City to mull paying convention center insurance

Commissioners to consider bolstering account to cover deficits

The coronavirus pandemic has affected many businesses including the opening of the Hilton Garden Inn located adjacent to the Harlingen Convention Center. BC Lynd Hospitality has pushed back the opening until October. (Maricela Rodriguez/Valley Morning Star)

HARLINGEN — The city might be dipping into its account set aside to cover the Harlingen Convention Center’s deficits.

In a meeting Wednesday, city commissioners will consider tapping into the convention center’s so-called working capital fund to pull about $60,000 to help pay the facility’s insurance for a two-year period, City Commissioner Frank Puente said Monday.

During the meeting, commissioners are set to meet in closed session with City Attorney Ricardo Navarro’s law firm “to receive legal advice pertaining to the city’s rights, duties, privileges and obligations under the convention center lease and operation agreement and the working capital fund contemplated therein and related legal issues,” the meeting’s agenda states.

As part of an agreement with partner BC Lynd Hospitality, which operates the convention center, the city set aside $500,000 to create the facility’s working capital fund to cover any deficits during its first two years of operation.

Since the convention center opened in May 2019, the city’s working capital fund has paid out about $387,000.

Now, the account is down to about $113,000 as the convention center continues its second year of operation, which closes at the end of May 2021.

Toward the end of this fiscal year, commissioners will decide if they need to pump more money into the account, City Manager Dan Serna said.

“We’re going to have to see how things go,” he said. “We’re going to have to review where we are during the last quarter of the year and discuss that with the city council.”

Cutting expenses

Now, BC Lynd is working to cut the convention center’s operational costs.

“We’ve been working with them too reduce expenses,” Serna said. “They have reduced their expenses.”

After the working capital fund is depleted, the convention center’s revenues will replenish the account, which will continue to cover any deficits, he said.

“That $500,000 has to be paid back,” he said. “That working capital fund has to be paid back with any excess revenue.”

When the working capital fund is replenished, BC Lynd will begin splitting any profits with the city, Serna said.

“BC Lynd must replenish the working capital fund before any profits are split,” he said.

Now, BC Lynd is paying the city to lease the convention center.

After the convention center’s first year of operation, BC Lynd began paying the city $60,000 as part of its annual lease agreement, Serna said.

Revenues cut in half

As a result of the coronavirus pandemic, BC Lynd has cut projected revenues in half compared with budget forecasts prepared during the same period last year.

Since the pandemic’s March outbreak, federal guidelines and state and local orders aimed at controlling the spread of the virus have capped gathering sizes at 10, effectively wiping out convention center bookings.

Last month, Keith Morgan, BC Lynd’s director of operations, presented commissioners with the convention center’s budget for the 2020-2021 fiscal year beginning last Thursday.

During the special meeting Sept. 22, BC Lynd released figures showing total revenues at $488,150 with a deficit of $234,772.

Earlier last month, Steven Villarreal, the convention center’s sales and marketing director, said he doesn’t plan to book an event until as late as next June.