 in savings from what it would have had to pay for operations and repairs under the old lease, Finance Director David Boyd said.
The theater lease locks in the city’s business relationship with PFM/Nederlander until at least 2023, while the stadium deal ensures the Bulls will be there until at least 2034. Both deals have rollover clauses that could provide for further extensions.
“This has been a relationship built on trust and built on experience,” Bell said of the stadium deal with the Bulls, after expressing similar sentiments about PFM/Nederlander.
Monday’s votes authorized Bonfield to sign both deals. But the ballpark lease first has to go through an “upset bid” process that in theory allows another company to intervene and bid for the right to operate the DBAP.
In reality, the Bulls are likely the only organization that will participate.
The city is requiring would-be bidders to pledge at least $2 million to stadium upgrades, matching a pledge from the Bulls.
Prospective bidders also have to operate a AAA baseball team affiliated with a Major League Baseball franchise, or one that’s “capable of” playing at the same level, the city’s terms for the bidding process say.