Rapid City Needs a New Arena

RPCC

This is a transcript from a speech I gave at the February 26th 2018 City Council meeting, in support of a new Civic Center Arena. It’s long, but it may contain information you are looking for:

“Good evening everyone, thank you for being here tonight. I wouldn’t expect any less attendance and involvement on such an important issue as this one. I’ll start my presentation with a summary of where we have been, and how we got to the point we are at today.

From approximately 2012 to 2015, a great amount of effort was put into planning for, designing and presenting options for new Civic Center Arena. The main emphasis and motivating factor at the time was the Americans with Disabilities Act.

On December 1, 2014, the City Council voted to build a new arena for $180 million in construction costs. A mixture of revenue bonds and certificates of participation was presented as the funding mechanism with 100% of annual Vision Fund collections as the funding source to be used for debt payment.

A task force was involved, there were several public meetings, paid advertising from opponents and proponents of the arena

On March 10, 2015 a public election was held at which time the funding for a new arena was defeated. The alternative of building a new arena was a $70 million rehabilitation of the Barnett Arena – a figure that was immediately thought to be bogus by industry professionals and many citizens. Three months later, in June 2015 a City election was held and a new City administration was installed.   In February 2016, I appointed the Civic Center Resolution Task Force. 11 members from the community, none with ties to the visitor industry, and none with a previous known investment in the 2015 ballot issue. The task force was weighted heavily with financial advisors, economists and business owners. A retired schoolteacher and baseball coach as well as a member from the disabled community were included.  On January 19, 2017, the task force work was complete.  The task force largely concluded that the new arena was the smarter financial decision. This opinion was not held unanimously among the task force members as there were two who believed the evidence was not conclusive to support a new arena at this time. In late January 2017, I began assembling a presentation to be delivered to the City Council and the public at large.

On June 7, 2017, I began formal presentations of the issue at hand: To renovate the Barnett or to build a new arena. Since that time, I have made 34 public and private presentations to 1228 individuals. Seven of those presentations to 467 people were held at the Rushmore Plaza Civic Center and included a tour of the Barnett Arena. At this time, four more presentations are scheduled through March 13th.

Each public presentation I hosted was structured with a presentation to include the history of the Civic Center, the challenges we are facing with the Barnett Arena, and the pros and cons to either remodeling or building a new arena to remedy these challenges. Following the presentation, a question and answer period was provided, along with a tour of the Barnett Arena for any interested attendees. After the first presentation on September 14, 2017, I decided to start conducting an informal poll after each presentation to collect input and gauge where a portion of our residents stand on this issue. This began on September 25, 2017, and it was done for my benefit at the time; however, I believe the raw information may now be of benefit to you as well.

This informal exit poll was simple and straightforward consisting of a box to check for either “remodel” or “build new,” along with a blank space for comments. Not all presentation goers participated, and the figures do not necessarily represent an accurate sampling of Rapid City residents. Nonetheless, this poll was available to 443 community members, and 288 took the opportunity to participate and provide their input. As a courtesy, I thought you might be interested in what they have to say as well. Here is a summary of our informal findings:

Remodel                   8.5 out 288                (2.95%)

Build New                 274.5 out of 288       (95.31%)

Undecided                4 out of 288               (1.39%)

Both                          1 out of 288               (0.38%)

In addition to the polls, I’ve had the opportunity to mingle with the community over this extended period of time. As you might imagine, when you are mayor of Rapid City, you are mayor all of the time… at the grocery store, the hardware store and around the neighborhood. The face-to-face feedback I have received over the past year and a half, has been overwhelmingly in support of a new arena. In that feedback, I can’t tell you how many times comparisons to the old plan and this one were made. This is consistent with the feedback received over numerous presentations and other public gatherings. The majority of people in Rapid City appear to prefer investing in a new structure rather than expending millions on the old one. This was when I made the decision to engage with Stone Planning and TEGRA to assist with this project. This is also the reason the feasibility study was not made available sooner. I would not have expended funds for consultants had the feedback been negative.

Rapid City has a rich history as being one of the nation’s leading markets in the visitor industry. Gold was discovered in the Black Hills in 1874 by then Lieutenant Colonel George Custer and his men. As a result, this caused a massive influx of gold seekers. Rapid City was unofficially founded in 1876 as Hay Camp by a group of disappointed miners – based on the reality of there being no gold near Rapid City. The first Rapid City settlers dubbed Rapid City “gateway to the Black Hills“. One square mile of land was used as Rapid City’s border with six blocks designated as the business district. The new focus: to supply the miners. Officially founded as Rapid City in 1882, tourism had become a major industry by the 1890s. By 1900, Rapid City had survived a boom and bust yet was established as an important regional trade center for the upper Midwest. There were a number of important developments in our area that shaped who we are today: 1927 – 1941 the construction of Mount Rushmore. 1940  – The Army Air Corps Base (now known as Ellsworth Air Force Base) was opened. Rapid City’s population doubled between 1940 and 1948 due to the influx of military personnel and the economic benefits of government payroll. In April 1972, Rapid City voters approved a measure to create what we now refer to as the Vision Fund. The 1/2 cent sales tax at the time was to be used to fund the Rushmore Plaza Civic Center. At the same time, voters also approved the 1% gross municipal receipts tax, otherwise known as the BBB tax. Two months later, in June 1972 the Black Hills suffered a devastating flood and in addition to the loss of human life, the property damage in Rapid City alone was $100 million at that time. $600 million in today’s money. A good portion of Rapid City’s infrastructure was severely damaged during this time, yet plans moved forward to build the Rushmore Plaza Civic Center. Construction of the Civic Center began in 1975 and was completed in 1977.
Rapid City and its Civic Center has enjoyed being South Dakota’s largest and most used convention and entertainment center from 1977 to as late as 2014 when the Sioux Falls Sanford Premier Center opened. The Rushmore Plaza Civic Center including the Barnett Arena have been in operation for the past 41 years. The biggest change in the past 41 years – the entertainment and convention markets have changed for the better. The music industry has changed significantly. There are now 83 million millennials living among us. In a recent study, 84% of those millennials report regularly traveling the U.S. seeking events and entertainment. It is a priority that baby boomers such as myself cannot fully understand. The fact remains, we are being outsourced by what is now the largest generation in America, the millennials.  What has not changed in the past 41 years – the Barnett Arena. By the way, the Rapid City Auditorium at 7th and Quincy Street was demolished in its 45th year. These buildings have a useful life, not so much as it pertains to durability but to functional usefulness. Times change.

Rapid City has enjoyed decades of benefits from the visitor industry. It’s only fitting and proper that we reinvest in it from time to time. Each option on the agenda tonight has a risk versus reward ratio: The rehabilitation option appears safer to some primarily in my opinion, because it’s known, And less money. The risk could be seen as minimal or moderate but with the exception of becoming legally and ethically compliant in our agreement with the Department of Justice, there is no reward. We will not sell a single additional ticket. In fact, less seating will be available for purchase. No additional square footage will be created so our current events needing to expand, such as the Black Hills Stock Show and Rodeo, LNI, Sport Show, and the upcoming Home Show will not gain space. We will not attract a single additional trade show based on the remodel. The rehabilitation option is an expense. The build new option appears to have more risk because it represents the unknown. What if? say the doubters. That is a normal and expected response. So how do we bridge the risk gap? With data, market information, facts and an acknowledgement of the changing times.

The risk of the new arena is limited to a couple major issues: The Future success of the facility

  • The force multiplying effect of the Sioux Falls Sanford premier center.
  • The entertainment industry’s renewed priority of traveling shows.
  • The ability for our current signature events to expand.
  • The ability to attract new trade shows.

More information on this topic will be presented from Stone Planning and also Civic Center Director Craig Baltzer.

The ramifications of expending $130 million can be intimidating, but there are important facts to consider:

  • Approximately $25 million has been saved in anticipation of the approval of either option. In the case of building a new arena, this means that around $105 million in bonds would be needed to accomplish this option.
  • A combination of revenue bonds and certificates of participation will likely be used which will mean the City will not encroach on its debt limit set by South Dakota state law.
  • 54% of the current Vision Fund collections will be used for debt service, as opposed to 100% in 2015.
  • This will keep approximately $5.5 million available for funding important projects for the community.
  • This will provide in the scenario of a major recession, a 46% safety barrier to protect against the urge of future administrations to raise taxes or reduce services in other areas.

Let’s talk about and acknowledge the opposition to building a new arena: It has been mentioned government should not be in the “entertainment“ business. Our history shows, and I am here to reiterate that we are not in the entertainment business but we are in fact, in the visitor business. It has been mentioned we have great infrastructure needs and that spending more than $100 million on an arena would be unjustified based on our current infrastructure. This thinking is understandable, however I don’t believe our City Council or the citizens at large would allow the Vision Fund to be converted to infrastructure spending. Further, we are just as behind, and no more, on infrastructure than any other city in America. We must always look to balance the interests in government. Even following the Rapid City flood and the massive recovery efforts that ensued, Rapid City continued building the Rushmore Plaza Civic Center when it could have easily used that money for infrastructure. There need not be a dilemma regarding infrastructure or an arena. We can have both.

I’ve had a great amount of feedback regarding the Vision Fund and I know many citizens voted no in 2015 because 100% of the funds would be used for the arena. The Vision Fund is a sales tax paid by everyone, including our visitors. Although there is room for debate on this issue, I am simply stating that the City will not likely divert $100 million in vision funds to infrastructure as an alternative to funding the arena and other projects.  It has been mentioned Rapid City lacks the population base to support a large arena. Think back to 1972 when Rapid City’s population was slightly over 40,000. Our arena capacity was 10,500. Today’s population is nearly 75,000 and our arena capacity is between 6800 and 8000 depending on the type of event. In addition, Rapid City citizens have never exclusively filled the Barnett Arena. Not even once. We have documentation that for concerts and tradeshows, the majority of attendees are from out of town and many are from other states. Just recently, Old Dominion, an up-and-coming country western group, played to a small audience of 3300 in the Barnett Arena. 20.9% of those attendees were from 27 other states. This is a consistent trend that is seen in our large venue events. People travel for events including entertainment and trade shows.

I have heard that Sioux Falls opening their Sanford Premier Center will preclude Rapid City from being successful with the new arena. The data shows the opposite. Major promoters are looking for show routes and recently, Sioux Falls officials have indicated a recognition that they are missing traveling show bookings because there is not a logical next venue to the west on I-90. Sioux Falls having an arena is a force-multiplier rather than a competitive challenge. I receive comments about high ticket prices and even a suggestion to subsidize ticket prices with taxpayer funds. Amazingly, people‘s willingness to travel for entertainment makes a ticket price an apparent minimal inconvenience. I believe the market is genius when allowed to work. Concerning the traveling show industry, the market is working. It’s true that concert tickets costing upwards of $200 seems to be cost prohibitive for some. I must admit, I would have a hard time philosophically paying $200 to spend a few hours being entertained. The new arena and the shows it will attract will not be for everyone, but will benefit everyone. The location is been brought up a number of times and suggestions have been made to move the arena near I-90 for convenience. Practically, this move is cost prohibitive. Functionally, this move would not allow us to expand existing trade shows/sporting events or attract new ones. Fundamentally, this idea flies in the face of our philosophy on infill development. Parking has been brought up more than a few times. The former mayors article referred to current parking as “scarce”. The fact remains, today at the Civic Center we are parking less cars with more parking spaces than any time in history. In 1977 and for approximately the next 15 years, we were able to seat 10,000+ audience members for a concert. This, without the aid of the east parking lots. Central high school with its expansion has also expanded their parking lot. Where did the 10,500 spectators who attended the Elvis Presley concert park? Anywhere they could find. It’s not that the parking situation couldn’t be better, and it certainly is a few times a year inconvenient, you might even say with events going on at the high school, theater, ice arena and other meeting rooms, parking is a problem. That said, it is not a $30 million problem. Nor would a $30 million parking ramp be the magic pill that alleviates all parking issues. Rapid City has just as much and in many cases more available parking for events then other arenas in our region. If we build a new arena, we will have similar parking availability as Sioux Falls. It has been said the Sioux Falls arena has an advantage over our proposed arena because they are privately managed and Rapid City is publicly managed. The difference or advantage of private versus public management is not a financial one. For a city that’s never had an arena before, it should look to private management to acquire an adequate level of expertise in facility management and event coordination. In Rapid City’s case, we have an event center management legacy that offers 41 years of success as its resume. Additionally, Craig Baltzer, the executive director, has experience both in private management and in public management. There is no perceived advantage over converting Rapid City’s management strategy from public to private.

Comments have been made regarding the ticketing system used by the Rushmore Plaza Civic Center. Some have stated our ticketing system does not offer advantages as other ticketing systems such as “ticket master“. The Civic Center’s ticketing system is “Paciolan” (Pack-e-o-lon) which has an impressive record of event ticket sales.

  • 37+ years serving live entertainment organizations
  • Over 500 organizations that sell through this system
  • Over 120, million tickets sold annually
  • 85 professional sports organizations use the system as we do:
    • 19 regional ticket partners
    • Over 100 arenas and convention centers
    • 75 performing arts venues
    • Over 170 clubs, theaters and other venues
    • 120 college athletic teams

Paciolan is known as one of the leading ticket sales organizations in professional sports as well as arenas and convention centers.

And finally, perhaps the elephant in the room is the idea that the Mayor, City Council or just the City in general is “shoving this issue down the voter’s throats”. Obviously there are some emotions tied to this sentiment and some of the 60% of the 31% of voters who voted in 2015 take offense to this issue being brought to the forefront. South Dakota law requires a one year waiting period on initiated measures, but no such waiting period exists for referred measures.  Clearly it’s not a legal infraction and it is ethically appropriate to bring this issue back three years later based on:

  • The fundamental differences in the 2015 plan and the 2018 plan;
  • The financial ramifications between the two options; and the disorganized and perhaps even disingenuous campaign that culminated with the public election in 2015.

Fundamentally, I cannot see how offering this issue again, which is just as referable as it was in 2015 shoves anything down anyone’s throats. Failing to bring this issue back to the public under the circumstances would be a dereliction of duty on my part given the potential consequences and benefits that await.

There is a desire for the City to bring this issue forward as an initiated measure rather than putting the people in a position to refer it to public vote. The City‘s position is that it lacks the legal authority to initiate measures. Recently, a South Dakota legislator as well as a former mayor and former legislator cited South Dakota codified law 6-8 B-3 as an authorization for cities to do so. After a legal analysis by City Attorney Joel Landeen as well as the City’s bond counsel Jennifer Hanson from the Dorsey and Whitney law firm in Minneapolis, we disagree with the assertion that our City is legally authorized to initiate measures. The City Attorney can explain further but I will just say, it is an issue of the provided statute being referred to, out of the context of other related statues.

I contacted a member of the South Dakota legislature and inquired about legislation to enable cities to initiate measures. The response was not favorable and urged that the City Council be put in a position to perform their prescribed duties then let the citizens refer it. In other words there’s a process to get this to a public vote and no other process is needed.

One question has been brought up repeatedly regarding the ultimate fate of the Barnett Arena should we build a new one. If the council then the voters approve building a new arena, there will be a 2 1/2 to 3 year time period for design and construction. I believe that three-year period is more than adequate to design a plan, find related funding and adopt an plan execution timetable. Conversely, it does not make sense to come up with an ironclad plan not knowing if the council or the voters will approve a new arena. Please keep in mind, the only thing we have to do with the Barnett Arena to achieve compliance is stop using it as we use it today. The large majority of the ADA issues in the Barnett are above the floor level so for some period of time the floor space could conceivably be used to complement the new arena. I want to be clear about this: The proposed plan to build a new arena does not include $25 million to rehabilitate the Barnett, nor does it suggest we do so. I believe some deconstruction will occur with the Barnett to transform it into a multipurpose venue. It is important to note that constructing a new arena is complementary to our Downtown Master Plan as well as Rapid City’s Comprehensive Plan. Furthermore, it reflects the values and priorities documented by a recent citizen survey which is a scientifically reliable survey with a very small margin of error. People and communities including Rapid City, want recreation, entertainment, and a place to gather. Quality-of-life is a major concern of our millennial generation.

A major local employer indicates difficulty hiring young employee talent based on the lack of amenities in our area. Local young professionals commented recently that the lack of modern entertainment options is one of the deciding factors in young people leaving our area and a deterrent to young people considering moving to our area. We have something in common with the city administration and the city voters who approved the Rushmore Plaza Civic Center in the 1970s. We are not building it for ourselves as much as we are building it for future generations. Our children, grandchildren and great grandchildren. I have to confess that in 2015 I voted for building a new Civic Center Arena. I did so solely on faith. Decades of success at the Civic Center as well as knowing the community as I did at the time, made me feel positively about it. Knowing what I know now, I’m glad that measure was defeated. It was the wrong plan. The priorities were not aligned with the needs of Rapid City and our visitors. It was excessive. If this issue goes to a public vote, I will vote yes again but this time I will base my vote on data, market information, facts and the reality of changing times. Tonight the City Council has on the agenda two options: to rehabilitate the existing Barnett Arena or to build a new arena. In other words, one option is to invest in our future and the other is to expend funds on the present. I am asking this City Council to show Rapid City what you stand for. Make a decision that will benefit all of us for decades. A decision that will show this community we are capable of having and committing to a vision. I’m asking you to vote tonight in favor of building a new arena.

 

 

 

2 thoughts on “Rapid City Needs a New Arena”

  1. Would it not be cheaper just to build a whole new civic center north of the interstate where they’re would be adequate land for parking lot?

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    1. No. It would be more expensive. All of the infrastructure would have to be added, land would have to be acquired and there would be no force multiplying effect with the current Civic Center Arena. In other words, no new tradeshows, no ability to expand current events.

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