Assembly presses operator for audited financials after internal audit flags missing ticket surcharges and potential $930,000 shortfall

Assembly Chair Christopher Constant convened a March 20 work session to continue review of internal audit 2026-0112 and to press the private operator of the Sullivan Arena and the Boki Dempsey facility to produce overdue audited financial statements.

City staff told the Assembly the auditor finished fieldwork in late December and that the city received the Sullivan 2023 audited financials only after the audit was completed; subsequent Sullivan years and audited financials for Boki Dempsey had not been delivered. Staff said they issued the operator a notice of default and received a response; the city then replied to that response. The operator proposed an alternative approach to producing audits in an email that staff had not yet digested.

Bill Faussett, representing city staff, told the Assembly the contract requires capital reserve deposits equal to 5% of audited gross revenues, and without the missing audited revenues the city cannot calculate those deposits. Using figures in the internal audit, Faussett said the contract “at this point” suggests the city should have received in excess of $930,000 that it has not received to date. The city has requested the operator provide the remaining contractual financials by April 30.

Staff also said the city has posted two requests for proposals (one for Sullivan, one for Boki Dempsey) and allowed bidders to bid on one or both facilities; the RFPs close March 23–24 and the selection committee will review proposals afterward. Staff cautioned that proposals will likely seek more subsidy than prior contracts and that any transition must consider existing bookings such as the Wolverines hockey schedule.

Assembly Member Anna Broulli raised questions about inconsistent ticket-surcharge reporting and whether the municipal admission surcharge in Anchorage Municipal Code Title 10 (amended 2021) applies to free events or to ancillary uses such as parking-lot rentals. Staff said past ticketing records showed some events listed the surcharge and some did not, and they will seek clarification on how surcharges should be applied going forward.

Assembly Member Aaron Baldwin Day asked whether the city can compel the operator to stop scheduling new events while in default; staff said pausing scheduling could be a formal tool and that termination is another contractual off-ramp but carries operational risk because events are already booked. Baldwin Day and others emphasized Anchorage Municipal Code 7.20.030’s responsible-bidder language, saying a bidder that has materially failed to perform municipal contracts may be deemed non-responsible and thus ineligible for award until the deficiencies are addressed.

Staff reported the city’s utility payments for December through mid-March totaled about $270,000, which staff estimated equates to roughly $2,600 per day for that interval. The operator did not appear at the work session to answer questions; the record reflects the contractor was not present.

Vice Chair Bragley and staff discussed internal controls and procurement practice improvements, including a commitment not to execute contracts that require performance bonds until the bond is in hand and a review of in-contract provisions that could be tightened. No code changes were proposed at the work session; staff said they would consider process improvements and, if warranted, bring proposals to the Assembly.

No formal vote or termination decision was taken during the work session. Staff said next steps include receiving proposals, reporting whether proposals were received (possibly as early as the middle of next week), and, depending on what is submitted, bringing a recommended procurement or contract action to the Assembly. The chair adjourned the session to the confirmation hearing scheduled for 3:20 p.m.

Claims and accusations were made on the record: Assembly Member Baldwin Day urged the operator to “get your act together,” said the operator was currently “not responsible and not responsive” to the municipality, and urged that the operator should not be allowed to contract with the city unless they provide required audits and records. The operator did not appear to respond during the session; city staff noted the operator had previously said there may be offsets for investments but that such offsets were not clearly authorized by the contract and might not be consistent with Title 7.

Background: the internal audit prompted the follow-up session after a prior work session. City staff said RFPs remain open and the city is attempting to balance continuity of scheduled events with fiscal stewardship while it pursues either bringing the current operator into compliance or moving to a new contract.