Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield
and Dignity Health Amphitheatre
Consolidated Financial Statements
June 30, 2023
C O N T E N T S
Page(s)
Independent Auditors’ Report 1 - 2
Management’s Discussion and Analysis (Required Supplementary Information) 3 - 6
Consolidated Financial Statements
Consolidated statement of net position 7
Consolidated statement of revenues, expenses and change in net position 8 Consolidated statement of cash flows 9 - 10
Notes to consolidated financial statements 11 - 18
Supplementary Information
Consolidated schedule of operating expenses 19
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 20 - 21
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Facilities' internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Mechanics Bank Arena, Theater , Convention Center, Valley Children's Ice Center of Bakersfield and Dignity Health Amphitheatre's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information on pages 3 through 6. Such information is the responsibility of management and, required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational , economic , or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audits were conducted for the purpose of forming an opinion on th.e combined financial statements that collectively comprise the Facility's basic financial statements. The supplementary information on page 19 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audits of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America . In our opinion, the schedule is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 24, 2024, on our consideration of the Facility's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Facility's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Facility's internal control over financial reporting and compliance.
BARBICH HOOPER KING
DILL HOFFMAN, LLP
Bakersfield, California
March 24, 2024
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Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield
and Dignity Health Amphitheatre
Management’s Discussion and Analysis
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JULY 2022 TO JUNE 2023
MECHANICS BANK ARENA, THEATER, CONVENTION CENTER, VALLEY CHILDREN’S
ICE CENTER OF BAKERSFIELD AND DIGNITY HEALTH AMPHITHEATRE MANAGEMENT
DISCUSSION AND ANALYSIS
This section of Mechanics Bank Arena, Theater, Convention Center, Valley Children’s Ice Center of
Bakersfield and Dignity Health Amphitheatre’s (the Facilities) annual financial report presents our discussion and analysis of the Facilities’ financial performance during the fiscal year ended June 30, 2023. Please read it in conjunction with the Facilities’ consolidated financial statements, which follow this section.
FINANCIAL HIGHLIGHTS
In the 2022/2023 fiscal year, the total net position of the fac ilities increased $1.1 million, revenues increased $1.7 million, and total assets increased $5.7 million in comparison to prior year.
OVERVIEW OF THE FINANCIAL STATEMENTS
The annual report includes this management’s discussion and analysis, the independent auditors' report and the basic consolidated financial statements of the Facilities.
REQUIRED FINANCIAL STATEMENTS
The financial statements of the Facilities report information using accounting methods similar to those used by private sector companies. These statements offer short and long term financial information about its activities. The Statement of Net Position includes all of the Facilities’ assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to the Facilities’ creditors (liabilities). It also provides the basis for evaluating the Facilities’ capital structure as well as assessing the liquidity and financial flexibility of the Facilities.
All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Change in Net Position. This statement measures the success of the Facilities’ operations over the past year and can be used to determine whether the Facilities has successfully recovered all its costs through its user fees and other charges, profitability and credit worthiness.
The final required financial statement is the Statement of Cash Flows. This statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing, and financing activities and provides answers to such questions as where did cash come from, what was cash used for, and what was the change in the cash balance during the reporting period.
Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield
and Dignity Health Amphitheatre
Management’s Discussion and Analysis
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FINANCIAL ANALYSIS OF THE FACILITIES
One of the most important questions asked about the Facilities’ finances is, “Are the Facilities as a whole better off or worse off as a result of this year’s activities?” The Statement of Net Position, and the Statement of Revenues, Expenses and Changes in Net Position report information about the Facilities’ activities in a way that will help answer this question. These two statements report the net position of the Facilities and the changes in net position. One can think of the Facilities’ net position - the difference between assets and liabilities - as one way to measure financial health or financial position. Over time, increases or decreases in the Facilities’ net position is one indicator of whether its financial health is improving or deteriorating. However, one will need to consider other non-financial factors such as changes in economic conditions, population growth, and new or changed government legislation.
Below is a summary of the Consolidated Statements of Net Position, Table A-1:
Dollar Percentage
2023 2022 Change Change
Current assets 10,958,301 $ 5,636,548 $ 5,321,753 $ 94% Total assets 10,958,301 $ 5,636,548 $ 5,321,753 $ 94% Current liabilities 9,282,535 $ 5,087,820 $ 4,194,715 $ 82% Other liabilities 250,000 250,000 - 0% Total liabilities 9,532,535 5,337,820 4,194,715 79% Unrestricted 1,425,766 298,728 1,127,038 377% Total net position 1,425,766 298,728 1,127,038 377% 10,958,301$ 5,636,548 $ 5,321,753 $ 94%
Table A-1
Condensed Consolidated Statements of Net Position
Assets increased approx. $5.3M dollars. The increase in current assets can be attributed increased cash received for ticket sales and receivables collected. The $4.1 million increase in liabilities can be attributed to an extremely busy event calendar, highly popular artist lineups resulting in increased advanced ticket sales, suite sales and deferred suite license and sponsorship revenues.
Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield
and Dignity Health Amphitheatre
Management’s Discussion and Analysis
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Dollar Percentage
2023 2022 Change Change
Operating revenues 11,231,318 $ 9,488,442 $ 1,742,876 $ 18% Less direct event expenses 5,079,981 5,014,781 65,200 1% Gross profit 6,151,337 4,473,661 1,677,676 38% Operating expenses 5,059,536 4,176,250 883,286 21% Operating increase 1,091,801 297,411 794,390 267% Nonoperating income 35,237 1,317 33,920 2576% Change in net position 1,127,038 298,728 828,310 277% Net position, beginning of year 298,728 - 298,728 0% Net position, end of year 1,425,766$ 298,728 $ 1,127,038 $ 377% Table A-2
Condensed Consolidated Statements of Revenues, Expenses and Changes in Net Position The current fiscal year operations resulted in the facilities recognizing $1.1M in operating income for the current year. There was a minimal increase for direct event expenses as we continue to monitor event staffing cost ($65k). Operating expenses increased by $883k in the current year due to overall increases in utility cost, salaries and wages, and general liability insurance. Revenues increased $1.7M for suite and parking revenues, but most notable are facility rents, reimbursables, concessions commissions and facility fees.
Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield
and Dignity Health Amphitheatre
Management’s Discussion and Analysis
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Over (Under) Percentage
Actual Budget Budget of Budget
Operating revenues 11,231,318 $ 9,178,749 $ 2,052,569 $ 22% Less direct event expenses 5,079,981 4,483,518 596,463 13% Gross profit 6,151,337 4,695,231 1,456,106 31% Operating expenses 5,059,536 5,024,497 35,039 1% Operating income 1,091,801 (329,266) 1,421,067 -432% Nonoperating income 35,237 40,000 (4,763) -12% Change in net position 1,127,038$ (289,266) $ 1,416,304 $ -490% Year Ended June 30, 2023
Table A-3
Change in Net Position, Actual to Budget
Gross operating revenues for the year were more than budgeted. Increases are attributed to the building being 100% functional for the year. Revenues increase can be found in suites and sponsorships, rent, parking, facility fees, and concessions. Rate increase for rent, parking and facility fees are contributing factors of revenue improvements. A strong concert line up and improved attendance help boost commissions on concessions for the year, making history for the Arena.
CONTACTING MECHANICS BANK ARENA
This financial report is designed to provide a general overview of the finances and accountability of Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield and
Dignity Health Amphitheatre. If you have questions about this report contact Mechanics Bank Arena, Theater, Convention Center, Valley Children’s Ice Center of Bakersfield and Dignity Health Amphitheatre, 1001 Truxtun Avenue, Bakersfield, California 93301, Attention Finance Manager.
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ASSETS
Current Assets
Cash 10,368,311$
Accounts receivable 543,697
Prepaid expenses 46,293
10,958,301
Capital Assets , at cost 18,896
Less accumulated depreciation 18,896
-
10,958,301$
LIABILITIES AND NET POSITION
Current Liabilities
Accounts payable, trade 177,916 $
Accounts payable, AEG Management, net 369,937
Accrued expenses 481,754
Deferred revenues 7,243,470
Advance from the City of Bakersfield 1,009,458
9,282,535
Other Liabilities 250,000
Net Position
Unrestricted 1,425,766
10,958,301$
See Notes to Consolidated Financial Statements.
Mechanics Bank Arena, Theater, Convention Center,
June 30, 2023
Consolidated Statement of Net Position
and Dignity Health Amphitheatre
Valley Children's Ice Center of Bakersfield
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Mechanics Bank Arena, Theater, Convention Center,
Valley Children's Ice Center of Bakersfield
and Dignity Health Amphitheatre
Consolidated Statement of Revenues, Expenses and Change in Net Position For the Year Ended June 30, 2023
Net revenues:
Facilities rent 2,209,693 $
Recovered event expenses 2,085,637
Suites 1,294,044
Concession commissions 1,747,023
Signage and advertising 861,110
Ticketing fees 1,046,646
Facility fees 723,751
Parking 446,805
Ice Sports Center, other revenue 154,790
Ice Sports Center, general admissions 545,466
Merchandise 89,842
Other income 26,511
11,231,318
Direct event expenses:
Event labor 2,714,517
Other direct event expenses 2,365,464
5,079,981
Gross profit 6,151,337
Operating expenses 5,059,536
Operating income 1,091,801
Nonoperating income (expense):
Interest income 119,982
Other income, net 234,406
Management incentive fee (319,151)
35,237
Change in net position 1,127,038
Net position, beginning of year 298,728
Net position, end of year 1,425,766$
See Notes to Consolidated Financial Statements.
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Mechanics Bank Arena, Theater, Convention Center,
Valley Children's Ice Center of Bakersfield
and Dignity Health Amphitheatre
Consolidated Statement of Cash Flows
For the Year Ended June 30, 2023
Cash flows from operating activities:
Cash received from customers 8,405,923 $
Cash received from contracts for services 6,210,947
Cash payments to suppliers for goods and services (4,205,412) Cash payments to employees for services (5,003,156)
Net cash provided by operating activities 5,408,302
Cash flows from investing activities:
Interest income 119,980
Net increase in cash and cash equivalents 5,528,282
Cash and cash equivalents, beginning of year 4,840,029
Cash and cash equivalents, end of year 10,368,311$
See Notes to Consolidated Financial Statements.
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Reconciliation of operating income to net cash provided by operating activities:
Operating income 1,091,801 $
Adjustments to reconcile operating income to net
cash provided by operating activities:
Other income 234,406
Management incentive fee (319,151)
Changes in operating assets and liabilities:
Accounts receivable 216,241
Net receivable from the City of Bakersfield (501,745)
Prepaid expenses (9,711)
Accounts payable, trade 787,735
Accounts payable, AEG Management, net 179,998
Accrued expenses 56,380
Deferred revenues 3,672,348
Net cash provided by operating activities 5 ,408,302$
Mechanics Bank Arena, Theater, Convention Center,
Valley Children’s Ice Center of Bakersfield
and Dignity Health Amphitheatre
Notes to Consolidated Financial Statements
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Note 1. Nature of Business an d Significant Accounting Policies Nature of business:
The City of Bakersfield (the City) owns the Mechanics Bank Arena, Theater, Convention Center, Valley Children’s Ice Center of Bakersfield and Dignity Health Amphitheatre (the Facilities). The Mechanics Bank Arena was built by the City and began operations in October 1998. It is the only building of its kind in the Bakersfield area.
In December 2003, the City opened the Valley Children’s Ice Center of Bakersfield (Ice Center). The Ice Center is used for public skating, hockey leagues, figure skating, and other community events.
In February 2007, the City opened the Dignity Health Amphitheatre (the Amphitheatre), an outdoor theatre located in Bakersfield.
The activities of the Arena, Theater, Convention Center, Ice Center and Amphitheatre (the Facilities) are recorded in a special revenue fund of the City’s accounting records. The City owns all the assets of the Facilities, and accordingly, all amounts related to the operation of the Facilities belong to the City. The management company operating the Facilities has a fiduciary responsibility under the management agreement to maintain and operate the Facilities in the best interests of the City and the community.
In an agreement dated March 20, 2013, the City contracted with AEG Management Bakersfield, LLC and AEG Facilities, LLC to begin overseeing the operation and management of the Facilities for a term of ten years, expiring on June 30, 2023. On mutual agreement between both parties, the agreement was extended through June 30, 2028.
In October 2019, AEG Facilities, LLC and SMG merged and are now ASM Global (ASM), a division of AEG Corporate.
ASM was hired by the City for its expertise in the management, operation and marketing of public assembly facilities.
Principles of consolidation:
The consolidated financial statements of the Facilities include the accounts of the Mechanics Bank Arena, Theater, Convention Center, Valley Children’s Ice Center of Bakersfield and Dignity Health Amphitheatre after elimination of all significant inter- company accounts and transactions.
Basis of accounting:
The Facilities’ basic consolidated financial statements are presented on the full accrual basis of accounting and conform to accounting principles generally accepted in the United States of America. The Facilities utilize accrual basis accounting in which revenues are Notes to Consolidated Financial Statements
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recognized when earned and expenses are recorded when a liability is incurred or economic assets are used. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Revenues and expenses not meeting this definition are reported as nonoperating.
Revenue recognition:
Suite contracts
Revenues from suites are recognized over the contract period per the contract terms.
Contracts are billed throughout the year. The suite payments are recorded as deferred revenue until earned and are recognized over the contract period.
Naming rights, signage and advertising contracts
Revenues from naming rights, signage and advertising contracts are recognized over the contract period per the contract terms. Contracts are billed according to the contract terms. Payments are recorded as deferred revenue until earned and recognized over the contract period.
Ticket sales
The Facilities, through its contract with Outbox AXS, LLC, sells tickets to events as an agent of the event holder at the on-site box office location and through the telephone and internet. All proceeds from the sale of tickets belong to the event holder. The ticket sales are recorded as deferred revenue when sold. After the event has occurred, settlement with the event holder takes place. The net of total ticket sales less event expenses such as facility rent and reimbursement of direct event expenses is then paid to or received from the event holder. The event ticket proceeds are removed from the deferred revenue account in the month the event occurred.
The Facilities earn a ticketing fee on the sale of event tickets that take place through the telephone and internet. Revenues from these fees are recorded as deferred revenue at the time of sale and are recognized in the month the event occurred.
Event revenues
Revenues from the Facilities’ events such as facilities rent, direct event expense reimbursements, concession commissions, parking and merchandise are recognized in the month the event occurred.
Net position:
The Facilities utilize a net position presentation in accordance with GASB Statement 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments, as amended by GASB 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position.
Notes to Consolidated Financial Statements
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Net position is categorized as invested in capital assets, net of related debt, restricted components of net position and unrestricted components of net position. These categories are defined as follows:
Invested in capital assets, net of related debt - This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. If there are significant unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net position component as the unspent proceeds.
Restricted components of net position - This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Generally, a liability relates to restricted assets if the asset results from a resource flow that also results in the recognition of a liability or if the liability will be liquidated with the restricted assets reported.
Unrestricted components of net position - This component of net position is the net amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.
Use of estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
For purposes of reporting cash flows, the Facilities considers highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents also include cash on hand and amounts deposited with banks.
Notes to Consolidated Financial Statements
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Custodial credit risk:
The California Government Code and the Facilities’ investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits and investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit).
The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the Facilities’ deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.
Cash funds deposited with various banks and savings and loans are covered by Federal depository insurance up to $250,000. As of June 30, 2023, the Facilities has cash deposited with banks in excess of the related insurance coverage.
Concentration of credit risk:
Credit is extended, in the form of accounts receivable, to customers located primarily in the County of Kern, California.
Accounts receivable:
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to valuation allowance based on its assessments of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, they have concluded that an allowance for doubtful accounts is not necessary as of June 30, 2023.
Capital assets:
The Facilities’ capital assets are recorded at cost. Depreciation is computed using the straight line method over estimated useful lives of 3 - 10 years.
Maintenance and repairs of capital assets are charged to operations and major improvements are capitalized. Upon retirement, sale or other disposition of capital assets, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in the consolidated statement of revenues and expenses.
Notes to Consolidated Financial Statements
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Recently adopted accounting changes:
The District adopted GASB 87, “Leases”, as of July 1, 2022, whi ch requires lessees to recognize on the balance sheet right-of-use assets and lease li abilities for leases previously classified as operating leases under the previous authoritative standards and provides enhanced disclosures surrounding the leasing arrangements. The adoption of the new lease standard resulted in no changes as of July 1, 2022.
Note 2. Cash and Cash Equivalents
Cash and cash equivalents as of June 30, 2023 consisted of the following:
Petty cash 600 $
Cash on hand 36,308
Checking accounts 536,495
Savings account 9,794,908
10,368,311$
Note 3. Advance from City of Bakersfield
During the normal course of business, the City pays expenses that are allocated to the operation of the Facilities. These expenses include payroll and related expenses for the City employees and equipment rent. The amount of the advance fluctuates throughout the year depending on allocated monthly expenses and additional cash flow needs. The advance is an intercompany account that is eliminated in the consolidation for the preparation of the City's financial statements. The amount allocated by the City to the Facilities for the year ended June 30, 2023 was $1,009,458.
Note 4. Deferred Revenue
Deferred revenue at June 30, 2023 consists of the following:
Suite contracts 794,008 $
Naming rights 267,434
Sponsorship agreements 286,963
Ticket sale and rebates 5,696,933
Event deposits 198,132
7,243,470$
Notes to Consolidated Financial Statements
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Note 5. Administrative Services Agreements
ASM provides administrative services to the City for the Facilities. Compensation for these services is a base fee of $400,000 for the first year, paid in equal monthly installments. The base fee will be adjusted annually (up or down) by the Consumer Price Index, but in no event will any increase or decrease exceed three percent. For the year ended June 30, 2023, ASM received $489,452 in total management fees from the City for the three respective facilities.
In addition to the base fee, ASM receives an incentive equal to a percentage of the difference between the actual net operating profit or net operating loss for each facility and a benchmark. ASM receives an incentive of: 1) 25% of the difference between the actual net operating profit and a $332,575 loss realized by the Arena, Theater and Convention Center; 2) 50% of the difference between the actual net operating profit (loss) and a $20,785 loss realized by the Ice Center and 3) 50% of the difference between the actual net operating profit (loss) and a $62,358 loss realized by the Amphitheater. By agreement the incentive fee was $319,151 for the year ended June 30, 2023.
The management agreement also includes a net loss guarantee where if the net operating loss in any given fiscal year for all of the Facilities taken in the aggregate exceeds a base amount of $415,718, ASM will reimburse the Facilities in the amount the net operating loss exceeds $415,718. The Facilities generated a net operating profit in the current year, as such no reimbursement was necessary in the current year.
Per the management agreement, ASM made a one-time contribution of $250,000, from its own monies, to an event development account and was to be utilized for future events. In the event of early termination, ASM is authorized to withdraw any amounts remaining in the event development account as of the date of the early termination. The Facilities used the contribution during the year ended June 30, 2021. During the year ended June 30, 2022, ASM agreed to restore this reserve by taking a charge against current operations. This amount may be used upon mutual consent of the City and ASM.
Note 6. Commitments
The Facilities have entered into various long-term contracts and leases. At June 30, 2023, outstanding commitments consist of the following:
Naming rights:
The City and ASM have entered into licensing and naming rights agreements with Mechanics Bank, Valley Children’s Healthcare (VCH), and Dignity Health for the exclusive naming rights of the Facilities. The agreements call for the City and ASM to use reasonable efforts to identify the Arena as the “Mechanics Bank Arena, Theater, Convention Center”, the Ice Center as the “Valley Children’s Ice Center of Bakersfield” and the Amphitheatre as the “Dignity Health Amphitheatre” in all official documents, press releases, advertising, announcements, answering of telephones, as well as all promotion and print material produced or disseminated by or for the account of the Facilities.
Notes to Consolidated Financial Statements
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During the year ended June 30, 2023, total revenue earned from these agreements amounted to $447,000. The naming rights for the Arena terminate in January, 2025, naming rights for the Ice Center terminate in May, 2028, and naming rights for the Amphitheatre terminate in December, 2027,
Ticket sales:
The City and ASM have entered into a licensed user agreement with Outbox AXS, LLC (AXS), a related party to ASM through common ownership, to be the exclusive provider for ticket sales for any event presented at the Facilities. Under the agreement, AXS has the authority to act as an agent for the Facilities for ticket sales to the general public by any and all means including telephone and internet. AXS earns fees from the ticket sales such as inside ticket charges, customer convenience charges, credit card charges, handling charges and ticket sale royalties. AXS collects these fees as tickets are sold and the net amount is remitted to the Facilities weekly. This agreement began in July 2015 and is effective through the date which the ASM management agreement expires.
ARAMARK
The Facilities is currently operating under a contract with ARAMARK to operate concession and catering services for the Arena, Theater and Convention Center (the Facilities), effective through June 30, 2023. On mutual agreement between both parties, the term was extended one five-year period to June 30, 2028.
The Facilities is entitled to receive 35% of the first $500,000 in gross concession receipts and 40% of receipts in excess of $500,000 but less than $2,000,000 and 45% of any amount exceeding $2,000,000 annually. For the year ended June 30, 2023, the Facilities received $1,747,023 in gross concession and catering receipts from ARAMARK.
Hockey lease:
The City and ASM have entered into a lease agreement, which has been assigned to KG Oilers Corporation, for exclusive use of the Facilities for East Coast Hockey League (ECHL) games. KG Oilers Corporation has agreed to pay $3,500 for each preseason home game played, $6,525 for each regular season home game played and $1,525 for each post season home game played. The fees will be subject to change at two-year intervals beginning on February 1, 2016. The change in payment will be based on the changes in the Consumer Price Index. During the year ended June 30, 2023, fees under this agreement were $4,271 for each preseason home game, $7,962 for each regular season home game and $1,860 for each post season home game played. The Hockey lease was renewed through 2027.
The KG Oiler Corp. (Tenant) receives $5,370 per luxury suite leased by the Arena or $145,000 if all twenty-seven suites are leased. In addition to the suite payment, on suite leases sold or renewed after the effective date, an advertising and promotional inventory package will be included that will be provided by the Tenant as part of each new sale or renewal of a suite lease.
Notes to Consolidated Financial Statements
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The suite lease pricing will be adjusted to incorporate the fair market value of the advertising and promotional inventory, which will be estimated to be 10% of the new suite lease price. Tenant will receive the entire amount of the portion of the advertising and promotional inventory package for each new sale or renewal of the suite lease after the effective date. In no case will Tenant receive a sum less than $6,500 when combining the suite lease payment and suite advertising package payment for each suite lease sold or renewed after the effective date.
The $6,500 threshold will be subject to change at two-year intervals beginning February 1, 2016. The change in payment is to be based on the changes in the Consumer Price Index.
Fees are to remain unchanged. For the year ended June 30, 2023, KG Oiler Corp. received $157,398 for the suites leased.
Concession and catering services:
The City and ASM has entered into an agreement with Keith Barnes dba KB Concessions to provide concession and catering services for the Ice Center. The Facilities will receive 15% of gross concession receipts received from non-vending machine sales and 10% of gross concession receipts received from vending machine sales throughout the term of the new contract. This agreement is effective through September 6, 2021, with renewal currently in progress with the City. For the year ended June 30, 2023, the Facilities received $8,333 in concession commissions from KB Concessions.
Note 7. Insurance
The Facility has insurance coverage for general liability, auto, crime and workers’ compensation. The general liability insurance has no retention level per occurrence with the maximum amount of coverage being $3,000,000. Workers compensation insurance has no retention level per occurrence with the combined maximum amount of coverage being $1,000,000. The auto liability insurance has no retention level per accident with the maximum amount of coverage being $1,000,000. The crime insurance has a $1,000,000 retention level with the maximum amount of coverage being $5,000,000. The Facility also has an umbrella policy, which has no retention level and with a maximum amount of coverage of $25,000,000. All buildings are covered under the City’s insurance as the City owns all structures within the Facilities.
Note 8. Subsequent Events
The Facilities has evaluated events and transactions subsequent to June 30, 2023, through the date of the independent auditor’s report, noting no significant events that require disclosure in the consolidated financial statements.
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Mechanics Bank Arena, Theater, Convention Center,
Valley Children's Ice Center of Bakersfield
and Dignity Health Amphitheatre
Consolidated Schedule of Operating Expenses
For the Year Ended June 30, 2023
Utilities 1,311,397 $
Salaries and wages 1,274,893
Management fees 489,452
Employee benefits 446,018
Program expenses 346,482
Insurance 225,508
Equipment rental 199,388
Supplies 175,565
Payroll taxes 153,985
Computer expenses 153,851
Professional fees 53,473
Bank fees 45,699
Miscellaneous 44,008
Office supplies 22,198
Meals and entertainment 20,474
Dues and subscriptions 19,019
Telephone 18,054
Security 16,428
Training 13,849
Repairs and maintenance 10,457
Marketing 6,991
Travel 5,834
Postage 4,829
Uniforms 1,684
5,059,536$