Thursday, October 21, 2010

Robbing Peter to Pay Paul

I think there are two essential flaws in the Mayor’s vision to build the Event Center.  I know I have blogged about this before, but, honestly, his financial plan is bothering me. 

The two flaws as I see it are the use of the general reserve fund and the private naming rights to build the Event Center.  Both of these funding sources should be earmarked for the operation of an Event Center once it is built.  To use these two funding sources as construction money is essentially robbing Peter to pay Paul in order to get the dang thing built. The second penny sales tax in the CIP and bonding should be the funding sources for construction of the EC.

The Mayor likes to use the last Taskforce Study as his basis for his vision, but the reality is the Arena site is the only thing he has used from the Study.  The Taskforce Study recommends that the naming rights should be used for operations. According to projections from the consulting firm Conventions, Sports & Leisure naming rights could generate $250,000 a year which would amount to $5 million in revenue if a company buys naming rights for 20 years plus another $161,000 to $375,000 per year from premium seating. The study says by including that money in the operational costs, the new event center and Arena could make a $185,000 profit annually under one scenario or lose $198,000 under a less optimistic scenario. Removing naming rights and premium seating from the same analysis results in an annual loss of $440,000 to $609,00 as reported by the ARGUS LEADER.  

The Mayor doesn’t have a plan yet to pay for the event center’s operating budget, but he said he intends to have one before the public vote. I think he is a day late and a dollar short. He needs to have a financial plan now so the public can read about it, digest it and come to grips with it.  I hope he has someone working on those private donors right now instead waiting and giving the public some pie in the sky, wishful thinking instead of the real thing.

It is not enough to come up with the money to build it.  The Mayor needs to convince all those skeptics and naysayers out there who vote no on everything that he also has concrete money sources for not only construction but also operations.  This is not something he should be doing later.  He needs to be doing it now. 

I worry that this whole design RFP business is going to be wasted money because of the Mayor’s views that the city is energized about the event center and getting it built. He is backwards on his thinking this process through.  Let’s all sit around the campfire and sing kumbayah and it will happen. Yea, right.

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