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HomeMy WebLinkAbout103-82 RESOLUTIONY APPLICATION TO STATE BOARD OF FINANCE FOR \i ASSISTANCE UNDER CITY -COUNTY TOURIST MEETING pP AND ENTERTAINMENT FACILITIES ASSISTANCE LAW �`' Applicant: City of Fayetteville, Arkansas. Contact person: Donald L. Grimes, City Manager, or James N. McCord, City Attorney, Post Office Drawer F, Fayetteville, Arkansas 72701. Eligible facilities: Tourist meeting facilities con- sisting of a 40,500 square foot, 5 -story convention center and adjacent parking facilities consisting of a 3 -level 290 space parking garage. The Convention Center is located at the northeast corner of the downtown square (intersection of Center Street and East Avenue). It consists of auditoriums, meeting rooms, and office space. The Convention Center, completed in the Fall of 1981, has been leased by the City. of Fayetteville to the University of Arkansas for use by the University's Division of Continuing Education in conducting educational programs, short courses and seminars on a regional and statewide basis. The seminars will be taught to groups of both professional and nonprofessional status. These persons will pay a fee to the University for their attendance at the various functions. During periods of non-use by the University, the Center is available to the general public so long as such use does not conflict with the public use policies of the University Board of Trustees for off -campus facilities. The lease limits the fees the University may charge the general public for use of the Convention Center to the cost to the University of custodian, janitorial, and other special services (exclusive of utility services) in connection with such use. The lease between the University and the City is for a term of 23 years, subject to biennial appropriations by the General Assembly. The basic rent payable by the University, • • • -2- $122,000.00 per year,lhas been pledged by the City toward the debt service on tourism revenue bonds issued by the City to finance construction of the Convention Center. Under the lease, the University is responsible for all operation and maintenance expenses of the Center. A 290 -space, 3 -level parking garage has been constructed by the City on property immediately northeast of the Convention Center. The garage was financed from the proceeds of parking revenue bonds. It will be operated by a parking management company with whom the City has contracted. The facility will be available to the general public on a first-come, first-served basis. The operator will charge hourly rates as specified by the City; provided, spaces on the uppermost level will be leased on a monthly basis during normal business hours with said spaces to be made available to the general public after normal business hours on a first-come, first- served basis upon payment of a gate entry fee. Fayetteville, a City of approximately 36,800 persons, was without a Convention Center prior to construction of the existing facility and adjacent parking garage. A 250 -room Hilton Hotel has been constructed immediately north of the Convention Center by private developers. Thus, the City can now offer a Convention Center with proper seating and acoustics conveniently located to parking facilities and room accommo- dations. The complex is only one block from the business route of the only interstate highway traversing the City of Fayetteville. Financing of eligible facilities: The City financed construction of the Convention Center by issuing $4,475,000.00 in tourism revenue bonds under Act No. 380 of the Acts of Arkansas of 1971, as amended, and financed construction of the 3 -level, 290 -space parking garage adjacent to the Convention Center by issuing $591,000 1The annual rent is equivalent to $3.00 per square foot. • -3- in parking revenue bonds under Arkansas Acts 1971, No. 380, as amended, and Arkansas Acts 1949, No. 463, as amended. The bonds are secured by a mortgage of the improvements and a pledge of: (1) rentals received by the City under its lease with the University of Arkansas; (2) all revenues collected under the City's 1% gross 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 receipts tax levied on hotels, motels, and within the City; and (3) net parking revenues. Debt service requirements on the bonds are CONVENTION CENTER TOURISM REVENUE BONDS $341,686 341,636 387,686 404,324 424,904 438,694 440,994 437,474 438,474 438,686 433,101 432,001 435,081 436,956 432,706 437,706 431,206 433,094 438,406 441,750 443,125 442,531 289,969 Estimated Number PARKING REVENUE BONDS $ 58,320 70,920 82,920 95,180 105,760 114,660 124,880 133,060 143,900 155,100 58,300 restaurants as follows: TOTAL ANNUAL DEBT SERVICE REQUIREMENT $400,006 412,606 470,606 499,504 530,664 553,354 565,874 570,534 582,374 593,786 491,401 432,001 435,081 436,956 432,706 437,706 431,206 433,094 438,406 441,750 443,125 442,531 289,969 of Delegates Attending Regionall Meetings: Year 1982 1983 1984 1985 1986 Number of Delegates 1,832 2,565 3,591 5,027 7,038 Estimated Average Length of Stay Per Delegate Attending Regional Meeting: ;. 2.68 days 1 Meeting intended primarily for Delegates from outside the State. el • • -4- Estimated Amount of Expenditures by Delegates: -• Year 1982 1983 1984 1985 1936 Amount Daily Average for Delegate $ 314,463 $ 64.05 462,290 67.25 679,633 70.62 998,965 74.15 1,468,408 77.85 Estimated Investment Multiplier: 4.0 Estimated Additional State Sales Tax and State Income Tax Revenues to be Derived as a Result of the Expenditures: Year 1982 1983 1984 1985 1986 Amount $ 56,100 82,473 121,247 178,215 261,964 See attached statistical survey prepared by Bureau of Business and Economic Research, College of Business Administration, University of Arkansas, Fayetteville, Arkansas. Expected additional expense to the State: Estimated Additional expense to the State consists of the basic rent and maintenance expenses payable by the University of Arkansas under its lease with the City of Fayetteville for the Convention Center. Basic rent is $122,000.00 per year, or $3.00 per square foot. Mr. Fred Vorsanger, University of Arkansas Vice President for Finance, estimates annual maintenance expenses at $2.00 per square foot or $81,000.00. Local support: The project has been endorsed by the Fayetteville Chamber of Commerce, Downtown Fayetteville Unlimited, and the City of Fayetteville Advertising and Promotion Commission. • 5 Request for formal determination: The City of Fayetteville respectfully requests the State Board of Finance to determine that: (1) The proposed facilities are eligible facilities. (2) The State assistance shall be two-thirds of additional State sales tax revenues and additional State income tax revenues estimated to be generated with the amount of Stat assistance fixed separately for eadh of the two bond issues.1 (3) The economic multiplier for computing additional State sales and income tax revenues is 4x. (4) The estimated State sales and income tax revenues to be produced annually shall be subject to adjustment based on surveys of actual delegate/attendee expenditures and numbers of such attendees. Respectfully submitted, CITY OF FAYETTEVILLE, ARKANSAS faht• MA`+OR 1 Ark. Stat. Ann. §19-5504(g) provides that if a City issues two or more issues of bones to finance eligible facilities the amount of State assistance shall be fixed separately for ec_ch issue. As indicated herein, Fayetteville issued $4,475,000.00 in tourism revenue bonds to finance a convention center and $591,000.00 in parking revenue bonds to finance an adjacent parking garage. • • • • ESTIMATED FUNDS AVAILABLE FROM ACT 763 ACTS OF ARKANSAS OF 1977, FOR THE CENTER FOR CONTINUING EDUCATION FAYETTEVILLE, ARKANSAS Prepared by: Phillip Taylor Bureau of Business and Economic Research College of Business Administration University of Arkansas, Fayetteville Fayetteville, Arkansas July 9, 1982 • ESTIMATED FUNDS AVAILABLE FROM ACT 763 ACTS OF ARKANSAS OF 1977, FOR THE CENTER FOR CONTINUING EDUCATION FAYETTEVILLE, ARKANSAS This report contains estimates of the economic impact, and consequent state tax flows, that may be generated by the visitors utilizing the Center for Continuing Education constructed by the City of Fayetteville. The methodology used in generating the estimates presented here has been patternedafter that contained in a letter submitted by the City of Little Rock to the State Board of Finance on June 8, 1977. ACT 763, ACTS OF ARKANSAS AF 1977, AS AMENDED This act provides the possibility for acquiring State funds to support the construction of tourist meeting facilities. Application for such funds must be made to the State Board of Finance and if the Board rules the subject tourist meeting facilities to be eligible, the city or county making the application may receive from one-third to two-thirds of the additional State tax revenue generated by the facility, not to exceed 80 percent of the debt service requirements of the facility. The Act specifies that an investment multiplier of from 2 to 5 can be used in making the revenue estimates. It also provides that only increases in State revenues resulting from the use of the facility, and after allowing for any increases in State costs, shall be considered in determining the amount to be refunded to a city or county. • DELEGATION UTILIZATION OF THE CENTER FOR CONTINUING EDUCATION The data contained in Table I indicate considerable fluctuation in both the number of functions and the total attendance at these functions from Fiscal 1971 to Fiscal 1982. However, prior to the construction of the Center for Continuing Education there was little space available for continuing education and conventions on the campus of the University or in the city. Also, coinciding with the opening of the Center for Continuing Education, the Division of Continuing Education began to actively develop a plan for marketing the programs that would utilize the new facility. The first regional meetingl utilizing the Center for Continuing Education was held on January 15, 1982. A summary of the number of meetings of this type during the six-month period from January through June, 1982, is provided in Table II. As shown in that table, there were eleven such meetings with 916 delegates. The "average length of stay" for each delegate was 2.68 days. Annualizing the above data yields an estimate of 1832 delegates staying a total of 4,910 days during 1982. At the present time, the Center for Continuing Education has 72 events listed on its calendar. The distribution of these events by date and estimated attendance is given in Table III. Based on this infor- mation and existing development plans, the Division of Continuing Education estimates an annual increase of 40 percent in the number of delegates attending regional meetings at the Center between 1982 and 1986. These estimates are shown in Table IV. lAs defined in Act 763 of 1977. • • • • TABLE I ATTENDANCE AT CONFERENCES, INSTITUTIONS & WORKSHOPS UNIVERSITY OF ARKANSAS FAYETTEVILLE CAMPUS (1970-1982) Fiscal Number of Total Year Conferences Attendance Percent Change in Attendance 1970-71 63 8,008 1971-72 81 12,127 51 1972-73 73 6,471 - 52 1973-74 62 7,565 27 1974-75 81 9,534 26 1975-76 109 13,001 36 1976-77 122 12,010 8 1977-75 57 7,600 37 1978-79 98 12,746 68 1979-80 85 11,497 - 10 1980-81 96 13,954 21 1981-82 115 15,069 8 Source: Division of Continuing Education, University of Arkansas, Fayetteville. • TABLE II REGIONAL MEETINGS AT THE CENTER FOR CONTINUING EDUCATION JANUARY 1, 1982 - JUNE 30, 1982 Length of Number of Number of Stay (days) Events Delegates 1 1. 45 2 6 470 3 1 145 4 2 244 5 1 12 11 916 Source: Derived from information provided by the Division of Continuing Education, University of Arkansas, Fayetteville. • TABLE III FUTURE MEETINGS CURRENTLY1 LISTED ON CALENDAR CENTER FOR CONTINUING EDUCATION • Number of I Estimated Year Month Events Attendance 1982 July 19 1,613 August 10 1,925 September 5 510 October 11 1,050 November 7 907 December 1 100 1983 January 1 100 February 2 200 March 1 100 April 6 1,580 July 2 266 October 1 150 November 1 200 1984 March 2 400 April 2 600 1985 October ' 1 1,200 1July 8, 1982 Source: Derived from information provided by the Division of Continuing Education, University of Arkansas, Fayetteville. • • 4 TABLE IV PROJECTED NUMBER OF DELEGATES VISITING THE CENTER FOR CONTINUING EDUCATION 1982 - 1986 Year Number of Delegates 1982 1,832 1983 2,565 1984 3,591 1985 5,027 1986 7,038 Source: Derived from information provided by the Division of Continuing Education, University of Arkansas, Fayetteville. It should be noted that the Hilton Hotel, adjacent to the Center for Continuing Education, also promotes the use of the Center. Moreover, by September 1, 1982, the Hilton management expects to add a person to their staff with the specific objective of further enhancing the flow of delegates utilizing the Center facilities. Consequently, the projections presented in Table IV would appear to be reasonable and, in fact, minimum in nature. DELEGATE EXPENDITURES There are no studies currently available that reflect the expenditures of delegates visiting the Center in Fayetteville. However, for the 1978-1979 period a study conducted by the Little Rock Convention Bureau found the average daily expenditure per delegate to be $SS.62. Moreover, that same study found delegates attending trade shows spent $78.00 per day, while exhibitors at those same shows spent $193 per day. For purposes of this report, it would seem reasonable to assume that delegates attending meetings in Fayetteville spend amounts similar to those attending meetings in Little Rock ($55.62). Thus, the data presented in Table V are premised on that assumption and, in addition, are adjusted for inflation. Table IV combines the information in Tables IV and V to develop total spending by delegates attending regional meetings. IMPACT ON STATE REVENUE COLLECTIONS Act 763 of 1977 specifies that the state revenues to be considered in making estimates of impact are those derived from the income and gross • • 11 • ;• • • TABLE V EXPENDITURES PER DELEGATE Year Daily Total 1978-1979 $55.621 $149.064 1980-81 61.002 163.48 19S2 64.053 171.65 1983 67.25 180.23 1984 70.62 189.26 1985 74.15 198.72 1986 77.85 208.64 11978-1979 Convention Expenditure Survey, Convention Bureau, Little Rock. • 2Adjusted for inflation as estimated by the U.S. Travel Data Center, Washington, D.C. 3Assuming a 5% inflation rate for each year from 1981 through 1986. 4Based on the Center for Continuing Education (Fayetteville) experience in 1982 that indicates an average length of delegate stay at a regional meeting of 2.68 days. • TABLE VI ESTIMATED TOTAL SPENDING OF DELEGATES ATTENDING REGIONAL MEETINGS Year Number of Spending per Total Delegates Delegate Spending 1982 1,832 $171.65 1983 2,565 180.23 1934 3,591 189.26 1985 5,027 198.72 1936 7,038 208.64 314,463 462,290 679,633 998,965 1,468,408 • • sales taxes. Thus, the estimates developed in this report are based on individual and corporate income taxes and the gross sales tax. The Act also specifies that an "investment multiplier" of from 2 to 5 may be used. The term "investment multiplier" is not defined in the Act. Thus; for purposes of this report, it is assumed to mean the number of times a dollar spent by a delegate will "turn over" in the Arkansas economy. In its letter to the State Board of Finance dated June 8, 1977, the City of Little Rock assumed a multiplier of four (4). The estimates that follow are predicated on that same assumption. Since the "multiplier" may be said to act on Gross State Product, rather than income, but the subject taxes are generally related to income, a transition must be made between Gross State Product and Personal Income. Data, for 1975, developed by the Industrial Research and Extension Center indicate the Gross State Product to by $9,745,000,000. For that same year, the Bureau of Economic Analysis of the U.S. Department of Commerce estimated Personal Income in Arkansas to be $9,775,000,000. (Subsequent alterations in base data from which these estimates were derived may have caused the actual numbers to be modified slightly since the original work was carried out.) Given the similarity between these two estimates, it is assumed that, numerically, Gross State Product and Personal Income in Arkansas are equal. Table VII contains a step-by-step illustration of the estimating methodology used to develop the estimates of the impact on State revenue of the Center for Continuing Education. The following table (VIII) presents the estimates for each year from 1982 through 1986, using the illustrated methodology. • Individual Incom51 Corporate Income - Gross Sales2 Total TABLE VII ILLUSTRATION OF THE METHODOLOGY USED TO COMPUTE STATE REVENUE IMPACT 1980 Tax Collections $314,698,501 83,580,805 332,566,535 $730,845,861 Personal Income in 19803 = $16,402,000,000 Total Tax Collections Personal Income $730,845,861 $16,402,000,000 mm torn Effective Tax Rate 0.044558 or 4.46% 1982 Delegate Spending4 Multiplier Personal Income Generated Effective Tax Rate Additional Revenues $ 314,463 x 4 $1,257,852 x .0446 $56,000.1992 Q. 1Individual Income Tax liability as shown in Arkansas Individual Income Tax Data from 1980 Returns, Revenue Division, Department of Finance and Administration, January 6, 1982, p. 7. 2Statement of Gross Tax Collections, Revenue Finance and Administration, January 1, 1982. 3Bureau of Economic Analysis, U.S. Department of Commerce, April 1982. 4Table VI. Division, Department of • • TABLE VIII ESTIMATED ADDITIONAL STATE REVENUES GENERATED BY THE CENTER FOR CONTINUING EDUCATION Year Regional Delegate Spending Personal Income Generated Revenue Yield 1982 1983 1984 1985 1986 $ 314,463 462,290 679,633. 998,965 1,468,408 $1,257,852 1,849,160 2,718,532 3,995,860 5,873,632 $ 56,100 82,473 121,247 178,215 261,964 • ,. • ALLOWED REFUND OF INCREASE IN STATE REVENUES The Act provides two conditions in establishing the allowed refunds from any amount of increase in State revenues generated by delegates meeting at the Center for Continuing Education. The first condition provides that not less than one-third nor more than two-thirds of any established increase in revenues may be refunded. Table IX contains the estimated minimum and maximum as determined by this condition. A second limiting condition pertains to 80 percent of the debt service requirements. This latter condition has not been considered as a factor in making the estimates contained herein. TABLE IX ALLOWED REFUND RANGE Year Revenue Yield Minimum Maximum 1982 $ 56,100 1983 82,473 1984 121,247 1985 178,215 1986 261,964 $18,700 27,491 40,416 59,405 87,321 $ 37,400 54,982 80,831 118,810 174,643 •