Friday, October 28, 2011

Event Center Operational Budget

The operating budget for an events center, as proposed, essentially hinges on two aspects: tenants (which drive visitors/revenue) and private funding (which will help offset other expenses related to running the buildings). The already obligated Entertainment Tax is proposed to be used as a contingency for operating costs of the new Events Center if revenues aren't sufficient.

We have seen estimates from the consultants hired by the city. They are estimates, not reality. Reality is a proven track record. If someone could tell us one event facility that has operated in the black consistently since built then maybe we could believe in these "revenue estimates" for the event center. You can read about event centers all over the country that aren't making it and which require a subsidy from their governmental body. That is a fact, not an estimate, not a promise, not a forecast based on growth.

So what happens if this new Events Center doesn't make money and/or the private funding is not sufficient?

The recommendation is for one management company to run all three facilities. If the combined three facilities (Event Center, Convention Center, Arena) require city subsidy, the proposal is to use the entertainment tax.

The entertainment tax generates approximately $5 million/year. This tax also funds the current operating subsidies for the Washington Pavilion and Convention Center, in addition to capital improvements for both buildings (new exhibits for the Pavilion, carpet for the Convention Center, etc). Some of the $5 million will free up in 2014 when bonds are paid off. But, the city has also proposed expanding the use of the entertainment tax to include the current Arena, Orpheum Theater, Great Plains Zoo and Delbridge Museum and now the Event Center.

All of these facilities have equipment and other capital needs and all have required operational support from the city. In addition, they all are aging. Any other improvements/expansions of any of these facilities would also come from the entertainment tax. There have been identified needed improvements to the Arena, a recommended expansion of the Convention Center from the 2008 task force and a significant master plan that the City Council has endorsed for the Great Plains Zoo. Will those be put on hold or not done at all if the entertainment tax is needed to subsidize the Event Center operational budget in the future?

The city is obligating the 2nd penny sales tax for 22 years to construct/build the Event Center. The city has outlined what those annual debt payments will be until 2033. That's all anyone is talking about it. This project is more than just constructing it. You need money to operate it.

It's the annual operating expenses that people should worry about because without tenants which drive visitors and revenues, and significant and sustained private funding forever, it is probably a good bet that there will be a need for a city subsidy sometime in the future of the Event Center. To promise the event  center will operate in the black due to event mix guesstimates, forecasted revenues, and promises of private funding is just plain irresponsible. 

The 2nd penny sales tax will fund the construction through a 22 year debt obligation. The Entertainment Tax will need to subsidize the operating and capital improvement expenses of this event center. Those are two facts to remember when voting on November 8th.


  1. Just to note, We live well outside of Sioux Falls, and as a family we frequent the Great Plains Zoo, so much so that we've become members. Anyhow, whenever we come to town, we eat out, go to a few stores, do the tourist things like going to the falls and getting ice cream (and how we do miss the Horsebarn that was closed last year) Your zoo is a great draw for families, yet, it does need quite a bit of updating and future maintenance, and probably more than we can see as just zoo-goers.

    Anyhow, guess my thought is that Sioux Falls needs to invest in what it currently has, seems like you start projects and forget about them, and move onto the next thing.

  2. Anyone hear of a quid pro quot building naming deal being cut with a former mayor for his opposition to the events center. This could be big news.

  3. Yes...heard its the library on the West Side.

  4. @ Anonymous 11:44 am and 12:20 pm, there is no truth to your comments. Former Mayor Dave Munson states there is not nor has there ever been any such agreement. His support or lack of support regarding the event center is not for sale. Any effort regarding the naming rights of the west branch library are being done without his involvement.

  5. What on earth would Mayor Munson's connection be to the west side library? I could see maybe the main library or northeast in his stomping grounds, but the west side??? This does sound fishy. I hope the media tracks this and covers it if it happens.

  6. Munson's support has never been for sale, unlike say Entenman's or Huether's.

    There's a trail there if someone is willing to follow it.