She better do this cover;
[youtube]https://www.youtube.com/watch?v=2sky1tt8vLA[/youtube]
Had a good chuckle today. A friend was driving by the EC and he called me and asked if I wanted to go to Joan Jett with him (the tickets are $10) He was able to get two floor tickets, 17th row. How ironic that the first concert at the EC with $10 tickets isn’t even sold out (they went on sale Friday). Makes you wonder how many tickets were scooped up to the other shows by First Premier and Sanford employees and scalpers? I know, it’s Joan Jett, but I am going out of curiosity mostly, and hey, I get to see the inaugural concert at the EC. Also, I went online today and saw you can still get tickets to Aldean from scalper sites. I wonder how many empty seats will be at these ‘sold out’ concerts.
This comes from someone less than impressed with Events Center:
You will ALWAYS find tickets to ANY event on scalper sites. Even events trumpeted as sellouts within minutes of tickets going on sale. The tickets come from promoters, the artist, the artists’ management (allcomped, BTW) and, yes, in some cases, actual scalpers who really bought up blocks of tickets. A show can be a true sellout, and there will still be empty seats. The tickets were sold or distributed, but were then not re-sold or otherwise placed in the hands of concertgoers. You’re going to have to do some actual digging to make a determination of the success or failure of this white elephant. A few empty seats won’t make your case.
Let’s see how many times the prime sponsors and their scalpers are going to buy up all the extra tickets in the future. If SMG, promoters and the City can’t practically give away tickets to this concert the first day / first hour, how little demand is there for this place?
My objection, besides the location and the debt, has always been the argument that this will be some great driver of economic development and economic impact. In terms of the former, well, look at the surrounding area so far. The only development I suspect will be initiated or subsidized by the city (think hotel at the golf course).
As far as the economic impact, this is always wildly overstated. I’ve read too many reports/studies and anectodal stories to be convinced otherwise.
In our specific case, I came up with the following. I don’t think I have a flaw in this logic, but if I do I’d welcome a correction.
In my analysis I’ll give the supporters and the city the greatest benefit of the doubt. I’ll make it as easy for their side as possible.
There are two components to this, the capital cost (at this point the debt service to construct it) and the operating cost.
As far as the operating cost, let’s just be generous and assume that all of the sponsorships and title agreements will offset the operating costs and this breaks even on an operating basis. I’m not sure it will, and really suspect in the out years it won’t when the shine has worn off, but for now let’s just say the operating budget is break even.
That leaves us with debt service. The average debt service payment on this for the next 20 years will be 8 million dollars a year.
Let’s hypothetically say we have 12 big concerts a year, and they are all sellouts (12,000). Let’s be generous and say every single ticket buyer is from out of town, so its all economic impact (the story in the Argus yesterday titled “Premier center showing its drawing potential” mentions that 56% of ticket buyers are out of town) – but we’ll be generous again and say 100%. As far as economic impact to the city, that would be in the form of sales tax from those out of towners, who would not have come here otherwise, and spend their money at restaurants, stores, bars, hotels, etc. The city cut would be 2% of the 6% or as much as 3% of the 7% if its entertainment (bed, booze, dining out). Let’s just be generous and say every out of towner spends all of their money on the best case for the city (entertainment), so the city gets 3% of every dollar spent while they are in town. By my math, to generate 8 million dollars of sales tax revenue at a 3% cut, these out of towners will have to spend 260 MILLION dollars. And remember we have to assume all of these are really out of towners and they wouldn’t have come here anyway for some other reason, but let’s just be generous and assume both.
Sales of 260,000,000 would generate 7.8 million dollars of tax revenue at the 3% city cut. Its true yes local retailers would be getting extra revenue whenever people come into the city and spend, but we’re talking about whether this is a money maker for the city. It gets very dificult to calculate the compound effect of this spending, if the retailers here will recycle it again in the city or it goes out of town, so we’ll leave that to the side.
For the other side of the equation, if we take 12 sellout concerts, at 12,000 people per, that gets us to 144,000 people.
So, to generate enough tax dollars just to BREAK EVEN on the debt service payment I would get:
260 million required / 144,000 people =
$1805 spend per out of towner
So every single concert goer who comes to Sioux Falls has to spend $1805 dollars while they are here, and it all has to be money they wouldn’t have spent anyway (they couldn’t have come for any other reason like going to the mall the same weekend), and they all (100%) have to be from out of town. That’s a pretty heavy load.
In the same article in the Argus, Teri Ellis Schmidt said that not everyone stays overnight in Sioux Falls when they come to a concert, but IF they do, they ‘generally spend $300 to $400 per person’. We’re only 1/6th to 1/5th of the way there on the required spend, assuming every single concert goer stays overnight.
So, it would seem to me, giving the benefit of the doubt in every regard to the city, we’d need 5 or 6 sellout concerts PER MONTH, EVERY MONTH, with EVERY SINGLE concert goer from out of town, none of which would have come here anyway for something else, ALL of which MUST stay overnight, and spend the estimated amount from the CVB quote, just to BREAK EVEN on the debt service payment. We’re not even in the good investment/making money for the city until we get past that. Only then are we in the gravy.
Am I missing something here? I’d like to know where this mythical economic impact is and big boon for the city is.
I’m not factoring the intangible benefit of the ‘quality of life’, but even that I would venture is wildly overstated. I am fortunate enough I could go to a concert if I cared to, and I will go to the Stampede, but based on the Stampede ticket prices (compare them to every other team in the USHL now – we’ll have the best venue in the USHL but also the highest ticket prices and in some cases by a wide margin) and the concert prices, a lot of people aren’t going to see much quality of life improvement, because they won’t be going too often if ever.
Greg, thank you. And people ask me why I voted against the new EC. I think you summed it up, it will never pay for itself.
Thank you Greg, why can’t the big promoters in the 9th and Main building figure this kind of stuff out. They would rather make stuff up and call it all good.
Reminds me of Tracy Turbak at the City Council Informational not being able to understand mean, median and average wages while pulling other stuff out of his butt to make the Mayor look good.
How much hard mental work goes into trying to make the garbage press releases look good that could have actually gone into making the numbers right and helpful.
Thanks Greg for the great article.
One has to wonder how turbak can go on tv and say all is well and on budget But last week we had city attorney at news splash about the contractor doing a no cost mockup of panels but funny how we didn’t hear who will pay. I still say a constructive change order caused the poor quality or a poor design and the city will have to pay that too. Daily is right we may be heading for default.
Greg, it’s a long read but strong evidence. Why didn’t the city do a market analysis? Not only will it (best case) not break even, debt service will prevent sound development & necessary infrastructure.
Our credit card mayor brought this city national interest. His idea of INTEREST is the lending definition.
Sigh, well, a program on MPR yesterday reminded me again of why it is that so many people simply CANNOT wrap their consciousness around a reality that might exist a month or two from today – let alone one that might exist 40-50 years from now.
The evolution of the human BRAIN was as a way to deal primarily with IMMEDIATE conditions. You know, simply to survive in a dangerous shifting environment. Remember – this venue was constructed not merely to meet TODAY’S needs- for to last for the next HALF CENTURY.
The typical human brain simply isn’t physically structured to deal with much beyond what’s happening right around it RIGHT NOW.
Say Neitzert – 20 years from now – what’s $100 gonna buy you? Couple of burgers?
For example-inflation rates for the past 20 years have been historically low – and yet, $100 in 1994 =around $170 in today’s dollars. Go back 30 years and today’s $100 bill would have been $250 worth of stuff.
So Greg – you asked what you’re missing. Answer – consideration of “The future value of a present sum.” It’s something they teach you in college -part of the most basic finance course you can take.
Thanks rufus, for pointing out that the time value of money does change things some.
A few points.
I do look long term. That’s one of my basic tenets of life. Its the reason why I many times don’t make silly purchases, I invest, save, and avoid debt. What feels good in the short term usually is not going to in the long term, and vice versa.
As far as 40 or 50 years down the road, I get that the event center will live beyond our debt service. We could be ‘in the gravy’ as they would say after 20 years and the debt service is extinguished. That being said, after a handful of years, and certainly 10 or 20, this will no longer be a shiny new building. Its going to be just another aging events complex that has been eclipsed by newer venues in other cities. Maybe after the debt is gone, we’ll have decades of net positive income and economic impact, but count me dubious. Its also worth noting every year for the next 20, citizens can think about the opportunity cost, there’s another term, of the debt service. That 8 million could build a outdoor aquatics center every year on the scale of Drake Springs to replace our numerous aging pools, or a major road reconstruction/widening project, new arterial expansion, or new fire station. You spend money on this, you can’t spend it on that. Opportunity cost.
As far as the future value of a present sum…you could be getting at a number of things I guess. You could be referencing the money spent today on the event center is less than what it would cost years from now with inflation, or that every year that goes by decreases the purchasing power of the 8 million a year, thus making in effect our debt service in real purchasing power less, etc. The fact that $1000 today is not going to have the same purchasing power 30 years from now would be one of the reasons a mortgage has an interest rate, and its party based on projections of inflation going forward, with the bank realizing that a $1000 monthly payment years from now won’t be worth as much as it is today (present vs future value). I guess one thing to point out is that while we might have saved money on the one hand by building it now vs years from now, we only have a finite number of dollars with a number of projects competing for them. The debt service necessarily defers other projects into the out years. That road project we might have done this year will now cost more years later.
I’ll agree though a 100% complete calculation would take other factors as you point out into account.
Been to long since I used those formulas, so you’re getting beyond my pay grade. I guess I would have had more respect for the proponents had they simply said this is a quality of life thing and its worth it on that account, and whether it makes money is the wrong question. I’ve purchased things that are terrible investments, but nice quality of life items, like an Ipad. That’s ok to do occasionally as long as it makes sense given your situation. I just don’t delude myself into thinking it was a good investment.
I thought we hated Joan Jett. Or is that just our cattle producers?
There is also the good possibility that some of those out of towners/staters that come to attend some of these wonderful concerts will be staying with family/friends that already live in SF. If these people would be inclined to help the people they are staying with, with the expense of food and drinks, there is a good chance that they would bring it from where they already live, instead of buying it here. That is what my family always did when we stayed with somebody, even if it was only for the day.
Meanwhile – you just add fuel to the fire for the “I’ll take anything I can as ammo to criticize the mayor” brigade here – who aren’t capable of being self-critical – or critical of any data that SEEMS to support their prejudices. BTW – a change of 1->2.78 isn’t ” a few points”.
Oh – and talk about a waste of an investment dollar – “outdoor aquatics center like Drake Springs”. Seriously; dude.
I’m still hoping they build it downtown.
not that anyone here is a maroon 5 fan, but they just announced their tour, and they aren’t playing sf. isnt that the caliber of concert we were promised? not acts that have already played the arena.
She certainly scrubs up nice. WOW! I’d go just to look at her. My hearing is almost gone and I am not proficient reading lips,yet.
Joan Jett — blech! SF thumbing its nose @ the meat producers surrounding this city that pay a lot of sales tax to support the city, with no return, other than this is the only place to get stuff nearby.
Greg — good job. (spoken as a former Finance 101 instructor). Those formulas are not the one-size-fits-all reality they are touted as. And yeah, each attendee will never spend that much.
Agree with teatime
The first concert in OUR 183 million dollar taxpayer funded Events Center……Joan Jett of PETA fame in OUR AG state of South Dakota.
Great decision SMG and MMM.
How much are them Slipknot tickets? Or did them guys agree to play for free?
Seems to me they are bringing imperfect fits and has beens.All on the ‘spent too much money on drugs
need to work through my retirement or become a China-Mart greeter’ bands.
Slipnot and Korny?
If not mistaken some of the SN groupies may come
they were somehow spawned in IA?
Yeah I want to see bands in str8 jackets and devil
masks.Knot so sure lots of our rural audience will dig that shit.
State Fair/Sioux Empire level crappy ass crap.
Probably charge way too much for tix too.
My last concert was Joe Satriani at the Electric Factory in Philly PA when I couldn’t justify
paying some overblown dildos (albeit virtuoso dildos)over $20 to get in
(general admission)and $8 for 12 oz. of beer in the 90’s.
I’ve been to many concerts starting when my older sister hauled my ass to Radio City Music Hall
to see bands like Aerosmith and Heart for $5 a tix.
Came into my OWN concert going prime after she took me to Van Halen in 1977 at the Filthydelphia SPECTRUM
in her Camero (SP) Berlinetta.
Those were the days my friend actually claiming place in line and camping out at the TICKETRON to get
2nd row seats running the lists of who was in line and such and having to pee so bad but unable to do it because of line cutters needed to be held in check.
Now People camp out for iCRAP 3 weeks in advance
and have corporate sponsors.
WTF
In Art and Labor and camping in line for TIX and running the buyer lists on PAPER at age 15,..
OBG
Who cares what Joan Jett eats? She’s here to entertain. Like she has done many times in SD.
JR – Right on. I think it is wonderful that Joan is a Vegan.
OBG, these little ditties are for you;
https://www.youtube.com/watch?v=1v3CzvQ9e_w
https://www.youtube.com/watch?v=LoF_a0-7xVQ
@OBG-
” $8 for 12 oz. of beer” man u coulda just got that for lunch in downtown soo falls these days. i sure do miss the bkfst special at Irv’s in n mpls. whew.
yep Ol’ Joan Jett got so beat up by our rancherboss meatheads out west on that macy’s gig that the gentleman debtgrowers of the east practically owe her a good SD gig to make it up to her.
I spose ol Sir Paul McCartney looked down on ol SD from Warren Buffet’s plane when he flew over from Fargo to Omaha on his tour and thought, “eww.”
Too bad the ol’ macy’s SD float don’t got room on it for Slipknot, tho. That’d rep ol SD to the world something good.
Thanky L3wis Milkmen no (unless its gibby haynes BLOOD AND MILK MILK AND BLOOD)
All into Suicidal amazing you link me to but I don’t know that one.I saw them at the Tower Theatre in PhilliPA
Upper Darby,..unpaid parking ticket to prove it.
They opened for Megadeth Hangar 18 tour.
And I leave you with this link
http://www.youtube.com/watch?v=ZmzIKX4xNyM
Silence on the set!
In Art and Labor and rebellion,..
OBG