New Intrust Bank Arena contract would have made $500,000 less for Sedgwick County

Sedgwick County would have gotten about $500,000 less income from the Intrust Bank Arena if the current operating contract had been in place in the arena’s first five years, according to a report released Tuesday.

From 2010 to 2014, the arena made $3.9 million in profit, Assistant County Manager Ron Holt told county commissioners Tuesday.

Of that, the SMG operating company received $2.3 million, 59 percent of arena profit.

Sedgwick County, which owns the arena, received $1.6 million, or 41 percent of the profit.

Under the new contract, SMG would have received $2.8 million, or 72 percent of the total arena profit, Holt’s report said.

The county would have received $1.1 million, or 28 percent of the profit.

Under the original pact, SMG received the first $450,000 of arena profit each year, Sedgwick County got the second $450,000, and anything above that was split 60-40 with the county getting the larger portion.

In the new contract, SMG keeps the first $400,000 of arena profit and the county and SMG evenly split anything more than that.

Under the old contract, the arena only got to the 60-40 split once, the first year of operation in 2010.

That one year generated more than half the total profits from the first five years – slightly more than $2 million.

Holt noted 2010 was an anomaly; event attendance was extraordinarily high because of community excitement about the new facilities and pent-up demand for high-quality shows.

For two of the first five years, including last year, the county received no income because the arena brought in less than SMG’s first $450,000.

Last year was also by far the lowest year for net arena income at $122,853 – down from $705,678 in 2013.

Late last year, the county extended SMG’s contract for five years, but with the new profit split.

Holt said the problem with the initial contract was that once SMG got past $450,000 in profit, there wasn’t much incentive to keep maximizing arena income because there was little likelihood SMG would make any more than that, Holt said.

Under the new contract, SMG “will be incentivized by sharing 50/50 on any additional profit,” he said.

After the meeting, Holt said the contract is to the county’s benefit, even if it doesn’t generate a profit in any given year, because SMG would absorb any potential loss, eliminating the risk the county would face if it ran the arena on its own or paid a flat fee for private-sector management.

Commission Chairman Richard Ranzau said Tuesday’s report was primarily for informational purposes to give commissioners a rough idea of what they might expect going forward.

“We have a contract and a contract is a contract, so for right now that’s where we’re at unless we ask them to renegotiate, which is not what I’m proposing,” Ranzau said.

This story was originally published February 24, 2015 at 1:02 PM with the headline "New Intrust Bank Arena contract would have made $500,000 less for Sedgwick County."