Yesterday the city of Renton released an economic feasibility study for the proposed King County Events Center. The study was conducted by the independent firm of Berk & Associates with the intention of identifying potential economic benefits from the facility. It did not include a cost analysis of the project which has an estimated building cost of $340-360 million. Including infrastructure improvements the total cost could increase to as much as $500 million.
Reviews of the study have covered a broad spectrum with critics painting a picture of a poor economic investment, implying that taxpayers get a bad deal unless their investment pays for itself dollar for dollar in direct tax returns. In doing so they brush aside other benefits discussed in a private media session with the studies authors and hosted by Renton city planner Alex Pietsch. It also ignores the fact that civic spending, by its very nature is limited to those projects which provide public benefit, but do not return sufficient profit to be constructed in the private sector. Fixation on pure tax revenue fails acknowledge that most other civic projects, including the Seattle Center, Seattle Convention Center and Everett Events Center, as well as public parks, golf courses, and other amenities are routinely constructed without being held to this same standard. The community invests in quality of life for its residents with the understanding that it pays for itself by sustaining the growth and vibrancy of the city in immeasurable ways.
The Renton Arena Feasibility Study does an admirable job of presenting a broad and rosey view of returns alongside a more conservative view intended to silence some critics. In its summary document it presents two scenarios, the first of which consists of â€œcore eventsâ€ which basically includes professional sports and 5 nights of convention type events annually. The second category, â€œTotal Event Scheduleâ€ includes significant additional events including private corporate parties, national sporting events such as figure skating competitions, womenâ€™s NCAA basketball, etc. Each of these options is then further subcategorized. In addition to a â€œtotal, all eventsâ€ category the study acknowledges that a large number of events would occur in the region with or without this new facility. The study defines â€œAt Riskâ€ events as those which would simply depart to other regions without construction of this facility. The category of â€œAt-Risk, New Moneyâ€ includes only those revenues which come from out of the county or state and would be at risk.
For those unfamiliar with the arena funding debate it should be pointed out that this New Money category is central to the two sides differing views. Opponents of arena financing point out that many arena feasibility studies infer that all money generated by those facilities is additional money into the economy. This inflates the total return and paints an inaccurate picture. By their line of thinking the majority of funds spent on sports would simply be redistributed to other local entertainment options.
Michael Hodgins of Berk & Associates, co-author of the Renton Study pointed out yesterday determining what portion of local money would be redistributed to other entertainment options may be the hardest economic factor to forecast. The reality is likely somewhere in the middle with some families choosing other local entertainment options while others save the money, take out of state vacations, or otherwise remove the funds from local circulation. In presenting the report he repeatedly referred to its conservative assumptions, a sentiment which was echoed by Renton Mayor Kathy Keolker. The city demanded a â€œvery conservativeâ€ report according to Keolker who believes the findings support her interest in the project.
Rather than debate the exact percentage of funds which remain in the local economy this study simply presents both sides of the story with the â€œAt Risk Totalâ€ column assuming demonstrating all money potentially lost while â€œAt Risk, New Moneyâ€ disregards all local revenue and only focuses on funds brought into the county or state for events specifically for events hosted at this facility. New Money impacts however are rarely disputed as it is clear that out of area residents travel only to see specific events which are not available closer to their homes.
According to the study the state would see a return of tax revenue totaling between $205 and $340 million in tax revenues over the next 25 years. The $205 million represents â€œCoreâ€ activities while the $340 includes the â€œTotal Event Scheduleâ€. Of this $134 million and $258 million respectively are considered â€œat riskâ€ while $78 and $152 million are â€œNew Money at Riskâ€
What needs to be pointed out is that these numbers represent actual tax revenue only. They assume that the arena would exist in a vacuum without any surrounding development. For example new restaurants and businesses surrounding the arena would pay additional B&O(Business and Occupancy) taxes and increased property values would result in higher county property tax revenues. Renton officials advise that 4 major hotel developers have inquired about sites within the city. While this thinking is appropriate for a conservative and impartial study it is virtually assured that significant other development, and the associated revenue would occur as a result of the buildingâ€™s presence.
What Does this Mean?
State and local leaders, including Senator Margarita Prentice and Mayor Keolker are applauding the study as proof that the Events Center will provide substantial benefit to the community, spurring associated growth and garnering national exposure while coming extremely close to paying for itself and attracting a private contribution in excess of $100 million to a facility which will ultimately be owned by the county.
The states current legislative package calls for $300 million in taxpayer funds to be contributed to the King County Event Center with an additional $123 million going to the arts and other state projects. Of these totals 48% of the funds are generated by existing restaurant, hotel, and rental car taxes which primarily target visitors to the region. These tax revenues are not available for other projects or general fund projects. The remaining 52% is slated to come from the state sales tax credits which are already in place and dedicated to economic development projects. Assuming that these ratios are applied somewhat equally the state would make a total facility investment of $156 million and then conservatively see a â€œNew Money, At Riskâ€ return of $152 million in direct tax revenues during the life of the building. At the same time it paid for itself the Events Center would have an annual attendance of 1,749,800 people for a total of 44 million attendees while supporting as many as 5,800 jobs per year. Additionally it would spur economic growth in the surrounding community and provide additional visibility for our community worldwide.
Critics may argue that sports facilities have to be profitable to benefit the community but Prentice and her allies do not need to look far to provide a shining example of the kind of community development they are looking for. Since the arrival of SafeCo Field in 1999 and Qwest Field in 2002 Seattleâ€™s SODO district has emerged as a thriving commercial district with new businesses, housing, and amenities developing as a direct result of the new Stadiums. A walk through this district clearly illustrates the potential for South Lake Washington and Renton as a city. Renton leaders envision similar growth should the event center be constructed.
"This is a big plus for the economy," said Prentice. "This raises money, lots of it, and creates a whole lot of jobs."