Thursday, March 5, 2015

County consultant terms C4C 'of great importance'

Posted By on Thu, Mar 5, 2015 at 2:10 PM

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The long-awaited consulting report on City for Champions, commissioned by the El Paso County Board of County Commissioners, concludes the four tourist venues are "of great importance," but the county didn't release the full report to the public.

Nor did the press release issued by the county address specifics of the downtown stadium project's financial viability and economic impact on the county. In other words, the release didn't address whether it would be wise for the county to dedicate tax increment financing or other tax dollars to the project. 

The county supposedly sought the study in part because the county is being asked to help fund C4C by assigning $1.4 million a year, or $42 million over 30 years, through TIF — sales tax revenue growth over a baseline set in December 2013.

We've asked for the report itself but haven't heard back.

City for Champions was introduced in July 2013 by Mayor Steve Bach. It includes four projects: downtown Olympic Museum and Hall of Fame, sports medicine center at the University of Colorado at Colorado Springs, Air Force Academy visitors center and a downtown stadium.

The consultant, BBC Research and Consulting, concluded the four projects would attract 1.5 million new visitor days to El Paso County and that the museum has the "greatest prospect" of bringing in new tourism money, the news release said.

But there was no data provided specifically for the $97 million downtown stadium project, the most controversial of the projects and the one requiring local tax money to be built. 

According to a report prepared by Economic & Planning Systems for the state Economic Development Commission, which has agreed to give the city $120.5 million to build the four projects over 30 years, the downtown sports and events center can be expected to attract 4.75 million net new out of state visitors from 2017 to 2043. Net new out of state visitors is the goal of the Regional Tourism Act under which the EDC allotted the money.

The report presented today didn't use that term, but rather provided the "new visitor days" figure of 1.5 million and didn't say whether that was per year or over a longer term.

The release:
BBC Research and Consulting, a nationally recognized firm with more than forty years of experience in economics, research and planning has completed development of a financial model to assist El Paso County in evaluating the benefits and financial impacts of City for Champions. The firm was engaged by the County in 2013 for an independent and “county focused” review of various projections, assumptions and conclusions affiliated with the state supported City for Champions economic development initiative.

“The state’s analysis focused on the financial impacts to the state itself, said El Paso County Budget Officer Nicola Sapp. We wanted to focus specifically on the impacts to El Paso County. We asked BBC to give us a fresh look, a different look and a specific focus in order to develop a financial model that we can use to assess the bottom line impacts of the various C4C projects as they evolve and become more defined. We know that some of the projects are well into the design phase while others are still very much conceptual at this time and what BBC has developed is a flexible model to assess the financial and budget impacts on the county as these projects gain greater definition.” Mr. Frick observed that the Sports and Events Center is in conceptual development with a business plan and feasibility study needed.

“It is reasonable to assume that these four projects will bring 1.5 million new visitor days to El Paso County,” BBC Managing Director Ford Frick told Commissioners. “The Olympic Museum has the greatest prospect of bringing new national dollars and the sports and events center also holds similar promise with competitors coming from all over the world and bringing with them coaches and families others.” Frick also noted that the UCCS Sports Medicine Center will have benefits beyond just new visitors to the area because local residents using the facilities will be bringing the insurance premiums they have paid out back into the local economy. He went on to tell Commissioners that the model focuses on new dollars, adjusts out local attendance by residents and takes into account the fact that visitors from other parts of the state will typically stay for shorter lengths of time and spend less. “These are strong projects, independently financed; bring unprecedented levels of state support and prospects for substantial local benefit,” Mr. Frick concluded noting that the projects are of “great importance.”

Budget Officer Sapp concluded the presentation noting that the BBC review confirms that all C4C impacts are over and above the County’s existing sales tax base and the historic and projected natural growth of that base. “It’s important to keep in mind that the County’s has experienced over the past 30 years annual increases in sales tax revenues of more than 5% and that growth is not fully captured in the BBC analysis making this a more conservative than what we would actually expect. But again, this is a flexible tool for you to use in evaluating these projects as they gain more definition.”
Former City Councilor Joel Miller, who's running for mayor, has been critical of the downtown stadium project and the county's $45,000 study, saying last August it would be useless because it was based on "overly optimistic numbers" for attendance and tax collections.

click to enlarge Miller: The study is useless. - FILE PHOTO
  • File photo
  • Miller: The study is useless.
Moreover, Miller said BBC officials told him the study wouldn't include include a cost-benefit analysis. Such research, Miller says, would look at the "substitution effect" — consumers' tendency to forgo spending at an existing venue to attend a new one — and "opportunity costs," the "what if" factor of channeling the money elsewhere, such as city infrastructure.

Here's the letter Miller wrote back in August to commissioners and City Council about the study:
August 3rd, 2014
To: The El Paso Board of County Commissioners and Members of Colorado Springs City Council
From: Councilmember Joel Miller

Dear Colleagues and Honorable Members of the El Paso County Board of Commissioners:

I appreciate the BOCC offering the opportunity to sit down with BBC’s Ford Frick. He seems like a good man who’s committed to doing the best work he can within his assignment. That said, after meeting with Mr. Frick, it’s apparent that he’s working with figures that will not provide an accurate City for Champions (C4C) picture for citizens. Mr. Frick’s analysis will take mostly at face value visitor numbers, spending assumptions and multipliers provided from previous analysis conducted by C4C proponents and analyzed in the state’s third‐party analysis conducted by Economic and Planning Systems (EPS).

BBC’s analysis may make some minor adjustments for double‐counting tourists and the number of visitor days spent in the area, but the primary inputs will be proponent data provided to BBC and used by EPS. The goal of the proponents’ data was to show the maximum potential of economic benefit. Because Mr. Frick will base his analysis on proponents’ overly optimistic numbers, as well as other reasons detailed below, I believe the analysis will be flawed.

In recent months, I’ve communicated with several nationally renowned sports economists, including Stanford Economist Roger Noll. In the case of C4C, and the proposed downtown stadium in particular, Dr. Noll has stressed the necessity of conducting a “cost‐benefit analysis” that takes into consideration specific factors, especially the substitution effect and opportunity costs.

The substitution effect considers that visitors to Colorado Springs (and citizens, also) have a limited leisure budget. Money these consumers spend at one leisure activity is money they will not spend at another. If consumers spend money at the proposed downtown stadium, for example, that’s money they won’t spend at the zoo, Fine Arts Center, or a Sky Sox game. In effect, with C4C, government would choose winners and losers by funding projects that would take money away from other businesses and non‐profits via the substitution effect. In some cases, actual business could be taken away by C4C projects; venues that currently hold flea markets, for example, may be forced out of business if future flea markets are held at the stadium.

Opportunity costs are projects that could’ve been funded if the same amount of money being spent on C4C was instead spent elsewhere. Proponents are considering using County and City tax increment financing (TIF) from 90% of the City for 30 years to fund C4C. While I’m not in favor of using sales tax from 90% of the city on any project, a thorough economic analysis should consider the “what if” effects of spending that money elsewhere, especially on projects that fall within the role of government—on road and other infrastructure improvements, for example.

Not only did Mr. Frick acknowledge that his assignment was not to perform a cost‐benefit analysis that includes the substitution effect and opportunity costs, but he hadn’t even been informed that TIF financing was being considered by his client, the County. Furthermore, Mr. Frick will not evaluate whether or not attendance figures given to him by C4C proponents are realistic—he will use those numbers as the primary basis of his analysis.

Given the concerns I’ve cited, I do not believe the BBC analysis will be a useful tool in determining the real costs and benefits of the C4C proposal on our community.
Again, I thank you for giving me the opportunity to meet with Mr. Frick, and, of course, I’m open to discussing this matter further with any of you.

Very respectfully,
Joel Miller

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