At a 30 January special meeting, the Hollister City Council
voted unanimously to put the city into the T-shirt, cap and pin
business for the 2008 Hollister Motorcycle Rally. Does that make
sense eventually? Probably. Does that make sense now? Definitely
not. I hope there is time to revoke this rash decision.
At a 30 January special meeting, the Hollister City Council voted unanimously to put the city into the T-shirt, cap and pin business for the 2008 Hollister Motorcycle Rally. Does that make sense eventually? Probably. Does that make sense now? Definitely not. I hope there is time to revoke this rash decision.
The city owns the rights to the “official” rally merchandise and they would be selling their own product. That part makes good sense, but only if they really understand the market and can handle it. I think they are gambling on both those critical factors.
I supported the privatization of the rally that took effect in 2007. It netted the general gund almost $70,000 in license fees alone. One major purpose of getting a professional promoter/sponsor was to reduce the city’s risk. Getting into the T-shirt business now has the opposite effect. The driving force is the prospect of profit, but the balancing force is the risk of loss. I’m not risk adverse, but I like to understand the risks I’m taking and the city should have the same attitude. They should never make bets with the rent money.
The current version of the rally is only a year old. In order to make it a paying proposition there were significant changes in 2007. Among these were a new layout and different event scheduling in relation to the Fourth of July. Therefore, we have very little recent history to make a risk assessment. Will the changes of 2007 be popular with the targeted audience? It’s much too early to tell – a sample of only one event is unreliable.
City Manager Clint Quilter presented a good general outline of intent, but it would hardly pass muster as even a basic business plan and it is already February and time is running out! There were far too many critical estimates, unresolved issues, and one big red flag. A key element of success in 2007 was an $180,000 advance from the T-shirt vendor for the right to sell official merchandise. That payment offset a large portion of the city’s costs, but now the city says that the 2008 rally rights would be worth much less on the open market. Why?
Without outside funding, the city would have to put up $182,000 this year plus another $358,000 for T-shirts, caps, pins and cost of sales, which places $540,000 of the public’s money at risk. What happened to the private safety net?
The city predicts that a sellout minus all costs would leave $474,000 profit for Hollister plus $22,000 in city taxes. The city says that they easily break even at only 60 percent sales, which would be $69,000 without taxes.
If a private vendor paid the fees and netted that $69,000, they would get a nice 12.8 percent return in less than six months with an opportunity to make $497,000, a return of more than 85 percent. That is the red flag. The vendors should be rushing to buy into this wonderful opportunity, but they are not. If it sounds too good to be true … You know the rest.
Hollister is not in a position to take this much financial risk now, and the staff does not have the information, resources or time to do it right. The city should concentrate its limited resources on making the rally a great experience that generates repeat business; only then should we consider getting into the T-shirt business. We could get lucky and this might work out, but it’s not a gamble worth taking when we are almost broke.
The best way to increase profits at this time is to make the rally a great event and cut expenses, especially the huge public safety bill. Every dollar saved that way goes directly to the bottom line. When members of the city council were campaigning for the 1 percent sales tax increase of Measure T, no one ever mentioned that “T” would end up standing for T-shirt.
