UPDATE: WOW, that was fast! City News video already up.
Another Academy award winning performance by MMM, crying about the profits of the Events Center and chastising the naysayer’s (who actually use math instead of emotions to point out the FACTS). But let’s look at those FACTUAL(?) numbers.
Interesting again the way Tracy Turbak plays with numbers?
6 Month Statistics
$1.1 million net operating income $962,383.40 sales tax payable 408,807 attendance (October 3, 2014-April 2, 2015- not including Grand Opening events) 94 event dates (includes multiple events in one day) 11 sold-out events 8 total pop/rock concerts 5 total country concerts 32 basketball games
Let’s forget about the events. What is important is the actual numbers of revenue including sponsorships.
Does the city collect sales tax on the sponsorship rights including the ‘non-profit’ Sanford Hospital system naming rights?
Does the city collect revenue on the rental of the events center itself?
Backing into the total taxable revenue of the Events Center shows about $16,000,000. Using a minimum tax rate for Sioux Falls business of 6% (I know some revenue was at 7% for entertainment / food but let’s be conservative) we find the SD Sales Tax revenue is close to the $962,383.40 reported.
Now look at the SD Sales Tax in terms of attendees.
Let’s say we break down tax collected per reported person. If we have $962,383.40 Sales Tax payable and we have 408,807 people showing up to an event, the city collected only $2.35 per person. So we built an events center where the city claims each person spent approximately $39.18 to attend the complex. $39.18 for tickets and concessions?
Let’s just look at the 13 sold out concerts:
10,000 (sold out concert tickets)
$60 (per ticket)
              13 (concerts)
$7,800,000 (total) * .07 tax rate = $546,000 (Sales Tax due State of South Dakota)
$7,800,000 (total) * .06 tax rate = $468,000 (Sales Tax due State of South Dakota)
Who is paying all the sales taxes? Where are they? Something once again does not add up. In each of the 94 events, $10,238.12 was collected. How? Once again the numbers are not adding up. It appears we are just to be excited by big numbers without understanding the actual audit. Tracy once again is playing with fuzzy math.
And let’s pretend for a moment that the EC does make $2.2 million this year. That doesn’t even come close to paying the almost $10 million dollar mortgage per year. Hardly in the black. Like I said before the vote, this place was built to make other people money, contractors, promoters, scalpers and management companies, while the taxpayer’s of this city foot the mortgage.
Thanks!
UPDATE: Still NO comment on the siding.
So let’s say the numbers Tracy gave us are correct. With a $9,500,000 per year debt service, the EC would have to have renters each day of the year (or 365) paying over $26,025 per day.
The EC has been open for about 180 days now. Do we know they have actually received at least $4.25 million in rentals during this time to service the debt and still have a $1.1 million net profit?
I believe we are once again Turbak’d Huether style.
Greg lays down some good comments with the Argus article, as I pointed out above;
http://www.argusleader.com/story/news/city/2015/04/23/event-center-makes-first-six-months/26248467/
Greg Neitzert ·
While this is good news, a number of facts were conveniently omitted or obfuscated – Net Operating Income (NOI) is not the same as net income, it excludes debt and mortgage service. We are paying 9 million in debt service this year. This isn’t ‘making’ money, if we make 2 million in operating income this year pay 9 million in debt service, that isn’t what I’d call a brilliant financial move. Even factoring in the additional sales tax revenue, even if it were all new, we’re still way in the hole. Also don’t forget tax revenue generated by anyone in Sioux Falls is NOT economic impact, its transfer spending. About 80% of attendees are from Sioux Falls, give or take, so most of this tax revenue is not new revenue. Its just transfer. Whether I, as a citizen of Sioux Falls, spend $75 at Minervas or $75 at the event center, for Sioux Falls its a wash. In fact it could be worse at the Event Center, my money goes to an artist who takes the money and leaves, no multiplier effect. If I spend it a local business you have the multiplier effect amplifying the impact. At a average 20% rate of out of town visitors at events, that would be $180K of net new sales tax revenue generated ($360K annualized). So let’s say we have $360K in net new sales tax revenue plus a NOI of 2.2 million anualized, we have about 2.5 million in revenue, and 9 million in debt service, so we lost 6.5 million dollars. If you think the quality of life benefit is worth it regardless of the cost, have no argument with you, but don’t fool yourself into thinking this is anything but a financial disaster.
Math is hard
Smoke and mirrors. NOI is not net income, it excludes mortgage and debt service – in our case 9+ million in debt service. Taking 1.1 million over 6 months is an annualized 2.2 million dollars. We’re still 7 million in the hole. And this is probably best case scenario numbers, because of the newness and novelty, numbers will be higher the first few years.
Now let’s take the next argument, economic development around the event center. That’s easy, there is none. We knew that would be the case.
Now sales tax revenue, in other words economic impact, what leaders always tell you is the holy grail and reason for building these things. We’re told 900,000 in sales tax revenues in the first 6 months. I don’t know how they got there, but I’ll grant them that just for kicks.
We’ll say 1.8 million then in annualized sales tax revenues.
But keep in mind, nobody said it was net NEW sales tax revenues, just sales tax revenues. The only sales tax revenue that matters is NEW revenue, economic impact, new revenues that would not have come in without the event center. Namely, out of towners coming to town to spend money here. The AECOM report the city commissioned to its credit is clear on this, someone from in Sioux Falls is NOT economic impact. Its transfer spending and doesn’t count. My wife and I are going to three concerts at the event center this summer. Our net economic impact – $0. That’s because whether we spend it at Minervas or the event center, the city’s net take from our spending is the same. No impact. Its only those coming from out of town that create impact. Let’s assume 100% of those going to events are from out of town, ridiculous, but just bear with me. Then we’d say all 1.8 million was new impact. Add that to the 2.2 million in operating income, and we’ve got 4 million in income total. And 9 million in debt service. We’re still losing 5 million a year. For the next 20 years.
True, we will extinguish debt service in 20 years, but by then the EC will just be another old building and will be no doubt needing big capital expenditures for maintenance and repair.
Now if we use the more realistic numbers, which the city conveniently leaves out, not everyone going to an event is economic impact (out of towners). From the AECOM study and historical data, 85% of those going to Storm and Stampede are from Sioux Falls. Those games comprise about 20% of dates at the event center (as estimated). So only 15% would possibly be new economic impact. So 20% of the dates (the sports teams) are a rounding error in terms of impact.
For concerts AECOM estimated 30% from Sioux Falls, 67% from out of town but close enough to drive (day trippers) and 3% far away (hotel night stay). Now a lot of the day trippers may have come to Sioux Falls anyway, but let’s just give the benefit of the doubt and say 70% of concert goers are economic impact. Let’s even say that 70% in the aggregate of all events are economic impact. Taking 1.8 million dollars in tax revenues collected x .70 (the percent of it that would be NEW – not transfer) we get about 1.3 million in NEW economic impacts. Coincidentally the AECOM study estimated about 1.1 million in economic impacts (new tax revenues) to Sioux Falls from the event center, so my methodology is probably about right.
If we take the numbers the city claims at face value, giving them total benefit of the doubt we have 1.1 million in new sales tax revenue plus 2.2 million in operating profit, which gives us 3.3 million in revenue and 9 million in debt service. We’re still down 6 million in our capital fund, enough coincidentally to do a massive road improvement project every year for the next 20 years.
Another formula I like to point out – debt service is 9 million a year. If we take a 3% sales tax rate for the city best case (entertainment tax) it takes 300 million in sales to get to 9 million in sales tax. Keep in mind as well again only those coming from out of town that wouldn’t have come anyway are economic impact and new sales tax dollars, so all Sioux Falls residents have to be excluded. Let’s just take a crazy, but best case, example for the city. Let’s assume 100% of concert goers are from out of town. And let’s assume they all come and spend $500 per visit total, which is close to what I think the CVB has claimed before for someone staying overnight. I’m even giving $500 per person so $1000 for a couple which is probably way high. If every single concert goer is from out of town and every one spends $500 in Sioux Falls when they come, it would take 600,000 of them to get to 300 million (and the 9 million in new sales tax). Assuming we JAM PACK the event center for every concert, it would take FIFTY sold out shows with 100% visitors from out of town PER YEAR to break even on debt service. That’s a sold out show every week all year long. Good luck with that.
As I have stated, if you think it was worth the quality of life benefit, regardless of the cost, I can’t argue with you, that is totally subjective and I respect that. But there is no way you can argue this is anything but a financial disaster.
12 pesos to the dollar. I think city finance is working in pesos. Use dollars. It’s not only a disaster, there won’t be money to fix the inferior construction. It’s gonna be hard to attract events when it’s falling apart. How about allowance for regular maintenance?
The answer to this and other Huether follies is one big municipal bankruptcy. There was to much money chasing municipal bonds. It came from what was left after the mortgage lending crisis. Retirement money was looking for a safe haven. It proved to not be muni’s. City bankruptcy’s are becoming common.
All these unnecessary sports confinement’s will become debt free per bankruptcy. This city illegally competes with private enterprise. Once marijuana becomes legal, Sioux Falls will have the biggest and best indoor grow farms in the country.
The people that I know that live 100-200 miles away that might consider attending something in the center are on the cheap side, just like I am. They would pack a lunch and eat in the car before going to the event, and unless they knew somebody close by that they could stay with for free, they would head for home after whatever event thye had attended. They wouldn’t spend money in a restaurant or motel. So far the people that I know haven’t heard of an event that they would pay to see. I would have liked to go the Professional Bull Riding, but besides not having the stamina to go anyplace, I also couldn’t afford to go. I also would have liked to see The Million Dollar Quartet that was at the Pavillion. Even if the actors in that show weren’t good, the music would have been worth it. As far as the concerts at the Event Center go, I would’t pay a plugged nickel to see any of them.
The man is a moral disgrace. He knows the majority of folks are low information consumers and they will never understand the math but they do believe in his fake emotion.
He’s a living-breathing credit card commercial.
Bob Seger was terrific.
Eagles coming is a huge get for Sioux Falls.
Well played.
I think the new siding for the EC is hiding in the same place as the MOU with the VA for Spellerberg Park.
Matryr Huether spending our money.
according to kelo at 6, the eagles haven’t sold out yet, and the country chick group has a lot to tickets available. could buyer fatigue be setting in already? weren’t the eagles the reason this place needed to be built to begin with?
“Now let’s take the next argument, economic development around the event center. That’s easy, there is none. We knew that would be the case.”
“But but but but but but BADLANDS PAWN.” – Mike Huether
Should we all take bets on how long before the city water carrier Stu Whitney writes an Op Ed arguing that the current Mayor was completely right, we who questioned the event center were wrong (and had bad motives of course), and that the Mayor should be perhaps appointed Mayor for life? Oh wait, he already suggested that a few weeks back when he floated the idea of eliminating term limits for the Mayor.
After laughing at the last 5 minutes of the city press conference, I am annoyed at the implication that if you question the event center you are a ‘naysayer’, ‘negative’ and by implication are a bad person. No one has a monopoly on virtue. It is possible to care about the city and have been opposed to the event center. The clear message was that those who agreed with the Mayor on this are on the side of the angels, and if you didn’t you are a scumbag. That’s a technique of a demagogue, appealing to emotions and passions, and implicating those who disagree with you as without virtue. And of course, its a cute technique to act like if anyone questions your policies that they are attacking you personally. There’s a big difference. I don’t care about personalities, I care about policies, and disagreeing with your policy is not a personal attack on you.
Wait til we get to buy tickets at the ec for mmm elect me for governor. Won’t that be a hoot. Then we’ll get slide shows of the world according to shape places by Jeffry schmitt showing how much the populace will benefit from rmb and mmm big ass apartment complexes and why a 1bedroom apt from mmm investments will cost at least 1200 per month then toss in the responsibility taxes we all need to pony up for to keep the love shack I mean ec standing above us all. Why not finish with the sterilization of down town SF and how wonderful life is for the lofters and why the poor folk got the boot to go east of weber Ave. Life is good if your stupid in Sioux Falls. Good grief. Oh yeah I drove by spellerberg park and was sad too see the park hacked to hell. Thank the council for that one
“No one has a monopoly on virtue.”
The best comment I have heard all night. I have always said there is a difference between negativity and the truth. Lying is negative and sometimes the truth hurts. Live and learn.
Speaking of the downtown lofts, what’s the over/under on how soon the Top Hat is forced to move or close after that complex behind them is finished? No way those rich folks are going to like having those drunk hipster smokers standing out back all night long.
As shown here, these turbak numbers make little sense. They simply do not add up. One thing I have noticed. Been in the building once. There on a free ride, virtue of one of the many, many sponsors who get pocketfuls of tickets to hand out like Monopoly money. Turns out many of the people seated around us were also there compliments of a free sponsors ticket. The event I was at was a hockey game. Attendance was announced at something around the 5500 number. No way were there 5500 in that building. My guess, even all the sponsorship handout tickets, could not put the actual people in the building close to what the announced attendance was. Why do you suppose that is? I suspect most know they cannot afford to spend 2 hours of take home pay for a slice of pizza and a cup of tap beer.
Tears of a Clown
On Ticketmaster it appears there are about a dozen obstructed view tickets left above the floor and then around 30 up front on the floor that sell for $500-1,000. I would call that as close to a sellout as one can expect when the cheapest tickets were over $100 with most in the building selling for $173.00.
So Joan – you’re saying the EC is increasing spending/sales tax OUTSIDE of SF? (buying lunch items, gas, tires, etc. in home town before coming to the city). 🙂
That’s the way the people I know would do it. I live in Sioux Falls and due to health problems I haven’t been out of the apartment building that I live in since mid-October. I guess with the people that I know, it’s a matter of if they can afford the tickets for an event, that is their entertainment, therefore a picnic type meal will have to be the food. Of course they would buy tires in a town closer to them and they might would have to fill up with gas before leaving SF, but that is about all they would spend here. A lot of it is how we were brought up.
Good comments. I’m taking it all in. I wish councilors and the mayor would read here. Media, they’re somewhere out there reading 1970’s teletypes. We have computers on watches now. They’re reading Morse code smoke signals.
MMM is a classic case of progressive political expression. Imaginary math, low information support, over the top emotional appeal and scathing vitriol if you oppose. Think climate change, alternative energy, education…. If he only had a printing press.
Scott on 04.23.15 at 10:46 pm
Speaking of the downtown lofts, what’s the over/under on how soon the Top Hat is forced to move or close after that complex behind them is finished? No way those rich folks are going to like having those drunk hipster smokers standing out back all night long.
Next time you drive by the SW corner of 13th Street and Second Avenue take a look at the front door of the first loft. It has bars across the entire door. Hmm, maybe not such a desirable neighborhood for those expensive properties!!??
I have a feeling the “ghetto” Sunshine also may not last long after those lofts open.