Saturday, June 20, 2009

RR to Global: Settle Center Debts

By Rosalie Rayburn
Copyright © 2009 Albuquerque Journal
Journal Staff Writer
          The city says the clock is still ticking for Global Entertainment to meet a city deadline to settle debts associated with the financially troubled Santa Ana Star Center.
        City Manager James Jimenez gave Global Entertainment President Rick Kozuback 30 days to respond to a June 12 letter seeking payment of $367,608. That figure includes about $81,000 for repairs at the center, $75,000 for surcharge fees due the city on items sold at the 6,500-seat events center and $292,000 for outstanding debts.
        Rio Rancho signed a 10-year contract with Global Entertainment in 2004 to manage the Star Center. At the time, Global predicted profits from Star Center events would cover payments on $36 million worth of bonds the city sold to build the arena. Instead, the center lost money, prompting the city to notify Global in December that its contract would be terminated March 31.
        Instead, Global Entertainment pulled out of the Star Center in early February and the city took over management, leaving the thorny issue of debts unresolved.
        Kozuback had a meeting with city staff in early May. He said Friday that he left the meeting believing he was on the way to a mutually acceptable solution.
        "With this letter, it's clear that we didn't make progress on a compromise," Kozuback said in a phone interview from his office in Tempe, Ariz.
        Global Entertainment's position, reiterated in letters sent to Jimenez in December and January, is that actions the city took stifled revenue flow to the center, hampering Global's ability to cover operating costs, including money owed to vendors.
        The letters said:
        •Â  The city "unilaterally" granted a rent reduction to the New Mexico Scorpions hockey team, the Star Center's primary tenant, from $6,800 per game to $1 per game.
        •Â  City staff directed Global not to book acts after April 1 and told sponsors and suite holders not to worry about Star Center bills.
        "The city's actions have strangled the Star Center's revenue streams and brought the building to a financial standstill, unable to pay its own expenses or payroll," said Barry Kohlus, senior vice president for Global of Rio Rancho, in a Dec. 24, 2008 letter.
        In a Jan. 20 letter, a Global attorney said unless the city acted to "cure" these "defaults," Global would stop providing management services on Feb. 1.
        Kozuback said Friday that Global wanted the city to cover operating expenses between Jan. 1 and the end of March and in return, the company would waive its management fee.
        "We never could get clarity as to what they were proposing," Jimenez said Friday.
        He said the letters didn't accurately reflect what happened.
        Jimenez said Global was involved in discussions about the Scorpions rent. The June 12 letter points out that the city discounted the amount Global owes by $27,924 to reflect the rent reduction. He said the city's position has been, and still is, that Global should cover debts incurred while it was still managing the Star Center.
        Kozuback said there was more than $100,000 in payments due to the Star Center when it left in February, which he believes should be used to offset the debts.
        He is still hopeful of reopening talks with the city. Jimenez said the city will reevaluate the situation when the 30 days expires but declined to say what action the city might pursue.
       

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