This week the Wichita City Council will update an agreement from last year, but it appears important issues were not addressed.
Last February the City of Wichita approved an agreement with a local business to manage events at Naftzger Park. With the pandemic upending public events, the business — Wave Old Town, LLC — was unable to program any events. Therefore, the city wants to add additional time to the agreement.
During the delay, the city could have addressed problems with the original agreement. Some problems concern the bidding process. My concern was the uncertainty in the profit-sharing agreement, which could result in widely varying results depending on how the profit is calculated. None of these issues are mentioned in the agenda packet for Tuesday’s meeting. Further, the item is scheduled on the consent agenda. This means there will be no discussion on this item, and there will not be a vote specifically on this item, unless at least one member of the council decides to “pull” it from the consent agenda.
There is discussion on Facebook in the Naftzger Park group here. Following, my article from February 2020, which applies today as then:
Naftzger Park event management agreement ambiguous
The profit-sharing agreement for Naftzger Park event management contains ambiguity that could lead to disputes.
Today the Wichita City Council approved an agreement with Wave Old Town LLC for event management in Naftzger Park in downtown Wichita. The agreement was approved unanimously.
While there was controversy over the awarding of the contract (Wichita Eagle reporting is here), others have noticed that the contract is imprecise in a way that could lead to problems.
The city and Wave will share profits and losses based on a schedule in the management agreement contained in the agenda packet for today’s meeting, Item V-2. The issue is when the profit-sharing is calculated.
Based on the way the profit-sharing is calculated, different profit-sharing results could be obtained from the same event history. The management services agreement the city council passed today does not speak to this issue. Neither does the request for proposal for event management.
The issue is when the profit-sharing calculation is performed and using which data, as follows:
- Profit-sharing could be calculated independently for each event, using data for just the current event. This is illustrated in example 1.
- Profit-sharing could be calculated once at the end of the year (or another period) using the sum of events during the period. This is shown in example 2.
- Profit-sharing could be calculated independently for each event, using cumulative data for the year (or another period). Example 3 illustrates.
As the following examples show, the differences between these three methods of calculation could be substantial. These three examples assume two events, one with an event profit of $49,999, and the second with an event loss of $49,999. Notice that depending on how and when the same calculation is performed, Wave’s share of profits could be $0, or $25,000, or $49,999. The city could either lose $25,000 or $0.
While these examples are contrived and use extreme values, they illustrate that the agreement the council passed is ambiguous. There could be disputes that could be avoided with careful attention to detail by the city when constructing contracts.