Overview
The Massachusetts Convention Center Authority is an independent public authority of the Commonwealth that owns and operates several public facilities primarily for conventions, tradeshows, and industry meetings. The Authority was established by Section 31 of Chapter 190 of the Acts of 1982 and Chapter 152 of the Acts of 1997 to acquire and operate the John B. Hynes Veterans Memorial Convention Center and the Boston Common Parking Garage, to oversee the construction and operation of the Boston Convention and Exhibition Center (BCEC), and to acquire and operate the Springfield Civic Center. According to its website,
The [Authority’s] mission is to generate significant regional economic activity by attracting conventions, tradeshows, and other events to its world-class facilities while maximizing the investment return for the residents and businesses in the Commonwealth of Massachusetts.
The Authority is governed by a 13-member board of directors. Nine members are appointed by the Governor, 2 members are appointed by the Mayor of Boston, and 2 (ex officio) members are the Secretary of Administration and Finance and the Collector-Treasurer of the City of Boston or their designees. The Authority’s board is responsible for appointing an executive director to serve as the Authority’s chief executive officer.
During our audit period, the Authority was responsible for the operation of the following facilities.
John B. Hynes Veterans Memorial Convention Center
The John B. Hynes Veterans Memorial Convention Center, located at 900 Boylston Street in Boston, was acquired by the Authority from the Commonwealth under Chapter 190 of the Acts of 1982. The Authority remodeled and expanded the former Hynes Auditorium building, creating the John B. Hynes Veterans Memorial Convention Center, which reopened for business in 1988. The center consists of 176,480 square feet of exhibition space, including the Hynes Auditorium, which has seating for more than 4,000 people. The center generates event-related revenue primarily from the rental of meeting and exhibition space.
The Boston Common Parking Garage
The Authority acquired the Boston Common Parking Garage from the Commonwealth under Chapter 190 of the Acts of 1982. This underground public parking garage is in the Back Bay / Beacon Hill neighborhood of Boston, beneath the Boston Common, and holds 1,350 vehicles. It provides parking for commuters, nearby residents, and tourists. It generates revenue almost exclusively from parking fees.
BCEC
Chapter 152 of the Acts of 1997 authorized the design and construction of the BCEC. The BCEC, located in South Boston, officially opened for business in summer 2004. It is approximately 2.1 million square feet and is located on a 60-acre site. The BCEC generates event-related revenue primarily from the rental of meeting and exhibition space, the sale of services that support the use of that space, and commissions on food and beverage sales at the facility.
MassMutual Center
Under Chapter 152 of the Acts of 1997, the Authority obtained ownership and control of the Springfield Civic Center, located in Springfield, from the Commonwealth. The Legislature authorized funding for the Authority to expand and renovate the facility. In September 2003, the Authority entered into an agreement with the Massachusetts Mutual Life Insurance Company for the naming rights to the Springfield Civic Center. In consideration for a payment of $5 million, the Springfield Civic Center was designated the MassMutual Center (MMC).
The MMC opened for business in fall 2005. It contains 100,000 square feet of space, including a ballroom, five meeting rooms, a 40,000-square-foot exhibit space, and a renovated 8,000-seat arena. The MMC generates both arena revenue (e.g., revenue from hockey and basketball games) and convention event revenue.
MMC Management
On September 1, 2016, the Authority entered into a three-year management services agreement (MSA) with Global Spectrum Limited Partnership of Philadelphia, doing business as Spectra Venue Management (SVM), and Blue Tarp reDevelopment Limited Liability Company, doing business as MGM Springfield, to manage the MMC. The MSA’s original term ended on June 30, 2019, but it allows the Authority, at its discretion, to execute two separate one-year extensions.
On June 26, 2017, the Authority and SVM executed an assignment agreement whereby the MSA was fully assigned to MGM Springfield effective July 1, 2017.
The terms and conditions of the assignment agreement require MGM Springfield to manage all aspects of the MMC’s operations in accordance with the MSA, including the following:
- acting as the Authority’s agent in conducting financial transactions and entering into contracts for the use of the MMC
- developing sales and marketing strategies for the MMC
- providing all management services, systems, and materials required to operate, supervise, and maintain the MMC
- establishing and adjusting prices and rates for catering, concessions, occupancy, advertising, user, and license agreements and for booking commitments
- acting as the Authority’s agent to execute, administer, and ensure compliance with service contracts with respect to the MMC, including contracts for ticketing; Web development and maintenance; computer support; furniture, fixture, and equipment purchasing; engineering services; fuel; maintenance; staffing of personnel, including guards and ushers; extermination; and other services
- managing and overseeing food and beverage services, related contracts with vendors, concession and merchandise agreements, rental agreements, booking commitments, licenses, and all other event-related contracts or agreements
- maintaining the MMC, including equipment, security, and any improvements, in a manner that is consistent with similar facilities and general accepted standards in the convention center industry
- expeditiously collecting, and depositing in the MassMutual operating account, all revenue and other receipts generated from events and other business activities
- preparing an annual operating budget estimating gross monthly and yearly revenue and expenses, subject to the Authority’s review and approval.
MGM Springfield manages all of the MMC’s operations and personnel, including the hiring of employees, agents, and independent contractors. MGM Springfield had 39 full-time and 152 part-time employees to manage MMC operations as of the end of the audit period. All MMC operating expenses are paid from operating revenue generated by the MMC and by subsidies from the Massachusetts Convention Center Fund (CCF).
Authority Financial Information
Section 10 of Chapter 152 of the Acts of 1997 created the CCF to provide funding for the Authority’s debt payments. The CCF is funded through hotel tax receipts from certain hotels in Boston, Cambridge, Springfield, and Worcester; a surcharge on vehicle rentals; a parking surcharge; a surcharge on sightseeing tours and cruises in Boston; and sales tax receipts from certain hotels and other retail establishments in Boston, Cambridge, and Springfield.
Section 439 of Chapter 26 of the Acts of 2003 expanded the use of CCF funds to include the payment for the net cost of operations and the cost of long-term capital maintenance. It also established a $17 million cap on the amount of funds used to cover the Authority’s operational costs. In 2004, the annual cap was raised to $23 million. Chapter 195 of the Acts of 2014 increased the annual caps for fiscal years 2016, 2017, and 2018 to $25 million, $26 million, and $28 million, respectively. (The annual authorization for fiscal year 2019 stayed at $28 million.) In addition, the State Treasurer and the Secretary of Administration and Finance must annually certify the sufficiency of CCF revenue for any given year. CCF revenue cannot be used until the certification takes place. In 2018, the Authority requested $24,746,206 in reimbursement from the CCF: $14,158,769 for the costs of operations and $10,587,437 for capital costs. In 2019, the Authority requested $40,381,098 in reimbursement from the CCF: $17,544,945 for the costs of operations and $22,836,153 for capital costs. The balance in the CCF was $196,270,258 as of June 30, 2018 and $268,854,729 as of June 30, 2019.
The Authority’s management uses the coverage ratio, an industry standard performance metric, to measure the extent to which its gross operating revenue covers its operating expenses. For example, a coverage ratio of 50% indicates that 50% of the expenses of operating a particular facility are paid for by the revenue generated by the facility, and the remaining 50% needs to be covered by the CCF. The Authority’s overall coverage ratio for fiscal years 2018 and 2019 was 90%. The table below compares each facility’s coverage ratios for fiscal years 2018 and 2019. During this period, the MMC’s coverage ratio was significantly lower than those of the Authority’s other facilities.
Coverage Ratio Comparison by Facility
|
|
Coverage Ratio |
Coverage Ratio |
|---|---|---|
|
BCEC |
106% |
115% |
|
John B. Hynes Veterans Memorial Convention Center |
94% |
106% |
|
MMC |
48% |
53% |
|
Boston Common Parking Garage |
425% |
516% |
MMC Events
MGM Springfield classifies events held at the MMC as convention center rentals, entertainment events, hockey games, or community events.
Convention Center Rentals
Convention center rentals include events like tradeshows, college and high school graduations, and conferences. The contracts for these events require the organization that is promoting the event to provide a pre-event deposit in an amount that can be up to the full estimated cost of the event. The MMC event manager organizes all internal and external resources necessary to host the event, including staffing, food and beverage services, and building preparation. It sometimes uses vendors for services including staging, ushering, and security.
Entertainment Events
Entertainment events include things like concerts, ice shows, athletic (non-hockey) events, and exhibitions. In addition to a building rental fee for these events, MGM Springfield negotiates the sharing of non-rent revenue such as tickets, facility and service fees, and food and beverage revenue. Entertainment events are structured by MGM Springfield as either co-promotions or direct buys. Co-promotions are events where the Authority partners with a promoter to produce an event and shares the net profit or loss. Direct buys are events where the Authority is the sole promoter and accepts all profits or losses from the event. The MGM Springfield general manager is required to produce profitability forecasts for every proposed co-promotion and direct buy and submit it to Authority management for review before putting it under contract. Each event also requires a license agreement that includes the promoter obtaining a $3,000,000 insurance policy to protect the Authority from casualty claims for any injuries or other casualties related to the event.
Hockey Games
The MMC is the home arena for the American Hockey League’s Springfield Thunderbirds and American International College’s hockey team. Hockey games are governed by a contract between the Authority and the teams for all games played by the Springfield Thunderbirds and American International College at the MMC throughout the season.
Community Events
Community events are events hosted by the MMC to benefit the general public, such as holiday-themed events and exhibitions. There are no contracts associated with these events. MMC personnel (MGM Springfield employees) form a committee to plan and manage events, and admission is free. The MMC general manager is responsible for approving all expenditures.
Billing and Event Settlement Process
For all events, the MMC’s staff uses a standard billing and event settlement process. This process requires circulating an event folder to each MMC manager involved in the event. The event folder contains all the documentation for the event, including an invoice approval form that is used to generate a final bill for the promoter or client. The folder also includes all vendor invoices for expenses related to the event. Each MMC manager involved in the event is supposed to review the documentation in the folder, verify the accuracy of information (e.g., the billable hours for a particular vendor), and sign off on the invoice approval form. All events have payment terms that are expressly stated in their contracts.
| Date published: | February 16, 2021 |
|---|