IS IT TRUE Part 2 September 11, 2013 “What Should Evansville Pay to get a Convention?”

IS IT TRUE the claims of economic payback for conventions over a 25 year period and the cost of the total incentive package to entice a hotelier to come to Evansville is a pretty complex business model that has many assumptions and risks involved in its calculation?…in every advance mathematical model that involves differential equations the initial conditions changing slightly can alter the range of outcomes dramatically?…this was addressed implicitly in the movie “The Butterfly Effect” starring Ashton Kucher several years ago?…in a convention based math model each convention brings its own initial conditions and the most indicative of those is whether the Evansville experience for the conventions attendees is a good experience or not?…the ultimate irony would occur if there really was a 5-Star hotel with every amenity known to man but the combined sewers light up the aroma of downtown for every convention for one year?…is such a scenario where people were so offended by the smell of the sewers the entire investment in that 5-Star hotel would be negated by the smell and repeat business would not happen?…as we all know a $100 Million 5-Star hotel will not be happening anytime soon and the truth be told a $30 Million limited service hotel as was proposed by both Woodruff and Kunkel would be sufficient to provide the accommodations needed (as opposed to wanted) for the kinds of conventions that Evansville will have a real shot at bringing in?

IS IT TRUE let us pose the following question, “Would Evansville PAY any convention manager $200,000 in advance for each convention they would commit to bring to town?”…if this answer is yes then maybe the deal that is on the table is worthy of consideration?…if the answer is no the answer is clearly that this deal needs to be tabled until something better comes along?…Evansville currently gets about 35 conventions per year and Fort Wayne is represented to get 50?…if Evansville can aspire to perform exactly like Fort Wayne in attracting extra conventions then we can expect to bring in 15 more?…this does not speak to the quality of the conventions but only the quantity?…Fort Wayne’s extra 15 includes everything from a 50 person domestic low budget convention up to the Indiana Democratic Party that has been there once?…the note for the hotel incentive according to Mayor Winnecke will be $2.6 Million per year and the operating annual losses of the parking garage will be in the $100,000 range?…that amortizing those annual payments over the 15 new conventions that we expect to get calculates out to roughly $200,000 per convention?…we therefore reiterate our question?

Evansville, if a convention planner would commit to bring in a convention in 2014 before a hotel is possible would you pay that planner $200,000? Evansville if that planner would commit to a 25 year contract to bring a convention in every year for the next 25 years would you pay this planner $5 Million over the next 25 years?

IS IT TRUE we openly solicit economic arguments for and against paying such direct incentives from each and every member of the City Council?…we also would like to know how many members of the Evansville City Council would borrow $100,000 to make a personal investment in the hotel as proposed?…if the answer is NO ONE WOULD, that is very telling?

IS IT TRUE that in spite of the fact that the City Council voted 8 – 1 in favor of hiring Crowe-Horwath to VET this deal on Monday night, a contract is not yet even written and the vetting has not begun?…the inertia of the train called Evansville is slowing down a process that our leadership wanted to expedite?…at this rate the vetting may be done by Christmas?

IS IT TRUE September 11, 2013

IS IT TRUE we asked Evansville City Controller Russ Lloyd Jr. how the bond payment for the Ford Center would be paid in the event the downtown TIF was not capable of making the payment and have received an answer?…we appreciate Russ’s willingness to answer this question very much and present it to our readers the way he answered it?… the 2014 Budget for Arena bond payments is approximately $8.1 million?…payment sources per bond documents are the City of Evansville’s share of the Food & Beverage tax supplemented by1/2 TIF funds and 1/2 Riverboat Funds with County Option Income Tax (COIT-LIT) as a backup in the event that those three sources have insufficient funds to make any of the payments?…the 2014 City of Evansville collections of the Food and Beverage Tax is estimated to be $750,000, leaving the downtown TIF to pay $3,675,000 and Riverboat Funds to pay $3,675,000?…that Controller Lloyd assured us that both funds have sufficient money to make this payment?…he further let us know that typically even TIF supported bonds have backup payment sources to avoid default?…in the case of Ford Center the COIT was added as a funding source to make the bonds more saleable?

IS IT TRUE we have previously established via the 2012 annual report for the downtown TIF that 2012 was a year that the TIF spent $1.5 Million more than it took in?…there is a sufficient accumulated balance in that TIF to make the kind of payments that Controller Lloyd estimated for a few more years so all should be well with the Ford Center note through 2015 or so?…the real wild card looming is the continued reliance of Riverboat Taxes to fund long term bonds when the revenues of the Indiana Riverboats has been in a slow decline?…it was recently reported that Indiana casinos as a whole have seen a 12% decline in revenues over the last year?…Evansville’s Tropicana was somewhat less affected only seeing a 2.4% decrease in revenue?…this will translate directly into a lower payment to the City of Evansville at a time that the City seems to be on a spending spree with the Riverboat Money pushing fixed expenses closer and closer to the anticipated revenue?…this financial decision is very much like a family where the breadwinners are getting pay cuts and or their hours cut back going forward with building a swimming pool or putting in a room addition on credit?…counting on the downtown TIF and the Riverboat funds to cover everything is a risky and unwise financial plan and anyone that can add who has the discipline to do a 25 year spreadsheet will learn that very quickly?

IS IT TRUE it was reported yesterday that “the deliberations of the City Council with respect to funding the downtown hotel are just about ended”?…in that very same article is was reported that the VETTING was not even started yet?…while we do not doubt the accuracy of either of these statements we find them to be rather conflicted?…it is entirely expected based on Google searches that the principles of HCW will pass background checks and credit checks with flying colors?…the VETTING of the results of other projects they have done like Branson Landing are not so assured of being in the bag as winners?…there are plenty of things out there that have been published about that and other projects that look very much like the Ford Center in underperforming financially relative to the financial projections used to entice the powers that be to move forward with the project?…that will raise the question of is this proposed hotel, retail, restaurant, and apartments project really the best use of $37.5 Million borrowed dollars assuming it is wise to borrow that much money in the first place?

IS IT TRUE then candidate Winnecke made some big statements regarding the establishment of angel networks and venture capital to invest in start-up technology based companies that would in turn create jobs and wealth in Evansville?…then candidate Winnecke spoke glowingly of the contract signed in 2008 between GAGE and NAVSEA to enable the entire federal portfolio of patents available to companies in a 26 county region centered in the City of Evansville?…after 20 months in office nothing but a bus trip to Crane, IN for politicians and academics seems to have happened?…Evansville remains the only city in America with a population over 100,000 that does not have so much as a branch office of a venture capital firm?…in the meantime out in Palm Springs, CA the Coachella Valley Innovation Hub has just seen one of its companies go from a one man operation to become a publicly traded company with a market capitalization of $18.4 Million in that same time period with 18 more such companies in the pipeline for similar liquidity events?…the public investment in that company was exactly ZERO but the support structure in place for such companies is now regarded as the best in California and has an acceptance rate for company applications for membership of less than 20%?

IS IT TRUE if Evansville can ever get over the misguided vision that fun and games is the only thing worthy of public investment and the only ticket to economic prosperity such things could happen in Evansville?…the fields of clean coal technology, fracking, and plastics should be areas where technical innovation and commercialization are vibrant and prosperous and Evansville is a well positioned as any place or even better to pursue such activities?…talent is the necessary ingredient to do this things and talent follows investment dollars?…the real problem is that those investment dollars do not exist in Evansville?…this is not a problem that a hotel, dog parks, or any assortment of fun and games temples will ever fix?