Questions about fairgrounds' economic impact linger

Sunday, October 31, 2010 at 11:45pm

Metro Councilman Duane Dominy’s bill to preserve the Metro-owned Tennessee State Fairgrounds is set for consideration on the second of three votes later this month. If history is an indicator, he’ll bolster his case by pointing to the figure “$50 million to $60 million.”

That’s the economic impact Dominy and others claim the much-disputed fairgrounds property off Nolensville Pike and Wedgewood Avenue generates for the city on an annual basis. The figure is an estimate from an internal report produced by the fairgrounds’ staff. Vacate the 117-acre property as proposed by Mayor Karl Dean, the logic goes, and jeopardize millions of dollars in spending for Nashville’s economy.

But the origin of the figure is somewhat suspect. Fairgrounds administrative employees did not reach $50 million to $60 million by commissioning a statistician or economist to directly study Metro’s fairgrounds. Instead, the fair staff members applied a calculus commonly used in economic studies and then gauged the fairgrounds numbers by looking at reports of other fairgrounds with comparable facilities and attendance figures.

In other words, they ballparked it.

“The fair board, to my knowledge, has never retained an economist to do an analysis of the economic impact of the events at the fairgrounds,” James Weaver, chairman of the Board of Fair Commissioners, told The City Paper. He added that economic impact studies tend to be expensive.

“Would I be surprised if the number were that high in actuality? Yeah, I would be a little surprised. That’s a fairly significant number,” Weaver said. “Anybody that’s throwing that number around does so at their peril, because that number was not a professionally derived number. That was somebody on staff sitting down with a cocktail napkin [and] seeing what they could come up with.”

No economic study

Economic impact generally refers to the amount of spending that occurs in a defined area as a result of an existing or planned facility, venue or event. Prior to the council’s January vote to approve financing for a new convention center, Dean frequently trumpeted a study conducted by HVS Consulting that said
Music City Center would generate $139.4 million in annual spending by 2017.

The $50 million to $60 million figure can be found in a three-page document compiled in March 2009 by fairgrounds staff members that cites Minnesota-based Markin Consulting, which conducted a “highest, best use” study on the fairgrounds in 2008 but did nothing to determine economic impact.

“A vital portion missing from the Markin report is our current economic impact with NO additional improvements of not only the 10-day fair, but the 270 events held at the site,” the report says, with underlined and capitalized words its authors presumably wanted to stress. “The economic impact of the 10-day fair is understated at best … or has never been calculated.”

The paper produced by the fairgrounds goes on to discuss criteria, which includes comparative analyses of economic impact studies that looked at facilities with similar demographics, attendance figures and types of events. It cites the Evergreen State Fairgrounds in Monroe, Wash., which has an annual economic impact of $23 million, and the Lane Event Center in Eugene, Ore., which had a $33 million effect in 2006 ($45.4 million in today’s dollars). Neither of those studies factored in the value of monthly flea markets; therefore, the Nashville report points to comparable monthly flea markets that generate spending that ranges between $15 million and $23 million.

A sizable percentage of a venue’s economic impact often comes from the number of hotel room nights people book because of it. In total, the expo center and state fair produce 28,952 annual room nights, according to the document.

The fair staffers also used a measurement tool commonly employed in economic impact studies. It multiplies the number of fairgrounds visitors — here, they say, it’s 1 million — by a spending figure.

“In our preliminary study, evaluating comparable combined event centers and fairs, we currently generate an estimated economic impact of $50 [million] to $60 million ANNUALLY,” the report concludes.

Tennessee State Fair Executive Director Buck Dozier said staff members used a formula similar to the one employed by the Nashville Area Chamber of Commerce.

“Based upon the matrix they used, yes, I’m going to say I have confidence in it,” Dozier said. “In fact, at one time I thought maybe we were too low, but probably not. I’m going to stand by it at this point based upon what they told me they used, and what I know they used.”

The chamber itself has never conducted an economic impact study of the existing fairgrounds. But it is in the process of looking at the redevelopment potential of the site, which chamber leaders have said is ripe for corporate relocations.

Would the dollars stay anyway?

Dominy, who will know his fate as the Republican hopeful in the state House’s District 59 race on Tuesday night, said he’s been told the figure was derived using the same formula that produced the convention center’s estimated effect.

“Economic impact is something that we desire in the city of Nashville,” Dominy said, adding that the city spends $7.5 million per year on the Nashville Predators to bring in 600,000 to Bridgestone Arena each year, while the fairgrounds “had a million patrons come across that property without a tax dollar.”

(This is misleading: The fairgrounds has a reserve fund that, because of eight consistent years of losses, is nearly depleted. Next year, if the status quo is maintained, Metro would spend money from its general fund for fair operations.)

But Councilman Walter Hunt said he’s questioned the fairgrounds’ figure from the beginning.

“First of all, I never realized how they came up with that number,” Hunt said. “I did not see the hotel nights that they projected in anybody’s presentation. In other words, I have not seen any support for the numbers that they threw out. … It could be on the high side, it could be on the low side, or it could
be nonexistent.”

Still, other council members say the methodology is no different from what outfits like the Nashville Convention & Visitors Bureau use to make projections.

Councilwoman Emily Evans, who said she’s skeptical of economic impact studies in general, said the numbers used to calculate the fairgrounds’ effect fall in line with those used to measure the $133 million annual impact of the existing Nashville Convention Center.

“It just doesn’t seem to be that far off the mark to me,” Evans said.

Megan Barry, the council’s Budget and Finance Committee chair, also said she’s comfortable with the approach.

“We oftentimes look at other cities and look at their data for a benchmark,” Barry said.

Dean’s plan is to relocate expo center events to Hickory Hollow Mall in Antioch. Meanwhile, a group called the Tennessee State Fair Association is looking for property inside Davidson County to hold an annual state fair in the future. If both plans fall into place, the fair’s economic impact would remain inside Davidson County’s borders — regardless of the amount.

14 Comments on this post:

By: wwrcd on 11/1/10 at 7:16

Gracias por escribir esta historia.

By: Jagman on 11/1/10 at 8:40

The fairgrounds generates more income and enjoyment then the public golf courses in the city. Moving the flea market to a shopping mall would be the end of it. Dean got his way on the convention center, why doesn't he back off on the fairgrounds. Is his ego TOO big?

By: JeffF on 11/1/10 at 9:59

Dean got cornered on this article. Hard to criticize the math of an enemy when they are using the same formula used to justify his own white elephant. The official policy from the mayors office on this will be to ignore it until it goes away.

The question still lingers: Who has been promised this land and when will the mayor let us serfs in on it? Based on the secrecy I would imagine it will not be popular or we would have heard the trumpets from the downtown sentry towers proclaim it to the peons.

By: left on 11/1/10 at 10:12

Truth hurts so bad, that an administration and a newspaper will lie to the end to cover it up!

By: judyboodo@yahoo.com on 11/1/10 at 11:41

Why doesn't the City Paper just put Dean on the letterhead. The writer fails to mention all of the "expenses" that are and have been taken out of the Fair grounds budget for years.

By: fair_minded on 11/1/10 at 1:22

(This is misleading: The fairgrounds has a reserve fund that, because of eight consistent years of losses, is nearly depleted. Next year, if the status quo is maintained, Metro would spend money from its general fund for fair operations.)

No that statement is what is misleading. Firstly, there have not been eight consistent years of losses-- there have been two, and 2010 will likely be a loss as a result of the State Fair, which usually brings in an average of $1.2-1.4 million, being outsourced for only $100,000 flat fee. This pretty much insures a loss for the year.

And as a result of poor management by the Fair Board, yes, it might take a boost from Metro next year. But it would be the first time in 108 years that any taxpayer money was spent on the fairgrounds. The losses are less than $1 a year-- so even if Metro kicked in some to jump start the fairgrounds, it's still much less than what they pay each year to subsidize the Preds and the Titans, which are supposed to be money makers for Metro. However, with $2.8 million remaining in the reserve fund (which is there to cover shortfalls) with some proper management, it could probably still continue without Metro's help.

Mr. Weaver talked about declining revenue, but let him show us the steps that were taken to reduce spending and expenses in light of those reductions, which affected virtually every business in the declining US economy. The declining profits from the fairgrounds have either been engineered to happen, or intentionally mismanaged.

And none of this changes CM Dominy's statement that the fairgrounds brings in a million visitors a year at no cost to the taxpayer-- and that is not a 'ballpark' figure, but actual attendance counts of the various events.

The method that was used is how Metro does any economic study-- they are generally done in-house by members of the finance department, using the same formulas that were applied to the fairgrounds.

*NO* economic impact study is exact-- they all use "ballpark" figures based on estimates using formulas. There is no concrete way to determine actual economic impact, which is why those formulas have been developed.

Those figures are just as valid as Dean's convention center estimates or his estimates of revenue from tourist taxes.

But just for laughs, let's say that the figures are 10% off... so the fairgrounds brings in only $52 million... or even 20% off-- it still would bring in $48 million... and that's using the low end of the estimate which is actually $60-70 million in the report.

That's still major bucks, and more impact that almost any other venue in Davidson County. Certainly too much to throw away just so the mayor and his finance director can give the property to their developer buddies.

By: fair_minded on 11/1/10 at 1:25

oops! In the second paragraph above, the sentence *should* read: "The losses are less than $1million a year-..."

By: MAmom on 11/1/10 at 8:46

IN A NEWSPAPER ARTICLE you see points in the first paragraphs first. Most prominent in Mr. Garrison's article about the revenue estimate are expressions like:
1) "the origin of the figure is somewhat suspect,",
2) "In other words, they ballparked it."
3) also Weaver's derisive opinions are presented as if they were valid facts: "That was somebody on staff sitting down with a cocktail napkin [and] seeing what they could come up with.”

THEN ALMOST AS AN AFTERTHOUGHT - AT THE END OF THE ARTICLE -GARRISON PUT IN THE FAVORABLE OPINIONS OF THE REVENUE ESTIMATE BY FINANCIAL PEOPLE LIKE EMILY EVANS AND MEGAN BARRY.

Shame on you Citypaper - publishing this article that was obviously structured to belittle those trying to save the Fairgrounds from GREEDY BUSINESS INTERESTS.
-----

PLEASE HELP SAVE THE FAIRGROUNDS! WHAT CAN YOU DO?
(1) Call or email your Metro Council person. Let them know how you feel about the Fairgrounds and ask them to support BL 2010-770.
(2) Attend the Metro Council meetings scheduled to discuss the fairgrounds on November 9.
(3) Be at the Metro Council meeting when they vote on the bill to save the fairgrounds on November 16.

By: MAmom on 11/1/10 at 8:47

WHO is in the "group called the Tennessee State Fair Association" which "is looking for property inside Davidson County to hold an annual state fair in the future." More of the Mayor's "cherry-picked" people?

If so, the criteria they use to select a site will be expediency - something cheap and available - and probably as inappropriate for a State Fair - as the Hickory Hollow location is for a flea market.

And ALSO according to thisarticle - now the Chamber is after the property too.

By: MAmom on 11/1/10 at 8:52

Interesting that the mayor's point people are attacking the Fairgrounds revenue estimate - the week after their plans to lease Hickory Hollow Mall for millions of dollars was met with almost universal disapproval by Nashvillians.

By: bfra on 11/2/10 at 9:00

MAmom - Dean has already made it clear, he doesn't care anything about education & could care less, what the people that elected him want or think

By: localboy on 11/2/10 at 9:16

Hey guys, look on the bright side - now Metro has its own mall!

By: MrT on 11/2/10 at 9:28

Didn't I read somewhere that the property was donated for the fairgrounds? If so, using it for private development could certainly raise some legal questions.

As for all those poor folks that live near and suffer the ill-effects of the fairgrounds...I have no pity on you whatsoever. The fairgrounds has been around a lot longer than you have and you bought your property knowing what you were getting. Of course it was more "affordable" ...you're living next to a race track! That's like buying a house next door to an airport and then complaining about the noise and pollution. I'm so glad I moved to Sumner county!

By: TITAN1 on 11/2/10 at 11:43

MrT, I have used that same logic before. They don't understand logic.