December 7, 2016

RALEIGH — An event center that could cost up to $51 million threatens to generate far more costs than benefits for Rocky Mount. A new John Locke Foundation Spotlight report explains why. The report also recommends alternatives for boosting the city’s economy.

“The event center could become an albatross around the necks of both current Rocky Mount taxpayers and their children at a time when they can least afford to assume this kind of long-term debt obligation,” said report author Julie Tisdale, JLF City and County Policy Analyst.

The N.C. Local Government Commission could vote as soon as Friday on special-obligation bonds associated with the event center project.

“With approval from the state LGC, the city’s discussion materials propose a $33.7 million bond with a 20-year term,” Tisdale explained. “Interest payments would top $17 million. That’s a total cost of more than $51 million. All of this could be accomplished without voter approval.”

Tisdale’s report explains why voters, taxpayers, and city leaders ought to think twice about the project.

A primary concern involves uncertainty about the event center’s purpose, Tisdale said. “This idea has been kicking around since 2012, and it’s still hotly debated,” she said. “Cost estimates have changed over time, the center has attracted both enthusiastic support and fierce opposition, and even the nature of the center itself seems to be in flux.”

Basic details call for a 175,000-square-foot facility on a 12-acre site, with basketball and volleyball courts and seating for about 5,000 people.

“Current plans seem to adopt an ‘all things to all people’ concept,” Tisdale said. “While the city cites a specific focus on youth and amateur sports, it also mentions a leadership and development center, corporate team building, classrooms, convention and trade shows, and even a health center. What exactly is this intended to be?”

There seems to be little clear vision, Tisdale said. “Simply put, the project risks mission drift, becoming a space that is reasonably equipped for many functions, but doesn’t stand out against the competition or cater to any one type of event.”

Cost concerns extend beyond construction and financing, Tisdale said. Two different consultants produced drastically different projections about the center’s financial viability.

One study projected operating losses for the first three years, followed by profits in year four. “The company that produced this report runs event centers similar to those proposed for Rocky Mount,” Tisdale said. “There’s a potential conflict of interest if the consultant could end up winning a management contract once the facility is built.”

Tisdale also questions that study’s comparison of Rocky Mount with other projects inside and outside the United States. “Many of the comparison projects are in communities substantively different from Rocky Mount: a Houston suburb, San Francisco Bay area communities, tourist locations such as Myrtle Beach, even a national stadium in the Bahamas.”

An earlier feasibility study painted a much less rosy financial picture, Tisdale said. “This study looked out for 10 years and never projected profits,” she said. “Instead it projected a total of $4.3 million in operating deficits over the center’s first decade.”

“Each of the comparable facilities noted in the report — from Asheville to as far away as Brookings, S.D. — had significant operating deficits year after year,” Tisdale added. “If Rocky Mount sees the same results, these additional costs would have to be made up by taxpayers.”

Rocky Mount has seen a declining population and falling property values, Tisdale said. “Projections already call for property tax increases to cover an expected drop in property values in Nash and Edgecombe counties, both of which contain portions of Rocky Mount,” she said. “Tens of millions of dollars in additional tax burden would fall on taxpayers in Rocky Mount if this events center moves forward. There is no guarantee that the number of taxpayers or taxable property would increase to ease that burden.”

The city also lacks enough hotels and restaurants to host events Rocky Mount would like to attract, Tisdale said. “The city council seems to think that an event center will spur investment in hotels and restaurants,” she said. “But given the history of similar centers, it is highly questionable whether the center would attract sufficient traffic to entice developers to pursue these kinds of projects.”

Tisdale recommends three alternatives to pursuing a new government-owned events center. “First, Rocky Mount and both Nash and Edgecombe counties should consider lowering, or at least freezing, tax rates despite the pending property devaluation,” she said. “Yes, this would mean a short-term drop in government revenue. But it also would offer relief to property owners while making the area more attractive and desirable for the type of investment that will improve the local economy.”

Second, Rocky Mount should consider opportunities to rethink its approach to zoning. “Less restrictive zoning makes it easier for businesses to grow and entrepreneurs to innovate.”

Third, the city should take advantage of opportunities linked to local property devaluation. “Land and buildings in Rocky Mount would be less expensive than those in competing locales, making them attractive to private-sector companies wishing to grow, build facilities, or locate corporate offices,” Tisdale said. “Private-sector development offers a good contrast to an event center propped up with taxpayer dollars.”

“None of these measures is as exciting as a flashy new events center, but they encourage real, sustainable growth,” she added. “That, rather than further local government debt burden, is what Rocky Mount needs.”

Julie Tisdale’s Spotlight report, “Rocky Mount Event Center: An unwise burden for taxpayers,” is available at the JLF website. For more information, please contact Tisdale at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].