Friday, December 26, 2014

Rapid City's Identity Crisis Will Come To A Vote

Is Rapid City Ready For Prime Time?
(photo from
    We should go ahead with the Rushmore Plaza Expansion Project. The existing facility has been around for close to 40 years and is in need of a very expensive overhaul to make it comply with standards imposed by the Americans With Disability Act (ADA). Basically, we're committed to putting $90 million into the current facility just to satisfy the ADA.  Now it looks to me like roughly another $100 million gets us a national-class facility. True, the final cost 4 decades hence of up to $400 million seems daunting, but that's the way financing huge projects goes. 
     For example did you buy your house for $100 thousand?  I guarantee you'll pay three or more times that much over the life of the mortgage, which is what long-term financing is all about. But the compelling question is, will you get fair value for the out-of-pocket monthly mortgage payments you'll be making for the better part of your adult lifetime?  That's really the question that we have to ask ourselves about the Expansion Project.  Is it worth the $300-$400 million (depending on the interest rate of the bonds we issue--and remember, we're committed to half of that already thanks to ADA) we'll be shelling out for it over the next 3 decades? Apparently, we've got the cash flow to support something on the order of $12-$15 million a year to pay the thing off, but what we really want to know is if the new facility will give the economy enough of a boost to make it worth the expense.  I think it will.  Civic center-based events produce significant amounts of money for the Rapid City economy. Consider this:  the Lakota Nation Invitational (LNI) just came and went, bringing thousands of people into town for its 3-4 days of activities.  It's economic impact? Around $4 million. Then there's the stock show and its hundreds of thousands of attendees--we're talking seriously serious bucks here.
     Now remember, we already HAVE to spend $90 million or so for ADA-compliance purposes, so our calculations should be based on the return we'll get from the extra $100 million or so that a brand new and much larger facility will cost.  I think this is just too good an opportunity to pass up.  Sources (sorry, no names, no genders) tell me that the Chamber of Commerce Convention and Visitors Bureau have been saying for years that Rapid City needs space to handle large conventions that want to come here but can't because they want to do everything under one roof.  My sources and my common sense tell me that the sales tax dollars gained from these confabs will be huge.  My hope is that as the discussion progresses before the public vote on this thing takes place next Spring that some hard economic projections will surface--and if they come anywhere close to what I think they'll be, the return on Rapid City's investment will be impressive indeed.  
Let's Hope The Vox Of The Populi Is Informed
(photo from KEVN news)

      Beyond that, there's a point about marketing the area in general.  South Dakota's chronic shortage of skilled and well-educated workers has long been bemoaned by state officials in Pierre, who've been thrashing around for years trying to find ways of getting outstanding people to stay and migrate here.  What better way to raise the public's consciousness about our first class entertainment and recreational activities than to have Rapid City highlighted in news and marketing journals because of the activities and events taking place here?  This is anecdotal, I know, but a winter doesn't go by that I don't hear from people I know scattered around the country about LNI or the Stock Show.  You can't buy this kind of publicity and exposure.  
     The proposed civic center has the potential of being one of the crown jewels of the northern Plains, nestled as it is in one of the great natural and historic centers in the United States.  For the few million a year it will cost us on top of what we already have to spend to upgrade the existing facility anyway, it's a risk that we'd be smart to take. In 2012 we had a $163 million budget.  Stripping away the annual cost of the ADA-imposed alterations that we have to complete, expansion or no expansion, we have 30 years to finance $100 million, which is manageable and well worth the risk. 

Note added on 12/26 @9:14 p.m.:  Commenter Rick K. below references a study that leads him to conclude that the expansion is a bad idea.  Here's the AECOM study.  Note the following conclusion at the bottom of page 5 of this study:  "A number of comparable facilities have shown that both new arenas that replace obsolete facilities as well as larger, multipurpose indoor venues can successfully attract levels of usage that support facility operations."


  1. Rick K says,,,

    John, please read the AECOM study.

    1) Addressing the ADA issues will cost approx. 35 million.

    2) Addressing other "code issues" about 35 million.

    About 70 million will polish our "Jewel"

    3) The AECOM study basically says do not add nine thousand seats to the arena. This area does not contain the population base or average income to support the fantasies of those Chamber/ECO Development folks you didn't name. The study basically says don't build it, but if you do - "these things need to happen"
    The study gives no rationale for the likelihood of the success of those "things that need to happen" such as - the current average attendance at concerts needs to almost double from 2,600 currently to 5,000. Since we currently have almost 10,000 seats, why do we need to add 9,000 seats, for a total of 19,000 seats, so we can average 5,000 in attendance at concerts ?

    The study predicts an increase of 5.5 events per month (449 per year to 515), less than a 15% increase, does that sound like an "economic train" to you ? Many of those "events" and the increase in projected attendance (about half) are derived from the adding of 2 pro-sports teams and landing a half dozen or so State track events. I have heard we are averaging about 3,750 at the Rush Hockey games, the two additional sports teams are only projected to be about half of that in attendance (per the study)

    Bottom line on attendance - per the study - in 2013 we had approx. 928,500 attendees. By 2026 ( if every thing that needs to happen - happens as projected) the attendance will increase to 1,210,000. Frankly, that is barely a 30% increase over 13 years. We will spend nearly 200 million dollars to increase the size of the Barnett arena by almost double, so it can be 75% empty most of the time, to realize a 30% increase in use. IMO that is pathetic.

    About conventions - I constantly hear that the price of flying to Rapid City and the lack of on-site motel rooms are the deciding factors for conventions, this 200 million does not even touch those two issues. If you are serious about being a destination for conventions - fix the air-fare issue and build another onsite hotel with another 500+ rooms, that might be money well spent, this plan is not.

    1. Here's the AECOM study, Rick K.
      I've also put it into the body of the post so readers can click on to it directly and form their own opinions about its conclusions.

  2. Before RC signs onto this expansion project, they may want to wait to see how much Sioux Falls has to pay in operating subsidies for the just-opened Denny Sanford Premier Center. Considering the number of sporting events booked at the Sanford Health-owned Pentagon, the new center is not off to a good start.