Thursday, March 31, 2011

Building a Revenue-Generator

A Downtown Events Center Will Create Good Jobs, Help Fund Sioux Falls Schools & Benefit the Entire Community by Keeping Property Taxes Down

Expanding Property Tax Revenue
Property taxes, which are the basic funding component for the schools, drawing 67% of the property tax revenue, must be a major consideration for Mayor Huether and the City Council.

The land associated with the Arena site does NOT provide the opportunity for extensive private development. A review of all land adjacent to the Arena site indicates there is very little private land available for development at the Arena. The result is a loss of additional property tax revenue that could be generated by private development associated with this $100 million public investment.

From the Sioux Falls Business Journal:
One Developer’s Perspective of the Arena Site: An Area 'Still Kind Of Limping Along' -- Doug Brockhouse grew up in the neighborhood, which has been known through the years as West Sioux. He also owns a business, Arena Storage, on West Second Street. Some of the streets are at unusual angles - such as the diagonal Burnside Street - because they were built around a huge military base. Remains of some of the barracks still are visible in the neighborhood.

Today, the area "is still kind of limping along and nothing has really ever taken flight out there," said Brockhouse, a principal with Bender Commercial Real Estate. Brockhouse doesn't envision much more development if an events center is built there. "I really don't see much growth out there because of it," he said. "I really don't." (Sioux Falls Business Journal, Dec. ’10)

Conversely, building the new events center along the river greenway at Cherapa Place will spur development in a way out city hasn’t seen since the opening of the Empire Mall. Much land has opened up for private development in the downtown area – especially along the river and in the uptown area of Falls Park. Additionally, with the re-location of the railroad out of downtown, 16 acres of prime real estate will open up for parking and development opportunities. Developers and entrepreneurs are looking for the city to spark their plans with a new events center, which will bring upwards of 500,000 additional visitors to the downtown area. Possibilities for public and private partnerships will be extensive.

Collecting More Sales Tax RevenueThe sales tax impact is equally important, and an important consideration in locating the events center is the amount of increase in city sales tax it will generate. After all, any financing will most likely be secured by sales tax revenue bonds, regardless of the location.

Recently, local television stations interviewed out-of-city residents about their preference for an Event Center. The consensus of the brief report was something to get in and out of easily. We want the center to be convenient for out of town visitors. But we must be careful to not make it too convenient --- we need visitors to see the best of Sioux Falls, have a great event experience so they come back again and again – and we want them to stay and spend money. This does two things: (1) it generates economic activity, which generates jobs, and (2) it generates sales tax revenue, which helps pay principal and interest on the bonds borrowed to build the events center.

Locating the EC on a site that allows visitors to easily flee Sioux Falls will continue to be very costly to Sioux Falls taxpayers. If the location causes SF to miss other opportunities for development, it will sacrifice economic activity, additional property tax revenue and jobs.
Source: Build It Downtown Facebook Page


  1. Just a few observations. First off, your revenue generating economic impact engine. I've always had a problem with this concept. Where do these people come up with their numbers? I consider my spouse and myself typical Sioux Falls residents. If we budget $300 a month for local entertainment, what difference does it make whether we spend that money 4 times a month out in the urban sprawl, or once a month DT? It still has the same economic impact in this city regardless of where we spend it. I suspect most events are attended by SF MSA residents. So just where is this added economic impact money really coming from and going to?

    Second. "Possibilities for public and private partnerships will be extensive." If figuring out how public and private enterprises will collaborate on figuring out how much to charge for parking at an "event", then yes, partnerships will be extensive.

    I have a real issue with this being continually referred to as a $100,000,000 public investment. There will be much more to this than just building an arena for 100 million. That alone raises a red flag. The consulting architect involved in this thing has not built an EC for years under about $11,000 a seat. Throw in things like street upgrades, parking upgrades, and utility upgrades will put this white elephant at about $200,000,000. To give you a clue, here are the numbers from Lincoln Nebraska, a situation very similar to ours.

    ARENA CAPACITY ~16,500
    ARENA SIZE ~450,000 sq ft
    TOTAL PROJECT COST (EST) $339,749,343
    Arena $180,797,782
    Roadways $28,910,857
    Utilities $5,236,704
    Env. Remediation $7,504,500
    Prep/Stormwater Mitigation $10,827,792
    Railroads $49,325,000
    Amtrak $1,705,500
    Parking Facilities $35,792,765

    Polly Amalo

  2. "4 times a month out in the urban sprawl, or once a month DT?"

    Urban sprawl = likely to be a chain.
    Downtown = likely to be a local.

  3. "If figuring out how public and private enterprises will collaborate on figuring out how much to charge for parking at an "event", then yes, partnerships will be extensive."

    Either site has parking issues that will run into the millions to address, but only downtown has any shot for "multi usage" day/night/weekend. Whether it's public or private you want the best potential payback if you have to spend the millions anyway.