Downtown Core Economic Vision

Wells, Nevada

Prepared by: Better City

i

Table of Contents Executive Summary ............................................................................ 1

Background..................................................................................... 1

Current Opportunities .................................................................... 1

Housing and Quality of Life............................................................. 2

Strategic Quality of Life Projects..................................................... 2

Quality of Life Assets + Tourism Venues = Win/Win ....................... 3

Asset Inventory ............................................................................... 3

Geothermal Resources ................................................................... 4

Proposed Projects .............................................................................. 4

Action Items ................................................................................... 4

Wells SWOT Analysis .......................................................................... 5

Strengths ........................................................................................ 5

Weaknesses .................................................................................... 5

Opportunities ................................................................................. 5

Threats ........................................................................................... 6

Demographic and Economic Characteristics ...................................... 7

Population and Age ........................................................................ 7

Education........................................................................................ 8

Income and Housing ....................................................................... 9

Traffic Counts ............................................................................... 10

Reno Redevelopment Success .......................................................... 12

Other Successful Redevelopment .................................................... 13

Vision for Downtown Wells .............................................................. 14

Housing Project ............................................................................ 14

Destination Attractions................................................................. 14

Benefits of the Vision ....................................................................... 22

Rebranding ................................................................................... 22

Generating Traffic ......................................................................... 22

Job Creation .................................................................................. 22

New Market Opportunities ........................................................... 22

Increased Tax Revenue ................................................................. 22

Tourist Tax Policy Comparison Study ................................................ 23

Lodging Tax Background ............................................................... 23

Analysis ......................................................................................... 24

Conclusion .................................................................................... 25

Project Phasing and Funding ............................................................ 25

Phase I – Analysis and Planning .................................................... 25

Phase II– Hot Pools, Garden, Hotel ............................................... 26

Phase III – Subsequent Development ........................................... 26

Conclusion ........................................................................................ 27

Appendix .......................................................................................... 28

Tables Table 1: Population and Age ............................................................... 7

Table 2: Education Comparison .......................................................... 9

Table 3: Education Attainment > 25 Years Old ................................... 9

Table 4: Income Estimates Comparison ........................................... 10

Table 5: Wells Housing Estimates ..................................................... 10

Figures Figure 1: Faults and 2008 Earthquake near Wells .............................. 6

Figure 2: Nevada Seismic History ....................................................... 6

Figure 3: American Community Survey Population Estimates ............ 7

ii

Figure 4: Age Comparison .................................................................. 8

Figure 5: Wells Racial Composition .................................................... 8

Figure 6: 2013 Education Attainment >25 (% of Total) ...................... 9

Figure 7: AADT, I-80 East of Wells .................................................... 10

Figure 8: AADT, I-80 West of Wells................................................... 11

Figure 9: AADT, U.S. 93 North of I-80 ............................................... 11

Figure 10: U.S. 93 South of I-80 ........................................................ 11

Figure 11: Sixth St. West of U.S. 93 .................................................. 11

Figure 12: Sixth St. between Humboldt and Lake ............................. 12

Figure 13: Humboldt Ave. E of I-80 .................................................. 12

Figure 14: Reno Riverwalk District and Whitewater Park ................. 13

Figure 15: Example Housing Project ................................................. 14

Figure 16: Proposed Project Location............................................... 15

Figure 17: Hot Pools in Winter at Lava Hot Springs, ID ..................... 15

Figure 18: Newest Hot Pool at Lava Hot Springs .............................. 16

Figure 19: Activity in Hot Pools at Lava Hot Springs ......................... 16

Figure 20: Lava Hot Springs Hot Pools at Night ................................ 17

Figure 21: Conservatory ................................................................... 17

Figure 22: Children's Play Area Concept ........................................... 18

Figure 23: Water Feature Example ................................................... 18

Figure 24: Indoor Vegetable Garden ................................................ 19

Figure 25: Botanical Garden Walkway .............................................. 19

Figure 26: Marjorie K. Daugherty Conservatory ............................... 20

Figure 27: Phillipis Garden Restaurant Bar ....................................... 20

Figure 28: Limited-Service Hotel Room ............................................ 21

Figure 29: Wellness Spa Treatment .................................................. 21

Figure 30: Wells Traffic Counts, 2013 ............................................... 28

Figure 31: Vacant Land/Buildings (Blue Outlines), Sixth and Seventh

Streets .............................................................................................. 29

Figure 32: Vacant Land/Buildings (Blue Outlines), US 93 to Ruby Ave.

.......................................................................................................... 30

Figure 33: Vacant Land/Buildings (Blue Outlines), Shoshone Ave. to

Wells Ave. ......................................................................................... 31

Figure 34: Duluth Lodging and Sales Tax .......................................... 32

Figure 35: Tax Rate Comparison ....................................................... 33

Figure 36: Duluth Food and Beverage Tax Rates & Uses .................. 34

iii

Disclaimer

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. Although we

endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or

that it will continue to be accurate in the future. You should not act upon the information contained in this publication without obtaining specific

professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained

in this publication, and, to the extent permitted by law, Better City, LLC, its members, employees and agents do not accept or assume any liability,

responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in

this publication or for any decision based on it.

1

Executive Summary

Background The City of Wells was first established in 1869 as a railroad town and

watering hole. The area is endowed with an abundance of ground

water, which gave the City its namesake. It also lies near the

headwaters of the Humboldt River. The City served as a midpoint

oasis for trains as they traveled across the Great Basin Desert. With

the advent and widespread adoption of the automobile, the railroad

industry and the business it brought to town declined.

With the construction of I-80 and U.S. Highway 93, the City

transitioned into a stop for travelers along the highways and has

become highly dependent on highway traffic for sales and lodging

tax revenue. Highway 40, or Sixth St., became the City’s downtown

and main economic corridor. In 1985, I-80 was extended past the

City, which caused a significant decline in downtown traffic. In

addition, the continual improvement in vehicle gas efficiency has

allowed more travelers to bypass the City, causing many gas stations

and other businesses to close.

To add to its struggles, in 2008 the City was hit by a 6.0 magnitude

earthquake that caused considerable damage to many of the City’s

buildings, especially historic buildings along Sixth and Seventh

Streets. Although some repairs and rebuilds have been completed,

many buildings have since been torn down. Others are in such a

state of damage and disrepair that they are unfit for occupancy. The

exodus of businesses from the downtown due to the economic

calamity caused by the earthquake has also contributed to the City’s

high vacancy rate. The City is in need of a vision and actionable

strategy to brand itself as a destination attraction for travelers as

well as a community of choice for new residents and employers.

Current Opportunities The City has significant job creation opportunities in the mining and

extraction industry over the next five years. Demand on City

resources will be significant as many workers may immigrate to the

City during the construction of a new gold mine being developed by

Newmont at their Long Canyon operation. The mine is centrally

located between Wells and Wendover. Strategic planning and

public/private investments in workforce infrastructure will be critical

in order for Wells to attract and capture this new workforce rather

than losing it to Wendover or Elko. Collaborative partnerships with

private industry should be formed to identify the needs of employers

as well as those of the existing and future workforce in order to work

together to find mutually beneficial solutions.

The mining and extraction industry is dependent on global

commodity prices, subjecting the industry to dramatic boom and

bust cycles, as seen in the Elko County region in the past two

decades. As such, the City should identify funding mechanisms that

can capture, channel, and complement future tax revenue generated

by the mining and extraction industry and workforce

accommodation projects to foster growth in other strategic clusters

that have less volatile economic cycles. Securing these funding

mechanisms is time-critical as Newmont is planning new

construction starting in early or mid-2015.

Applications for planning grants through the Economic Development

Administration (EDA) and the Department of Housing and Urban

Development’s (HUD) Community Development Block Grant (CDBG)

Program are being prepared to assist the City in developing plans

and strategies for workforce accommodation and long-term

economic diversification.

2

The development of highway amenities and destination attractions

capable of capturing significant sales and lodging tax revenues from

highway travelers and tourists will provide the City with a revenue

source that can be re-purposed for strategic projects designed to

eliminate blight, diversify the City’s economy, revitalize the

downtown core, and capture and retain its workforce.

Housing and Quality of Life The City suffers from a lack of quality housing and a notable amount

of blighted land and buildings. Typically, housing issues stem from a

lack of employment opportunities, but the City has a much different

underlying problem. Demand for housing is weak because the City

lacks quality of life offerings for its citizens and the workforce in the

City and region, and because of the blight that exists. Improvements

in quality of life and a change in community perception will position

the City to better attract new housing developments and new

residents who come to work for the mine and other future

employers.

The City should work to address the underlying quality of life issues

in concert with existing employers, Newmont, and their workforce.

For example, workforce attraction and retention policies should be

coordinated among existing businesses, local government, and

housing developers. Surveys should be conducted to determine

needs, and planning charrettes held to engage the public. The

outcome of these efforts should be to develop strategies to address

and resolve quality of life issues that ultimately drive demand for

housing in the community.

Strategic Quality of Life Projects The City suffers from a lack of quality of life offerings, which can be

addressed and remedied through public private partnerships (PPP).

PPPs will require the participation of the City and the private

development community in the development of year-round

destination attraction assets. These assets can provide recreation

and entertainment to local citizens thereby providing them a higher

quality of life.

More importantly, these projects should be large enough in scale to

attract the regional and larger markets. Ultimately, the ability of a

community to attract dollars from outside its borders determines its

economic fate. Capturing the regional, national, and even

international market will allow these projects to attract and catalyze

additional private investment as well as provide significant economic

benefit to existing local businesses while creating market

opportunities for new small business owners.

A clear strategic vision must be adopted with regards to the location

and operational structure of these assets with the ultimate outcome

being the ability to transfer the operational risk and ongoing

maintenance responsibility to the private sector. As such, the

location of quality of life assets should be driven in part by the

private sector based on fundamental economics and the ability to be

self-funded through a PPP structure.

The downtown core is not a suitable location for a strategic

destination attraction due to its distance from the freeway and lack

of visibility. A downtown site that is closer to the freeway will

provide better freeway visibility and access, while also acting as a

gateway to the downtown district. The bend on Sixth Street near

Shoshone Avenue appears to be a natural place for such a

development. The public meeting held at City Hall on December 4,

2014 resulted in general support for this proposal from the

stakeholders present. Environmental and geotechnical surveys

should be conducted to determine if soils are uncontaminated and

the site is developable.

3

Quality of Life Assets + Tourism Venues = Win/Win The City is well-positioned to develop quality of life assets and grow

its tourism base, but suffers from a high-degree of seasonality and

lacks amenities that would allow locals and tourists to take full

advantage of local recreational opportunities. Snowmobiling and

cross-country skiing could provide economic benefit to the

community but their season is limited to the winter months and the

City lacks outfitters and rentals. Conversely, the Humboldt Mountain

Range, mere miles from downtown Wells, has the potential to

become a moderate driver for tourism with hiking, biking, fishing,

and more, but these activities’ season is limited to the summer

months, and again the City lacks outfitters and rentals. A new year-

round destination attraction will supplement these existing assets

and provide occupancy demand that will drive additional private

investment in hospitality.

A project that equally solves the quality of life issues in the

community and addresses seasonality in the tourism base should be

a strategic focus. To date, efforts to address quality of life (and to a

certain degree seasonality by bolstering year-round demand) have

focused on single or multi-day events and small improvements to

existing assets. This is a very common approach and a policy that is

not unique to the City. Unfortunately, this policy will never create

the change needed to address the underlying fundamental economic

issues within the community.

Existing funding sources such as the City’s transient lodging tax (TLT)

revenue, which provides recreation and advertising funds, should be

committed to strategic year-round destination attraction projects.

This funding can be used to provide quality of life assets to local

citizens yet place the burden of taxation to fund these assets on

visitors from outside the community. The use of TLT to develop and

maintain strategic year-round destination venues addresses the

quality of life issues that plague the community.

In turn, destination venues produce additional TLT revenue since

they are demand drivers for hotel rooms. Continual public

investment (when appropriately partnered with private investment

and operation) in strategic year-round destination venues creates a

virtuous cycle of investment and growth.

Asset Inventory The City has a number of assets that may be of use in building up the

downtown core or improving quality of life:

Approximately 50 acres of vacant land and land with vacant buildings along Sixth and Seventh Streets from U.S. Highway 93 through the downtown core (see Figure 31 through Figure 33;

A new community swimming pool was recently completed to replace the one damaged in the 2008 earthquake. The pool offers daily, monthly, quarterly, and annual passes, as well as 10- and 20-use punch passes. Group and private swimming lessons are also offered, as well as private parties and lockers;

The City owns a 160 acre shovel-ready industrial park that is adjacent to the municipal airport. The park is only minutes from Highway 93 and I-80 where three truck stops are located;

The municipal airport is minutes from the downtown core and right next to the industrial park. The runway dimensions are 5,508 x 75 feet. It has a 25,000 pound single-wheel weight bearing capacity. The airport offers 100LL and JET-A fuel;

The City also owns the 9 hole Chimney Rock Golf Course, which has a snack bar, a pro shop, and golf carts for rent.

4

Geothermal Resources The City’s geothermal resources provide an asset that can be

leveraged to recruit energy and environmentally-conscious

businesses in industry clusters such as tourism and energy. The

ability to successfully recruit these industry clusters will largely be

dependent on the City’s infrastructure assets.

Evaluating the feasibility and interest of Wells Rural Electric

Company to develop a “clean grid” using geothermal energy within

the City should also be pursued as this may represent a competitive

advantage in recruiting employers to the City.

Proposed Projects Better City recommends an immediate focus on recruiting a

developer for a new housing development. This will supply the

housing that incoming employers need. Subsequent development of

the project that will be proposed below should be advanced through

a phased approach that focuses on the City’s long-term quality of life

goals through developing destination attractions.

Feasibility studies and market analyses should be conducted, and the

private sector engaged in the development of a natural hot pools

attraction using the City’s geothermal resources, an indoor botanical

garden or conservatory that also utilizes geothermal energy, an

adjacent restaurant, and a hotel with a spa component (the

“Project”). This Project will provide the type of year-round

destination attraction that the City needs to pull travelers from the

highway and entice tourists to visit.

Action Items Better City recommends the following action items:

EDA Short Term Planning Grant Application – CEDS;

EDA Short Term Planning Grant Application – Economic Redevelopment;

HUD CDBG application – Local planning and implementation;

Recruit developer for new housing project to prepare for the expected influx of Newmont mine workers;

Year-round destination attraction strategic project feasibility studies;

Recruit developer(s)/operator(s) for year-round destination attractions;

Funding strategy for each Project phase;

Begin dialogue with Wells Rural Electric Company to assess feasibility and interest in developing geothermal electricity source and “clean grid;”

Conduct data and trend analysis on tax revenue generated from tourists from TLT revenues to determine underlying drivers, customer base, and price sensitivity to changes in the tax rate.

5

Wells SWOT Analysis

Strengths The City has a variety of assets that provide a strong economic

foundation. The primary competitive advantages the City has include

the following:

natural beauty of the Humboldt and other nearby mountain ranges;

open spaces that provide a number of tourism, recreational, and lifestyle opportunities;

the City’s centrality between Elko and Wendover;

abundant water;

warm/hot water sources;

vacant, inexpensive land;

an intersection of a major highway and an interstate;

extractable natural resources in close proximity;

a shovel-ready 160 acre industrial park located near Highway 93 and I-80.

The City provides an attractive quality of life for those looking for

open space, low levels of crime, and a strong community

atmosphere.

Weaknesses The City faces challenges due to its small population, earthquake

induced blight, remote location, and the distance of downtown from

Highway 93 and I-80. These factors contribute to economic

development challenges including a lack of housing and amenities as

well as insufficient export industries. Despite the industrial park’s

proximity to Highway 93 and I-80 it has been a struggle to fill the

park with tenants. It will be difficult to attract manufacturing jobs to

the park until the quality of life issues the City faces are addressed.

At present, most of the City’s employers are in non-basic sectors that

focus on providing goods and services only to City residents.

Opportunities Based on interviews with local officials, business, and civic leaders,

three industry clusters have been identified as the most important

drivers of future economic growth for the City due to their size,

potential growth, and/or ability to attract revenues from outside the

City.

Extraction of natural resources promises significant job growth over

the next few years with the construction of the Newmont gold mine

beginning in 2015. However, growth or decline in this industry is

almost entirely dependent on global commodity prices and any

growth in this industry should be leveraged to diversify into other

industries.

Tourism is a potential key driver of the local economy. The City

should explore the following tourism opportunities:

expand tourism revenues through development of additional tourism service providers;

activities and development opportunities that extend the tourist season and expand regional, national, and international tourism;

opportunities to utilize the City’s warm/hot water resources in tourism developments.

Employment base expansion from Newmont’s new Long Canyon

Mine operation will create additional housing demand that will

support new residential development.

In light of the sparsely-filled industrial park, manufacturing may seem

like a natural economic focus and driver as well, but growth in this

6

industry will be largely dependent on developing the three industries

named above. Only after this takes place will the City be an attractive

location to manufacturing companies.

Threats Wells will compete with Wendover and Elko to capture immigrating

miners to live, play, and shop in their communities. Many of the

City’s stakeholders have expressed concern that younger people will

choose Wendover and Elko over Wells because those cities offer

more services, amenities, recreation, and entertainment than Wells

The City’s industry concentration in mining and extraction leaves the

local economy exposed to fluctuations in global commodity prices,

which can significantly impact economies as firms react to drops in

spot pricing with workforce and production reductions.

Figure 1: Faults and 2008 Earthquake near Wells

Earthquakes are a continual threat to the City, with numerous faults

in the surrounding area. These faults, as well as the 2008 earthquake

epicenter, are shown in Figure 1. Note that the 2008 earthquake did

not occur on a mapped fault. This is because the fault where the

earthquake occurred was not mapped prior to this event. The

smaller circles on this map are locations of aftershocks of the 2008

earthquake.

Figure 2: Nevada Seismic History

Nevada is one of the most seismically active states, although the

southwestern half of the state is much more active than the

northeastern half (see Figure 2). Major earthquakes (magnitude 6.0

or higher) in the 100 thousand square kilometer region of

northeastern Nevada are expected only once every hundred years.

7

The likelihood of a major earthquake occurring near a City is small

due to the low population density of the region. The state as a whole

has seen a reduction in the number of major earthquakes in the last

five decades. The 2008 earthquake in Wells is the only major

earthquake that has occurred in Nevada since 1960. Given these

factors, the City is unlikely to experience another major earthquake

for a long time. However, the threat is always present, and the City

and its residents and businesses should take precautions against

them.

Demographic and Economic Characteristics

Population and Age According to the 2010 Census, the City had a population in 2010 of

1,354. Esri estimates the 2014 population was 1,381, and projects a

2019 population of 1,567 as seen in Table 1.

Table 1: Population and Age

The County’s population fell by four percent from 2000 to 2010, but

the U.S. Census American Community Survey (ACS) estimates show a

modest population increase from 2009 through 2013. Although

Figure 3 shows a higher 2010 ACS population estimate than the 2010

Census population because of an overestimation, this figure still

shows the overall increase.

Table 1 also shows that the median age was significantly higher at

the 2010 Census than those of the State-wide and National median

ages, and Esri projects that the median age will continue to climb.

Table 1 and Figure 4 show that while the percentage of the

population of the 18-64 cohort has been, and is projected to remain

fairly constant, the percentage of the population over 64 has, and is

projected to increase, and the percentage under 18 has, and is

projected to decrease.

Figure 3: American Community Survey Population Estimates

Nevada U.S.

2000 2010 2014 2019 2010 2010

Total Population 1,346 1,292 1,381 1,567

AgeUnder 18 29.3% 25.3% 23.0% 22.7% 24.6% 24.0%

18-64 60.4% 61.9% 61.4% 59.6% 63.5% 62.9%

Over 64 10.3% 12.8% 15.6% 17.7% 11.9% 13.1%

Median 35.7 40.3 41.3 42.1 36.3 37.2Sources: U.S. Census Bureau, Esri

Wells

1200

1250

1300

1350

1400

1450

1500

2009 2010 2011 2012 2013

8

Figure 4: Age Comparison

Figure 5: Wells Racial Composition

The City is relatively homogenous racially with nearly 80 percent of

the population being white. There is a small population of American

Indians as well, and approximately 15 percent of the population is

some other race or races.

Education The City’s two schools are part of the Elko School District. There is an

elementary school and a combined jr. high/high school.

Since 2007, enrollment in Wells High School has remained relatively

consistent. Nevada employs a star and index rating system to grade

its schools. The star system is on a scale of one to five, and the index

is on a 100 point scale. As shown in Table 2, Wells High School is on

par with the school district and Statewide averages in stars. Its index

score is only slightly below the school district average, but five points

below the Statewide average. In 2013, the graduation rate in the City

was lower than in the school district by 10 percentage points, though

only one percentage point lower than the Statewide rate at 62.1%.

Nevertheless, both math and reading proficiency at Wells High

School is higher than either the school district or Statewide rates.

The percentage of adults 25 years and older with a high school

diploma or equivalent is lower in the City than either the Countywide

or Statewide percentages. The percentage of adults in the City who

hold a high school diploma or equivilent decreased slightly from

2000 to 2013 from 78.7 percent to 78.5 percent, while both the

countywide and Statewide percentages increased by approximately

4 percentage points.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Two or More Races

Some Other Race Alone

American Indian Alone

White Alone

9

Table 2: Education Comparison

Although Wells High School is doing well in some areas, poor

performance in other areas, such as high school graduation rate,

may be an impediment to community and economic development.

Between 2011 and 2013, there was also a small increase in the

number of people who have attended at least some college, as well

as in the number of bachelor’s degree holders. The number of

advanced degree holders, however, fell slightly.

As shown in Table 3 and Figure 6, the percentage of high school

graduates is smaller in the City than Countywide or Statewide, as is

the percentage of graduate degree holders. Although the portion of

bachelor’s degree holders is higher in the City than Countywide the

total portion of bachelor’s or advanced degree holders is lower in

the City than Countywide, and much lower than Statewide. This also

may be a hinderance to economic development.

Table 3: Education Attainment > 25 Years Old

Figure 6: 2013 Education Attainment >25 (% of Total)

Income and Housing The City’s 2013 median household income (HHI) was $50,438 – only

slightly below the statewide average, but substantially lower than

Elko County, which has a much higher than average median HHI. The

City’s per capita income is below the State and County levels, and

the low to moderate income (LMI) rate is nearly twice as high in the

City than in either the County or the State.

2012 2013 2012 2013 2012 2013

Stars 3.0 3.0 3.1 2.9 3.2 3.1

Index Score 64.0 55.2 61.5 55.9 60.8 60.2

Grad Rate 69.0 62.1 74.7 72.0 61.7 63.1

% Prof - Math 78.3 82.8 75.5 81.7 76.0 78.0

% Prof - Reading 78.3 82.8 76.6 82.4 79.5 81.5

Source: Nevada Department of Education

Wells HS Elko SD Statewide Wells Elko Co. NevadaNot High School Grad. 21.5% 16.8% 15.4%

High School Grad./Equiv. 27.7% 28.1% 28.7%

Some College/Assoc. Deg. 37.0% 38.7% 33.5%

Bachelor's Degree 12.6% 11.1% 14.8%

Graduate/Professional Deg. 1.2% 5.3% 7.6%

Bachelor's Deg. or Higher 13.8% 16.4% 22.4%

% High School Grad or Higher 78.5% 83.2% 84.6%Source: American Community Survey 2013

10

Table 4: Income Estimates Comparison

The number of housing units in the City has increased since 2010,

although the number fell in the decade prior to that. The percent of

owner occupied units rose between 2000 and 2010, but has since

fallen back to 2000 levels. The percentage of vacant housing units

has seen a steady decrease since 2000, although the rate of decrease

has slowed considerably since 2010. The median home value in the

City rose by 45 percent between 2000 and 2010, but the value has

fallen again by 8.5 percent since 2010 (see Table 5). These highly

fluctuating trends of the housing market are likely indicative of the

economy’s dependence on the volatile mining industry.

Table 5: Wells Housing Estimates

Traffic Counts Traffic on I-80 near the City has been somewhat irregular since 2000,

especially east of the City, as shown by automatic traffic recorder

(ATR) 71120 in Figure 7, which has experienced a net decline in

average annual daily traffic (AADT). West of the City there was a

sharp uptick in AADT in 2002, but by 2006 AADT had fallen below

2000 levels, and although it has risen somewhat steadily since then,

it has not rebounded to the 2002/2003 peak (ATR 70292 in Figure 8).

U.S. 93 near Wells has experience a fairly steady increase in AADT

since 2000, both north and south of I-80 (Figure 9 and Figure 10).

2009 was a down year for traffic at this station, as it was at each of

the counting stations around the City, except at ATR 70292 shown in

Figure 8.

Since 2000 ATR 70130 on Sixth Street, or Highway 40, leading from

U.S. 93 to downtown Wells has seen a net decrease in AADT (Figure

11), and traffic between Lake Avenue and Humboldt Avenue has

declined by 40 percent (ATR 70128 in Figure 12). AADT on Humboldt

Avenue, which connects Sixth Street to I-80, is down 19 percent

since 2000 despite a 38 percent increase in 2013 (see ATR 70297 in

Figure 13).

Figure 7: AADT, I-80 East of Wells

Wells Elko Co. Nevada

Median HHI 50,438 70,238 52,800

Per Capita Income 23,967 28,358 26,589

LMI* 61.0% 34.2% 35.9%Source: American Community Survey 2013, HUD, Wells CDBG Income Survey 2014

*2014 Estimates; all other data are from 2013

2000 2010 2014 2019

Total Housing Units 692 667 707 799

Owner Occupied 53.6% 55.8% 53.6% 56.1%

Renter Occupied 27.6% 29.5% 32.0% 30.9%

Vacant 18.8% 14.7% 14.4% 13.0%

Median Home Value 85,900 124,800 114,130 141,892 Source: American Community Survey 2013, Esri

4,700

4,800

4,900

5,000

5,100

5,200

5,300

5,400

5,500

5,600

5,700

AADT - Station 71120I-80 E, 1.8 mi E of US-93

11

Figure 8: AADT, I-80 West of Wells

Figure 9: AADT, U.S. 93 North of I-80

Figure 10: U.S. 93 South of I-80

Figure 11: Sixth St. West of U.S. 93

6100

6200

6300

6400

6500

6600

6700

6800

6900

7000

7100

AADT - Station 70292I-80 E, 0.3 mi W of Humboldt Ave.

1850

1900

1950

2000

2050

2100

2150

2200

2250

2300

2350

AADT - Station 72110US-93, N Side of I-80

800

900

1000

1100

1200

1300

1400

1500

1600

1700

AADT - Station 70131US-93, S Side of I-80

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

AADT - Station 70130Sixth St. Between US-93 and Lake

12

Figure 12: Sixth St. between Humboldt and Lake

Figure 13: Humboldt Ave. E of I-80

Although there has been a net increase in traffic on U.S. 93 and I-80

since 2000, traffic through the City’s downtown core has decreased.

This confirms what has been known for years: the City has become a

bypass community for freeway and highway travelers.

Notwithstanding 2010 having a big upsurge in traffic counts on the

arterial roads within the City, by 2013 counts had receded to be near

or at 14 year lows. See Figure 30 for a map showing 2013 traffic

counts in and near the City.

Reno Redevelopment Success The City of Reno began redeveloping its downtown in the mid-1990s.

Although Reno is not comparable to Wells in size, it can offer lessons

in redevelopment that are applicable to a city of any size.

Reno, like Wells, has abundant geothermal resources. Reno has

positioned itself for growth in the clean energy and geothermal

industries and has worked to attract companies in these areas. The

Reno area is now home to 13 geothermal companies, as well as

several advanced manufacturers. The City hosted the Geothermal

Resources Council 2009 and 2012 Annual Meetings and the

Geothermal Energy Expo, the world's largest gathering of vendors

providing support for the geothermal industry. Wells may be able to

capitalize on its close proximity to Reno during future geothermal

industry events, and in future efforts to recruit geothermal

companies.

Reno has also focused on recreation. Despite being a city of over 400

thousand, Reno reports that 56 percent of people use walking as one

of their primary modes of transportation. This is due in part to the

walkable retail, recreation, and park areas that have been

established there, such as the Riverwalk District – a retail center on

the Truckee River in downtown Reno, and Wingfield Park.

1100

1300

1500

1700

1900

2100

2300

2500

AADT - Station 70128Sixth Street Between Humboldt and Lake

700

800

900

1000

1100

1200

1300

1400

1500

AADT - Station 70297Humboldt Ave. E of I-80

13

Figure 14: Reno Riverwalk District and Whitewater Park

A notable feature of Wingfield Park is the whitewater park,

constructed in the Truckee River in 2003. The whitewater park was

designed for kayakers, but also lures people for rafting, wading, and

swimming. It is a year-round attraction that some say started Reno’s

downtown “redevelopment renaissance.” Although the Riverwalk

and Wingfield Park already existed, “the downtown whitewater park

brought excitement to the river, combined with opening up the river

banks for public access” according to Downtown Makeover, an

organization that tracks redevelopment in Reno and promotes

downtown Reno’s urban core and lifestyle. This type of year-round

attraction in a district adds a unique dimension that promotes a

sense of community and gives residents and visitors alike a reason

beyond retail and restaurants to visit and spend time in a downtown

area. A natural feature such as a river is not necessary to develop

this type of attraction: there are many other ways to draw people to

an area.

Other Successful Redevelopment Demonstrated characteristics of successful communities, particularly

in terms of redevelopment, are the existence of a clear community

vision, high expectations of development and quality of life, the

understanding that a high quality of life brings jobs, the goal to be a

community of choice, and a commitment to invest in themselves. An

example is Lawrence, Kansas.

Lawrence had a failing downtown whose buildings’ second stories

were boarded up, and first stories had scab tenancy or no tenants.

The city identified the core impediment to growth as inadequate

parking in the downtown, which prevented businesses from thriving.

The city also recognized a bourgeoning art scene in the downtown.

They developed a vision, and the city committed to invest in itself

and its quality of life. Lawrence built $30 million of parking structures

to mitigate the parking issue, and as a result quality tenants moved

in and stayed. Lawrence also built a $7 million art center to capitalize

on the emerging art scene. The city’s self-investment in turn brought

private investment to the downtown and allowed the private

investment to be profitable. Downtown Lawrence today is a

beautiful, thriving center of economic activity.

Reno and Lawrence have both demonstrated the characteristics of

successful communities outlined above: they had a clear vision or

focus, they recognized that aiming low would not raise them to the

level where they wanted to be, they attracted jobs and activity by

identifying and improving quality of life issues, and they focused on

becoming a community of choice by making smart investments in

themselves.

14

Vision for Downtown Wells With these examples and principles in mind this document offers a

vision for Downtown Wells that aims high, focuses on correcting the

deficiencies that have impeded the City’s growth since the I-80

bypass in 1985, and will allow the City to redefine itself as a

destination. Recommendations for this vision are to recruit a housing

developer to accommodate the likely influx of mine workers at the

Long Canyon Gold Mine, and development of destination attractions

to enhance the City’s qualify of life.

Housing Project

Figure 15: Example Housing Project

Elko County has struggled with providing enough housing for

immigrating mine workers and this has resulted in workers using

hotels as their housing. This is not only expensive and inconvenient

for the miners, but it removes the rooms they occupy from the

supply of overnight accommodations, causing a shortage for visitors

and reducing the overall quality of life.

In anticipation of the influx of young individuals and families with the

development of the Long Canyon Mine, a housing development

should be the highest short-term priority for the City. Failing to

capture the incoming mine workers and their families would be a

missed opportunity to give the City an economic boost as the new

residents spend their income on local housing and goods and

services.

Local developers should be approached first to gauge their interest

in this opportunity. If a local group is not interested or positioned to

move quickly on this opportunity, Better City has spoken with a

group that has interest in immediately pursuing it. Since there is

interest in locating a new housing development in the City funding

this project should be left largely to the private developer

Destination Attractions It is recommended that the City form PPPs with developers and

private investors for the purpose of developing a hot pools

attraction, an indoor botanical garden or conservatory with a

possible terrarium section and an adjacent restaurant, and a hotel

and spa. These plans would be best-suited to the east end of the

downtown district where there is higher visibility to I-80 than the

western part of downtown provides. To this end the idea to locate

the Project near the bend on Sixth Street near Shoshone Avenue as

shown in the highlighted area of Figure 16 has already been

discussed above.

15

Figure 16: Proposed Project Location

Hot Pools

There is warm and hot ground water throughout the City, including

near downtown, with several points reaching temperatures up to

105 degrees. This natural phenomenon presents an opportunity for

the City to explore the establishment of a resort area similar to that

in Lava Hot Springs, Idaho.

Lava Hot Springs is a small resort town in southeastern Idaho 10

miles from I-15 that has branded itself as a year-round destination

for vacationers and a recreation pit stop for passersby. Attractions

include the famous natural hot pools that range from 102 to 112

degrees and are open year-round; a small outdoor waterpark with a

large pool area, a high dive, and water slides; an indoor pool with a

small splash area; and a river that runs through the town that is

popular as a turbulent tubing run. The town has restaurants and over

500 hotel rooms, plus campgrounds and vacation homes for

overnight accommodations that cater to the high visitation rate the

town receives.

Figure 17: Hot Pools in Winter at Lava Hot Springs, ID

The hot pools facility has five hot pools of varying temperature; an

outdoor deck area with heated floors and a cold outdoor shower;

canopies covering portions of the pools; locker room facilities that

were replaced in 2005/2006, with showers and heated floors; and a

small massage therapy space that is leased to a private company.

The natural mineral water is not manipulated or treated in any way;

the continuous water flow keeps the pools clean and hot.

The hot pools in Lava Hot Springs are built directly over artesian

wells, so conveyance of the water is not an issue as it will be in Wells.

The primary initial concern with water conveyance in the City was

heat loss. However, hot ground water tends to retain its heat very

16

well during conveyance, especially when the pipes run underground,

so heat loss during conveyance should not be a major concern.

The newest pool in the Lava Hot Springs facility is likely to have the

most similar characteristics to pools in a potential City facility. The

pool was constructed in 2008 at a cost of $625 thousand (see Figure

18).

Figure 18: Newest Hot Pool at Lava Hot Springs

The water is pumped through a pipe to the pool at a temperature of

105 degrees, the same temperature as the hottest known water in

Wells. The pool, which holds 20 thousand gallons and is the smallest

of the large pools in the facility, takes about an hour to fill with the

water cooling to about 102 degrees when it exits, making it the

coolest pool in the facility. Due to the pH level – around 5.2 – and

corrosiveness of the water, the pool is lined with flagstone from

Oakley, Idaho. It is likely that the same amount of cooling can be

expected for hot pools in the City’s potential facility. If water hotter

than 105 degrees cannot be located for use in the City’s potential

facility, and hotter pools are desired, supplementary heating would

be required.

Figure 19: Activity in Hot Pools at Lava Hot Springs

Although the facilities in Lava Hot Springs are run by a public entity,

the Lava Hot Springs Foundation, the operation is fully self-sustaining

and operates independent of any public funding. It is recommended

that the City establish a PPP for its hot pools facilities in which the

developer would contribute a percentage of the construction and

startup costs, and subsequently operate the facilities as a private

business and as the risk bearer.

Total volume of the hot pools in Lava Hot Springs is approximately

230 thousand gallons. The newest pool was constructed at an

inflation-adjusted price per thousand gallons of capacity of $34,275.

A hot pools facility in the City would likely be on a smaller scale than

the Lava Hot Springs facility, at least initially. It should be noted that

depending on the pH level of the ground water in the City, less

17

expensive building materials than were used in the newest pool in

Lava Hot Springs may be viable, as was the case in the other four hot

pools in Lava Hot Springs.

Figure 20: Lava Hot Springs Hot Pools at Night

Lava Hot Springs also maintains a “Sunken Gardens” area just above

the hot pools, which provides a quiet, relaxing, and beautiful area for

visitors to spend time and enjoy the plants and flowers.

Indoor Botanical Garden

An indoor botanical garden, or conservatory, provides a rich, diverse,

relaxing, and educational experience. An indoor garden located in

Wells would be considered an oasis for those traveling the long

stretch of desert along I-80 between Salt Lake City and Reno and

beyond, or traveling along Highway 93.

Figure 21: Conservatory

There are many possible themes and features that could be

developed in an indoor garden that would enliven the attraction and

create more than just a place to look at plants. Some concepts

include the following:

Waterfalls, fountains, rivers, and ponds, perhaps with fish and turtles;

Terrarium area with birds, reptiles, and amphibians;

Educational features for adults and children, such as informative signs and literature that discusses the areas in which the various plants are indigenous, plant bingo or scavenger hunt, I-spy descriptive games, etc.;

Children’s play and education area with swings, vines, caves, a “stream table,” slides, tree houses connected by rope bridges, and other entertaining and educational features;

18

Figure 22: Children's Play Area Concept

Areas featuring differing climatic, botanic, and geographic themes – for example, tropical, temperate, desert, and local climates, Amazon rain forest, Sonoran desert, Rocky Mountain, and Mediterranean coast themes;

Various changeable displays and different plants blooming at different times of the year to entice people to make return visits;

o At Phipps Conservatory in Pittsburgh, major features such as waterfalls and stream systems, as well as architectural and cultural elements are designed to be changed easily to enhance seasonally changing display themes;

Figure 23: Water Feature Example

Vegetable and herb garden that can employ a combination of soil- and hydroponics-based gardening. The food grown in the garden could be sold to visitors or used in an adjacent restaurant.

19

Figure 24: Indoor Vegetable Garden

This attraction would be unique in the region. Coupled with the hot pools it will have the ability not only to pull people off the highway to spend a few hours as they rest from the road, but to spend the night on their way to their final destination. The geothermal resources in the City can also be captured for creating the environmental conditions that a conservatory requires, giving it an added level of uniqueness and helping to mitigate utility costs, which is one of the greatest ongoing operational expenses for a conservatory. An example of this is Edwards Greenhouse in Boise, Idaho, which utilizes geothermal energy to heat an indoor Pop-up Park that is open from late January to mid-February.

As popularity of these attractions grows the City will also become the final destination for people who are looking for a place to spend a few days relaxing, especially during winter months when the opportunity to soak in hot pools and see a beautiful, thriving garden will be particularly appealing and scarce.

The cost of constructing an indoor botanical garden can vary greatly

in terms of the building and mechanics, and in terms of the actual

plants and exhibits. According to AJC Architects in Salt Lake City, who

have experience designing indoor garden facilities, construction

costs can vary dramatically depending largely on the type of

polycarbonate or glass used, the size of the building, and the climate

the building must maintain. For instance, maintaining an indoor

tropical climate in a climate like the City’s would require extensive

temperature and humidity control systems. As with most

constructions, the larger the facility the lower the cost per square

foot due to the ability to capture economies of scale.

The cost of the plants and landscaping also varies depending on the

types of plants acquired, their stages of maturity, and the

elaborateness of the landscaping. However, this portion of the costs,

surprisingly, is likely to be relatively small.

Figure 25: Botanical Garden Walkway

20

The recently opened Marjorie K. Daugherty Conservatory at

Lauritzen Gardens in Omaha, Nebraska has three areas, all with

separate climates: a tropical area, a temperate area, and a small

gallery area. This conservatory was designed, engineered,

manufactured, and built by Rough Brothers, Inc. The facility is larger,

more complex, and possibly more elaborate than is likely for the

City’s conservatory. It was built into a hillside with a 20-foot rise in

elevation, which added significantly to the costs and required

installing an elevator. There is also an underground water system

that runs six water features including a 10 foot waterfall, and the

enclosure required custom engineering and manufacturing.

Figure 26: Marjorie K. Daugherty Conservatory

Before building the conservatory, the outdoor Lauritzen Gardens

would see a large drop-off in visitation from January through April.

Since opening the conservatory in October, 2014 Lauritzen Gardens

has seen an increase in memberships, and a higher rate of local and

tourism attendance than during their peak summer season in years

past. These initial attendance numbers are not expected to remain

so high, but it is clear that the conservatory has turned Lauritzen

Gardens into a year-round attraction.

Garden Restaurant

To enhance the novelty of the indoor garden, a restaurant that

serves food grown in the indoor garden would add another reason to

stop and to stay for a longer period. The idea of going straight from

the conservatory to a restaurant that serves food that patrons have

seen growing next door, and know was freshly picked that day, even

in the middle of winter, would have a great deal of allure to many

people.

This type of restaurant would provide a singular experience in dining.

One concept is to adjoin the restaurant to the indoor garden with a

glass wall between them so that there is a view into the garden. This

concept would have to be done strategically so as not to impede

future expansion of the indoor garden. The garden theme could also

extend into the restaurant as in the example shown in Figure 27.

Figure 27: Phillipis Garden Restaurant Bar

21

Hotel

Development of a destination attraction would not be feasible

without adequate overnight accommodations, which the City

currently does not possess. There are two options recommended for

the hotel development.

Option 1 – Limited-Service Hotel

The first option is to recruit a limited-service hotel. This is by far the

more likely of the two options, as there are many limited-service

brands and it is likely that the City could recruit one to this type of

project. A limited-service hotel offers few services beyond check-in

and room cleaning, although many limited-service facilities now offer

amenities such as an exercise room, an office center, and a pool.

Figure 28: Limited-Service Hotel Room

This hotel class would attract a more price-conscious demographic

and be more affordable to travelers who decide to stop off for a

night on their way to another destination.

Construction of this class of hotel in this area is likely to cost roughly

$80 thousand per room. Using this cost, a 90 room hotel would cost

$7.2 million to construct, and a 75 room hotel would cost $6.0

million.

Option 2 –Hotel with Wellness Spa

The second option is to recruit a hotel and wellness spa developer.

This would be much harder to accomplish than recruiting a limited-

service brand as there are relatively few developers with experience

in this product type in a rural community.

A wellness spa focuses on promoting the overall physical and

psychological health and wellbeing of its guests through treatments,

activities, and education that are designed to help prevent illness

and teach guests how to live a healthier lifestyle. Natural hot pools

and a peaceful botanical garden could be powerful leverage for

recruiting a wellness resort developer to the project, especially if

coupled with a PPP in which the developer would receive help with

construction costs.

Figure 29: Wellness Spa Treatment

22

These higher-end services and facilities, especially those offered at a

wellness spa, would seem to fit into and enhance the niche industry

of relaxation, wellness, and enriching experiences that natural hot

pools and an indoor botanical garden will begin to create in the City.

A wellness spa would likely add $500,000 to the cost of a hotel.

Either of the aforementioned hotel options will fill the needs of

overnight visitors and be an asset to the other attractions, but they

will appeal to different demographics. If the first option is pursued it

is still recommended that a spa with a minimum of basic services be

recruited either to co-locate with the hotel, or as an independent

facility.

Benefits of the Vision This vision of developing a destination attraction near the downtown

core will help the City to redefine itself, becoming a community of

choice to the City’s rising generation and other young people who

move to the region. It will generate regional, national, and

international traffic, create jobs and new market opportunities, and

increase tax revenue. It will create a “sense of place” where City and

regional residents will want to go, and will draw out-of-towners to

the City for overnight and multi-night stays.

Rebranding This vision will directly address the issue the City has faced of being

unable to attract the younger generation to live in Wells instead of

choosing Wendover or Elko. Not only will it provide adequate

housing in a region that has struggled to provide that basic necessity,

but it will make the City a place that the rising generation chooses to

stay or return to after obtaining an education. The City will be the

kind of place that a miner moving to the region with a young family

would choose to live, because of the strong sense of community to

complement the quality of life that the City will offer.

Generating Traffic Traffic on the main access routes to the City has increased over the

past decade. These proposed attractions will not only capture that

traffic, but will be cause for its continual rise as the City becomes a

destination of choice for vacationers. These attractions have the

potential of attracting an additional 200,000 visitors to downtown

annually.

Job Creation Each component to the proposed vision will create new jobs as well

as bolster existing small businesses. The developments are estimated

to create an additional 45 jobs.

New Market Opportunities With the increased traffic and new brand will come new market

opportunities in the City as local entrepreneurs identify

opportunities to fill niches in the market, and out-of-town businesses

are shown the great quality of life the City has to offer. These

opportunities could be as simple as adding a convenience store or

restaurant that overnight and day trip guests will be eager to

patronize, or as big as a major manufacturer choosing to take

advantage of the industrial park.

Increased Tax Revenue One of the natural benefits of a growing economy is higher tax

revenue. This will occur as more locals and visitors choose to live,

work, and play in the City, and as property values increase due to the

development that takes place. This will enable the City to offer

better amenities to its citizens and guests, improving the local quality

of life. The City’s TLT revenue will also increase significantly, making

23

it feasible for the City to offer real support to the creation and

sustaining of local recreation offerings.

TLT can be a great boon to a city’s economic health, but only if it is

put to growth-promoting uses. The following section summarizes a

study conducted by Better City that compares two neighboring cities’

uses of their tourism tax resources and their contrasting levels of

success resulting from their different approaches.

Tourist Tax Policy Comparison Study Better City conducted a lodging tax comparison study of Superior,

Wisconsin and Duluth, Minnesota. These cities are two neighboring

communities with the same economic base but have had disparate

success in attracting and capturing the regional market and

developing a tourism industry while providing quality of life

amenities for its citizens.

Duluth has successfully developed a tourism cluster through the

development of a ski resort and entertainment district comprised of

a convention center, sports arena, aquarium, movie theaters,

restaurants, and waterfront amenities. These projects were funded

in large part by pledging lodging tax and food & beverage tax

proceeds for bond issuances to fund capital costs for these projects.

Conversely, Superior has used its lodging tax to market the

community, fund ongoing operational costs of museums, and to

provide support funding for various one-day or weekend events.

Although the State of Wisconsin permits communities to impose a

food and beverage tax to fund the development of a convention

center, Superior has not done so. Superior has had little success in

developing a tourism base as their investments have done little to

change the fundamental economics of their community.

Although the State of Nevada does not permit communities to

charge a food and beverage tax, the higher TLT rate that Nevada

allows makes up for it.

Lodging Tax Background Duluth City Council had passed a 3.0% lodging tax, which was

incorporated into Section 54(D) of the City Charter. As stipulated by

the City Charter, revenues are to be allocated in the following

manner:

The greater of 5% or $5,000 paid into the general fund to cover costs for administration;

65% paid into the general fund to be used for the support and maintenance of the arena-auditorium of Duluth;

35% to the advertising and publicity fund.

Subsequently, the State of Minnesota adopted Section 477A.01,

Subdivision 18 which states that no county, city, town, or other

taxing authority could increase a present tax or impose a new tax on

sales or income. Duluth lobbied the State of Minnesota on multiple

occasions and secured authority to impose a tax on lodging in

addition to the 3.0% lodging tax the City had imposed and

incorporated into their charter. The tax was not subject to voter

referendum:

• 1980: The State granted Duluth authority to pass a 1.0% sales tax

on lodging, in addition to their existing 3.0% lodging tax per City

Charter (Laws 1980, chapter 511, section 2). The proceeds were

to be used to pay for activities conducted by the city or other

organizations which promote tourism in the City of Duluth, and

to subsidize the Duluth Arena-Auditorium and the Spirit

Mountain recreation authority. The law provides the City Council

24

with the authority to exempt smaller establishments from this

additional tax.

• 1998: The additional lodging tax was temporarily increased by

0.5% to 1.5%. This increase was to be used to pay the debt

service on bonds in a principal amount of $8.0 million issued for

capital improvements to the Duluth Entertainment and

Convention Center (DECC). Once paid off, the rate would return

to 1.0%. (Laws 1998, chapter 389, article 8, section 26).

Uses of proceeds was expanded to include capital improvements

of tourism facilities and pledging such tax revenues to pay

principal of and interest on City of Duluth bonds issued to

finance such tourism facilities.

• 2003: Although the lodging tax rate of 1.5% remained the same,

the use of proceeds for the 0.5% increase from 1.0% to 1.5% was

expanded to include debt service on outstanding bonds originally

issued in the principal amount of $4.97 million to finance capital

improvements to the Great Lakes Aquarium (“GLA”). Once this

and the $8.0 million DECC bond are paid off, the rate would

return to 1.0%. (Laws 2003, First Special Session chapter 21,

article 8, section 12).

• 2014: The $4.97 million and $8.0 million bonds for the GLA and

DECC, respectively, were paid off and the 0.5% lodging tax

increase expired. However, the State approved an additional

0.5% to pay the debt service on bonds in the principal amount of

no more than $18.0 million, plus issuance and discount costs, to

finance capital improvements to public facilities to support

tourism and recreational activities in that portion of the city west

of 34th Avenue West. The current lodging tax rate is at 5.5%.

See Figure 34 in the Appendix for Duluth sales and property tax rate

history.

Analysis As shown in Figure 36 in the Appendix, Duluth used the proceeds of

its lodging and food and beverage taxes to support bond issuances

that funded $71.2 million of capital costs for regional destination

attractions including the DECC, the Spirit Mountain recreation

authority (ski resort), and the GLA. These tax revenues are largely

borne by tourists with proceeds used to develop projects that are

not only destination attractions but also quality of life amenities for

its citizens.

Over many decades of focused investment, tourist derived revenues

were used to develop an entertainment district that has catalyzed

significant private investment including new hospitality, restaurants,

and a large first-run movie theater. Duluth’s hotel room base dwarfs

Superior’s because of the hotel room demand its regional

destination attractions generate.

These large regional destination attractions spend considerable

amounts of money on marketing to the surrounding region. Their

success ultimately depends on their ability to bring in tourists and

visitors from outside the community. For example, a planned

destination attraction in the region has $1.4 million budgeted

annually on marketing. This is an order of magnitude larger than the

few hundred thousand dollars spent by the municipality through its

Convention and Visitors Bureau.

The added benefit of multiple destination attractions in Duluth is

that each has its own sizeable marketing budget. These monies are

spent on bringing visitors into the community who not only visit the

destination attractions but also patronize hotels, restaurants, movie

25

theaters, and other venues. The marketing benefit to the community

and local small businesses is significant.

In addition, Duluth’s projects developed quality of life amenities for

City residents, which attracted and retained the City’s workforce,

and ultimately defined the City as a community of choice. The

worker base prefers to live in Duluth because of the amenities and

quality of life the community offers.

Although lodging tax rates between the two communities have been

comparable during this time period as shown in Figure 35 in the

Appendix, Superior’s unfocused investment decisions with tourism

tax revenue have impeded its economic growth. With little to offer

its citizens, workers for Superior-based employers live in Duluth or

surrounding suburbs. This residential pattern has significant negative

impacts to Superior’s property tax base.

Comparison Study Conclusion The use of tourism related tax revenue to make strategic focused

investments in regional destination attractions are critical to the

economic success of a community. Not only do these attractions

develop a tourism cluster but they also provide quality of life to the

local citizenry and capture and retain the local workforce.

The cost to develop quality of life assets within the community are

being borne largely by tourists through tourism related taxes. As the

tourism base expands and a recreational and entertainment district

is developed, a stable tax revenue base is created that can be used

to develop additional destination venues and quality of life amenities

for local residents.

Project Phasing and Funding

Phase I – Analysis and Planning The first phase of this Project should involve market analyses and

feasibility studies for each of the Project’s components. A master

plan should also be developed that includes rezoning of key areas to

provide direction and focus to the redevelopment efforts, and details

of how subsequent phases will be carried out and leveraged for

future development.

Also as part of Phase I, the steps outlined in the Housing and Quality

of Life section should be followed to identify and address the

community’s underlying quality of life issues. Involvement of citizens,

local government, local employers, and their workforce, will be

critical to this portion of the Project.

Finally, a dialogue should be facilitated with Wells Rural Electric

Company (WREC) to assess the feasibility of, and their interest in

developing a geothermal electricity source and “clean grid.” In Better

City’s initial interview process Clay Fitch, CEO of WREC, indicated

that WREC would be willing to seek grants and other funding

available for energy efficiency. He also showed interest in the

geothermal potential, and said that the company has explored the

possibility before, but not for many years.

Funding Phase I

The federal government provides ample funding opportunities for

this type of planning effort through various agencies. It has been

recommended that the City pursue funding through EDA, USDA, and

HUD to develop planning documents that will accomplish the

purposes of Phase I. An application for funding through EDA has

been prepared. The City has already secured some CDBG funds from

the State, and is pursuing additional funds as these may be used as

26

matching funds for federal planning assistance programs such as

EDA’s Short-Term Planning Grant program.

Phase II– Hot Pools, Garden, Hotel These components of the Project should be developed

simultaneously or in close chronological proximity to the extent

possible. They will each provide leverage to attract developers for

the others. Leveraging the hot pools and indoor garden is especially

important for recruiting a hotel developer, particularly of the type

described in Option 2 –Hotel with Wellness Spa under the Hotel

section on page 21.

Developers and operators should be recruited for these attractions

as early as possible. If one entity is willing to operate all three

components together this could be advantageous in terms of

simplicity of a deal and business structure and the ability to leverage

each component to promote the others.

Funding Phase II

Federal and State funding for implementing plans can be as scarce as

funding for the plans themselves are abundant. For this reason it will

be necessary to employ more creative funding methods for Phase II.

PPPs should be established where needed to recruit developers for

this phase. It may be necessary for the City to carry the debt on

some of the construction in order to enable solvency for the private

operators of the different component businesses. This can be done

through bonds that would be serviced through the TRT and other

tourism revenue. The details of this funding plan should be a core

deliverable of Phase I.

Phase III – Subsequent Development Phase II will generate market momentum to propel development of

many possible Phase III projects. This could result in more tourism

projects such as another spa, another hotel, more destination

attractions, or capitalizing on existing outdoor recreation

opportunities as outdoor retailers, and equipment and power sports

rental businesses see market opportunities. Market momentum in

other industries will naturally follow as manufacturers, gas stations,

restaurants, entertainment venues, conventions, and retail and

service businesses recognize the demand for their products that the

increased population and tourism traffic will bring.

This market momentum will also make the City an ideal place for

cultural and recreational events that will foster the quality of life that

the permanent attractions and offerings promote.

Development farther down Sixth Street toward Highway 93 will be a

logical location for many incoming developers. Further development

in the downtown along Sixth Street and the portion of Seventh

Street that runs adjacent to the downtown core, is a logical

subsequent step. While development closer to the Four Way will be

desirable for many developers and should not be hindered, the City

would be free to focus its efforts and incentives on revitalizing the

downtown core as a walkable retail and social hub.

Funding Phase III

There are some possible public funding sources available for this

phase, although funds are limited as is the scope that they cover.

One of these sources is USDA’s Rural Business Development Grant

(RBDG) Program that is slated to combine and replace the RBEG and

RBOG programs in 2015. This program may be used to fund specific

implementation projects, or to establish a revolving loan fund (RLF)

that new startups could tap into to help them get their feet under

them. An RLF would be ideal as it would offer perpetual funds for

continual development.

27

Another USDA program that could be useful in some developments

is the Rural Energy for America Program (REAP), which helps fund

renewable and green energy for small businesses.

USDA’s Rural Economic Development Loan and Grant (REDLG)

program works through local utilities and may also be an option if

WREC is willing to be the borrower/grantee. This program is meant

to fund local small businesses in projects that will create or retain

jobs in rural areas.

Conclusion Rising traffic counts on I-80 and U.S. Highway 93 and the City’s

placement at the intersection of these two major roadways provide a

great opportunity for economic development. The City’s status as a

bypass community can be transformed to a community of choice by

developing a destination venue for overnight visits. The nature of the

proposed Project will also make it attractive to passersby as a

popular desert oasis to refuel, stretch the legs, and experience

something unique.

As the Project gains traction it will drive additional development in

the tourism, retail, and service industries, and possibly even the

manufacturing industry as employers see the agreeable quality of life

offered in the City.

The prospect of mine workers moving to the region as the Long

Canyon Mine’s operations ramp up has already been enough for a

housing developer to express interest in building a development in

the immediate future; the Phase II and Phase III components of the

Project should be enough to draw mine workers and other

employers and their employees to the City.

If the tax revenue generated by the Project is used prudently and

focused plans are put in place the Project can drive economic activity

and job growth at a sufficient scale to drive positive market

momentum. The vision presented in this document is ambitious, and

not without risk. Doing nothing, however, involves far more risk than

this proposal. The City is in need of a vision that will excite its

residents and turn developers’ heads, both of which can be

accomplished by this Project.

28

Appendix

Figure 30: Wells Traffic Counts, 2013

29

Figure 31: Vacant Land/Buildings (Blue Outlines), Sixth and Seventh Streets

30

Figure 32: Vacant Land/Buildings (Blue Outlines), US 93 to Ruby Ave.

31

Figure 33: Vacant Land/Buildings (Blue Outlines), Shoshone Ave. to Wells Ave.

32

Figure 34: Duluth Lodging and Sales Tax

0.000%

2.000%

4.000%

6.000%

8.000%

10.000%

12.000%

14.000%

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Lodging Increase 4

Lodging Increase 3

Lodging Increase 2

Lodging Increase 1

Lodging Base Tax

Duluth Sales Tax

County Sales Tax

State Sales Tax

33

Figure 35: Tax Rate Comparison

3.000%

6.500%

1.000%

2.500%

6.875%

5.000%

0.500%1.000%

0.000%

2.000%

4.000%

6.000%

8.000%

10.000%

12.000%

14.000%

16.000%

Duluth Superior

Base Bed Tax Rooms > 25 Rooms > 30

State Sales Tax County Sales Tax City Sales Tax

34

Figure 36: Duluth Food and Beverage Tax Rates & Uses

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

F&B Increase 2

F&B Increase 3

F&B Increase 1

F&B Base

$5.0 M GLA + $8.0 M DECC

Now Expired

$18.0 M 34th Avenue West

Duluth Arena-Auditorium

Spirit Mountain Recreation Authority

$40.2 M DECC &

New Arena