Deputy in City Auditor's Office Issues Report Saying:
LB Convention & Entertainment Center Operations Cost LB Taxpayers $2.5 Million in FY 2000, $3.0 Million in FY 99
Cumulative operating losses since 1978 opening exceed $60 million
City Hall is diverting part of Center parking increase, originally imposed to bail out Civic Light Opera, to fund City Hall's Special Advertisng & Promotions Fund, a practice "which appears contrary to the statutory [Tidelands] trust...the City Charter and generally accepted accounting principles."
City Auditor Burroughs' Recommended Action: "Receive and File"
(January 22, 2001) A report by a deputy in the LB City Auditor's office says the LB Convention & Entertainment Center's operations cost LB taxpayers $2.5 million in FY 2000 (ended Sept. 30, 2000) after posting a $3 million loss in FY 1999 (ended Sept. 30, 1999).
The written report, buried as a "consent calendar" item on the Tuesday, January 23 City Council agenda (details below), says that since its 1978 opening, the LB Convention & Entertainment Center's operations have caused City financial operating losses of "several million a year" and "cumulative cash operating losses are in excess of $60 million."
The report by Deputy City Auditor Earl A. Hobbs, addressed to a Special Projects Officer in the Dept.of Community Development, is dated November 30, 2000. City Auditor Gary Burroughs has transmitted it to the City Council for action on January 23, 2001.
City Auditor Burroughs' recommended actions is: "Receive and file" (effectively take no further action at this time). Mr. Burroughs' transmittal letter offers no written recommendations to the Council or the public on halting or reversing the Convention and Entertainment Center's operating losses.
"Consent calendar" agenda items are routinely approved by the Council and not slated for discussion or public input unless a member(s) of the public or a Council member requests separate discussion and public input from the City Clerk before the start of the Council meeting. If no one requests that the item be separately discussed, it will be "received and filed" without discussion or public input. (The January 23 Council meeting will be at the CSULB campus, 1250 Bellflower Blvd., Martha Knoebel Dance Theater, at 6:30 p.m.)
In addition to revelations of Convention & Entertainment Center operating losses, the report says City Hall [several years ago] instructed the Convention Center facility operator to increase its parking charge (now $7) by $1 as part of a bail out of the (now ceased) Civic Light Opera and has continue to divert the increase into its Special Advertising and Promotions Fund.
"This practice appears contrary to the statutory [Tidelands] trust, general trust law, the City Charter and generally accepted accounting principles," the report said. It recommended that the appropriateness of diverting Convention Center parking revenue to other city funds "be referred to the City Attorney for additional review."
The report also noted that for nearly twenty years, City Hall has failed to follow a 1981 City Manager-authorized Administrative Regulation requiring that the City's General fund reimburse the Tidelands for all losses from non-trust [non-Tidelands related] events (and events are conclusively presumed non-trust unless the City Attorney makes a writen determination it is a trust event.)
A 1982 report by the City Auditor's office found the Administrative Regulation was not being followed, and the Auditor's office latest report said this "continues to be the case today." It recommended that the applicability of the Administrative Regulation be reviewed by City Management and the City Attorney. "If still applicable, it should be followed. If not, it should be revised or rescinded," the report said.
LBReport.com has put the verbatim Auditor's Office report in our Reference section, where is can be viewed by clicking on Auditor's office report on Convention Center.
The Auditor's office report did not examine net taxpayer gains or losses from the Convention and Entertainment Center, only operating losses. LB taxpayers receive a percentage of ancillary revenue (hotel bed tax, sales taxes) generated by convention visitors, including hotel bed tax (which totalled roughly $13 million last year) and sales taxes.
As previously reported on LBReport.com, under a City Council approved formula in the Municipal Code, City Hall's General Fund receives only half of LB's hotel room tax; the other half is allocated between advertising and promotional activities and (for downtown hotel room tax) the downtown Redevelopment Project Area. Under this formula, the LB Area Convention and Visitors Bureau receives roughly 25% of LB's hotel room tax. (See LB's Transient Occupancy Tax)
We presume the lion's share of convention related revenue goes to downtown hotels and businesses, since they receive a larger share of revenue generated than the public. From an economic perspective, the Convention and Entertainment Center (and thus taxpayers) to some extent subsidize these businesses by generating customers for them, in exchange for which City Hall and taxpayers receive a percentage in return.
The extent to which this may or may not offset Convention Center operating losses and other taxpayer costs (including infrastructure, public services) is beyond the scope of this article.
LBReport.com thanks Stearns Park neighborhood leader Traci Wilson-Kleekamp for alerting us to this story.