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.