New Arena Facts vs. Fear

The Two Cents has again provided another gut-feeling, non-researched opinion on the operation, construction and ultimate success of our proposed arena. The election on this issue is just 15 days away, so of course, I felt you deserved to hear the other 98 cents on the matter.

Two Cents cost overruns

“The new arena location is bad” – (FALSE)

The proposed new arena location will be conjoined to the remainder of the Civic Center Campus, thus reducing overhead and staff costs. The location is surrounded by our major roadways of Omaha Street, North 5th Street, and the new and improved I-190 interchange. In addition, it is within walking distance of several hotels, and the downtown core which encompasses numerous local businesses that assist in collecting sales tax to help drive our general fund. A Civic Center by definition is meant to bring people together, but building a new arena on the outskirts of the City would limit the ability of the Civic Center to acquire new or to expand current events.  Just the infrastructure costs of the new arena in an off-site location would drive the cost so high, we would not be able to afford it. It would also not generate the revenue as a stand-alone facility to cover the operation and overhead costs, let alone make a profit.

“Taxpayers are responsible for the debt if revenues do not meet projections” – (While that is technically true, it is baseless)

The feasibility study and pro forma financial projections are based on a market analysis for the region which the Civic Center reaches, and these projections are conducive for building a new arena. The same fearful statement could have easily been said 40 years ago when the Civic Center came about, and I imagine it was, but look what a great addition it has been to our city. The Civic Center is one of the City’s greatest assets, which requires regular updates to remain viable. A new arena is just that.

“There is no way to control cost overruns and they will be huge” – (FALSE)

There absolutely is a way to control project costs, and the City team has researched this for years. We will not use the same method of acquiring design and construction services used in the 2006-2008 Ice Arena construction debacle. Then Mayors Jim ShawTwo Cents Ice arena debacle and Alan Hanks worked together to bring the ice arena to fruition with the bids coming in at $22.2 million, or just over 56% higher than the original cost estimate of $14.2 million. Additional funding was committed through the Vision Fund and the project was completed for a grand total of $25,766,288. This total included more than $650,000 worth of change orders. No wonder people don’t trust the government.

Even though the project was complete, the building was unusable because it was not furnished. The Civic Center had to spend over $2 million to buy furnishings such as Zambonis, netting, seats, ticket systems, spotlights, concession equipment etc. The Civic Center also had to borrow $1.5 million to create the east parking lots. But the building was still unusable for hockey. The Civic Center was out of money, so the Rapid City Rush Hockey Team borrowed $2.15 million to complete the furnishing of the building so they could play hockey. They’ve been paying on that loan for the past 10 years, with three years to go. And Hanks and Shaw want to lecture us on how to build an arena?

The City has used a competitive process to select a construction manager, as well as an architect. The ‘Construction Manager at Risk’ is a construction manager who is hired to deliver the project within a guaranteed maximum price. All potential surprises are evaluated in advance and unforeseen cost increases are absorbed by the construction manager. There have been very detailed cost estimations accomplished over the past several months and a final budget has been set. $130 million, lock, stock and barrel. The City (taxpayers) will not spend a dollar more.

We have also hired an owner’s representative: a company who uses their expertise to look out for the tax payer’s interests. The owner’s representative, TEGRA has managed projects in 37 states, and not once has a project been over budget. This same company has served as the owner’s representative for both Black Hills Energy’s Horizon Point and the Sanford Premier Center in Sioux Falls.

These significant changes to the process benefit our taxpayers and make this a safe project with no surprises. With 15 days left before the future of the Civic Center is decided, I encourage those who have not researched this topic to do so. Email me with your questions (mayorsoffice@rcgov.org), or view the full presentation at www.barnettarena.com.

 

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