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The Sioux Falls City Council approved the management and food and beverage contracts for the new Denny Sanford PREMIER Center. The council unanimously approved giving both SMG and Ovations management responsibility.
One will be over operations and the other food and beverage service. Both will work out of all four of the city's event and entertainment spaces.
“Were there discussions taking place about whether there will be possible operating subsidies or what profit will be made? Were those discussions taking place?” Council Member Kermit Staggers asked during the presentation.
SMG already manages the Sioux Falls Arena and Orpheum Theater. Ovations provides food services for the city too. Both will now oversee their respective operations at the Sioux Falls Arena, Convention Center, Orpheum Theater, and Denny Sanford PREMIER Center.
“SMG manages the facilities for a fee. As a result, it is the city which is responsible for receiving all of the income and paying all the expenses,” attorney Jim Wiederrich said. He was hired to help the city negotiate the contracts.
SMG's fee begins with a base price of $100,000 the first year of the five-year contract. It tops out at $110,000 the final year. The company is also eligible for incentives that could nearly double the city's yearly payment to them.
“Ovations is the entity at risk and can make a profit or not make a profit,” Wiederrich said regarding the food and beverage contract.
Ovations will pay the city a cut of its sales average at about 37 percent a year over its five-year contract. Both companies also chipped in large, up-front payments to boost their agreement totaling more than $900,000 for improvements and marketing needs. Tuesday’s unanimous vote allows the mayor to ink the deal.
“Even though we're only here at the end approving it, what it's done is add transparency to the whole process,” Council Member Greg Jamison said.
The contract talks began last March. Both take effect in January. Find more information on the contracts and watch the presentation on the city's website.