SAN JOSE -- The nonprofit group that manages San Jose's Convention Center and downtown theaters has excelled in recent years, so much so that its latest annual performance audit shows it achieved all of its goals except one: For the second year in a row, it fell short of meeting the number of theater performances it booked.
Instead of an agreed-upon 90 percent target, it hit 84 percent in the fiscal year ending in June.
Missing just one of its thresholds means Team San Jose won't get its $350,000 bonus from the city -- and the group is crying foul.
"It's all or nothing," said a frustrated Bill Sherry, the Team San Jose CEO who is hoping to persuade the City Council at Tuesday's meeting to award the bonus anyway because "circumstances entirely out of Team San Jose's control" impacted the score.
The controversy is reminiscent of past contractual disputes between the city and Team San Jose under a former CEO whose tenure witnessed the group's perennial financial struggles, capped by a $750,000 default in 2010 that led to his ouster.
Among other hardships, Sherry cites unexpected cancellations of Ballet San Jose and Symphony Silicon Valley performances that resulted in the loss of days that certain venues could have been booked; delays by the city's former redevelopment agency in renovating the San Jose Civic; actions by the city that restricted booking the Center for Performing Arts; and reduced use of the San Jose Civic because of negotiations of the Nederlander Concerts contract.
"Looking at it from my perspective, I've told my employees: If you work hard and perform, you will be rewarded," Sherry said. "They have gone beyond my wildest dreams in terms of performance during a very challenging and difficult time."
The audit numbers show that in addition to surpassing fiscal targets for gross revenue and gross operating profit, Team San Jose met all four of its performance measures for economic impact: hotel room nights, event attendance, estimated economic impact and return on investment. The group -- a unique coalition of local hotels, arts, business and labor -- also met its target for customer satisfaction, notable during a period when the convention center has been undergoing renovation and expansion, which began in the summer of 2011, although the most of the disruptive work started after the 2011-12 agreement had ended.
But a contract is a contract, some city officials say.
City Auditor Sharon Erickson, whose 25-page report details Team San Jose's achievements -- including drawing nearly 1 million people to events at seven facilities and booking nearly 240,000 future hotel room nights during fiscal year 2011-12 -- said that while Team San Jose exceeded targets for a number of measures, there was an obligation to hit 90 percent of the theater performance target.
Instead of 386 days of performance, it booked 324 days at its venues.
"There is a purpose behind each one of these performance metrics," Erickson told this newspaper, adding that the goal for theater performance days is to ensure that downtown's cultural facilities are booked, attracting visitors who then spend time and money with businesses and restaurants downtown.
The agreement between the city and Team San Jose, she said, "clearly states there was a 90 percent goal, which they did not meet. It's unfortunate that nobody realized this before now."
A similar management agreement for the city-owned Hayes Mansion Conference Center stated that if managers failed to reach 90 percent in two fiscal performance measures, then the management fee would be reduced by 1 percent -- which is what happened in 2011-12.
However, a remedy for Team San Jose's shortcoming surfaced late Friday in two joint memos from Councilman Pete Constant, the council's liaison to Team San Jose, and Councilman Sam Liccardo, whose council district includes downtown.
The first offers a creative solution to the bonus: Reimburse Team San Jose from a special hotel tax fund for any 2011-12 city-related expenses the city manager determines are linked to the convention center expansion, as long as those expenses don't exceed $350,000.
The reimbursement money could morph into the bonus payment, which Sherry said would be used for training purposes as well as rewarding and hiring managers and employees.
The second memo recommends that the city manager accept the auditor's report, but change Team San Jose's upcoming management agreement so that performance measures and incentive fees are awarded for the group's total overall performance, not tied to individual categories.
"Basically, I agree with Sharon's audit that the performance measure did not meet expectations in one area, and as far as that is concerned, the report can go forward," Constant said.
Still, Constant said he wants to give Team San Jose its due.
"There's no doubt that there are doing a great job," he said. "You cannot ignore the fact that we came from a really, really bad situation to an era where everything is positive. These types of sales organizations are built on incentives, and the best way to get results is to provide incentives."
City Attorney Rick Doyle said he won't advise the council to award a bonus because Team San Jose "didn't earn it."
Moreover, he said that before he could comment on the two memos, he will need more information about the kind of expenses Team San Jose believes the city is obligated to reimburse the nonprofit.
Contact Tracy Seipel at 408 275-0140.
MEASURES TARGET RESULT % OF GOAL
Hotel Room Nights 218,000 239,848 110%
Event Attendance 848,114 968,704 114%
Estimated Economic Impact $52 million $85.4 million 164 %
Return on Investment $1.91 $2.63 138 %
Gross Revenue $12.1 million $19.4 million 161 %
Gross Operating Profit ($4.5 million) ($3.5 million) 129 %
Occupied Days in Theater 734 676 92 %
Performance Days in Theater 386 324 84 %
Customer Satisfaction Rate 87 percent 98 percent 113 %
Source: San Jose city auditor