7.0. site / location analysis - palmer, alaska

FEASIBILITY ANALYSIS OF A NEW CONFERENCE & COMMUNITY CENTER IN PALMER

Site / Location Analysis

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DRAFT COPY For Discussion Purposes Only

7.0. SITE / LOCATION ANALYSIS As important as size and configuration, the location and site of a conference and community facility can have a significant impact on the facility’s operational success and its ability to generate new visitation and associated economic impact in a host community. As part of the overall evaluation of a potential new Palmer conference and community center, an assessment of potential site/locations within Palmer was conducted to determine what general areas might be best suited as a host location for a possible center. In general, a large number of characteristics and factors are typically important when evaluating the attractiveness of sites/locations. For traditional conference facility projects these include, but are not limited to:

1. Proximity to quality full-service hotel inventory

2. Requirements of private partner (if applicable)

3. Size, cost and ownership complexity of site

4. Proximity to restaurants, retail, nightlife, entertainment

5. Pedestrian-friendly walking environment

6. Parking availability

7. Ingress/egress

8. Site visibility

9. Synergy with other development initiates

10. Compatibility with surroundings

11. Other considerations

Normally, the location of existing hotel product would be a primary consideration when evaluating potential sites for a conference center type project, but given the “civic/community” focus deemed appropriate for a new Palmer Center, the location of existing hotel product is less important. That being said, a location near concentrations of existing hotels and/or sites that have adjacent/proximate parcels available for future hotel development would assist in marketing to and attracting non-local events. While considered unlikely in Palmer under current economic/credit market/lodging conditions, under a scenario in which a new hotel was developed (via a public/private partnership with the City), the requirements and preferences of the private partner will have significant influence on the ultimate location. In all likelihood, a prospective hotel developer partner will be looking for a site/location that will be able to maximize non-conference center hotel room demand, as the conference center itself (even if attached to the hotel) will not likely drive the majority of room night demand in the hotel.



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Based on conversations with the City, Focus Group and other participants, it is understood that the “Mat Maid Block” has been targeted as a potential site for the conference and community center project. Exhibit 1 presents a map of the targeted Mat Maid Block site in Palmer’s downtown core, as well as the community’s associated road and hotel infrastructure.

Exhibit 1 – Targeted Site/Location Issues

As shown, the majority of Palmer’s hotel inventory is located in the downtown core (and also a concentration of restaurants and retail establishments), where the Mat Maid Block is also situated. The historical/cultural “core” of Palmer is also located in this area.

1

3

24

5

A

1 Pioneer Motel (28 rms)

2 Gold Miner's Hotel (28 rms)

3 Valley Hotel (43 rms)

4 Colony Inn (12 rms)

5 Alaska's Choice Inn (30 rms)

A Site A



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The Mat Maid Block site is made up of seven individual parcels ranging in size and are outlined below in Exhibit 2.

Exhibit 2 – Targeted Site

The total acreage of the Mat Maid Block is 8.74 acres. The largest parcel in the Block is #7, which is located in the southeast corner with 3.03 acres, while the smallest parcel is #6, which is 0.18 acres. Overall, it is believed that the location of the Mat Maid Block within and nearby the “historic” core of Palmer, its proximity to downtown (as well as some lodging) makes it an attractive location for the Center project. With the assumed inclusion of the fixed seat auditorium, the Center project itself would likely consist of an approximate one acre facility. Surface parking needs could approximate several additional acres. As the Mat Maid Block consists of individual parcels totaling nearly nine acres, it is believed that sufficient space exists to create the overall Center project, along with other ancillary development opportunities if desired. Based on our review of the overall community, there are not any other locations that immediately present themselves as superior alternatives to the Mat Maid Block.

Colony

1

2

3 4

56

7

ACREAGE SUMMARY1 0.7 acres

2 1.11 acres

3 0.36 acres

4 2.51 acres

5 0.85 acres

6 0.18 acres

7 3.03 acres

TTL 8.74 ACRES

GoldMiners

Valley


Analysis of Construction & Operating Costs

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8.0. ANALYSIS OF CONSTRUCTION & OPERATING COSTS

The purpose of this chapter is to provide an analysis of order-of-magnitude construction costs and the estimated financial operating characteristics associated with the potential new Palmer community and conference center. Overall, this information provides a preliminary indication of both the upfront and ongoing costs associated with each of the identified facility scenarios.

Preliminary Construction Costs To provide an understanding of potential costs associated with the construction of a new conference and community center in Palmer, an analysis was conducted of order-of-magnitude hard construction costs pursuant to the supportable building program elements presented earlier in this report. Construction costs tend to vary widely among comparable projects. Many variables exist that influence actual realized construction costs, including type of facility, size, components, level of finish, integrated amenities, costs of goods and services in the local market, location and topography of the site, ingress/egress issues, costs savings related to developing a joint hotel/center project and other such aspects. Exhibit 1 presents the estimated order-of-magnitude hard construction costs for the proposed conference and community center (under low and high cases), adjusted for current economic conditions and local conditions in Palmer. Importantly, architectural design and site/infrastructure analysis will be required to fully estimate ultimate development costs. In addition to the estimated order-of-magnitude hard costs, soft construction costs, costs associated with land purchase and improvement, other potential infrastructure improvement costs and potentially annual operating costs will also need to be considered in the ultimate planning scheme, if subsequent planning steps are taken.

Exhibit 1

Hypothetical Order-of-Magnitude Hard Construction Costs

Low Case High Case

Multipurpose Hall 7,000 8,000Meeting/Classroom 3,000 4,000Museum/Cultural 5,000 6,000Auditorium 5,000 8,000

Total Sellable SF 20,000 26,000

Gross SF Factor 1.9 2.0Gross SF 38,000 52,000

Hard Costs per GSF $300 $450

Hypothetical Hard Costs $11,400,000 $23,400,000



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It is estimated that order-of-magnitude hard construction costs for a new Palmer Center could range from between $11.4 million and $23.4 million (in 2010 dollars). This range is fairly wide as we have assumed a range of space levels, finish quality and amenities (including the wide variable that would relate to the inclusion of a fixed seat auditorium). It is important to note that these estimates take into account the higher average construction costs in Alaska, as well as the lower average construction costs nationwide due to the economic downturn. Soft costs (i.e., financing costs, legal, architectural, consulting, permitting, etc.) would be in addition to these estimates, and could add 25 to 30 percent to total construction costs. Site acquisition and preparation costs, as well as any necessary infrastructure costs would also be in addition to these figures. Detailed architectural concept, design and costing study would be required to specifically estimate construction costs for a potential Palmer conference and community center.

Financial Operations Analysis This financial operating analysis only considers revenues and expenses generated through the operation of the facility itself and does not consider other potential ancillary income that may be related to the Center (such as incremental tax revenue, parking income, admissions surcharges, interest income, etc.), nor does it consider other non-operating costs, such as construction costs (i.e., debt service) and capital repair/replacement funding. This analysis is designed to assist project representatives in assessing the financial effects of the potential conference and community center and cannot be considered a presentation of expected future results. Accordingly, the analysis of potential financial operating results may not be useful for other purposes. The assumptions disclosed herein are not all inclusive, but are those deemed to be significant. Because events and circumstances frequently do not occur as expected, there usually will be differences between estimated and actual results and these differences may be material. The analysis of estimated operating results is presented in three components:

• Operating revenues.

• Operating expenses.

• Summary of estimated future financial operations.

As with all new conference or community centers, an initial startup period is assumed before event levels are anticipated to stabilize. Financial operating estimates prepared in this section reflect a stabilized year of operation (assumed to occur by the fourth full year of operation), shown in 2010 dollars. This analysis has been developed to reflect “net” operations. For instance, reimbursed event expenses and associated event revenues are not presented, rather, they are assumed to “pass through” the financial operating estimates developed in this section. Per capita revenue and expense assumptions were also developed using comparable facility data and industry experience with similar projects, along with consideration of the unique attributes of the Palmer marketplace and specific conditions envisioned for the proposed facility. As in all studies of this type, the estimated results are based on competent and efficient facility management and assume that no significant changes in the various event markets will occur beyond those set forth in this report.



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Operating Revenues The primary sources of operating revenue for a potential new Palmer conference and community center include space rental, admissions/gift shop, contract service/equipment, advertising/sponsorships and other revenue. For purposes of this financial operating analysis, no parking revenue has been assumed to be retained by the Center. The assumptions regarding the individual revenue components are also based on a review of the operations of comparable facilities throughout the country and industry trend data.

Facility/Space Rent Building rental revenues include charges for the leasing of facility spaces for event activities. Estimated rental revenues are based on estimates of the number of events within specific event categories, attendance levels, square footage used, assumed future growth rates, rental rates and receipts at comparable facilities, with an emphasis on Alaskan facilities.

Admissions/Gift Shop Admissions and gift shop revenue consists of the sale of tickets for admission to the building or ticketed events and the net revenues from sales of items in the gift shop.

Contract Service/Equipment Contract service and equipment consists of charges to event management and exhibitors for event-related services, such as providing electrical hook-ups and other utilities, leasing of equipment, providing security and cleaning services, advertising and other miscellaneous revenue items. Estimated service and equipment revenue is based on comparable facility financial operations and estimates of the number of events, attendance, square footage used, assumed future growth rates and receipts at comparable facilities.

Advertising/Sponsorships Advertising and sponsorship revenue consists of revenue obtained through the sale of advertising space throughout the facility.

Operating Expenses The primary sources of operating expenses for a potential new Palmer conference and community center include employee salaries, wages and benefits, utilities, repair and maintenance, general and administrative, insurance, materials and supplies, professional fees, and other expenses. The estimated operating expenses for a potential new Palmer conference and community center are based on historical operating expenses of comparable facilities and industry standards. Specifically, comparable facility operating expense data was analyzed on a per square foot basis. Consideration was



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given to operating efficiencies that could be expected to occur at the potential Center, as well as cost of goods/services adjustments specific to the Palmer area and the surrounding region. In estimating operating expenses, and staffing costs in particular, it is important that high-quality service is provided at a potential facility. Otherwise, the facility will not be in a position to attract and retain its market potential of event activity. The estimates provided in the previous chapter also assume that this quality standard is maintained.

Salaries, Wages and Benefits Estimated salaries, wages and benefits include compensation for full- and part-time employees. Employee benefits include payments for employee hospitalization programs, unemployment compensation, workers’ compensation, and FICA. This analysis is based on the financial operations of comparable and competitive facilities, and a potential facility’s size and event levels. It has been assumed that the Center will be staffed with personnel levels similar to that of other similar, well-managed centers. These estimates reflect the assumption that some full-time operations, maintenance, and setup staff will be maintained at the Center similar to comparable facilities.

Utilities Utilities expense at a new conference and community center in Palmer includes costs for electricity, water, gas and telephone. The estimates are based on industry averages and the assumption that the new facility will include all the current energy-saving components.

Repairs and Maintenance The analysis assumes that the maintenance costs for a potential Center in the early years of operation are relatively low. It is likely that such costs will increase incrementally over time as the facility depreciates. It is likely that the repairs and maintenance costs could eventually exceed the base-year estimates presented in this analysis. The establishment of a separate repair and maintenance reserve is recommended to fund future major capital projects.

General and Administrative General and administrative expenses include various day-to-day costs such as subscriptions, staff training, dues, staff travel, staff tuition reimbursement, licenses and permits, bad debt charges and other such items. This category also includes costs related to administrative business-related expenses such as postage, administrative supplies, administrative furniture and fixtures, auto allowances, administrative travel, memberships and maintenance of the administrative space.

Materials and Supplies Costs for materials and supplies for the proposed Center include those materials, supplies and equipment used for facility operations and its administrative offices. The analysis of materials and supplies expense is based on comparable facility operations and the levels of facility space.



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Professional Fees Professional fees are primarily comprised of costs for services including accounting and legal functions and other non-recurring consulting and advisory services. This also includes contractual services expenses, primarily consisting of costs for professional services including trash removal, cleaning, security and other such items.

Insurance and Other Expenses In addition to property and liability insurance, the remaining expenses that have been estimated include bad debt charges, vacation accrual and other miscellaneous operating expenses. In addition, a small amount of advertising and promotion activities and other similar expenditures have been included in the miscellaneous expenses.

Summary of Estimated Future Financial Operations Exhibit 2 presents a summary of the estimated financial operating results (in a stabilized year of operation) for a Palmer conference and community center for both scenarios (presented in 2010 dollars).

Exhibit 2

Estimated Financial Operating Results (stabilized year of operation, in 2010$)

SCENARIO 1 SCENARIO 2

Operating RevenuesSpace Rental $78,000 $93,000Admissions/Gift Shop (net) 41,000 48,000Contract Service/Equipment 25,000 26,000Advertising/Sponsorships 12,000 12,000Other 10,000 14,000 Total Operating Revenues $166,000 $193,000

Operating ExpensesSalaries, Wages & Benefits $226,000 $220,000Utilities 88,000 90,000Repair & Maintenance 17,000 20,000General & Administrative 42,000 40,000Insurance 18,000 18,000Materials & Supplies 28,000 30,000Professional Fees 20,000 20,000Other 15,000 15,000 Total Operating Expenses $454,000 $453,000

Net Operating Deficit ($288,000) ($260,000)



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As shown on the previous page, upon stabilization (assumed to occur by the fourth full year of operations), a new Palmer Center is estimated to generate an annual operating deficit of between $260,000 and $288,000 per annum, depending on the scenario. Start-up year operating deficits would be expected to be somewhat higher, as much as $400,000 per year for the first two years of operation. These figures only represent the annual operations of the Center and do not include non-operating items such as construction debt service, and capital repair/replacement reserve funding. It also does not include possible private sector contributions (such as donations and endowment funding), which are often critical in assisting ongoing operations of facilities of this nature. On a square foot basis, these types of operating losses are slightly higher than comparable conference and community centers throughout the country; however, they are consistent with (and slightly better than) comparable facilities operating in Alaska. For example, the Wrangell Center is operating at an approximate $460,000 deficit (before foundation, donation and public sector support). The following chapter of this report will outline the net new economic impacts estimated to be generated by the project(s)—benefits often cited by communities as a factor in a decision to invest in the construction and annual operating obligations for projects like this.


Economic Impact Analysis

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9.0. ECONOMIC IMPACT ANALYSIS

The purpose of this chapter is to provide an analysis of the potential economic impacts that could be generated by a potential new conference and community center in Palmer, based on key assumptions described herein. As previously mentioned, the evaluation of the economic benefits generated by conference and community centers is one of the primary determinants regarding the decision to proceed with projects. This chapter addresses:

• Economic impact concepts.

• Annual conference and community center economic impacts.

• Non-quantifiable impacts.

The annual operations of a conference and community center typically provide significant benefits to an area. Typically, and for purposes of this report, quantifiable effects are characterized in terms of economic impacts. Economic impacts are conveyed through measures of direct spending, total output, personal earnings and employment. These specific terms are defined later in this chapter.

Economic Impact Concepts The impact of a conference and community center is maximized when out-of-town attendees, exhibitors and/or attendee guests spend money in a community while attending a facility event. This spending by out-of-town attendees represents new money to the community hosting the event. This new money then creates multiplier effects as the initial spending is circulated throughout the local economy. It is important to note that spending estimates associated with the potential new Center only represent spending that is estimated to be new to the community (net new spending), directly attributable to the operation (and existence) of the facility. The analysis does not consider any assumed displaced spending within the community. For purposes of this analysis, “community” is referring to Palmer. The characteristics of economic impact effects are generally discussed in terms of their direct, indirect and induced effects on the area economy:

• Direct effects consist principally of initial purchases made by delegates or attendees at an event who have arrived from out-of-town. This spending typically takes place in local hotels, restaurants, retail establishments and other such businesses. An example of direct spending is when an out-of-town event attendee pays a local hotel for overnight lodging accommodations.

• Indirect effects consist of the re-spending of the initial or direct expenditures. An example of indirect spending is when a restaurant purchases additional food and dining supplies as a result of new dining expenditures through increased patronage. A certain portion of these incremental supply expenditures occurs within the local community (i.e., “indirect spending,” the type of which is quantified under this analysis), while another portion leaves the local economy (i.e., “leakage”).

• Induced effects consist of the positive changes in employment and earnings collections generated by changes in population associated with the direct and indirect expenditures.

The re-spending of dollars in an economy is estimated by using economic multipliers and applying them to the amount of direct, or initial spending. The multiplier effect is estimated in this analysis using a



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regional economic forecasting model provided by the Minnesota IMPLAN Group, Inc., a private economic modeling company. The IMPLAN system uses an input-output matrix with specific data for multipliers based on regional business patterns from across the country. Financial information for the matrix of multipliers is collected from various sources that include, but are not limited to, the U.S. Department of Labor, as well as state sales and tax reports. The system uses this data to determine the economic independence of specific geographic regions as well as the interdependence that exists between industries in those regions. The systems provide total industry output, personal earnings and employment data for approximately 520 industry groups.

For purposes of this analysis, results of the economic impact analyses are measured in terms of the following categories:

• Total output represents the total direct, indirect and induced spending effects generated by the project. This calculation measures the total dollar change in output that occurs in the local economy for each dollar of output delivered to final demand.

• Personal earnings represents the wages and salaries earned by employees of businesses associated with or impacted by the project. In other words, the multiplier measures the total dollar change in earnings of households employed by the affected industries for each additional dollar of output delivered to final demand.

• Employment represents the number of full- and part-time jobs. The employment multiplier measures the total change in the number of jobs in the local economy for each additional $1.0 million of output delivered to final demand.

The initial spending of new dollars into an economy begins a series in which the dollars are cycled through the economy. The re-spending of the dollars is estimated by using the economic multipliers discussed above and applying them to the amount of direct, or initial, spending. The multiplier illustrates that spending in a defined economy will lead to additional spending until that dollar has completed its cycle through leakage. Leakage represents the portion of a dollar spent in areas outside the designated economy.

Annual Economic Impacts As previously mentioned, this analysis only considers “net new” economic impact. This impact is derived solely by visitors attending or participating in facility events that do not reside in the Palmer area. For conservative purposes, our approach to economic impact estimation does not consider any spending by facility attendees/participants if they reside in the Palmer area. It has been assumed that any spending by these local individuals would represent “displaced” spending, that would have otherwise been spent locally on other products and services. One of the primary sources of direct spending involves attracting event attendees from outside the local area to make purchases in area hotels, restaurants and retail establishments. The analysis of direct spending related to Center activity begins with estimating the number of event attendees that could be attracted to Palmer. These estimates are based on the event attendance and event-day information developed through the market and event analyses. Estimates of per-day spending by out-of-town delegates and exhibitors are based on the results of an annual Convention Income Survey performed by Destination Marketing Association International (DMAI), formerly the International Association of Convention and Visitors Bureaus. The survey collected data concerning event related expenditures by delegates, exhibitors, associations and convention service contractors. The results of this survey have been adjusted to 2010 dollars and for cost of living levels



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and the unique characteristics of Palmer. The estimates of average daily spending on a per delegate basis were applied to estimates of potential future event activity at the potential new Center, based on the results of the overall market analysis. Adjustments were applied to estimated attendance levels for potential future event activity at the Center to segregate estimated levels of potential out-of-town event attendance directly as a result of the conference and community center. Exhibit 1 presents the annual new direct spending associated for a potential new Center in Palmer. This spending figure relates to facility Scenario 1. As mentioned in a previous chapter, a small level of event activity has been assumed to be lost under Scenario 2 (as the Borough is assumed to be the primary tenant with first date priority). As such, it is estimated that direct spending under Scenario 2 would be approximately 10 percent lower than for Scenario 1 (shown below).

Exhibit 1

Estimated New Annual Direct Spending by Industry

(Stabilized Year of Operations [Yr 4], in 2010 Dollars)

As presented above, total annual direct spending associated with a new conference and community center in Palmer (under Scenario 1) is estimated at approximately $1.3 million (in 2010 dollars). This total amount would be considered new spending to Palmer as a direct result of the annual operations of the new Center. Spending by local Palmer residents is not included in this figure and spending reductions have been made for a percentage of non-local attendees that would be expected to represent “day-trippers”, not requiring overnight accommodations. As the direct spending flows throughout the local and state economies additional rounds of spending, employment and earnings are generated. The total impact generated is estimated by applying specific industry multipliers to the initial expenditure to account for the total economic impact of the re-spending activity. The application of the multipliers involves calculating the product of the estimated amount of direct spending and the multiplier.

Entertainment, $37,755

Restaurant, $484,992

Other Industries, $67,764 Retail, $256,539

Hotel, $459,750

Total Annual Direct Spending –$1,306,800



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The total estimated direct expenditures generate effects on the economy that extend beyond the initial expenditures. Exhibit 2 summarizes the overall estimated new annual economic impacts within Palmer associated with estimated levels of potential event activity (under Scenario 1), based on the application of the IMPLAN multipliers.

Exhibit 2

Estimates of Annual Economic Impacts

(Stabilized Year of Operations [Yr 4], in 2010 Dollars)

As presented in the exhibit, the estimated total net new output for conference and community center events totals $2.1 million. Additionally, this spending is estimated to support between $914,800 in net new personal income (or “earnings”) in the local Palmer economy, along with 34 full and part-time jobs.

Non-Quantifiable Impacts The effects of attracting new events and attendees to the Palmer area could impact numerous industries and enhance economic activity throughout the community. Primary visitor industries, including hotels, restaurants, retail, local transportation, and related industries can benefit directly from a potential center. Indirect effects can benefit various support industries, including the wholesale, distribution, manufacturing, and other industries. In addition to the more quantifiable benefits of new facility development in Palmer, certain potential benefits cannot be quantifiably estimated. Potential qualitative benefits for Palmer include:

• New Visitation – New visitors will be attracted to the area because of an event in the new Center. These attendees, in turn, may elect to return to the area later with their families, etc. for a vacation after visiting the area for the first time. These impacts have not been quantified.

• Qualities of Life for Residents – The conference, cultural, educational and visual arts are often essential components of the fabric of modern communities. Infrastructure that support the arts,

Total Direct Spending$1,306,800

Total Output$2,090,880

Earnings$914,760

Employment34



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culture, history and higher learning are often the very things that work to attract families (and even companies) to live in specific communities.

• Construction Period Impacts – While not specifically quantified herein, there is normally a substantial short-term economic impact (including many jobs created) during the construction phase of major public assembly facility projects of this nature.

• New Visitation – New visitors will be attracted to the area because of an event in the new conference and community center. These attendees, in turn, may elect to return to the area later with their families, etc. for a vacation after visiting the area for the first time.

• Spin-Off Development – New retail/business tend to invariably sprout up near conference and community centers and other similar event facilities spurred by the operations and activities associated with the conference and community center, representing additions to the local tax base.

• Community Marketing – Attendees of certain conference and community center events (particularly, convention/conference/tradeshow) represent decision-makers and executives from a broad cross-section of industries. This exposure can benefit the area from a long-term business development perspective. These impacts have not been quantified.

• Anchor for Revitalization – New conference and community center development can oftentimes be the base of community-wide master development plans to enhance and revitalize markets. These impacts have not been quantified.

• Reduction in Lost Local Impact – Physical and functional limitations of existing Palmer area event facilities suggests that some level of event activity produced by local area companies and groups may be leaving the community to be held elsewhere where suitable facilities exist (i.e., Wasilla, Anchorage, etc.). To the extent that these Palmer-based groups must relocate outside of the local community (despite an interest in hosting events within Palmer), the spending related to these events effectively represents “lost” economic activity for the local area. Upon completion of the new Center, it is possible that many of these “local” events could be recaptured. These potential impacts have not been quantified.

• Other Benefits – There are a number of other intangible benefits of having a major conference and community center facility in a community that have not been quantified, including their ability to enhance community reputation and image, provide a local gathering point for residents and new advertising opportunities for local businesses.


Funding Alternatives Analysis

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10.0. FUNDING ALTERNATIVES ANALYSIS The purpose of this chapter is to provide a summary of the sources of funding that have been used within the public assembly facility industries and to discuss their potential for use in the possible development of a new Palmer conference and community center. The intent of the analysis is not to produce a financing plan for facility development, but rather to discuss certain financing vehicles, as well as public and private revenue sources that could be utilized to fund the project(s).

Typical Public Sector Funding Sources While there are a variety of public sector funding vehicles and revenue sources that have been used in the financing of conference and community facility projects in communities throughout the country, a large percentage are owned by the public sector and had original or expansion construction funding provided through municipal capital project funding (i.e., transfers from a City’s General Fund or Capital Projects Fund, etc.) or through the issuance of General Obligation or Revenue bonds. Types of financing/funding vehicles that are commonly used in event facility projects include:

• General Obligation Bonds

• Revenue Bonds

• Tax Increment Financing (TIF)

• Pay-As-You-Go Financing

• Certificates of Participation

• State Assistance

• Private/Public Equity & Grants

These common financing vehicles have been used for many public assembly facilities across the country, with the use of bonds and tax increment financing being the most prevalent. Over the years, relative to similar projects in other U.S. states, Alaskan public assembly projects have tended to have a greater level of State and Federal assistance with respect to initial development funding. Particularly, facilities including the Carlson Center (Fairbanks), Alaska Center for the Performing Arts (Anchorage), Nolan Center (Wrangell), Ted Ferry Civic Center (Ketchikan), and the Egan Center (Anchorage) have all used State and/or Federal grants or other contributions as part of their initial funding. Further, there are many State-wide foundations that have assisted in funding Alaska-based public assembly facilities, including the Denali Commission and Rasmuson Foundation. Service on locally-bonded debt is often supported by tax revenue, which has included the following:

• Hotel/motel taxes.

• Sales & use taxes.

• Property taxes.

• Restaurant/food & beverage taxes.

• Auto rental/taxicab taxes/fees.

• Sin taxes (alcohol, cigarette, etc.).

• Admissions/entertainment taxes.



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As previously mentioned, hotel taxes are frequently used to fund public facility projects such as conference centers, as the tax is borne by visitors and such facilities are normally considered visitor industry investment projects. Sales taxes are also frequently utilized for the construction of public assembly facility projects. Currently, the City of Palmer has a three percent sales tax in place, and the Mat-Su Borough has a five percent bed tax. For a comparison, the following other communities in Alaska that have a public assembly facility currently have the following sales and bed taxes rates:

• City of Anchorage (0% sales, 12% bed)

• Fairbanks Borough (0% sales, 8% bed)

• City of Ketchikan (3.5% sales, 7% bed)

• City and Borough of Sitka (6% sales, 6% bed)

• City of Wrangell (7% sales, 6% bed)

• City of Valdez (0% sales, 6% bed) By law in Alaska, there is no limit to the percentage of sales tax charged by the local municipality. However, it should be noted that the majority of Alaska communities that have a public assembly facility currently has a higher percentage of sales and bed taxes in place. For most comparable conference and convention center projects throughout Alaska and the country, close to 100 percent of initial development funding is typically borne by the public sector. For comparable cultural and arts center projects throughout Alaska and the country, it is typical that between 50 and 75 percent of initial development funding is contributed by the public sector. Another consideration for generating funds for community and conference center development is through the implementation of publicly-zoned districts, including public facilities, special use and tax reinvestment districts. The creation of these zones essentially involves capturing assessed valuation growth within a specific area related to a particular development. Enacting such zones often requires municipal, borough or state enacting legislation. Further, another identified funding opportunity for Palmer is through State and Federal assistance, including grants and loans through the following organizations:

• US Economic Development Administration

• USDA Rural Development

• Alaska Department of Commerce, Community & Economic Development

• Alaska State Council on the Arts

• National Endowment for the Humanities



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Potential Private Sector Participation and Other Revenue Sources In recent years, a growing number of communities have explored ways in which the private sector can participate in reducing the overall funding burden borne by the public sector. This participation has taken the form of:

• Naming rights.

• Sponsorships.

• Upfront service provider fees and facility component build-outs.

• Exclusive facility use agreements.

• Private donations of capital and/or land. Each of these opportunities for private sector participation in funding the facility should be evaluated. Given the potential costs for construction and the annual costs to operate, such private sector participation may be a necessary component of a successful project.

Naming Rights and Sponsorships Naming rights and other unique sponsorships have been increasing used in the public assembly industry in recent years. Naming rights agreements typically consist of a local corporation paying a fee upfront and/or over a series of consecutive years in exchange for the use of their company’s name for the entire facility or various components of it. Naming rights agreements are much more prevalent with professional sports facilities than with other event facilities such as conference and community centers. This is primarily attributable to typically much greater exposure potential at professional sports facilities (i.e., national broadcast coverage of events, exposure through other forms of media, millions of annual spectators, etc.). However, a small number of conference, community and arts facilities in small to mid-sized markets have sold naming rights for the entire facility or components of it. These transactions tend to succeed to the extent target companies can identify long-term benefits. These benefits can include: a revenue return, visual exposure for the sponsor, access to the attendees at the facility, sponsorship opportunities with events at the facility and other tangible benefits.

Upfront Service Provider Fees and Facility Component Build-outs Much of the recent private sector participation in public assembly facility funding has taken the form of up-front capital in exchange for guaranteed exclusive operating rights. For instance, a food service operator may contribute a portion of the costs of constructing the kitchen facilities or providing kitchen equipment in exchange for the right to provide food service in the building (or facility complex). These provider fees can also include other in-house services, such as: (1) electrical, (2) utilities/environmental control, (3) internet and communications, (4) virtual meetings/satellite, (5) audiovisual, (6) security systems, (7) entertainment; and other such items. Public assembly facility projects in recent years have increasingly seen private participation in the form of build-outs of various building components. For instance, several communities have partnered with one or more telecommunications firms whereby, in exchange for various advertising and sponsorship



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opportunities with the project, the firms installed the telecommunications systems (i.e., fiber optic and copper-based wiring, wireless components, equipment, etc.) at their own expense. In addition, the partnering firms may also receive revenue rights as facility users use the technology. Other private sector firms have provided similar build-outs in exchange for other unique opportunities at the facility, such as an exclusive area within the event facility that is used as a test area or showcase for the firm’s products or services.

Exclusive Facility Use Agreements In certain communities, there may be major corporations or institutions that are heavy users of the event facility. It may be possible to identify these users prior to facility development and negotiate up front funding in exchange for guaranteed use of the facility during certain times of the year. Such corporations or institutions may also be involved in the actual design of the event facility to help ensure that their facility needs are addressed.

Private Donations of Capital and/or Land Certain communities have succeeded in historical fundraising efforts for various public projects. In these instances, a few high-profile, community-oriented wealthy individuals have provided private donations of capital and/or land to help defray public sector development costs. There have been many Foundations created in Alaska specifically to help fund community projects such as the development of a community and conference center. Coordination with such groups may provide another option for funding in Palmer. Specified groups that have donated and contributed to projects similar to that proposed in Palmer include:

• Rasmuson Foundation

• MJ Murdock Charitable Trust

• Paul Allen Foundation

• Foraker Group Pre-Development Program

• Denali Commission Private donations from philanthropic individuals and organizations are often critical in the fundraising efforts for community, cultural and arts centers. Local capital campaigns (many times via the establishment of a dedicated endowment fund) tend to be instrumental in establishing seed money and demonstrating local interest in a project. Given the relatively small population of residents and corporations in Palmer, as well as limitations in the number of very wealthy individuals/families that make it their home, will likely pose challenges for a capital campaign. Nevertheless, attempts should be made to identify seed money of this nature if a determination to pursue a community and conference center project is made.



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Funding Conclusions and Examples As has been the case for many smaller Alaskan community facilities of this nature, the greatest chance for successful fund-raising in Palmer will likely consist of a diversity of public and private sector partners and sources. The Nolan Center in Wrangell is considered a good example, with both public sector contributions and strong participation via foundations, grants, private donations and other sources. The following summary write-ups present information on the funding sources used to construct public assembly facilities in Alaska and other communities across the country, including stand-alone buildings and public/private partnership models.

Wrangell Nolan Center – Wrangell, Alaska • Year: 2004 • Project: 5,300-square feet meeting space, 24-seat auditorium, museum, visitor center • Participants: City of Wrangell, Foundations, Trusts, Community • Deal Points: The $9.0 million facility was constructed, owned and operated by the City of

Wrangell. Total construction costs are broken down as follows: − $3.2 million - City of Wrangell − $3 million - Nolan Trust − $1.25 million - Rasmuson Foundation − $675,000 - Denali Commission − $629,000 - USDA − $250,000 - MJ Murdock Charitable Trust − $50,000 - Friends of the Wrangell Museum

Ted Ferry Civic Center – Ketchikan, Alaska • Year: 1994 • Project: 5,000-square foot civic center • Participants: City of Ketchikan • Deal Points: The $2.9 million facility is owned and operated by the City of Ketchikan. Total

construction costs are broken down as follows: − $1.5 million - City of Ketchikan − $823,000 – State grant − $550,000 – Federal grant − $10,000 – Other local contributions

Carlson Center – Fairbanks, Alaska • Year: 1990 • Project: Arena, 43,600 square feet of floor space • Participants: Fairbanks North Star Borough, State of Alaska • Deal Points: The $15 million facility is owned by the Fairbanks North Star Borough, and

operated by the private management firm, SMG. The facility was funded through the voter-approved appropriation of State grant money



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Dena’ina Convention Center – Anchorage, Alaska • Year: 2008 • Project: 86,000-square foot convention center • Participants: City of Anchorage, City-created CivicVentures • Deal Points: The City of Anchorage created the non-profit group CivicVentures to finance the

$111 million convention center. The facility was funded through City-issued bonds that were backed by an increase in the local hotel tax from 8 percent to 12 percent. The Center is owned by the City of Anchorage/CivicVentures and operated by the private management firm, SMG.

Egan Center – Anchorage, Alaska • Year: 1980’s • Project: 34,100-square foot convention center • Participants: City of Anchorage, State of Alaska • Deal Points: Anchorage’s 34,100-square foot Egan Center is also owned by the City and

operated by SMG, but was funded in the 1980’s by the State of Alaska’s surplus petroleum funds.

Detroit Lakes Community and Cultural Center – Detroit Lakes, Minnesota • Year: 2001 • Project: 16,900-square foot center, 837-seat auditorium • Participants: City of Detroit Lakes, State of Minnesota, Community, 501(c)(3) • Deal Points: The $9.5 million center’s construction was lead by a 501(c)(3), however

assistance was provided by the City of Detroit Lakes ($1.5 million construction loan), the local community ($4 million in support/fundraising) and a State of Minnesota grant.

Davis Conference Center and Hilton Garden Inn – Layton, Utah • Year: 2004/2008 • Project: 40,000-gross square foot conference center, 145-room hotel • Participants: Davis County & Western States Lodging • Deal Points: The $20 million conference center is owned by Davis County, and operated by

the hotel developer, Western States Lodging, who owns and operates the $18 million Hilton Garden Inn hotel that adjoins the center. Western States Lodging was given a renewable 5-year management contract for its center operations. The County pays an annual operating subsidy of $200,000 for the conference center, and in 2008, funded a $10.5 million expansion to the center largely by increasing the local occupancy tax.

Salem Conference Center & Phoenix Grand Hotel – Salem, Oregon • Year: 2005 • Project: 23,400- square foot conference center, 193-room hotel • Participants: City of Salem, VIP’s (private developer)

Deal Points: The $32 million conference center portion of the project was publicly financed through the sale of urban renewal bonds ($24.8 million) and a $7.2 million loan from the U.S. Department of Housing and Urban Development (HUD). The renewal bonds are being repaid by TIF generated within the urban renewal district, while the federal HUD loan will be repaid by a combination of proceeds generated from loans previously made by the City. VIP’s Motor Inns, Inc. originally owned the land upon which the facilities were built and, upon the completion of the project, sold to the City the portion of land upon which the conference center and parking structure were built. This purchase price ($1.5 million) was contributed immediately to the gain-loss reserve. VIP’s



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owns and operates the $18 million Phoenix Grand Hotel, and through a management contract, operates the Center as well. The City also contributes $300,000 per year from room tax revenues to the reserve until it has accumulated $4 million. Further, the City is responsible for funding future capital replacements to the Center and parking garage while VIP’s is responsible for funding capital replacements for the hotel.

Wenatchee Convention Center & Performing Arts Center – Wenatchee, Washington • Year: CC: 1980; PAC: 2000 • Project: 29,300 square foot convention center, 196-seat performing arts center • Deal Points: The $2.6 million convention center was funded through an Economic

Development Administration grant, while the $8.0 million performing arts center was funded primarily through $5.0 million in donations and local contributions, as well as $3.0 million from a State of Washington Arts Fund grant.

7.0. site / location analysis - palmer, alaska

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