Wednesday, September 7, 2011

Revenue to Pay for the Event Center

Don't worry, good folks of Sioux Falls, KELO TV reports the mayor says the concerns over how to pay for the Event Center are unnecessary. The mayor says future sales tax projections show borrowing the building's entire $115 million price tag can be done while managing expansion of city services as the city expands. (Don't forget the additional $10 million borrowed to pay for the bond issuance costs.) The operation costs will come from private enterprise money.

I think the city of Sioux Falls should build an Event Center, but is the financing of this project  sound based on projections that the Event Center will increase revenues city wide and sales tax growth will continue to grow to 5% over time? Sure there will be no increased taxes. But that is not the point. For the next 22 years, the debt to build this building will obligate the 2nd penny sales tax. The second penny sales tax funds roads, infrastructure needs both present and future. It pays for ongoing maintenance of facilities. This second penny workhorse will also need to take care of the ongoing maintenance costs of this new facility over the next 22 years so add that cost on to the debt cost in the capital program.

Just because the interest rates are low doesn't solely justify incurring such a debt obligating that important second penny sales tax fund for the next 22 years. The world economy is in poor shape. Consumer confidence is at its lowest. The odds of a double dip recession continue to rise. I talked to real estate broker today and she said that the housing market is so sluggish. It doesn't matter that mortgage interest rates are at their lowest. People have lost value in their homes and can't afford to sell. Others are afraid to take on more debt.

Regardless of the vote outcome in November, this mayor should use every ounce of his business acumen and marketing prowess to go out to Pierre and lobby the state legislature to get legislation passed to allow municipalities the right to raise a penny sales tax to fund special projects with the approval of a public vote. I know, it means an additional tax but without it, it means that second penny workhorse collected in Sioux Falls will be diminished even further from its original purpose of funding roads and other infrastructure needs.

Will private enterprise really step up to the plate and fund the entire operating costs of the Event Center in perpetuity? The Washington Pavilion, the Arena and the Convention Center operations have all required additional funding from the city. We all know how often they have operated in the black.  All the promises made regarding the revenue success of the Event Center are pure speculation. The mayor says the building will make money. Why is this building different from those other venues? What crystal ball is he looking at? The KELO report says the mayor still expects private industry to generate up to $2 million each year and said that would help pay to operate the building. Never in the history of Sioux Falls has private enterprise stepped forward to pay for the full or partial operating cost of a city owned building and I seriously doubt that will happen with the event center in perpetuity.

  • Just who is the private enterprise(s) that will be paying for the operating expenses of the Event Center in perpetuity? 
  • Tell us who they are now and how much they are committing for how long before the vote on November 8th. 
  • Tell us what won't be funded in future capital program years if the projected sales tax does not meet the growth estimates 
  • Tell us what city funds will be used to cover the losses if the forecasted revenue and private enterprise don't meet the operating costs of the event center.

The mayor says he wants to have an open and honest discussion and let the people decide. Answer those questions and that just might have an impact on how people vote on this issue.


  1. And don't forget the additional $80m needed to pay off the debt (as documented in the CIP projections from the city Finance department). That puts the real cost at over $200m!

  2. Good intentions Mayor, but very vad timing. As a voter I just cannot vote to commit this City of mine and the 2nd penny saes tax to a debt spanning 22 years at the expense of existing building and infrastructure needs. Irresponsible I think.

  3. Here is an email I received from the Mayor this past week, says not raising tax. Well maybe not him, but what about the next Mayor? And no, I do not believe him.

    Mrs. Banks,

    Thanks for your note. Because this was a personnel matter, it did need to be treated differently. How it is portrayed certainly impacts how folks evaluate the merits of it. The Council truly did all they could to treat it with dignity and professionalism.

    As for “having only one agenda” in your mind, I apologize but I don’t see how you can say that. I have tackled so many things in such a short time and much progress is being made on all fronts. The big story of course in the medias mind is the Event Center so you may get that perception.

    The finances of our city our very strong. We can afford to take care of the city and its needs and we can also invest in infrastructure like a new EC as well without overburdening our city and the taxpayers. We are not adding new taxes or increasing existing taxes to pay for it. We will live within our means.

    Thanks again for being engaged in your city. I wish you and your family well.