Four of the city's seven council members were not willing to walk away from negotiations over an outsourcing contract for Modesto Centre Plaza, although the other three were ready to leave the showroom.
At a special meeting Monday, the council voted 4-3 to proceed with talks with the DoubleTree Hotel, which could take over management of the downtown convention center by the holidays. Members were split over the hotel's demand that no changes be made to its lucrative catering contract.
Stephanie Burnside, Joe Muratore, Dave Cogdill Jr. and Dave Geer wanted to discuss details of a management contract with the hotel chain; Dave Lopez, John Gunderson and Mayor Garrad Marsh were opposed.
The DoubleTree, owned by Westmont Hospitality Group, shot down one of the city's key stipulations going into the talks. City leaders had said they wanted to revise or shorten the term of the catering contract, which for seven more years gives the hotel exclusive rights to cater events held by for-profit businesses at Centre Plaza.
Westmont said in correspondence last week it wasn't going to change the food service agreement with the city. The catering deal has existed since the convention center and adjoining hotel were built in the 1980s and was renewed for a 10-year term in 2009.
The council majority conceded the point Monday, stressing that the purpose of an outsourcing contract was to end an annual $600,000 to $700,000 general fund subsidy of Centre Plaza.
"When you look at our budget situation, it's important that we not continue with the subsidy," Cogdill said. "We can put that money into law enforcement or maintaining parks."
Muratore, a major advocate for outsourcing city services, said a management contract with the hotel group will keep Centre Plaza open for the community and free $700,000 to spend on other services.
But Lopez was concerned that the DoubleTree may seek to expand its monopoly over food service at Centre Plaza. At present, nonprofit groups can have local restaurants cater their gala fund-raisers at the center.
When he asked DoubleTree representatives if that would continue under a management contract, hotel General Manager Kole Siefken said it was negotiable. "I am just reluctant to continue down this path," Lopez replied.
Siefken noted that the hotel has offered discounts and reasonable terms to local nonprofits. "We work with them to get them into the building," he said.
Gunderson said the council has another option for reducing its costs at Centre Plaza. In May, a report from the council's auditor said cuts to staff could reduce the subsidy to $250,000 to $375,000 a year. "We've offered the keys to them (DoubleTree), and we're not getting anything in return," he said.
With an outsourcing agreement, Modesto would cut eight staff members and 20 part-time workers who cost the city about $875,000 a year in salary and benefits.
Modesto is talking with the DoubleTree because the hotel was the only private firm to submit a proposal for running Centre Plaza; its bid was chosen over a city employee group proposal.
Five other companies that manage convention centers showed interest when the city put out feelers last year. But city staff said the DoubleTree's catering deal was a stumbling block for the companies because food service is a key profit source.
The hotel's proposal for a five-year management contract seeks a fee averaging $130,000 a year from Modesto, plus incentive fees to be negotiated. Over five years, the management fees would total $663,000 and the incentives for meeting marketing goals or reducing maintenance costs could pay the hotel an additional $400,000 to $500,000.
The contract would come up for review after three years. Burnside said the city is just starting the process of working out terms of the deal, which will include marketing expectations, performance measures, incentives and other details.
Former Mayor Carmen Sabatino said city-owned meeting rooms in Centre Plaza always have competed with the hotel's spacious facilities, and he predicted that DoubleTree will run the center to its own advantage.
Victoria Sutton Krippner of the Make-A-Wish Foundation came to DoubleTree's defense, saying her group received excellent treatment from the hotel staff for its fund-raiser and "we are coming back again this year."