Riff Raff: A note on the offer to buy the Fort Smith Convention Center

by Michael Tilley ([email protected]) 560 views 

Here we go again with this Fort Smith Convention Center/prepared food tax debate in which room for calm and reasoned analysis is nuked by emotion, half-truths, perception sans context, anecdotal “facts,” the city’s inadequate management of the center, and those on the many sides who seek to make personal the discussion.

This latest round now involves three broad intertwined areas.
• The true costs of the city’s subsidization of the center, and consideration of a prepared food tax (1/2 cent) to offset the city’s known subsidy – which is estimated at $777,000 in the 2016 budget.

• Need by the city to reduce costs and/or raise revenue to cover a growing fire and police pension problem.

• Offer by developer Lance Beaty (Beaty Capital Group) to buy all or some of the convention center and possibly use half the exhibition space to build city offices.

In this essay, let’s talk about Beaty’s offer. Such a deal could free up the city budget in dramatic ways. Depending on how much of the convention center is acquired, it would remove or significantly lower the $777,000 the city pays to subsidize center operations. Cash from a buyout between $5 million to $15 million (depending on appraisals and what is purchased) to the city could be a budget savior. Even the low end of that range, along with a few adjustments in pension contributions, could give the city more and better options to secure the pension fund.

It also could result in a modern city hall convenient for city employees and citizens. Existing Fort Smith offices are a labyrinthian maze of quasi-functional space that may have appeared contemporary during the Truman administration.

A private operator may also improve the level of service and upkeep at the convention center. In recent weeks I’ve attended two large events at the center. The concession service was bad at both. Have seen more professionalism and better service at a small town high school football concession stand. For example, there were several thousand people at the center during a recent sporting event. Only one concession area was open. No telling how much money walked out of the center. While restaurants near the center were happy with the business, it was not convenient for our out-of-town guests who don’t have a lot of time between matches to eat. And then there was the time a convention center shift manager showed up with an off-duty Fort Smith police officer in an attempt to intimidate a few folks who had a problem with the service.

But I’m off track.

There are potential downsides to selling the convention center. Selling could create a potential monopoly for large desirable space, causing rates to rise beyond what local groups could afford. That would remove the ability to access a structure initially built with public funds under the promise of being an affordable public venue.

If exhibit space is reduced, Fort Smith may no longer be a convention/large event destination city. The annual Governor’s Conference on Tourism would likely not return. Ditto for the Arkansas Bandmasters. And the Arkansas Cattlemen’s Association. Boat and homebuilder shows would be cramped, if not impossible. The city would not have had space for the Justice Scalia speech with a reduced exhibit area. More than 6,000 players, parents, friends and family are in town this weekend (Jan. 30-31) and next weekend for the “Battle at the Fort” volleyball tournament. It’s not unreasonable to estimate $350,000 to $500,000 in direct spending in Fort Smith and Van Buren just for this one event. Reduce the exhibit space, and the tournament becomes difficult to manage and less attractive to out-of-state teams.

The Fort Smith Convention & Visitors Bureau said events at the convention center had a $45.288 million economic impact in 2015. Let’s say that number is too high and it’s only a $15 million economic impact. Are we willing to risk losing that impact with one of the few metro economic sectors that has grown in recent years? The metro’s travel and tourism sector reached a record annual average of 9,100 jobs a month in 2014, up almost 17% compared to the average in 2000.

There has been a review of the center. A group of business people, chaired by then Baldor Chief Financial Officer George Moschner, spent a little more than a month – they weren’t given enough time and support, in my estimation – in early 2010 reviewing the center. Following the review, the committee concluded that the center is necessary to the quality of place of the region, that it could be better managed, and the city doesn’t have enough budget flexibility to provide the funds to maximize center use. The group also reviewed several funding options, and determined that a 1% prepared food tax was “clearly” the best alternative. Fort Smith voters would later overwhelming reject a prepared food tax.

Have said all the above to say this: While Beaty’s offer is tempting, its consideration by the Fort Smith Board should come only after it learns more about the facility – true costs to operate, where efficiencies may be gained, sales improved, management structure, independent analysis of its economic impact, near- and long-term capital needs, and other items that might provide a more clear picture of costs and benefits.

We don’t know what we don’t know about the convention center. That seems a weak position from which to negotiate.