The DoubleTree Hotel wants annual payments of $130,000 from the city, plus incentive fees, to manage Modesto Centre Plaza in the next five years, according to a proposal going to the City Council this week.
Council members will consider awarding the hotel's basic proposal for a three-year agreement with one-year extension options.
If the council gives the green light Tuesday night, city management and legal staff would negotiate a detailed management contract, spelling out the city's expectations for bringing events to the downtown center and how local nonprofit groups would be accommodated.
"We would get to the harder work of negotiating what the contract looks like, the expectations and the performance measures," City Manager Greg Nyhoff said.
He said the city would expect the hotel to give reasonable rates and seamless service to local nonprofits.
The agreement wouldn't generate net revenue for the city to pay for needed upgrades to the convention center, built in the 1980s. City leaders mostly want to eliminate a general fund subsidy for Centre Plaza that has cost taxpayers more than $650,000 a year.
About eight city staff members and 20 part-time workers would lose their jobs under the outsourcing deal. The council Tuesday could approve severance packages for staff members, giving them up to two months' pay and health benefits.
The layoffs would not occur until a management contract is negotiated and approved.
The DoubleTree Hotel, which adjoins the downtown center, was among six companies that looked into managing Centre Plaza when the city put out feelers in September. Only two groups submitted formal proposals: the DoubleTree and city staff who run Centre Plaza.
An evaluation panel composed of city and county staff and others gave the higher score to the hotel's proposal. Over the five-year period, the city would pay the hotel $663,000 in management fees, plus incentives worth up to $150,000 if it hits targets for booking more events at the center.
By eliminating salary and benefit costs, the city would reduce the general fund subsidy to $155,000 a year, according to the proposal.
Councilman Dave Geer said Friday he needed to examine the offer to determine if the city would save enough money. "The more we can save, the better," he said.
Tuesday's action would complete what's known as a "managed competition" process, which allowed city staff to compete for the contract.
Consultant disagrees
John Christison, a Seattle-based consultant who advised staff, said he doubts whether a contract with the DoubleTree is in Modesto's best interest.
"If the city was interested in the long-term success of the convention center and making it a money producer, this is not the best route," he said.
Seeking another batch of proposals could result in a better offer, he said, adding that an alternative would be to provide adequate support for city staff members, so they can increase bookings at the center.
The DoubleTree is part of the worldwide Hilton brand of hotels and resorts, and would use the corporation's marketing staff to bring conventions and other events to Modesto, said Kim Brooks, corporate director of sales and marketing.
With the management contract, the DoubleTree can book events that need more space than what's available at the hotel, she said.
"The prime goal is to drive as many people through the center, whether it be conventions, trade shows or local catered activities," Brooks said.
Skeptics of the contract say that revenue generated by the hotel has slipped in recent years and that the DoubleTree has been late paying commissions to the city under its concession contract.
Nyhoff said the concession contract, which gives the hotel rights to cater events at Centre Plaza, could be an issue in the negotiations.
The Modesto City Council will meet at 5:30 p.m. Tuesday in the basement chamber of Tenth Street Place, 1010 10th St.
Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.
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