Study shows value of Expo Center
Amelia Morrison Hipps
Posted: Friday, December 6, 2013 10:43 am
A feasibility study about a proposed Expo Center at the James A. Ward Agricultural Center commissioned by the Wilson County Commission yielded a lot of information at Wednesday night’s meeting.
Conducted by the Business and Economic Research Center (BERC) at Middle Tennessee State University (MTSU), the study accomplished its goal, according to Wilson County Finance Director Aaron Maynard, who served as the liaison between the county and MTSU.
“The study was about establishing a baseline of operating costs and revenue to determine if the proposed Expo Center was feasible, particularly under the proposed funding mechanism, which is the 3 percent hotel/motel tax,” Maynard said.
“I think it showed that it is economically feasible.”
Maynard said MTSU was “an objective third party” and was instructed to base the study on solid expectations, “not what ifs.”
“What we were after was an objective, independent analysis about whether this thing would work or not,” he said. “It was almost, and I hesitate to use this term, a ‘worse case scenario.’ We surveyed local businesses only because wanted to know if they would utilize it and to expand it would have been more costly.”
He also noted that that the Expo Center “is not a convention center,” as some people may think. It is a multi-use center for events like AAU basketball tournaments, where teams come and stay for two to three days, staying in local hotels, eating in local restaurants and shopping.
Dr. Murat Arik, associate director of BERC, explained the study’s results via a PowerPoint presentation, covering five major questions or topics:
1. What are the characteristics of the proposed Expo Center, and why is it proposed?
2. What are the major study assumptions?
3. What are the sources of the proposed Expo Center revenues? Are the proposed sources of revenues enough to cover the operating expenditure and debt repayment? If not, what does it take to reach the break-even point?
4. What is the economic and fiscal impact of the proposed Expo Center on Wilson County?
5. Conclusion and Recommendation
Arik noted in his presentation that Wilson County has experienced significant growth in the last decade by more than 33 percent from 2000 to 2012.
“Growth often creates pressure on existing resources,” he said, noting that the county has the 34th largest fair in the United States and will host the National Junior High Rodeo Championship Finals in 2016-2017.
“However, the county does not have covered activity areas for these types of major events.”
According to the 2013 American Express® Meeting & Events forecast, Arik said demand for convention activities is on the rise in North America with a nearly 3 percent expected growth.
He also noted that a notable trend in the survey is a 9 percent shift from large cities to the second-tier cities as event locations.
“Demand for mid-tier or non-traditional meeting facilities is higher than luxury or resort-type facilities,” Arik told the commissioners and members of the public, which didn’t pack the courtroom, but filled it substantially.
He noted that there are six relatively large meeting facilities just outside a 30-mile driving zone west of Lebanon with the Music City Center, Gaylord Opryland and Nashville Expo Center, all in Davidson County; the Ag Expo Park in Williamson County; the Hendersonville Expo Center in Sumner County, and the Middle Tennessee Expo Center in Rutherford County.
East of Wilson County, though, there are none, as the counties are primarily rural and do not have large meetings facilities. “This presents an opportunity for Wilson County to attract out of county visitors,” he said.
Two scenarios presented
The BERC survey of local businesses showed that while there is “a healthy level of interest in an Expo Center,” not all businesses that have booked meeting facilities in the past are willing to book the proposed Expo Center.
Additionally, Smith Travel Research data suggests very competitive, average rates in the region and that businesses are willing to pay on average $102.89 per night.
Two scenarios were presented concerning operating costs and revenue, based on two different business models.
Scenario one used an average cost estimate based on peer county expo center analysis, while scenario two used a facility-size adjusted cost estimate based on peer county facilities that employee small numbers.
Arik noted that maintenance and operational expenditures are driven by the number of people employed.
Under scenario one, the total operating cost, plus the cost of paying back the $9 million bond financed for construction at an average interest rate of 3 percent over 20 years, would total $2,216,527 starting in 2015.
Of that, $604,942 would go to pay the bond, $1,611,585 would be operating and maintenance cost. By the year 2034, the bond payment would be the same, but the operational and maintenance cost would have risen to $2,459,553, for a total of $3,064,495.
Under scenario two, which employees fewer people, the bond payments would be the same, but the operating and maintenance cost would drop to $952,110 in the first year, for a total of $1,557,052. By 2034, the total costs would have risen to $2,058,024, with $1,453,082 being for operations and maintenance.
On the revenue side, BERC projected that in 2015, hotel tax revenues would be $670,865, while facility rental and services revenue would be $563,268, with additional lodging revenues from Expo Center activities being $9,704, for a total of $1,382,725.
Arik had included in these figures $100,000 each year from Wilson County Promotions, the non-profit organization who produces the Wilson County Fair, but District 14 Commissioner Jeff Joines asked it be removed because they do not have a commitment from Promotions on any specific dollar amount. Therefore, The Wilson Post removed that amount from the total figures presented.
By 2034, BERC projected that the hotel revenues would have increased to $924,130, with facility rentals and services revenue going to $859,643 and additional lodging revenue rising to $59,349, for a total of $1,943,122.
These figures are based on an annual growth rate of 2.25 percent for facility rental, 1.70 percent for the lodging tax and 10 percent growth for the additional lodging tax.
Under scenario one, the projected cost versus revenue would produce an annual deficit of $984,862, while under scenario two that figure drops significantly to $163,435.
Using scenario two, to break even, the Expo Center would need an annual revenue stream of $163,500 per year. This could be accomplished in of two ways, Arik said.
The first option is to host an annual event similar to the National Junior High Rodeo Championship Finals.
The second would by increasing the facility utilization rate from 10 percent to 12.5 percent, which would mean full utilization of the facility by nine days and an increased paid-event number of 13, taking it to 208 instead of 195.
Implementing either of the break-even scenarios would have the Expo Center breaking even by the year 2031.
Using 2014 dollar equivalents, the stabilized year values, or permanent impact, of the Expo Center, according to the BERC study, would be $4,881,505 in business revenue, while providing $117,069 in sales tax, $53,145 in property tax and $45,195 in other taxes.
It would generate 54 jobs with wages and salaries totaling $1,551,548.
In conclusion, the BERC study recommended the scenario two type of business model and recommended that the proposed Expo Center leverage the fact that Wilson County hosts the 34th largest fair in the United States to “bring in new venues or improve existing ones.”
Commission’s Budget, Agricultural and Public Works Committees will meet at 5 p.m., Monday, Dec. 9, in the county courthouse courtroom to further discuss the study. The public is invited to attend.
Correspondent Amelia Morrison Hipps may be contacted at firstname.lastname@example.org.