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hunden strategic partners Missoula Events Center Feasibility Study March 2010


March 23, 2010 Kim Latrielle & John Riley Missoula Events Center Steering Committee c/o Missoula Chamber of Commerce PO Box 7577 Missoula, MT 59807 Sent via Email to : kim@missoulachamber.com and john.riley@iscs.com Dear Ms. Latrielle & Mr. Riley: The Missoula Events Center Steering Committee via the Missoula Chamber of Commerce has engaged Hunden Strategic Partners (HSP) to conduct a feasibility study related to the development of a multi-purpose events center in Missoula, Montana. The attached is the final draft of our report. This report has been prepared under the following general assumptions and limiting conditions: !

The findings presented herein reflect analysis of primary and secondary sources of information that are assumed to be correct. HSP utilized sources deemed to be reliable but cannot guarantee their accuracy.

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No responsibility is taken for changes in market conditions after the date of this report and no obligation is assumed to revise this report to reflect events or conditions occurring after the date of this report.

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HSP has no control over development costs or timing of construction and opening.

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Responsible ownership, competent property management, and professional marketing are assumed and recommended. HSP no control over ownership, management and marketing of the facility, including financial results of the facility.

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Terrorist activity or macroeconomic events affecting travel and the economy cannot be predicted and may impact the development and performance of the project.

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This report shall not be used for any other purpose other than the stated purpose.

We have enjoyed serving you on this engagement and look forward to providing you with continuing service. Sincerely yours, HUNDEN STRATEGIC PARTNERS Attachment


T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Interviews and Survey Results

Chapter 6

Site Analysis

Chapter 7

Competitive Facility Analysis

Chapter 8

Comparable Facility Analysis

Chapter 9

Hotel Analysis

Chapter 10

Recommendations

Chapter 11

Conceptual Drawings and Preliminary Budget

Chapter 12

Demand Projection

Chapter 13

Financial Projection

Chapter 14

Economic, Fiscal & Employment Impact Analysis

Chapter 15

Governance Discussion

Chapter 16

Financing Options


E XECUTIVE S UMMARY The Missoula Area Economic Development Corporation (MAEDC) and a group of civic leaders, the Missoula Events Center Steering Committee, raised funds and organized an effort to determine the feasibility of an all purpose events center for Missoua, Montana. Hunden Strategic Partners, a firm specializing in such public assembly facility feasibility studies, was retained to conduct the study, broken into two phases. The first phase, conducted from the summer of 2009 through the fall of 2009, included a market analysis, competitive and comparable facility analyses, community stakeholder interviews and a survey of event planners. At the conclusion of the first phase, a public presentation was given in Missoula and, based on the positive results of the first phase, a recommendation was made to move into a demand, financial and impact analysis. The second phase of work was conducted primarily during the fall and winter of 2009 – 2010. In addition to determining the financial results for the facility, a variety of scenarios were analyzed to provide options to the community. These included a facility ranging in size from 5,000 – 7,500 seats and a cost ranging from $25 - $46 million. Recognizing that the feasibility of project is not complete if the funding cannot be arranged, HSP reviewed a number of options for funding in Montana and reviewed funding strategies used in other communities around the U.S. for similar facilities. A discussion regarding ownership and management was also included in the second phase of work. This report combines the results of both phases of work and presents our recommendations for moving ahead with the project.

Summary of Recommendations Based on the comprehensive analysis, a multi-purpose events center is recommended for Missoula. The community is currently leaking spending activity to other markets with event facilities because families and citizens of the Missoula area market have to travel an average of 200 miles in any direction to attend arena-style events in Spokane and other markets in Montana hundreds of miles to the east. When citizens travel to Spokane, dollars not only leak from Missoula County, but from the state. Missoula is the largest media market in the state and does not have a public events center. Such a facility is part of the public asset infrastructure contributing to the quality of life and such facilities help to attract and retain employers, employees, students and visitors. All of these groups contribute to the economic vitality of an area and as such, an events center becomes a catalyst and driver of economic vitality for an area if well conceived and located. The table below shows the range of recommended facilities, depending on what the community is able to fund.

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T abl e 1- 1 Recommendations Multi-Purpose Events Facility Arena Component 5,000 - 7,000 Retractable Seats Basketball Seating

Scenario A Scenario B Scenario C Scenario D 4,500 5,000

5,600 6,100

7,000 7,500

7,000 7,500

38,000

46,000

54,000

54,000

0 0 0

0 0 0

0 0 0

9,100 4,000 13,100

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Exposition Component 35,000 SF using Arena Floor Ballroom & Meeting Component 9,000 SF Divisible Conference/Ballroom 4,000 SF Other Meeting Rooms 13,000 SF Total Meeting Rooms Other Components Full-Service Kitchen Concession Stands Green Room Dressing Rooms (4) Lobby & Pre-Function Areas Source: HSP

The optimal facility is Scenario D, the 7,000-retractable-seat facility with 13,100 square feet of additional ballroom and meeting room space. However, depending on the facility that could be funded, a facility as small as 4,500 retractable seats is recommended, with a total capacity of 5,000 when 500 chairs on the floor are included for basketball. It is not recommended that an events center with fewer than 5,000 seats be developed. None of the facilities are recommended to have ice. Missoula is a logical location for a regional events facility of 5,000 – 7,000 seats due to a number of factors, not the least of which is the quality and location of existing competitive supply and the existence of a large, underserved market place of 450,000 in the Missoula media market. The facility should not act as a single facility type, such as an arena, but be multi-purpose in nature to host a variety of event types. Larger markets can support single-purpose facilities, but a multipurpose facility is best for Missoula’s regional market. The figures below are a series of drawings of Scenario D.

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Fi gur e 1- 1

The following figure shows the layout of the facility with the seats fully functional for an arena event.

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Fi gur e 1- 2

The following figure shows the layout of the facility with the seats retracted for a flat-floor show.

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Fi gur e 1- 3

As shown, in this scenario, the event space boasts 54,000 square feet of exhibition space, suitable for up to 270 booths for a standard convention or tradeshow set-up.

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Discussion of Strengths, Weaknesses, Opportunities and Threats When considering the idea to develop a multi-use events center or any other business plan, the interested parties need to analyze the proposal in a clear and rational manner. HSP has used the “SWOT analysis� to evaluate the proposed events center, drawing on the facts surrounding the proposal, the City of Missoula and the surrounding community, the existing facilities in the city, the facilities that may be considered as competitors in the region, and events centers throughout the United States that would be considered comparable examples to the proposed facility. The application of that analysis is as follows: Strengths (Existing attributes that are helpful to building an events facility.) !

Quality of Life. The city and the region have an excellent quality of life, with an educated populace, a large and well-known university presence, beautiful surroundings, a thriving music and performance scene, and unlimited possibilities for outdoor activities.

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Committed and Interested Leadership. A committed civic, community and business leadership within the city of Missoula is forward-thinking and acts in the best interests of Missoula and the area.

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Positive and Supportive University of Montana Leadership. The University of Montana has a good relationship with the City of Missoula and the region, and the leadership of the university is supportive of the proposed multi-use events center. This is critical given that their arena, the Adams Center, is the only other similar facility in Missoula.

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Community Interest. Interviews within the Missoula community reveal a great deal of support for projects that will enhance the city and area, including a possible multiuse events center. This was true even of professionals whose business included potentially competing with a new facility.

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Population Base. While the population of the Missoula Metropolitan Statistical Area is approximately 100,000 and the media reach is approximately 450,000. The population of the local and regional areas has grown over the last ten years and continues to increase at a rate greater than the state or nation. This increasing population provides a growing base of businesses and individuals who would attend functions and events at a new events center. The increasing business base provides expanded opportunities for sponsorship, advertising and special event usage.

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Easy Automobile Access. Interstate 90 gives drivers easy access to the City of Missoula from many of the regional population centers, including the cities of central and eastern Montana, as well as the Spokane, Washington and Coeur d’Alene, Idaho metropolitan area to the west.

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Downtown Redevelopment. Downtown Missoula has seen improvement based on private investment and public leadership. A vibrant downtown consists of popular restaurants, shops and clubs, providing a more visible face of the city and drawing more visitors from the surrounding areas. This helps the community as a whole and

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proves to visitors that it is serious about a vision for itself, regardless of where the events center is located. !

Hotels in Missoula. Recent additions to the number of hotels in the West ReserveInterstate 90 interchange area, as well as strong and successful established hotels in and near downtown, creates a block of hotel rooms in the city that can support events in Missoula.

Weaknesses (Existing attributes that may hurt the success of an events center.) !

Air Access. The Missoula International Airport provides regional and national access to the city, with over 500,000 passengers traveling through the airport in the past year. However, the cost of airfare and the relative lack of direct flights compared to other airports in the Mountain West combine to have a negative impact on travel to Missoula for those interested in hosting an event here. This suggests that the events center will need to rely primarily on drive-in based business, such as concerts, family shows, consumer shows and state-oriented events.

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Present Lack of Events in Missoula. Due to lack of facilities in the Missoula area promoters have not considered the city a prime location for a variety of events, including family shows and major concerts. The Adams Center at the University of Montana holds some events and concerts but that facility’s major focus is the university programs, especially team sports. This is more of a challenge to overcome than a long-term weakness.

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Current Lack of Event Marketing. Missoula has had no need to actively market the existing facilities for events because of the lack of availability of facilities. Again, this is a challenge to be overcome with funding and expertise and does not present a long-term weakness.

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Event Planners’ Lack of Knowledge of Missoula. Many of the meeting planners and promoters surveyed expressed limited knowledge of Missoula, both the existing facilities of the city and the offerings of the city and region generally. This will require a strong, long-term marketing and sales effort to overcome.

Opportunities (external conditions that will help the operations of an events center.) !

Lack of Current Facilities. The city (and region) has only limited event facilities, and those that exist cannot accommodate the number and size of events that would consider Missoula. The Adams Center, the only large facility that could host large events, has date conflicts with University of Montana sports and other events. It must first serve the student population and only then can consider other opportunities.

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Lack of Regional Newer Facilities of Similar Capacity. While the state and region have several facilities that will compete for events, no new or modern mixed-use events center exists in the region. The closest events centers to Missoula are the Butte Arena in Butte, Montana, which was built in 1952, the Four Seasons Arena at the Great Falls, Montana, ExpoPark, built in 1979, and the Spokane Arena, built in 1995. Of these facilities, only the Spokane Arena was constructed in the last two

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decades, although the other facilities have had several renovations. The lack of newer facilities provides the proposed events center with an opportunity to offer state-ofthe-art and modern amenities that groups and events seek. !

Stronger Local CVB Provides More Marketing Possibilities. The Missoula Convention and Visitors Bureau recently has benefited from the Tourist BID that will provide for greater funding for the organization. The result is a stronger organization that will be able to partner with a new events center that would promote events in Missoula and at the events center.

Threats (External conditions that are a threat to a new events center.) !

U.S. Economy and Weaker Demand. The U.S. economy has been in recession, which hurts demand for events. However, by the time such a facility opens, the economy will have likely rebounded.

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Competition from New Venues. A new facility has advantages over the older regional facilities but would lose the advantages and gain a major competitor if another city within the region develops a new events center or other facility. Coeur d’Alene, Idaho, is considering development of a new multi-use arena, with a completed study released in March 2009, recommending such a facility in that city. A similar facility study is underway in Pocatello, Idaho.

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Cost. The cost of the project is high and that could threaten the possibility of development. As such, various sizes were recommended.

Multi-Purpose Events Center Market Context The concept of a multi-purpose events center is somewhat unique to regional centers like Missoula. That is, in the spread-out Mountain West and in such places as the Plains, regional centers serve much larger populations than their immediate metro area for shopping, dining, entertainment, sports, transportation and other activities. While the local population is relatively small, the area and population served by its assets is larger than what is considered in other areas of the country. So facilities have been developed to serve these demographic characteristics. Larger markets typically support multiple venues with specific uses, such as performing arts centers, convention centers and fixed-seat arenas, accompanied by headquarter hotels. Smaller communities can also support such single-purpose facilities, but these are often large suburbs of major metro areas that capitalize on the surrounding area market of one million or more residents. In both cases, the investment in single-purpose facilities can be large, and it is not unusual to have a budget of $40 million or more for each. All but the hotel component generally necessitate nearly 100 percent public funding (and the hotel often requires a significant public investment) because such facilities generate economic activity for the community, but do not run at an operating profit level that supports debt service. So for a community to fund these distinct facilities, the minimum investment is $120 million ($40 million for each of three facilities) plus

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any hotel investments and annual operating subsidies. This is generally too large for a smaller market to consider. So for a small to mid-sized regional market center like Missoula, the concept of a multi-purpose events center is logical as it combines the majority of components of the three facility types into one, more efficient public assembly facility. It can host most of the event types of the three distinct facility types (except certain performing arts events better left to theaters), but at a total cost more supportable by a smaller market. The big picture analysis must consider two primary factors: supply and demand. On the supply side, are there facilities locally or nearby that are adequately hosting the events that would or could be hosted by an all-events facility? If not, what are the gaps in the market supply? What are the causes of this supply gap? In terms of demand, a population base and the character of that population base create event demand for all manner of events. For example, a large, lessereducated, poor population will not support event demand that a smaller, more educated and wealthier population base will. Missoula is home to a high-quality workforce, is generally welleducated due largely to the long-term impact of the University of Montana, and residents already support and attend events within and outside of the Missoula market. There is also geography to consider, especially in the mountain west. How far does one have to travel, often with family, to participate in or attend an event? In the case of Missoula, families often travel three or more hours to state youth athletic events and two hours for entertainment and other offerings in Spokane. This represents a direct cost to families and others for travel for youth sports on an ongoing basis. It also represents leakage, or lost opportunity to capture economic activity by those who would come to Missoula for events. On the supply side, while the Adams Center provides options for arena usage and other activities, the availability is limited by their calendar, which ultimately must serve the student population. It also limits the ability of the community to host non-university arena-based sports teams (except the hockey team that plays out of the Fairgrounds). So while the Adams Center does an admirable job of serving the community (even hosting concerts fairly regularly), it cannot be available for the range of events and date needs of events that could come to Missoula and thus keep economic activity in the region. Beyond the Adams Center, there is no events facility of high quality within the region. The best set of facilities in the state is in Billings, a significant drive. Closer, but across state lines is the other set of premium facilities, in Spokane. Considering that Missoula acts as the center of economic, tourism, media and other activity for a market of nearly 450,000, the public assembly facility offerings are lacking. The community appears to be losing not only events to other facilities, but also economic activity from the local population that travels outside the area for events. Comparable communities with universities have developed multi-purpose facilities and have found success. The comparable communities often become competitive with Missoula when companies are conducting site searches. As such, developing a multi-purpose event center in Missoula will help economic development officials attract and retain companies and talent in the region.

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Given the supply, demand and lost opportunity factors at play in Missoula, a multi-purpose events facility is indicated.

Competitive Supply and Market Demand Analysis HSP has completed a review of the competitive supply in the local area and region as well as the demand that is accommodated at those facilities. Based on interviews, we have also established an understanding of the unaccommodated demand that currently is not occurring in Missoula or its competitive supply. The following map shows the regional competitors’ locations. Fi gur e 1- 4

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The following table summarizes the regional competition, in descending order of seating capacity. T abl e 1- 2 Missoula Events Center Regional Competitors Date Opened

Seating Capacity

Spokane Arena Rimrock Auto Arena, MetraPark MSU Brick Breeden Fieldhouse Butte Arena Four Seasons Arena, ExpoPark Belgrade Special Events Center

1995 1975 1956 1952 1979 1996

12,210 10,000 8,900 6,250 5,434 4,800

32,000 30,000 38,000 19,623 33,000 n/a

41,500 50,000 50,000 29,623 53,000 n/a

196 343 202 119 204 194

Average

1976

7,932

30,525

44,825

210

Location Spokane, WA Billings, MT Bozeman, MT Butte, MT Great Falls, MT Belgrade, MT

Facility

Arena Floor Space Total Exhibit Space (Sq. Ft.) (Sq. Ft.)

Distance from Missoula (Miles)

Source: Various Facilities, HSP

Perhaps the most striking data point from the above is the minimum and average distance of the competitors from Missoula. Given that Missoula is the largest media market in the state and essentially ties for largest MSA, the absence of a dedicated events center for an average of 210 miles in any direction is notable. The closest and least competitive facility is a 120-mile distance and the most competitive facilities are between 200 and 343 miles from Missoula. This is a wide swath of territory and population unaccommodated by a public events facility. The largest regional competitor is the Spokane Arena, with a seating capacity of 12,210. The Spokane Arena is part of the Spokane Public Facilities District project in downtown Spokane, which includes the Performing Arts Center and the Spokane Convention Center. The facility has an arena football af2 team and a minor league hockey team as tenants, and it also hosts concerts, family shows and other events. The highest attendance in 2008 was for hockey, but the highest revenue gross came from family shows. The largest facility in Montana is the Rimrock Auto Arena in Billings, Montana, part of the MetraPark complex. The arena has a seating capacity of 10,000 with an arena floor space of 32,000 square feet and a total exhibit space of 50,000 square feet. The facility holds many sports events, as well as being a central part of the nine-day Montana Fair that is held at the MetraPark. The facility can hold events that need exhibit space that exceeds the arena floor and the additional space in the building, because it can use the other facilities in the MetraPark adjacent to the facility. The Rimrock Auto Arena 2009 calendar lists a total of 29 events in 2009, with a total of 60 eventdays, not including set-up and take-down. The event-days include the nine-day Montana Fair, with concerts and rodeos that take place during the fair. Additionally the arena hosted seven home games and two playoff games for the Billings Outlaws, of the Indoor Football League. Including the football games, but no practices or other football events in the facility, the Rimrock Auto Arena scheduled 69 event-days for 2009. Montana State University, in Bozeman, Montana, has several facilities that host events. The major competitive facility is the Brick Breeden Fieldhouse, the home of the university’s men’s and

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women’s basketball teams. The facility has a seating capacity of 8,900 with an arena floor space of 38,000 square feet and a total event space of 50,000 square feet. The main mission of the fieldhouse is to foster and support university and student events, but the facility also hosts nonuniversity events such as concerts and sports tournaments. The university has renovated the fieldhouse so that it has a theater configuration for large performances, called “Theatre at the Brick.” This use of large curtains and movable stage seats 3,300 and hosts theater events such as the “Broadway in Bozeman” series. The consolidated City-County of Butte-Silver Bow, Montana, owns the Butte Civic Center. Built in 1952 and renovated several times since construction, the Butte Civic Center can seat 6,250 for basketball and 5,100 for ice events. The arena floor has 19,623 square feet of space and has an attached “Annex” that has 10,000 square feet of space. The facility is projecting a total of 84 event-days in 2009 for the civic center, with 25 days of sports and 25 days of consumer shows leading the event categories. The Four Seasons Arena is located in the Montana ExpoPark, the Montana state fairgrounds site in Great Falls, Montana. The arena has a seating capacity of 5,434 with an arena floor space of 33,000 square feet and a total event space of 53,000 square feet. The facility hosts sporting events, concerts and trade shows. The Belgrade Special Events Center is an arena that hosts many high school regional and state competitions and tournaments. The Belgrade School System opened the facility in 1996, and it seats 4,800 for basketball and other like events. The facility also holds community and other school-related events but does not appear to market actively for private events, concerts or trade shows. Other facilities that have event space include outdoor and fairground arenas such as the Kalispell Arena, the outdoor arenas at the MetroPark in Billings and the ExpoPark in Great Falls and the fairgrounds at Coeur d’ Alene, Idaho. Certain hotels in the region have event space, including the Hilton Garden Inns in both Billings and Kalispell, the Billings Hotel and Convention Center, and the Coeur d’ Alene Resort in Coeur d’ Alene, Idaho, as well as several hotels in Spokane, Washington. One possibility that Missoula must consider is that Coeur d’ Alene, Idaho, is in the process of considering development of a multi-use events center. That city, which is 160 miles northeast of Missoula on Interstate 90, has completed a study that recommended a 6,000-seat sports and events arena for many of the same considerations and conditions that exist in Missoula. Such facility, if built, would be a primary competitor to a proposed Missoula events center, offering many of the same amenities, meeting space and arena availability. However, it would not be as convenient for the bulk of the Missoula media market nor would it compete for state association and sports tournament activity. Pocatello, Idaho is also studying a new arena, which if built, would be a secondary threat to Missoula.

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Potential Site Analysis Depending upon the final physical program of the building, the footprint will range slightly, but will likely be near 100,000 square feet. With landscaping and sidewalks, etc., the acreage for the building and surrounding improvements is at minimum three acres and up to five acres. Assuming a 5,500-seat facility (as a mid-point) and 3.3 persons per car (also as a mid-point), there is a need for approximately 1,700 spaces, or approximately 14 acres in parking. Again, this is a mid-point and the facility may require as many as 2,000 spaces. For planning purposes, the facility site at this point should have a minimum of 20 acres, unless structured parking is planned. Four potential site areas have been discussed and analyzed for an events center and these areas are shown below.

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Fi gur e 1- 5

The following table is a matrix of the ranking of the possible sites for the facility.

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T abl e 1- 3 Site Matrix and Ranking I-90 Sites by Reserve

I-90 Sites by Airport

Fairgrounds

Roundhouse/ Downtown

Critical Design Factors Adequate Site Area & Dimensions Ability to Expand Access - Attendees Access - Trucks Configuration Attendee Experience Visibility Safety & Security, including emergency access Relationship to Existing Buildings Subtotal

5 5 5 5 5 4 5 5 3 42

5 5 4 5 5 2 5 5 3 39

4 2 3 3 4 4 2 3 4 29

4 2 2 2 2 3 5 3 3 26

Site & Utility Factors Utility Infrastructure Environmental Quality Subtotal

5 4 9

5 5 10

5 5 10

4 1 5

Financial & Economic Factors Impact on Facility Performance Property Availability & Relative Costs Displacement & Relocation Development Costs Leverage Community Assets Ability to Induce Additional Developments Subtotal

5 5 5 5 4 4 28

4 5 5 5 3 4 26

4 5 4 4 4 4 25

3 2 3 2 3 3 16

Timing Factors Acquisition Timing Approvals Ownership Issues Subtotal

4 5 4 13

4 5 4 13

5 4 5 14

2 2 2 6

Grand Total (out of 100)

92

88

78

53

Source: HSP

Based on the review of site options, HSP recommends focusing on sites off of I-90 near West Reserve Street, although if the facility fits on the fairgrounds site, it should perform relatively well. It would not have the visibility and advertising capability from I-90, which suggests that revenues would be lower. Several sites should be in play to ensure a competitive and fair pricing process. Also, the development plan should include options for walk-able retail and restaurant activity onsite to create a complete experience that captures as much economic activity as possible before and after events. This will help to keep spending in Missoula.

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Demand Projection HSP projected the demand for the events center for each of the four scenarios and also developed financial projections for the events center for a ten-year period, shown in the following chapter. It is assumed that the events center will be owned by a newly-created public authority with private management to maximize performance. There are assumed to be no resident tenants, such as basketball, hockey, football or soccer teams. If a sports tenant is secured, the results of the facility are likely to improve compared to the figured shown here and in the following chapters. There is assumed to be no ice capability in the facility initially. A description of events is provided below. Family Shows are ticketed, public events that provide entertainment for a variety of demographic groups. These events include children’s themed traveling shows, circus events, ice shows and other events. Concerts. This projection is based on a comparison of facilities and the fact that Missoula is a regional market within a the northern mountain west serving a radius of at least 150 miles in any direction. However, the facility will have the benefit of the built-in student population on campus to help drive events and attendance. Other Sporting Events include WWE events, monster truck events, high school wrestling, volleyball and basketball tournaments, regional NCAA tournaments, Extreme Games events, and sports exhibitions. This is based on a weighted average of comparable facility attendance, combined with our judgment of market potential. Community Events. Community events include local charitable, social, religious, civic and other events of a large nature that would require facilities larger than any that currently exist. Flat-Floor Events include consumer shows and trade shows as well as events center-based conventions that use the events center floor and/or its meeting rooms. The events center could host a number of events oriented to local residents (such as consumer shows) in order to maintain facility occupancy and generate revenue when the events center is not being used for other events or the university. Meetings/Banquets. These are larger meetings and banquets held by renting customers or meeting planners for their social, reunion, religious, fraternal, educational, company or other events. The table below shows the key performance characteristics of the proposed event center scenarios, including size, cost, demand and financial performance.

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T abl e 1- 4 Summary of Event Center Scenarios (Stabilized Year of Operations) Scenario A

Scenario B

Scenario C

Scenario D

4,500 500 5,000

5,600 500 6,100

7,000 500 7,500

7,000 500 7,500

$25,410,000

$31,460,000

$39,160,000

$45,600,000

12 17 22 6 14 0 71

13 18 23 6 14 0 74

13 18 24 6 15 0 76

13 18 24 6 15 120 196

Retractable Seats Floor Seats Total Cost Annual Events Family Shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total Annual Attendance Family Shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total

41,040 64,600 96,140 2,850 25,200 0 229,830

45,695 80,370 122,360 3,705 28,000 0 280,130

51,870 88,920 150,480 4,560 33,000 0 328,830

51,870 88,920 150,480 4,560 33,000 48,000 376,830

Total Revenue (000s) Total Expense (000s) Net Income (000s)

$1,936 $1,907 $28

$2,263 $2,052 $211

$2,527 $2,316 $211

$2,851 $2,716 $135

Source: Hunden Strategic Partners

As shown, in Scenario A, the smallest of the facilities proposed, the cost of the facility is expected to be $25.4 million (not including land). The number of events annual is projected at 71 and nearly 230,000 are expected to pass through the turnstiles each year. Total revenue is projected to be nearly $2 million and expenses are projected at just over $1.9 million, leaving a slight profit in the stabilized year. In Scenario B, the project is expected to cost $31.5 million for a 6,100-seat facility. A total of 74 events is expected each year and total turnstile attendance is projected at 280,000. Revenue is projected to be greater than expenses by approximately $200,000. The net income is projected to be essentially the same for the 7,000-seat scenario (C) and the number of annual events is projected at 76. The number of attendees is projected to be nearly 330,000 – or about 100,000 more than Scenario A.

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In Scenario D, the facility will include a ballroom and meeting rooms as well as upgraded finishes. Total events are expected to be nearly 200 (due to the meeting and ballrooms) and total attendance is projected to be more than 375,000. Net income of $135,000 is expected in the stabilized year based on revenue of $2.85 million.

Financing As discussed in this report, the options for financing the facility that are available in many states are not options in Montana. The most common funding strategies for these facilities are either through a broad-based, time-limited local tax, such as a local sales or hotel tax, or through a “district funding model” whereby certain taxes, such as sales, income, hotel and food/beverage taxes are collected within the immediate ‘impact’ area of the facility (those that pay are those that benefit) and used to pay bonds on the facility. This method has been used in Colorado (Urban Renewal Districts), Kansas (S.T.A.R. Bonds), Missouri (MoDESA), Kentucky (KTDA), West Virginia (WVTDA) and is being proposed in Nebraska. Without the use of these tools, less targeted funding methods are the only options, such as general obligation bonds or direct state/federal appropriations. In both cased, the cost is spread amongst the most number of people, but is not targeted to those who will use and/or benefit from the facility, which makes these methods much less palatable for the general public. We recommend that the local delegation work to enable a funding district to be created in Missoula from which existing and/or new time-limited taxes can be collected in the immediate surrounding area of the events center and then be applied to the facility’s bonds.

Impact This section analyzes the economic, fiscal and employments benefit that would accrue to Missoula by the activities at the proposed events center, upon stabilization. It also reviews the potential economic and fiscal impacts induced through the construction of the project. These impacts can be viewed as the return on investment to the community. But for the event facility, this economic activity would not occur in Missoula. This could be said to be the amount currently leaking to other communities.

Definitions For the purpose of this analysis, impact totals are discussed in terms of the Missoula economy. The levels of impacts are described as follows: !

Direct impacts - are an expression of the spending that occurs as a direct result of the events and activities that occur in the events center. For example, a hotel guest’s expenditures on hotel rooms and meals are a direct economic impact.

!

Indirect impacts - consist of re-spending of the initial or direct expenditures, or, the supply of goods and services resulting from the initial direct spending in the events

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center. For example, a guest’s direct expenditure on a restaurant meal causes the restaurant to purchase food and other items from suppliers. The portion of these restaurant purchases that are within the local, regional, or state economies is counted as an indirect economic impact. !

Induced impacts – represent changes in local consumption due to the personal spending by employees whose incomes are affected by direct and indirect spending. For example, a waiter at the restaurant may have more personal income as a result of the hotel guest’s visit. The amount of the increased income the waiter spends in the local economy is considered an induced impact.

!

Personal income – measures increased employee and worker compensation related to the operations of the new facility. This figure represents increased payroll expenditures, including benefits paid to workers locally. It also expressed how the employees of local businesses share in the increased outputs.

!

Employment impact – measures the number of jobs supported in the study area related to the spending generated as a result of the events occurring in the events center. Employment impact is stated in job years.

The total impacts of the proposed project in Missoula presented in this analysis are expressed through the net new spending to Missoula County. The following table summarizes the estimated economic and fiscal impact of the proposed development, from annual operations based on the facilities’ stabilized operations, and from the construction activity.

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T abl e 1- 5 Missoula Event Center Annual Impact

Scenario A

Scenario B

Scenario C

Scenario D

From Operations Economic Impact Direct Spending Indirect Spending Induced Spending Total

$12,775,998 $4,352,291 $5,295,436 $22,423,725

$15,909,753 $5,419,252 $6,593,494 $27,922,499

$18,957,885 $6,456,501 $7,854,818 $33,269,204

$19,675,925 $6,702,779 $8,149,891 $34,528,595

$4,284,059 $1,398,497 $1,696,420 $7,378,976

$5,332,997 $1,741,731 $2,112,347 $9,187,076

$6,351,836 $2,075,477 $2,516,558 $10,943,870

$6,596,964 $2,154,333 $2,611,335 $11,362,632

8 157 52 67 285

9 196 65 83 353

11 233 77 99 421

15 242 80 103 440

$299,717 $53,986 $572,974 $926,677

$375,004 $66,866 $675,377 $1,117,247

$449,123 $79,028 $800,366 $1,328,518

$464,430 $82,325 $840,570 $1,387,326

$10,164,000 $2,701,591 $1,218,418 $14,084,009

$12,584,000 $3,344,827 $1,508,517 $17,437,344

$15,664,000 $4,163,491 $1,877,735 $21,705,226

$18,240,000 $4,848,192 $2,186,535 $25,274,727

Personal Income Employment (Job Years)

$4,303,438 90

$5,328,066 111

$6,632,138 138

$7,722,816 161

Income Tax State of Montana

$1,051,974

$1,302,444

$1,621,224

$1,887,840

Personal Income from Direct Personal Income from Indirect Personal Income from Induced Total Employment Employment Employment Employment Total

within Event Center from Direct from Indirect from Induced

Fiscal Impact Lodging Tax Auto Rental Tax Income Tax Total Fiscal Impact From Construction Direct Construction Spending Indirect Spending Induced Spending Total Spending

Source: HSP

For each scenario, the net impact on the community is different and it increases as the size of the facility increases. Therefore, Scenario A has the least impact and Scenario D has the most impact. For Scenario A, net new direct spending is nearly $13 million and total new spending is $22 million annually. Personal income from the spending increases by $7.4 million annually. Employment in Missoula increases by 285 in Scenario A and the net increase in taxes is nearly one million. The impact from construction is $4.3 million in personal income and 90 job-years (one job for one year).

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For Scenario B, net new direct spending is nearly $16 million and total new spending is nearly $26 million annually. Personal income from the spending increases by $9.2 million annually. Employment in Missoula increases by 353 in Scenario B and the net increase in taxes is $1.1 million. The impact from construction is $5.3 million in personal income and 111 job-years. For Scenario C, net new direct spending is nearly $19 million and total new spending is $33 million annually. Personal income from the spending increases by $10.9 million annually. Employment in Missoula increases by 421 in Scenario C and the net increase in taxes is $1.4 million. The impact from construction is $6.6 million in personal income and 138 job-years. For Scenario D, net new direct spending is nearly $20 million and total new spending is nearly $35 million annually. Personal income from the spending increases by 11.3 million annually. Employment in Missoula increases by 440 in Scenario D and the net increase in taxes is $1.1 million. The impact from construction is $7.7 million in personal income and 161 job-years. Conclusion An event center is recommended for Missoula based on all factors investigated. Without such a facility, the community will continue to send its economic activity to other markets and leak millions of dollars each year. With a facility, the community will retain this economic activity as well as received other benefits, such as an enhanced, attractive community for employers, citizens and visitors.

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Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Interviews and Survey Results

Chapter 6

Site Analysis

Chapter 7

Competitive Facility Analysis

Chapter 8

Comparable Facility Analysis

Chapter 9

Hotel Analysis

Chapter 10

Recommendations

Chapter 11

Conceptual Drawings and Preliminary Budget

Chapter 12

Demand Projection

Chapter 13

Financial Projection

Chapter 14

Economic, Fiscal & Employment Impact Analysis

Chapter 15

Governance Discussion

Chapter 16

Financing Options


M ISSOULA E CONOMIC , D EMOGRAPHIC & T OURISM A NALYSIS Economic and demographic trends are some of the best indicators of success for a multipurpose events facility.

Regional Access Missoula, Montana is located in western Montana about 30 miles from the state’s western border. Interstate 90, a major east-west corridor connecting Washington to Massachusetts, runs through Missoula. The figure below shows the layout of Missoula. Fi gur e 2- 1

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The figure below shows Missoula and the surrounding region. Fi gur e 2- 2

The closest larger market is Spokane, Washington, more than 200 miles to the west. Boise is located more than 200 miles to the south and is not easily accessible from Missoula. To the east are smaller communities in Montana, including Butte, Helena and Bozeman. Billings is located approximately 300 miles to the east and is approximately the same size as Missoula (in terms of its MSA).

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The Missoula airport is served by national carriers including Alaska Airlines/Horizon Air, Allegiant Air, Northwest Airlines/Compass Air, Delta Connection and United Airlines. There were 564,922 passengers that utilized the airport in 2007. The Mountain Line is a public transportation system that consists of 12 bus routes. The system links the airport, the university and various points of interest in the city.

Population The following table shows the population characteristics of the state, MSA, County and City. T abl e 2- 1 Missoula, Montana MSA, and State Population and Growth Rates Population 1990 248,709,873 799,065 78,687 78,687 42,918 54.5%

United States State of Montana Missoula MSA Missoula County City of Missoula City Pop. As % of MSA

2000 281,421,906 902,190 95,802 95,799 57,053 59.6%

2008 299,389,484 967,440 107,320 107,320 68,202 63.6%

Percent Change 2000-2008 6.0% 6.7% 10.7% 10.7% 16.3%

Source: U.S. Census Bureau, HSP

The State of Montana experienced strong population growth from 1990 to 2008, increasing by 21 percent (over 150,000 people), more than double the rate of the nation as a whole. The population of the Missoula MSA has increased from 79,000 to 107,000 since 1990. This growth suggests the area has a positive quality of life and reputation for luring new residents. The following table shows the Missoula media market. This area will be a primary area of influence and capture for a proposed event facility. T abl e 2- 2 Missoula Media Market Population Primary Media Market (8 counties) Extended Media Market via NBC affiliate* Secondary Media Market** Total Media Market Penetration

290,600 48,687 106,236 445,523

* Includes Silver Bow, Deer Lodge & Powell Counties ** Includes Beaverhead, Madison & Gallatin Counties Source: HSP

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The Missoula media market totals nearly 450,000 people and is shown in the map below. Fi gur e 2- 3

Multi-purpose event facilities draw attendees from beyond the immediate area as well as the media market and they serve as the primary event facility for the surrounding region due to the lack of other such facilities. It is important to understand the population within a surrounding area that is most likely to use an events center. The table below shows the population within 50, 100 and 150-mile radii.

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T abl e 2- 3 Missoula Population Radii Area 50-Mile Perimeter 100-Mile Perimeter 150-Mile Perimeter

Population 145,614 335,240 774,870

Source: Missoula Market Area, HSP

The population within 150 miles of Missoula is approximately 775,000 and suggests that, like many western markets, a regional center like Missoula can be the economic and entertainment hub for a population many times the city’s size.

Income Residents’ effective buying income helps to demonstrate the amount of disposable income that is available locally. Considered a bulk measurement of market potential, EBI indicates the ability to buy, and is essential for selecting, comparing, and grouping markets. Markets with higher EBI are important for multipurpose facilities because the local population often attends and/or hosts events in these facilities. The higher the EBI, the more likely the population is to use a facility. Effective Buying Income data is shown in the following table. T abl e 2- 2 Effective Buying Income (EBI) 2008

Total EBI (000) Median Household EBI

Missoula MSA

State of Montana

United States

$5,051,860,000

85,068,372,500

$6,300,794,040

$35,988

--

$41,792

25.8% 17.9% 27.4%

23.8% 18.2% 26.1%

24.5% 20.0% 30.5%

% of Households by EBI Group $20,000 - $34,999 $35,000 - $49,999 $50,000 & Over

Source: Sales and Marketing Management, HSP

While the Missoula County median EBI is less than the U.S. as a whole, it is higher than the state average. Also, because the Missoula media market includes multiple counties, it is important to note that total EBI and median EBI are higher for the media market. The following table shows the EBI for Montana’s ten most populated counties.

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T abl e 2- 3 EBI for the Top 10 Most Populous Counties in Montana

Rank 1 2 3 4 5 6 7 8 9 10

Top 10 Counties

Population

Yellowstone County Missoula County Flathead County Gallatin County Cascade County Lewis and Clark County Ravalli County Silver Bow County Lake County Lincoln County

140,487 102,924 88,137 84,398 79,194 60,309 41,565 32,572 29,119 19,356

Average Houshold EBI

Total EBI $2,700,980,000 $1,880,112,500 $1,642,620,000 $1,687,512,500 $1,410,290,000 $1,159,495,000 $781,580,000 $585,720,000 $448,360,000 $279,477,500

$37,413 $35,988 $37,178 $40,462 $34,726 $38,429 $35,679 $33,456 $30,770 $28,711

Source: Sales and Marketing Management, HSP

Two of the top ten most populous counties in Montana are part of the Missoula area: Missoula Count and Ravalli County. Missoula County has the second highest total EBI for the region with nearly $2 billion. The median household EBI for Missoula County is about $36,000, higher than the average for the top ten counties. The table below shows the income trends for Missoula from 2000 to 2007 (figures for 2008 and 2009 will not be available until later in 2010). T abl e 2- 4 Missoula MSA Income and Employment Year 2000 2001 2002 2003 2004 2005 2006 2007

Non-Farm Income

Non-Farm Employment

$ (000s)

% Change

Employed

% Change

Income/ Employed

% Change

$2,346,993 $2,563,611 $2,670,402 $2,780,921 $2,927,826 $3,108,064 $3,314,914 $3,552,971

-9.2% 4.2% 4.1% 5.3% 6.2% 6.7% 7.2%

67,036 68,945 70,158 71,375 73,451 75,157 76,598 78,732

-2.8% 1.7% 1.7% 2.8% 2.3% 1.9% 2.7%

$35,011 $37,183 $38,063 $38,962 $39,861 $41,354 $43,277 $45,127

-6.2% 2.4% 2.4% 2.3% 3.7% 4.6% 4.3%

Source: Bureau of Economic Analysis, HSP

Non-farm employment increased from 67,000 to nearly 79,000 from 2000 through 2007. Income per employed person increased form $35,000 to $45,000 over the period as well, greater than the rate of inflation. Unlike many communities, Missoula’s employment did not decrease during the recession of 2000 – 2001. The resilience of the local economy is due to large, stable economic entities like the University of Montana, regional health providers, and city/county government.

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The following table shows how the local income per employed person compares to statewide figures for Montana. T abl e 2- 5 Local vs. State Income and Employment Year 2000 2001 2002 2003 2004 2005 2006 2007

Missoula MSA Income/ % Change Employed $35,011 -$37,183 6.2% $38,063 2.4% $38,962 2.4% $39,861 2.3% $41,354 3.7% $43,277 4.6% $45,127 4.3%

Montana Income/ % Change Employed $36,639 -$39,017 6.5% $39,571 1.4% $41,150 4.0% $42,453 3.2% $43,920 3.5% $46,419 5.7% $48,590 4.7%

Source: Bureau of Economic Analysis, HSP

The level of income per employed person for the Missoula MSA remains just below the statewide rate. This is fairly consistent for each year between 2000 and 2007. The rate at which this figure grew annually was also nearly consistent for the Missoula area when compared to the growth rate of the state.

Employment Diversity The figure below shows the employment by industry category. Economies with diverse employment tend to be more resilient and grow more consistently over time than those with a heavy reliance in one sector.

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Fi gur e 2- 4

The Missoula employment market is very diverse and balanced by sector, with no sector representing more than 10,000 jobs. There are five major categories, including government, other services, leisure and hospitality, educational and health services, and retail trade that each represent between 8,000 and 10,000 jobs in the Missoula MSA.

Employers The table below shows the area’s largest employers.

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T abl e 2- 6 Missoula Area Top Employers Industry

Number of Employees

Community Medical Center Missoula CountyPublic Schools Plum Creek Timber St. Patrick Hospital University of Montana

Health Care Education Manufacturing Health Care Education

1000+ 1000+ 1000+ 1000+ 1000+

DirecTV Missoula County Smurfit-Stone Container Corp. US Forest Service Wal-Mart Albertonson's City of Missoula Opportunity Resources Stimpson Lumber Company Village Health Care Costco Jim Palmer Trucking Missoula Developmental Service Corp. Missoula Family YMCA Roseburg Forest Products Safeway Food & Drug The Good Food Store The Missoulian Watkins & Shepherd Trucking Western Montana Clinic

Service Government Manufacturing Government Retail Food Government Service Construction Health Care Retail Transportation Service Recreation Manufacturing Food Food Media Transportation Health Care

Company

500 500 500 500 500 250 250 250 250 250 100 100 100 100 100 100 100 100 100 100

-

999 999 999 999 999 499 499 499 499 499 249 249 249 249 249 249 249 249 249 249

Source: Missoula Chamber of Commerce, HSP

The largest employers in Missoula include the Community Medical Center, Missoula County Public Schools, Plum Creek Timber, St. Patrick Hospital and the University of Montana, each with over 1,000 employees. A strong and diverse base of employers is critical to support for a public infrastructure amenity like an arena or multipurpose center. These employers can host events and provide support via sponsorships and advertising.

Higher Education The following table shows the colleges and universities in the greater region.

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T abl e 2- 7 Regional Colleges & Universities Location

Number of Students

High Degree Offered

Missoula, MT Bozeman, MT Cheney, WA Spokane, WA Spokane, WA Coeur d'Alene, ID Spokane, WA Missoula, MT Spokane, WA Coeur d'Alene, ID

13,858 12,369 9,831 7,319 6,415 4,650 2,674 1,800 1,505 625

Doctorate Doctorate Graduate Graduate Associate Associate Graduate Graduate Doctorate Graduate

Institution University of Montana Montana State University Eastern Washington University Gonzaga University Spokane Community College North Idaho College Whitworth University Walla Walla University Washington Statue University-Spokane University of Idaho-Coeur d'Alene Source: HSP

As shown, the University of Montana, in Missoula, is the largest university in a 300-mile radius. The table below profiles the University of Montana, perhaps the largest economic force in the region. T abl e 2- 8 University of Montana Location: 2007-08 Enrollment: Affiliation: Programs: Faculty/Student Ratio: Founded: Campus:

Missoula, Montana 13,858 (11,799 undegrad) Independent Lutheran Coed undergraduate, graduate and doctorate schools 1:24 1893 220 acres, 50 acedemic and residential buildings

Source: Univeristy of Montana, HSP

The University of Montana is a state run, public school with nearly 14,000 students and 800 fulltime faculty and staff. The university offers undergraduate, graduate and doctorate degrees. It is a major force in the community and brings thousands in for sports events. It also provides the only major public assembly facilities in the region.

Tourism Attractions Missoula (and the surrounding area) is home to a number of visitor attractions that makes it a destination for many individuals and groups. While Missoula does not include major national recreation areas in its city limits, it is the gateway for national parks and recreation areas as it is

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conveniently located between several of the most noted in the nation: Glacier National Park, Yellowstone National Park and the nearby Rattlesnake National Recreation Area and Wilderness. The table below shows some of the primary attractions in the area. T abl e 2- 9 Missoula Area Top Tourist Attractions Sightseeing Lolo Hot Springs Rocky Mountain Elk Foundation Smokejumper Visitor Center Snowbowl Ski And Summer Resort Parks Glacier National Park Lolo National Forest Rattlesnake National Recreation Area Yellowstone National Park

Location Lolo, Missoula, Missoula, Missoula,

MT MT MT MT

Location Glacier County, MT Lolo, MT Missoula, MT Montana, Wyoming & Idaho

Cultural Historical Museum at Fort Missoula Missoula Art Museum Missoula Children’s Theatre Missoula Symphony Orchestra The Montana Repertory Theatre

Location Missoula, Missoula, Missoula, Missoula, Missoula,

Other Big Sky Brewing Company Bozeman, Montana Splash Montana Stevensville, Montana

Location Missoula, MT Bozeman, MT Missoula, MT Stevensville, MT

MT MT MT MT MT

Source: Missoula Chamber of Commerce, HSP

The primary attractions in the area, in alphabetical order, are discussed below. Big Sky Brewing Company – The local brewing company began production of its first beer in 1995 and the company now distributes bottled beer in 13 states with national sales of over 1.8 million six-packs and 455,000 cases of beer. The brewery conducts brew tours daily and attracts many visitors local, regionally and nationally. Glacier National Park – Glacier National Park is located north of Missoula bordering the Canadian provinces of Alberta and British Columbia. The park encompasses over one million acres and encompasses parts of two mountain ranges. As the nations tenth recognized national park, Glacier National Park was established in 1910. The park consists of over 700 miles of maintained trails and includes over one million acres of preserved forests, meadows and lakes.

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Historical Museum at Fort Missoula – Located on 32-acres of land in Fort Missoula, the Historical Museum features a number of exhibits honoring local area history with various artifacts and educational information. The museum opened in 1975. Lolo Hot Springs – The RV park and campground is located on 125-acres of land inside the Lolo National Forest and features live entertainment, a restaurant, a gallery, and natural mineral hot springs pools. Lolo National Forest – Located about 30 miles southwest of Missoula, the Lolo National Forest consists of about two million acres of forests and lakes. The area is available for camping, hiking and recreational sports. Missoula Art Museum (MAM) – Originally opened in Missoula in 1975, the newly renovated and expanded MAM opened its doors in 2006 and offers free admission. The facility features between 20 and 25 solo and group exhibitions that rotate through six galleries annually. Missoula Children’s Theatre – The Missoula Children’s Theatre is the largest touring children’s theatre in the nation and offers workshops and classes for children to learn the art of theater performance. Local productions are held at the theater in Missoula. Missoula Symphony Orchestra – The MSO celebrated its 55th year of operation in 2010. The orchestra has produced sold out shows and has annual performances including the free outdoor concert in downtown Missoula and several family shows. The Montana Repertory Theatre – The “Rep” has staged many productions in over 40 years of operation and hosts many shows that draw a regional audience. Performances range from local, university-produced shows to national touring acts. Rattlesnake National Recreation Area and Wilderness – Located about four miles north of Missoula, the recreation area and wilderness park features 61,000 acres of glaciated topography fit for hiking. Rocky Mountain Elk Foundation – In 1984, a group of elk hunters and enthusiasts created the Rocky Mountain Elk Foundation, an organization that directly benefits elk and other wildlife by directing funding toward the land. Elk hunting has become increasingly popular in the western Montana region. Smokejumper Visitor Center – Located in Missoula, the center is the largest active smokejumper base in the nation. The facility offers a glimpse into the profession of a forest fire fighter by education visitors on the day-to-day life of a professional smokejumper. Snowbowl Ski and Summer Resort – Located 12 miles northwest of Missoula, the Snowbowl offers 42 marked trails for all different skill levels. Splash Montana – Open from May to August, Splash Montana includes three waterslides, a lazy river, a 50-meter pool with lap lanes and water volleyball, polo, and basketball features.

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Stevensville, Montana – Settled forty-eight years before Montana became a state, Stevensville became the first permanent settlement in the state. Located about 30 miles south of Missoula, the city offers beautiful scenery, recreational opportunities and historic buildings. Other nearby attractions: Yellowstone National Park – Yellowstone is the nations first national park. Opened in 1872, the park is home to a variety of wildlife including grizzly bears, elk and bison. The national park features Old Faithful along with a number of additional geysers and hot springs. It is located south of Missoula and straddles the Montana-Wyoming border. Missoula is one of the primary gateways to Yellowstone and nearby Bozeman. Bozeman, Montana – Many visitors to Missoula also make the three hour drive to the City of Bozeman, which offers its own unique array of tourists attractions as well as many area accommodations for the nearby Yellowstone National Park. Bozeman’s attractions include the Bridger Bowl Ski Area, the Museum of the Rockies, the Pioneer Museum and Big Sky Resort.

Comparable Markets HSP reviewed other cities with universities in mid- to small-sized markets to understand if public assembly facilities had been developed in those markets beyond the existing university facilities. The table below shows the results.

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T abl e 2- 10 Comparable University Cities Media Market Population

MSA Population

Median EBI

931,052

561,505

$45,711

N/A*

489,762

$39,836

Eugene, OR

597,066

346,560

$35,424

Boulder, CO

N/A*

293,161

847,411

College Station, TX Athens, GA

Event Center (NonUniversity) Alliant Energy Center of Dane County

Number of Seats

RBC Center

18,680

Lane Events Center

3,600

$50,880

University of Oregon University of Colorado at Boulder

N/A

N/A

208,460

$45,365

University of Vermont

Memorial Auditorium

2,500

N/A*

207,425

$32,273

Texas A&M University

Building Convention Center

N/A

N/A*

189,264

$32,996

Classic Center

3,200

Columbia, MO

449,968

164,283

$37,003

University of Georgia University of MissouriColumbia

Columbia Expo Center

N/A

Missoula, MT

445,523

107,320

$35,988

University of Montana

N/A

N/A

Charlottesville, VA

224,356

194,391

$44,518

N/A

N/A

Mankato, MN

130,039

92,428

$40,044

Alltel Center Arena

8,100

Boone, NC

N/A*

45,196

$34,233

N/A

N/A

Brookings, SD

N/A*

29,668

$39,206

University of Virginia Minnesota State UniversityMankato Appalachian State University South Dakota State University

Swiftel Center

3,500

City Madison, WI Chapel Hill, NC

Burlington, VT

Institution University of WisconsinMadison University of North Carolina at Chapel Hill

10,230

*Suburb or City Within a Larger Metro Area Source: Sales and Marketing Management, US Census, HSP

Of the cities identified, most hosted public assembly facilities beyond what was offered at the university, including those with smaller markets. The next table shows the communities that Missoula often competes with for companies, jobs, talent and general economic development opportunities. The list includes some smaller, prosperous cities with easy access to outdoor activities. These cities are experiencing a high degree of growth and maintain a strong regional economic base. Each has a local university or college that provides a solid backbone for the community.

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T abl e 2- 11 Competitive Cities for Economic Development Media Market Population

MSA Population

Median EBI

1,079,675

462,677

38,016

Colorado Springs, CO

875,625

617,714

$45,086

Boise, ID

701,850

599,753

$42,261

Tri-Cities, WA

639,568

235,841

Missoula, MT

445,523

Billings, MT Bend, OR

Event Center (NonUniversity)

Number of Seats

Gonzaga University University of Colorado at Colorado Springs

Spokane Arena

6,147

World Arena

8,500

Qwest Arena

5,500

$44,193

Boise State University Washington State UniversityTri Cities

Toyota Center

12,000

107,320

$35,988

University of Montana

N/A

N/A

265,368

152,005

$37,340

Metrapark

9,200

159,560

158,456

$41,695

Montana State University Oregon State UniversityCascades Campus

N/A

N/A

Prescott, AZ

N/A*

215,503

$37,219

Prescott College

Tim's Toyota Center

5,100

College Station, TX

N/A*

207,425

$32,273

Texas A&M University

Building Convention Center

N/A

Flagstaff, AZ

N/A*

128,558

$40,214

Northern Arizona University

N/A

N/A

City Spokane, WA

Institution

*Suburb or City Within a Larger Metro Area Source: Sales and Marketing Management, US Census, HSP

Local events facilities have been able to benefit from the growth and regional interest in these towns. They are competitive with cities within their region because they offer both natural, scenic beauty and the necessary facilities and lodging to host concerts, sporting events, conventions, conferences and other events. As is shown, Missoula is one of the few markets in the competitive set without an event center beyond the university.

Conclusion Missoula is a growing, diverse and attractive market that continues to attract employers, residents and visitors due to its scenic beauty, recreational activities, university and health assets, and low cost of living. It offers many of the assets of a large city in a small town atmosphere all with the recreational and topographic attributes of the mountain west. The market has continued to prosper relative to other markets. The lack of an event center is one of the few areas where Missoula falls short of competitive and comparable markets. The driving population of nearly 800,000 within 150 miles and the media market population of nearly 450,000 would be the primary users of an events center. These market sizes are large enough to support an events center (as shown by the comparable markets) and without such a facility, this population base must drive to other less compelling venues in smaller communities for their events.

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Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Interviews and Survey Results

Chapter 6

Site Analysis

Chapter 7

Competitive Facility Analysis

Chapter 8

Comparable Facility Analysis

Chapter 9

Hotel Analysis

Chapter 10

Recommendations

Chapter 11

Conceptual Drawings and Preliminary Budget

Chapter 12

Demand Projection

Chapter 13

Financial Projection

Chapter 14

Economic, Fiscal & Employment Impact Analysis

Chapter 15

Governance Discussion

Chapter 16

Financing Options


MEETING INDUSTRY TREND DATA This section provides a current overview of trends and developments impacting meeting and convention facilities, as this will have an effect on any new facility. Since an events center in Missoula would have a large flat floor space that could host a number of events, such as trade and consumer shows, it is important to understand this industry. Conventions, exhibitions, and trade shows are conducted for the purposes of exchanging information, conducting business transactions, and for educational, cultural, and social enrichment. As developments occur in the larger economy, simultaneous developments occur in the meetings market, such as the growth of the tech sector generating growth in tech related meetings and events. Often, a single event will use many different types of spaces, including exhibit halls, banquet facilities, and breakout meeting rooms. Well-designed multi-purpose facilities offer the proportions of different types of spaces appropriate for their market. In addition, it offers the flexibility to host multiple events at one time. Different types of conventions and meetings have differing needs. The following table summarizes the key attributes of various types of meetings, including facility requirements.

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Table 3-1

Banquets

Typical Facility Used

Trainings

Exhibit Halls, Ballroom, Meeting Rooms, Hotel Block

Meetings

Facility Requirements

Conferences

Info Exchange Info Exchange & Sales

Sports Events

Primary Purpose

Consumer Shows

150 - 50,000

50 - 2,000

10 - 300

10 - 300

50 - 2,000

Info Exchange

Info Exchange

Training

Social, Business & Charity

Meeting Rooms, Hotel Block

Ballroom

Convention/ Conference Centers and Hotels

Convention/ Conference Centers and Hotels

150 - 15,000

250 - 50,000

8,000 1,000,000

Sales

Advertising & Sales

Info Exchange

Exhibit Halls, Hotel Block

Exhibit Halls

Arena or Arena, Stadium Ballroom, Meeting Exhibit Halls, or Exhibit Halls, Meeting Rooms, Rooms, Hotel Hotel Block Hotel Block Hotel Block Block

Ballroom, Meeting Rooms, Hotel Block

Convention Convention Expo Facilities Expo Facilities Center & Large Center & Large & Convention & Convention Hotels Hotels Centers Centers

Assemblies

Tradeshows

Attendance Range

Event Type

Conventions

Conventions with Exhibits

Facility Types & Requirements for Various Event Types

5,000 - 50,000 500 - 100,000

Arenas or Convention Centers

Sports

Arena, Stadiums, Convention Centers

Convention/ Conference Centers and Hotels

Convention/ Conference Centers and Hotels

Source: HSP

The various types of convention and conference center events are described below: Conventions and Trade Shows – Associations, professional groups, and other membership organizations hold conventions and trade shows, with attendance ranging from 150 to 50,000 attendees. The larger of these meetings take place in convention centers with large exhibit halls, but as a Center for Exhibition Industry Research (CEIR) survey indicates, the majority of events require less than 50,000 square feet. Conventions and trade shows may feature a single meeting, but usually offer a number of concurrent meetings and exhibitions. Facility needs include assembly space for general sessions and displays, banquet facilities, and numerous breakoutmeeting rooms. Two-thirds of conventions and trade shows use exhibit space as a means to communicate ideas and to display products. Conventions are high-impact events economically because a large percentage of attendees originate from outside the local area, typically stay several nights in the host city, and spend money on accommodations, food, transportation, retail goods, and entertainment. Spouses, family, or companions typically accompany a significant number of attendees. Like conventions, trade shows offer a forum for exchanging industry ideas. They vary slightly from conventions in that they are more product- and sales-oriented. Trade shows are exhibitintensive, and exhibitors prefer column-free, open-space facilities in which temporary custom booths for product display are constructed. Trade shows typically attract a large number of

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attendees, who originate from outside the host city but tend to have a shorter average stay than convention attendees. Consumer Shows - Consumer shows are public, ticketed events featuring exhibitions of merchandise for sale or display. Consumer shows provide a means of product distribution and advertising. Some, such as auto and boat shows, have a recreational and entertainment function as well. Consumer shows range in size from small local and specialized shows with a few hundred attendees to large shows with thousands of attendees. The larger consumer shows may occur in convention centers, shopping malls, fairgrounds, and other public-assembly facilities with large exhibition areas. The majority of attendees are local, but exhibitors often come from out of town. Site selection considerations for consumer shows include the size and income of the local population, availability of facilities, and the number of competitive shows in the market. Assemblies - Assembly events are social, military, educational, religious, and fraternal (SMERF) events. They attract large numbers of people and require arena or stadium seating. Similar to conventions, attendees originate from outside the host city, but, unlike conventions, these events do not usually require large amounts of exhibit and meeting room space. Sports – Sporting events are any youth, amateur, professional, or senior event of any variety of sports that can be played indoors. Typically, such events are held in arenas or stadiums; however, many events, from boxing to wrestling, to basketball, can be held in exhibit facilities with temporary seating/stands. A growing trend in this sector is cheerleading competitions. As such, convention centers can be marketed for a variety of event types. Conferences – Conferences are meetings typically held by associations, professional groups, and other membership organizations. Educational institutions also host conferences. These events do not usually require exhibit space, but otherwise the facility demands are similar to those of conventions—such as meeting space for general sessions, food service facilities, and breakout rooms. Hotels and conference centers typically serve as venues for conferences. Corporate, Training and Other Meetings – Corporate meetings include training seminars, professional and technical conferences, incentive trips, and management meetings. Corporate meeting planners and attendees demand high-quality facilities. The existing facilities can accommodate most of these types of meetings; however, there are catering challenges for some users. With a higher-quality and expanded program of spaces, higher-rated and larger corporate meetings can be accommodated. Banquets – Banquets are typically locally-generated events, from social and wedding events to the annual Chamber of Commerce event, which can be the largest of its kind in a given city. A mainstay of hotels and convention centers, banquets provide significant catering income and provide the community with its largest dining room, in most cases.

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National Supply Demand for meeting and exhibition space allowed many communities in the U.S. to develop successful convention and trade show facilities during the 1970s and 1980s. Public sector involvement in these developments was motivated primarily by the desire to capture the economic benefits of the events they hosted in their communities. The following figure shows the comparison of supply and demand growth beginning in 1987. Figure 3-1

Exhibit space supply has increased every year since 1999, however paid exhibit space rises and falls with the economy, so decreased in 2001 and 2002 as well as 2008. Demand also fell in 2009 although year-end figures are not available yet. This has led to tough competition amongst convention centers, especially larger facilities. The following table shows the increases in supply of exhibit space over the next several years.

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Table 3-1 National Projected Added Exhibit Space (Square Feet) Fiscal Year

Expansions

New Facilities

Total

Increase from Base

Base

2009-2010

1,023,532

441,728

1,465,260

1.6%

92,079,589

2010-2011

985,587

201,000

1,186,587

1.3%

93,266,176

2011+

20,000

816,000

836,000

0.9%

94,102,176

Source: Major Exhibit Hall Directory

The future increase in supply is expected to slow as a percent of the base supply, which, as the economy improves, should help to alleviate some of the stress on convention venues to make deals on rent that have been increasing over the past few years. The following table shows the distribution of facilities by size. Table 3-2 Distribution of National Facilities by Size Total Square Feet of Exhibit Space 25,000 - 49,999 50,000 - 99,999 100,000 - 499,999 500,000+

Percent of Facilities 16% 29% 47% 8%

Source: Major Exhibit Hall Directory

Nearly half of convention facilities have between 100,000 and 499,999 square feet of exhibit space. An event center in Missoula will be among the 16 percent of facilities with 25,000 to 49,999 square feet of exhibit space. There is less competition within this small category of facilities. The following table summarizes the ownership and management structure of U.S.-based exhibit halls.

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Table 3-3 Ownership and Management of U.S. Exhibit Halls Type of Entity

Ownership

Management

37% 32% 11% 9% 5% 3% 3%

63% 16% 4% 6% 2% 5% 4%

Private City County State Combination Government Government Authority Other Source: Major Exhibit Hall Directory

This trend toward private management has increased as governments and citizens are demanding more professional management and accounting related to the results at these major public investments.

Meeting Demand Meeting planners have the strongest influence on conventions and meetings held nationwide. This section includes some of preferences of U.S. meeting planners based on Meetings Media’s Market Trends Survey in 2008 as well as data from other sources. The following table shows the size of exhibitions measured by the total gross square feet of space used for their event. Table 3-4 Size of Exhibitions (Gross Exhibit Space) Percent of Total

Cumulative Total

6,000 - 14,999 SF

19%

19%

15,000 - 24,999 SF

13%

32%

25,000 - 34,999 SF

15%

47%

35,000 - 49,999 SF

13%

60%

50,000 - 99,999 SF

19%

79%

100,000 - 199,999 SF

14%

93%

200,000+ SF

7%

100%

Source: Center for Exhibition Industry Research

Distribution is fairly equal for the size of exhibitions. Nearly 20 percent of exhibitions occur in less than 15,000 square feet of exhibit space and an additional 13 percent take place in 15,000 to

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25,000 square feet of space. Facilities under 25,000 square feet of gross exhibit space can host one third of conventions. The following table shows the typical meeting duration organized by meeting planners. Table 3-5 Typical Meeting Duration 0.5 day 1 day 1.5 days 2 days 2.5 days 3 days 3.5 days 4 days 4.5 days 5 days More than 5 days

7% 9% 7% 14% 13% 22% 9% 8% 3% 5% 3%

Source: Meetings Media, HSP

Half of all meetings and events last between two and three days. The following table shows the types of facilities used for all conventions and meetings (respondents could give more than one answer). Table 3-6 Types of Facilities Used for U.S. Meetings and Conventions Downtown Hotels Suburban Hotels Resort Hotels (excluding golf resorts) Airport Hotels Convention Centers Golf Resorts Suites Hotels Gaming Facilities Residential Conference Centers Nonresidential Conference Centers Cruise Ships

68% 48% 42% 26% 19% 16% 16% 9% 9% 6% 1%

Source: 2006 Meetings Market Report

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For all meetings and conventions, hotels of all sorts are the primary host venue. Convention centers host one out of five meetings or conventions. For conventions only, typically only convention centers and large hotels host these types of events. The following table presents total attendance for convention/trade shows and consumer shows. Table 3-7 U.S. Exhibit Hall Events - Average Attendance Size

Conventions / Trade Shows

Consumer Shows

2,100 3,600 10,000

4,100 8,700 16,400

Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet Source: PricewaterhouseCoopers 2007

The following table shows the average event count and attendance for survey respondents by facility size. Table 3-8 U.S. Convention Centers - All Event Characteristics Size

Average Event Count

Average Total Attendance

344 370 219

262,200 523,000 1,099,900

Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet Source: PricewaterhouseCoopers 2007

The following table displays the number of convention/trade show and consumer show events hosted by survey respondents. Table 3-9 Surveyed National Exhibit Halls - Number of Events Size Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet

Conventions / Trade Shows 29 48 55

Consumer Shows 20 24 26

Total 49 72 81

Source: PricewaterhouseCoopers 2007

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The following table shows the average number of room nights generated annually by respondents to the convention center survey. Table 3-10 U.S. Convention Centers - Hotel Room Nights Average Number of Room Nights

Size Less than 100,000 square feet 100,000 to 500,000 square feet More than 500,000 square feet

34,300 164,300 1,122,400

Source: PricewaterhouseCoopers 2007

The next figure shows the seasonality of the convention calendar across the U.S. Figure 3-2

The following table shows the important factors when choosing a meeting destination/city.

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Table 3-11 Important Factors when Selecting a U.S. Meeting Destination Convention

Association Meeting

Corporate Meeting

Availability of hotels and/or other facilities suitable for meetings

83%

79%

74%

Affordability of Destination

77%

81%

77%

Safety and Security of Destination

46%

na

na

Ease of Transporting Attendees to/from Location

43%

na

62%

Transportation Costs

43%

na

na

Source: Meetings Market Report

The availability of suitable hotel and meeting space is of primary importance, followed closely by the affordability of the destination. Once a destination is selected, planners must then choose a hotel. The following table shows the important factors for selecting hotels within the destination. Table 3-12 Important Factors when Selecting a Hotel within a U.S. Meeting Location Item

Convention

Association

Corporate

Number, Size and Quality of Meeting Rooms

93%

69%

81%

Negotiable Food, Beverage and Room Rates

87%

80%

79%

Cost of Hotel or Meeting Facility

82%

80%

80%

Number, Size and Quality of Sleeping Rooms

79%

54%

72%

Quality of Food Service

70%

63%

70%

Source: Meetings Market Report

As shown, availability of the right spaces and the fees for those spaces are the primary factors.

Conclusion The convention and conference event industry is diverse and responds well to facilities that can adjust to meet their needs, such as an events center. Given that the Adams Center in Missoula is not always available and there are few other meeting and events facilities of high quality in the area, the proposed events center would fill a void in Missoula.

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Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Interviews and Survey Results

Chapter 6

Site Analysis

Chapter 7

Competitive Facility Analysis

Chapter 8

Comparable Facility Analysis

Chapter 9

Hotel Analysis

Chapter 10

Recommendations

Chapter 11

Conceptual Drawings and Preliminary Budget

Chapter 12

Demand Projection

Chapter 13

Financial Projection

Chapter 14

Economic, Fiscal & Employment Impact Analysis

Chapter 15

Governance Discussion

Chapter 16

Financing Options


C ONCERT , A RENA S PORTS & O THER E VENT T RENDS Arena or event center development for communities and markets comparable to Missoula has been increasing in the last decade for a variety of reasons. For small markets with or without a university, small arenas provide an opportunity to host sports teams, concerts, family and ice shows, community events, trade shows and conventions. Events for smaller arenas continue to be developed. These events can find success in small metropolitan areas. The market provides many reasons to consider an arena in Missoula, for winter sports, concerts and other events, as well due to the strength of the community and the potential that exists because nearly 800,000 people reside within a 150-mile radius.

The Arena Industry in the United States The nationwide trend to build new sports and entertainment facilities in recent years has affected markets large and small. The majority of large metropolitan areas with major professional sports franchises have opened new arenas in the last ten to 15 years, and even small markets with minor-league sports teams have done the same. In addition to hosting sports events, the venues are also typically multipurpose facilities that can accommodate events such as concerts, family shows, and other community-oriented events. Depending on a facility’s orientation and a market’s needs, it can also be used for events such as meetings, conventions, and trade and consumer shows. The advent of amenities such as luxury suites, club seating, private restaurant areas, and others have created new, potentially lucrative revenue streams for facility owners, although these are not always present in facilities – especially if there is not anchor sports tenant. In addition, naming rights and expanded sponsorship programs have also significantly increased opportunities for facility-based revenues. In order for a facility to have the ability to generate these revenue streams, it is generally important for it to have at least one full-time tenant, such as a college or a professional sports franchise. A professional basketball or hockey team, for example, provides a facility with approximately 40 or more guaranteed event dates. A men’s or women’s collegiate basketball program will generally play approximately 15 to 20 home games per season, and a volleyball program can add another 10 to 15 home matches. In addition, the revenues generated from premium seating, luxury suites, naming rights, and other sponsorships are heavily dependent on the existence of one or more sports tenants. These sporting events allow customers and advertising partners with regular access to a venue and a schedule of annually-repeating, relatively high-profile events for entertaining clients and friends, rewarding employees, and maintaining a strong local presence. Facilities without an anchor tenant can generate similar revenue streams, but not to the extent of a facility with an anchor tenant. Because of the availability of these new revenues, facilities can now be partially financed through project-based revenues such as naming rights and long-term commitments for premium seating

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and/or sponsorships rather than purely through general obligation bonds, municipal property tax revenue, or outside sources of university revenues or borrowing. However, these revenues are often not sufficient to entirely finance and operate a project such as an arena. As a result, facility development typically still involves other forms of private investment or contributions and public assistance, such as land contributions, dedicated tax revenue or fees, property tax abatement, individual and corporate giving, or others. This section describes relevant aspects of the arena industry as they relate to the Missoula market, including a review of recent and planned arena construction, discussion of event types and their characteristics, and others. Many university arenas are not used for non-university events, therefore both university and non-university facilities are discussed.

Recent and Planned Arena Development in the U.S. The following table summarizes a sample of smaller arena projects (defined as having 10,000 or fewer seats) that have opened since 2003 or are planned to open in the near future. Other projects have been built or are in various stages of planning, but this table lists a representative set of facilities that have been completed or are currently likely to be completed. This table will begin to demonstrate the size and type of facilities that are being built, as well as the markets that are expected to support them, their tenants, and their offerings. T abl e 3- 1 New Arenas Since 2003 With Less than 10,000 Seating Capacity Facility Name Pro Sports/Municipal Use Budweiser Events Center Comcast Arena at Everett Events Center Dodge Arena Orleans Arena* Ford Arena Tyson Events Center American Bank Center Stockton Events Center Chevrolet Centre US Cellular Arena Broomfield Event Center Rio Rancho Events Center Tim's Toyota Center Greater Wenatchee Regional Events Center Kent Events Center Lucas County Arena

MSA

2007 MSA Population (000s)

Tenant(s)

# of Permanent Seats

# of Luxury Suites

# of Club Seats

Annual Naming Rights

Estimated Cost (millions)

Opened/ Expected Opening

Fort Collins - Loveland, CO

269

CHL, NWBL

5,211

24

777

$75,000

$25.0

2003

Seattle - Tacoma - Bellevue, WA

3,168

af2, WHL

8,250

20

750

$740,000

$63.0

2003

McAllen - Edinburg - Mission, TX Las Vegas - Paradise, NV Beaumont - Port Arthur, TX Sioux City, IA-NE Corpus Christi, TX Stockton-Lodi, CA Youngstown-Warren, OH Bloomington-Normal, IL Denver-Boulder-Greeley, CO Albuquerque, NM Prescott, AZ

657 1,649 383 143 410 649 596 158 2,326 781 190

af2, CHL ECHL ECHL, NIFL USHL, NIFL CHL, Texas A&M-CC af2, ECHL, MISL CHL UHL, UIFL CHL af2, CHL CHL

5,500 7,000 8,200 10,000 6,000 10,000 5,700 7,000 6,000 6,500 5,100

25 22 15 27 11 24 24 24 25 26 20

500 220 750 0 302 500 500 700 900 500 500

$200,000 -$250,000 $200,000 n/a -$200,000 n/a --n/a

$20.0 $150.0 $70.0 $28.1 $50.0 $45.0 $41.0 $37.0 $45.0 $43.0 $24.0

2003 2003 2003 2003 2004 2005 2005 2006 2006 2006 2006

Wenatchee, WA

107

NAHL, AIFA

5,000

yes

yes

--

$45.0

2008

Seattle-Tacoma-Bellevue, WA Toledo, OH

3,309 651

CHL ECHL

7,500 8,000

n/a 20

n/a n/a

---

$68.0 $105.0

2009 2009

5,413

Univ. of Miami

7,000

25

0

n/a

$48.0

2003

456

Gonzaga

6,000

0

0

--

$25.0

2004

Waterloo-Cedar Falls, IA

163

Univ. of Northern Iowa

7,000

0

0

$4M total

$20.0

2006

Cincinnati-Middletown, OH-KY-IN Charleston-North Charleston, SC Springfield, MO Dover, DE Albany, GA

2,134 630 420 152 164

Northern KY Univ. Coll. of Charleston Drury Univ. Delaware State Aurburn

9,000 5,000 4,000 9,000 9,600

12 0 yes 24 12

0 0 0 700 450

$6M total $2M total $6M total ---

$64.0 $36.0 $12.0 $60.0 $92.5

2008 2008 2009 2009 2010

College-Led Arenas BankUnited Center McCarthey Athletic Center McLeod Center Bank of Kentucky Arena Carolina First Center O'Reilly Family Event Center Delaware Civic Center Auburn Arena

Miami-Fort Lauderdale-Pompano Beach, FL Spokane, WA

* Includes hotel and casino. Source: US Census Bureau, Venues Today, Revenues from Sports Venues, individual facilities

As the table shows, markets of various sizes have built and are planning sports and entertainment facilities. The arenas shown in the table range in size from 4,000 to 10,000 seats, and most have

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a significant supply of premium seating, although specific offerings of some planned facilities are not yet available. While some of these facilities are still in the planning phase or under construction, they demonstrate what each market feels is an appropriate venue, given its market characteristics. All of the facilities have or will have at least one sports tenant, including collegiate and minor league teams. The facility in Missoula is not expected to have a collegiate or professional sports tenant. This will allow for many types of events and an open calendar, but will also remove a built-in event and attendance stream during the year. It also suggests that premium seating is not likely in Missoula. This reduces the revenue, but also the cost of the facility.

Other Entertainment Events – Concerts and Family Shows Aside from sporting events and conventions/meetings, other typical uses of arenas are for entertainment events such as concerts and family shows. The text below describes these entertainment events and their characteristics as they relate to Missoula.

Concerts Concerts can be a major source of revenue for an arena. Arenas today are often designed and operated as much as music venues as sports venues. Because of recent consolidation in the music industry, few large event promoters generally control the concert industry and the availability of acts. As a result, it is wise for management of an independent arena to explore forming a strong alliance with at least one key promoter, depending on the local/regional competitive landscape. This type of arrangement would not have to be exclusive, and the arena would be able to contract with all interested promoters. Further, the facility itself could also promote, or co-promote with another organization, certain events (by taking on some of the risk and funding some upfront expenses in exchange for a higher share of event revenues) to keep a vibrant calendar going. Music Industry Trends Over the past several years, the live concert industry continued to show signs of health and popularity across the country. With decreases in CD sales and the availability of free music downloads, many bands are now touring more in order to maintain previous income levels. In 2007, according to leading industry chronicler Pollstar, primary-market ticket sales (which does not include secondary resellers such as StubHub) increased for the ninth straight year in the US and Canada, to $3.9 billion. This was despite a flattening in the face value of ticket prices after several years of steep increases. In 2007, the average ticket price for the top 100 tours was approximately $62. The industry has also been helped by the popularity of other touring events that are typically considered to be concerts, although many could also be called family shows. The number of available touring shows (particularly concerts) varies from year to year, as individual performers

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or bands are not always on tour. However, there is always a significant inventory of events available to facilities. A national tour can typically include 25 to 75 performances, and most arena concerts are held from the fall to spring. In the summer, most concerts take place in amphitheaters and other outdoor venues, particularly in recent years with the growing popularity of music festivals in the U.S. The most popular, well-established acts that once toured only large stadiums are now filling arenas and amphitheaters for multiple shows to smaller audiences. While stadium tours, and limited stadium performances, will continue to be staged, even groups like the Rolling Stones, Billy Joel, Elton John, and U2 are also booking performances at smaller arenas and amphitheaters. Missoula was fortunate to have Elton John twice at the Adams Center and have the Rolling Stones perform at the stadium. However, groups such as these would generally perform at a large arena, such as the Seattle Key Arena or the Salt Lake City EnergySolutions Arena, because they can easily sell 18,000 tickets or more (and often for multiple shows on consecutive nights in the same market). Touring acts that are popular but do not have the same following as an Jimmy Buffett or U2, and would not expect to sell out a facility the size of an NBA or NHL arena, would be better candidates to perform at a small or mid-sized arena in Missoula. Secondary and Tertiary Markets for Concerts Secondary and tertiary markets have demonstrated over the past few years that they can sustain a robust concert business. Recent years have been excellent for secondary markets, with such top acts as Cher, the Eagles, and many others playing a number of venues in smaller markets. According to industry sources, many acts are finding that they do not reach all their fans by only playing major markets. While smaller markets typically have facilities with smaller capacities and are less likely to support high ticket prices, adding smaller-market dates to touring schedules, on top of the standard primary-market dates, creates additional revenue for these acts and allows them to reach a broader base of fans. In addition, the trend to tour more, as well as the construction of new small facilities across the country, has also helped to attract concerts to small markets. In recent years, a number of popular touring concerts performed in smaller arenas throughout the country. For the most part, these acts would not be expected to sell out an arena the size of Key Arena, particularly for multiple dates, and would therefore be more likely to book a smaller arena, like one in Missoua. But in other cases, major acts have also performed in small facilities in smaller markets, as previously described. The following information provides examples of recent tours that are relevant to this discussion. The tour of the popular High School Musical included stops in many NBA and NHL arenas but also in smaller facilities such as the 2,700-seat Civic Center of Greater Des Moines. In Des Moines, eight performances had an average attendance of approximately 2,000 with ticket prices ranging from $10 to $60. The Jonas Brothers, who perform in both small and large arenas, performed at the 7,100-seat Sovereign Center in Reading, PA and the 6,800-seat Dodge Arena in Hidalgo, TX. Both concerts

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were near sellouts with ticket prices ranging from $30 to $75, and gross sales of $300,000 to $400,000. The Blue Man Group’s tour included performances in NBA/NHL arenas as well as smaller community venues (including the Allen County War Memorial Coliseum in Fort Wayne). An example of a major act that can sell out 20,000-seat arenas but also plays smaller venues is the Foo Fighters. Their tour included NBA/NHL arenas as well as 5,000- to 10,000-seat arenas such as Wachovia Arena in Wilkes-Barre, PA; the Glens Falls (NY) Civic Center; the Mid-America Center in Council Bluffs, IA; and the Pensacola Civic Center. With ticket prices from $23 to $55, shows at the Mid-America Center and Pensacola Civic Center generated more than $300,000 in gross ticket sales. James Taylor’s recent tour stops included the 5,100-seat Tim’s Toyota Center in Arizona and the 6,700-seat Cumberland County Civic Center in Portland, Maine. As discussed, there are a variety of non-sports events that play in smaller arenas. The key then is to have a competitive niche within the overall regional market and a strong management company that can book strong acts.

Family Shows Family shows generally are not as great a revenue producer for facilities as top concerts, but they have shown notable growth in the past few years. Tickets for family shows typically cost less than concerts in order to entice families to attend. Yet what family shows may lack in revenue, they more than make up for in reliable year-round bookings, as the touring schedules are more consistent than those of concerts. Further, family shows can agree to long-term booking arrangements with a facility and commonly hold several performances over multiple consecutive days. However, like the concert industry, most of the larger family shows are controlled by a small group of companies. In recent years, the number of touring family show properties has dramatically increased. The following table lists the primary organizations that produced family shows in 2008, as well as various characteristics of their events.

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T abl e 3- 2 2008 Family Events Productions Company

US Touring Units

# of US Shows

Avg. Ticket Price

Stars on Ice AVP Hot Winter Nights Toughest Cowboy Total

Unknown

$25 - $50

Thomas & Friends Dora the Explorer Scooby Doo in Stagefright Barbie Live! Cuentos de Princesas Total

550

$15.50

Five

100 in 50 Cities

$17.50

18, including Ringling Bros., Disney on Ice, High School Musical, and others

1,700

$24.50

Two

Approx. 400

$26

Day Out with Thomas 2008 Great Discovery Tour HIT Entertainment Fun Festival/ Thomas & Friends Live on Stage! Total

Unknown

$24.50

12

600

$43.50

Backyardigans Live Total

60 Markets

$22.50

Smucker's Stars on Ice

52

$44

New Sesame Street Live Sesame Street Live Sesame Street Live "When Elmo Grows Up" Ready for Action Total

250

$22.50

World Famous Lipizzaner Stallion Show

160

$22.50

RAW Smackdown/ECW Total

223

$48

AEG Events & Media

AEG Themestar LLC

AMP Live Events Feld Entertainment Harlem Globetrotters HIT Entertainment

Live Nation Motor Sports Nickelodeon Live Theatricals/ Broadway Across America

Go Diego Go

Stars on Ice, an IMG Production VEE Corporation

White Stallion Productions World Wrestling Entertainment

Source: Venues Today

In addition to the shows listed above, other organizations also produce dirt-show events, such as various types of rodeos, and other events. In general, family shows are more willing to play smaller markets than are other live events such as concerts. Ringling Bros. recently introduced a one-ring event for smaller markets and facilities, and the Harlem Globetrotters occasionally play in high school gyms. The events listed above typically play in a wide range of markets and facilities, including smaller markets such as Missoula. For example, Walking with Dinosaurs stops in a number of NBA and NHL arenas, in addition to small facilities. Perhaps most notably, Madison Square Garden Entertainment announced the first touring version of the Radio City Christmas Spectacular for the 2008 holiday season, with other touring events to potentially be added by MSGE in the future. The Radio City show will perform multiple events in

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23 markets in the eastern half of the U.S. (with an average ticket price of approximately $50), and will use arenas of various sizes that can be configured for a capacity of 7,000 to 12,000. Smaller facilities include the Resch Center in Green Bay, the Peoria Civic Center, and the CenturyTel Center in Louisiana, and according to reports, pre-sale orders at various facilities indicate extraordinary demand. An additional category of events is non-university and non-tenant sporting events, and similar to concerts and family shows, there is also often overlap between what can be considered a sporting event and a family show. For example, professional wrestling or a motorsports event can be categorized as either. Other sporting events that would not be considered family shows, such as a high school game or tournament, could also be held in a new arena.

Actual Event Demand at Comparable Arenas and Event Centers The number of entertainment events held at arenas and event centers across the country varies considerably, based on many factors such as arrangements with promoters and facility managers, the demographics of each market, facility size, the number and type of other arena users, competing local facilities, and others. However, actual event demand at leading facilities will begin to demonstrate the upper range of use that could be expected in Missoula or another mid-sized arena. The following table summarizes the top-grossing arenas of 5,000 to 10,000 seats, and 10,000 to 15,000 seats, in the United States. (Rankings are by gross ticket sales for “performances,� which can include family shows and other entertainment events in addition to concerts. Facilities listed below only include stand-alone arenas and do not consider theaters, amphitheaters, and casino-based arenas.) T abl e 3- 3 US TOP GROSSING ARENAS-5,000 TO 15,000 CAPACITY Number of Avg. Performances Attendence

Location

Tenants

Capacity

Hidalgo, TX Boston, MA Houston, TX Everett, WA Norfolk, VA Portland, ME

CHL, af2, NBDL Boston Univ. WNBA WHL Old Dominion U. AHL

6,800 7,500 8,000 10,000 9,300 8,700

45 49 23 38 35 13

Grand Rapids, MI San Diego, CA Jacksonville, FL Hershey, PA Manchester, NH Green Bay, WI Duluth, GA Moline, IL Fairfax, VA Spokane, WA Univ. Park, PA Greenville, SC Fort Wayne, IN

AHL, AFL -J'ville Univ. AHL AHL and af2 UWGB, USHL, af2 AFL, ECHL AHL, af2 George Mason Univ. WHL, af2 Penn State Univ. -IPFW, IHL, CIFL, NBDL

12,000 15,000 14,900 12,500 11,000 10,500 13,100 12,000 10,200 12,500 15,000 15,000 13,000

61 45 25 54 25 35 17 22 29 24 24 12 27

Avg. Ticket Price

Gross Ticket Sales

3,855 3,147 5,388 2,979 2,781 5,297

$48.18 $40.73 $34.98 $33.14 $31.61 $42.04

$8,358,312 $6,280,535 $4,334,459 $3,751,833 $3,076,643 $2,895,079

6,367 4,173 5,653 5,449 5,494 4,670 5,719 5,294 3,605 5,462 4,680 7,560 3,939

$40.05 $67.80 $56.58 $25.61 $51.12 $36.60 $56.23 $42.79 $46.36 $31.77 $33.03 $39.07 $32.51

$15,556,166 $12,732,939 $7,996,587 $7,535,383 $7,020,819 $5,982,206 $5,467,062 $4,983,369 $4,846,126 $4,164,295 $3,709,786 $3,544,050 $3,457,576

5,000 to 10,000 Seats Dodge Arena Agganis Arena Reliant Arena Comcast Arena at Everett Events Center Constant Convocation Center Cumberland County Civic Center 10,000 to 15,000 Seats Van Andel Arena San Diego Sports Arena Jacksonville Veterans Memorial Arena Giant Center Verizon Wireless Arena Resch Center Gwinnett Arena i Wireless Center Patriot Center Spokane Arena Bryce Jordan Center BI-LO Center Allen County War Memorial Coliseum Source: Venues Today, ERA

Because gross ticket sales are a function of the number of events, attendance, and ticket prices, the individual variables can vary among the facilities. However, event demand at these arenas exceeds 45 in a few instances, and average ticket prices can range from approximately $25 to

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nearly $70. Average event attendance also varies significantly, from approximately 2,800 to more than 7,500. However, overall, these were among the most successful arenas in their size categories in 2007. Comcast Arena in Everett, Washington, was the 4th highest-grossing facility in its category with $3.75 million in gross ticket sales from 38 events.

Minor League Sports As previously stated, many event/arena facilities have professional sports tenants. Missoula would not be expected to attract or support a major-league team (such as an NBA or NHL franchise), and this section discusses various minor leagues that could potentially place a team in a new arena in Missoula. The following table summarizes the characteristics of numerous minor leagues that would play in a mid-sized arena, including their average attendance and seating capacity, average market size, presence of premium seating, season, geography, and availability of new or expansion franchises. HSP has also estimated the potential for a franchise at an arena in Missoula.

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T abl e 4- 4 Potential Minor League Opportunities for Arenas Number of Current Teams

Avg. Atten.

Avg. Capacity

Range of Arena Capacity

Median Market Population (000s)

Season

CBA

6

n/s

7,120

3,000 to 17,000

113

Nov. - March

NBA DLeague

16

n/s

8,806

3,200 to 19,000

649

Nov. - April

Nationwide

ABA

37

n/s

5,735

1,500 to 12,750

2,091

Nov. - April

PBL

9

new league

3,738

1,000 to 12,000

3,738

AFL

12

12,654

17,654

10,500 to 23,000

af2

27

4,393

10,547

IFL

25

n/s

AIFA

13

APFL

CIFL

Geographic Territory

Franchise Availability?

Potential for Regional Existing Missoula Teams (scale of 1 to 10, 1 lowest)

Basketball East Coast, Upper League is quickly Midwest, Southwest declining

None

1

League is expanding

Boise

4

Nationwide

Annual expansions, relocations and teams folding

Spokane Sunz

5

Dec. - April

Upper Midwest & Canada

Unclear Health

None

1

2,465

Feb. - July

Nationwide

Reconstituted after collapse in 2008

Spokane

2

4,900 to 23,500

733

March - July

Nationwide

Annual expansions or relocations

Spokane, Boise

7

6,226

2,110 to 11,215

362

March - July

Nationwide

Annual expansions or relocations

Billings

8

n/s

7,314

4,800 to 10,500

375

March - July

All but Midwest Currently

Expansion planned; teams often relocate

Yakima, Wenatchee

6

5

n/s

7,880

5,000 to 10,000

625

April - July

Midwest

Questionable, league not stable

None, nearest Springfield, MO

1

6

n/s

7,329

2,500 to 14,800

781

March - June

Primarily Midwest

Annual expansions or relocations

None

1

AHL

29

7,076

12,559

5,400 to 20,562

749

Oct. - June

Nationwide

No expansion planned; relocation possible

None

1

CHL

18

n/s

7,460

2,000 to 19,675

505

Oct. - May

Primarily South Central U.S.

Added two small market teams this season

None

1

ECHL

20

3,779

9,712

3,974 to 19,023

587

Oct. - June

Nationwide

Expansion and relocation is possible

Boise

3

IHL

7

3,653

5,784

4,031 to 7,000

367

Oct. - May

Midwest

Expansion and relocation is possible

None

1

MISL*

5

4,707

11,868

9,000 to 17,380

2,668

Oct. - March

Primarily East and Midwest

Restructured

None

1

Xtreme Soccer

4

new league

10,606

3,800 to 17,625

6,996

Dec. - March

Primarily Midwest

Expanding

None

1

PASL-Pro

9

new league

4,031

1,500 to 10,050

2,299

Oct. - Feb.

Midwest and Southwest, affiliated with Mexican and Canadian leagues

New and Expanding

None

3

11

10,475

17,396

9,300 to 21,500

2,465

Dec. - April

East, Midwest, West and Canada

Expansion and relocation is possible

Everett

1

Football

Hockey

Soccer

Lacrosse NLL

*League folded in June 2008 but restructured recently Source: Revenues from Sports Venues, ERA, HSP

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Basketball. Professional basketball has several minor league options. The Continental Basketball Association historically is the oldest and most well-known minor league basketball league, begun in 1946 and serving for decades as an unofficial farm program for the NBA. However, in 2002 the NBA formed its own minor league, the National Basketball Development League, or the “DLeague”. The loss of the NBA relationship, combined with poor management decisions by the league, has led to a decline of the CBA. The NBA Development League, the D-League, started with eight teams in 2002, and for the 200910 season the league has sixteen teams. The goal of the NBA is to have a farm team for each NBA franchise, however not all have an affiliation. At this point the D-League is in fair demand, so a franchise may be difficult to obtain. The nearest team is in Boise. Other basketball leagues include the Premier Basketball League, a new league as of the 2008-09 season, and the American Basketball Association, an existing league. The ABA includes the Spokane Sunz, but the PBL has no regional teams. The ABA and the NBA D-League are the most likely options for basketball at an events center in Missoual. Football. Arena football is another sport that has a minor league using arenas for games. The Arena Football League plays in larger arenas, and recently folded and reconstituted. The AFL franchises play in larger arenas, with average capacity of over 17,000 seats. The nearest team is in Spokane and Missoula is not likely to host an AFL team. The AFL has a minor league association with af2, a development league played in smaller cities. The past season, which runs from April through July, the af2 fielded 29 teams. Throughout the past few years af2 has added several teams through expansion, while other teams have folded. The af2 has existing teams in Boise and Spokane and Missoula may be a candidate for such a team. Arena football has other minor leagues that are in constant state of change, developing and dissolving. Currently there are two leagues that have relative stability: the Indoor Football League, a new name for two leagues that have merged (the former Intense Football League and United Indoor Football) and the Continental Indoor Football League. The IFL has a regional team in Billings. Another football league that is expanding is the American Indoor Football Association (AIFA), with 16 teams located nationwide, including in Yakima and Wenatchee, Washington. One issue that a proposed minor league indoor football program would face is the cost of development and yearly operations of the team. Each league charges a franchise fee for joining the league, but the fees vary from a low of $10,000 for the APFL to $250,000 for the af2 league. The initial startup costs, including the field turf, goalposts, nets, and player equipment, would make the first year the most expensive. Yearly operations costs vary as well, with more than fifty percent of the costs going to player salaries and worker’s compensation insurance. Also included in the cost is the annual franchise fee that the league charges to pay for administrative costs. The af2 estimates that the yearly budget for its teams average $850,000. The IFL estimates an average of $420,000 per year per team. The APFL does not pay its players but provides equipment,

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transportation, and health insurance for those who do not have it through other means. Therefore, the yearly budget for each team is much less, averaging approximately $150,000 per year. The arena development should consider the space requirements for arena football to leave the option available. Arena football requires a field size of 200 feet by 85 feet, a size larger than that required by basketball. The height clearance, including any hanging scoreboard, has to be at least fifty feet. Hockey. One of the most successful and stable minor league sports for an arena, especially one not affiliated with a university, is minor league hockey. Several minor leagues exist in different areas of the country. The American Hockey League (AHL) is a more regional league that serves as a development league for the NHL. With 29 teams in Canada and the United States, the league has four divisions and teams located primarily in the Northeast and Midwest. The league has the best average attendance in minor league hockey, with 7,076 people per game, as well as the largest average capacity, at 12,500 seats per arena. There are no AHL teams in the Pacific Northwest. Only the ECHL has a team in the region, in Boise. Hockey currently exists in Missoula, but is housed at the fairgrounds and is not expected to move. Hosting hockey would require the expense of adding ice capacity. The added benefit to the arena and community compared with the cost is not clear, however HSP believes the cost, scheduling issues and likelihood of attaining a hockey franchise all point to a recommendation not to pursue this option unless it is an amateur team. Soccer & Lacrosse. Other possible indoor sports are indoor soccer and indoor lacrosse. The latest indoor soccer league, the Major Indoor Soccer League, folded in 2008 and reconstituted in 2009. There are no soccer leagues with teams in the region and it is unlikely that professional indoor soccer will be an initial tenant of a facility in Missoula. Indoor lacrosse, primarily played in the northeast and Canada, has one professional league, the National Lacrosse League (NLL) and these are generally in larger markets. Based on the above discussion, Missoula may want to consider a minor league team as a major tenant to supplement the use of the arena. Several reasons exist to recruit a minor league team to the proposed events center, but the most important would be to create and maintain a consistent revenue stream for the arena. When considering a minor league team, several factors should be considered, as follows: !

History of Stability of Leagues and Teams. If a league is stable and has teams that have existed for several years, those teams are viable and would have a better revenue stream that insures use and revenue to the facility. Except for the NBA dLeague, basketball leagues and teams do not have a record of stability. Arena and indoor football has some stability, especially in the af-2 leagues, but the af-2 may not

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have a franchise available. Other indoor football leagues have a less attractive history of stability. !

Community Interest. A major factor in determining whether to recruit a minor league team is interest in the community for that team. Without community support attendance will be low and the team would be unsuccessful.

Arena Size Requirements. Certain minor leagues have seating capacity requirements or floor area requirements that a developer must consider. Arena football requires field area that is larger than some basketball-only arenas, but arenas with ice hockey usually have a floor-area that meets arena football requirements. Based on the above, and other factors set forth in the description of the minor leagues, it appears that the best minor league options for the potential arena at Valparaiso would be indoor football and basketball.

Conclusion Arena and multi-use center development for small markets has been increasing in the last decade for a variety of reasons. Mid-size arenas provide an opportunity to host sports teams, concerts, family and ice shows, and community events, not to mention trade shows and conventions. More content (events, performing acts, etc.) has been developed to tour to these smaller arenas, which are located in small metropolitan areas. Missoula should be able to host a number of concerts, family shows and other events and may be able to land and support one or two sports tenants.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


M ISSOULA F ACILITY R EVIEW One important consideration in determining the feasibility of a new events center is the size and type of current facilities in Missoula and the surrounding area. The study will better be able to assess the need for event space with the information on existing space and availability. Missoula has several facilities that have meeting or performance space that would either compete with a new events center or complement a new facility.

Event and Meeting Space Missoula has two primary types of event and meeting spaces, public facilities and hotel facilities. The public spaces are available for lease and mainly consist of various facilities on the campus of the University of Montana. Several hotel facilities also have event and meeting space that could complement or compete with the proposed events center. The following is a summary table of the facilities with event and meeting space. T abl e 5- 1 Missoula Events and Meeting Facilities Facility

Size (Sq. Ft.)

Adams Event Center Western Montana Fairgrounds U of M University Center Missoula Children's Theatre Hilton Garden Inn Holiday Inn Missoula Downtown Doubletree Hotel Missoula Ruby's Inn & Convention Center Best Western Grant Creek Inn Wingate Missoula Airport Quality Inn & Conference Center South Courtyard Missoula

31,700 23,500 21,205 17,748 15,360 10,339 8,152 6,577 3,781 3,640 3,260 2,106

Source: Various Facilities, HSP

University of Montana Adams Event Center The largest event space in Missoula is the University of Montana Adams Event Center, the sports and events facility that hosts the University of Montana Grizzlies men’s and women’s basketball and women’s volleyball teams. The original facility, known as the Dahlberg Arena, opened in 1953 and has been expanded several times. The Adams Center hosts a wide range of events, from sports and concerts to trade and consumer shows. The following table lists the meeting space at the Adams Center.

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T abl e 5- 2 University of Montana Adams Event Center Facilities Size (Sq. Ft.)

Permanent Seating

Exhibit Space Dahlberg Arena West Auxiliary Gym East Auxiliary Gym

14,700 9,000 8,000

7,500 1,500 NA

Subtotal

31,700

9,000

5,400

NA

7,200

NA

NA

NA

44,300

9,000

Space

Other Space North B Foyer South, East and West Concourses Adams Center Sky Club Total Source: Adams Center

The largest space in the Adams Event Center is the Dahlberg Arena, which has 14,700 square feet of exhibit space when the portable bleachers are retracted. The Dahlberg Arena seats 7,500 in a “center stage� configuration, and 5,500 for sporting events. Most concerts and other events with a stage have a seating capacity of 5,500 due to the location of the stage. The following figure is a picture of the Dahlberg Arena as configured for a sporting event.

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Fi gur e 5- 1

The Adams Center also has a 9,000 square-foot West Auxiliary Gym that has 1,500 bleachers and serves as the home court for the University of Montana women’s volleyball team, as well as a practice gym for the basketball teams. The East Auxiliary Gym has 8,000 square feet and serves as a practice gym for the basketball teams and other sports practices throughout the year. All of the gyms have been used for non-sports events, and some events have incorporated the concourse space and foyer between the gyms and the arena. The Adams Center advertises a total of 44,300 square feet of exhibit space including the concourse and foyer space. Another meeting space within the Adams Center is the Sky Club, a clubhouse that is above and overlooks one side of the Dahlberg Arena. Used by Sky Club members and major contributors for sporting events, including basketball and football, the Sky Club is available for rent for small events and private parties. It can host 100 people seated at tables or up to 200 for standing events. In addition to the sports and event space the Adams Center also houses the offices for intercollegiate sports, the Athletic Performance Center (the 7,000 square-foot training facility for intercollegiate athletes), the Jacobson Academic Center for student-athletes, and the Grizzlies Hall of Fame. The facility is used during football game weekends for private groups and alumni. The Adams Center is the focal point of intercollegiate sports at the University of Montana. The following table sets out the usage of the Adams Center by listing the number of event-days (the number of days that each event is at the Center) from January 2007 through August 2009.

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T abl e 5- 3 University of Montana Adams Center Event-Days January 2007 through August 2009 Event-Days

Monthly Average

Yearly Average

Community Flat Shows Ticketed Shows UM non-Athletic Events Intercollegiate Athletics Football

226 45 30 219 126 16

7.1 1.4 0.9 6.8 3.9 0.5

85 17 11 82 47 6

Total Event Days

662

20.7

248

Total Non-Sports Event Days Percent of Non-Sports Events

520 79%

16.3 79%

195 79%

Total Non-UM Events Percent of Non-UM Events

301 45%

9 45%

113 45%

Event Type

Source: Adams Center, HSP

In the time period of January 2007 through August 2009, the Adams Center hosted events and groups for 662 event-days. The largest type of event was community events, which took 226 event days over the 32-month period, an average of seven per month and 85 per year. The University of Montana hosted non-athletic events for 219 event-days, an average of 6.8 per month or 82 per year, while the university held intercollegiate athletic events for 126 event-days and football events for sixteen event-days. The total of non-sports event-days for the Adams Center for the time period was 520, or 195 per year and 16.3 per month. The percent of non-sports events to total events is 79 percent. The event-days that were not related to the University of Montana totaled 301 over the period, with 226 of those being community-based events. The total percent of non-university events is 45 percent of all event-days. The Adams Center also has kept track of the number of event-days for each of the four major facilities that can be rented. The following table lists the event-days by facility from January 2007 through August 2009. Since some facilities are rented together, the total event-days for all of the facilities is more than the total number of event-days of the Adams Center as a whole.

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T abl e 5- 4 University of Montana Adams Center Event-Days by Facility January 2007 through August 2009 Event Type

Arena

Western Eastern Auxiliary Auxiliary Sky Gym Gym Club Total Usage

Community Flat Shows Ticketed Shows UM non-Athletic Events Intercollegiate Athletics Football

124 31 30 37 97 15

151 13 4 164 29 14

98 9 10 26 3 15

17 1 16 28 38 15

390 54 60 255 167 59

Total

334

375

161

115

985

Percent of Total Usage

34%

38%

16%

12%

Source: Adams Center, HSP

As the table above shows, the Western Auxiliary Gymnasium has the most usage, with 375 eventdays over the time period, or 38 percent of the total usage. The arena was used 334 event-days, or 34 percent of the total. The lowest amount of use is the Sky Club, with 115 event days or twelve percent of the total. For ticketed events, the Adams Center has determined the actual number of events that have generated the number of event-days listed in the tables above. The following table sets out the number and type of ticketed events for 2007, 2008 and to date in 2009. T abl e 5- 5 University of Montana Adams Center Ticketed Events Year 2007 2008 2009 Total

Concerts 4 8 0 12

Family Shows 2 0 2 4

Theater 0 1 0 1

Total 6 9 2 17

Source: Adams Center, HSP

The majority of the ticketed events at the Adams Center in 2007 or 2008 were concerts, with a total of eight concerts occurring in 2008. However, the Adams Center has not been able to book any concerts to date in 2009. The Adams Center reports that most concerts at the facility in the past few years did not reach 5,200 to 5,500 ticketed spectators, the capacity of the facility depending on configuration.

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The Adams Center reports that the staff does not keep a lost business report because few events are rejected. The Adams Center tries to work around any conflicts due to the three large spaces that it has available. It feels that it can accommodate almost every event if that event is flexible with dates. One area that the Adams Center understands it cannot accommodate or host is high school or other sports events in late February or early March. The high school sports look for arenas to host district and regional basketball tournaments during this time period. The Adams Center has to hold those specific weekends for the U of M basketball teams for conference tournaments and possible NCAA or other post-season tournament play. The administration is supportive of a new events center in Missoula and looks to work with the community to use the center if its needs exceed the Adams Center capacities. The administration stresses that a new multi-purpose events center would be an asset to the community and help the university recruit students and faculty as the community would be improved as a result of a new facility. University of Montana University Center The University Center of the University of Montana is the main student center for the university, the location of the bookstore, a major dining facility, a game room and office space for student government, the campus radio station, and various student organizations. The third level of the University Center has meeting and ballroom space that the university uses for meetings and events. The university also markets the meeting space for non-university meetings and conferences. The following table lists the meeting space in the University Center.

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T abl e 5- 6 U. of Montana University Center Meeting Space Space

Size (Sq. Ft.)

Divisions

Ballroom Theater Boardroom Conference Room 222 Conference Room 223 Conference Room 224 Conference Room 215 Conference Room 216 Conference Room 207 University Center 326 University Center 327 University Center 329 University Center 330 University Center 331 University Center 332 University Center 333

10,437 2,835 700 378 378 378 378 378 483 680 680 700 700 700 700 700

2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Total

21,205

17

Source: U of M University Center

The largest space within the facility is the ballroom, which can be divided into two rooms. The other spaces are the theater and fourteen small meeting rooms. All of the meeting space except the 200-series conference rooms is on the third floor of the University Center, as shown in the figure below.

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Fi gur e 5- 2

The University Theater seats 300 people and has state-of-the-art multi-media capabilities. The meeting rooms spread over two floors. Like all university facilities, the conference center is primarily used by the university and does not operate like a public conference center would. This limits its potential for community benefit and suggests that if a public events space were offered in the community, it would be able to generate more meetings activity for the area. Missoula Children’s Theatre The Missoula Children’s Theatre’s Center for the Performing Arts is a performance space in Missoula that also holds private events. The theater advertises itself as “Missoula’s unofficial civic center,” offering 22,000 square feet of space for rent. The figure below is a picture of the facility, completed in 1998.

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Fi gur e 5- 3

The following table lists the space available for events at the Missoula Children’s Theatre. T abl e 5- 7 Missoula Children's Theatre Center for the Performing Arts Space

Size (Sq. Ft.)

Meeting Space Auditorium Community Room Meeting Room Conference Room Classroom Classroom

12,000 2,112 1,716 640 640 640

Subtotal

17,748

Other Space Main Lobby Upper Lobby

1,320 918

Total

19,986

Source: Missoula Children's Theatre

The meeting space includes the auditorium, with 12,000 square feet and seats up to 324 people in its permanent theater-style configuration. The facility also has two large meeting rooms, the

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community room with 2,112 square feet, and the meeting room with 1,716 square feet. The facility has three smaller meeting rooms at 640 square feet each. The upper lobby and lower lobby total more than 2,200 square feet of space that is used for exhibits and receptions. Western Montana Fairgrounds The Western Montana Fairgrounds, in the midtown area of Missoula, rents several of its buildings for meetings and events. The following table lists the available space at the Western Montana Fairgrounds. T abl e 5- 8 Western Montana Fairgrounds Facilities Size (Sq. Ft.)

Daily Rental Fee

Commercial Building Llama Barn Home Arts Building Fine Arts Building

9,000 6,000 5,000 3,500

$875 $650 $410 $300

Total

23,500

Facility

Source: Western Montana Fairgrounds

The facilities at the fairgrounds host several types of events. The Commercial Building is a 9,000square foot wooden structure with beautiful high ceilings. The facility is not heated or airconditioned, but due to its construction can be used during the summer months for wedding receptions and other social events. The Llama Barn rents mainly to agricultural and livestock events. The Home Arts Building has heat and air conditioning and rents for $410 per day, while the Fine Arts Building does not have air conditioning but is heated, renting the 3,500 square feet of space for $300 per day. Also located on the Western Montana Fairgrounds is the Glacier Ice Rink, an indoor ice rink with permanent seating as well as a covered outdoor rink. The Missoula Area Youth Hockey Association partners with Missoula County to manage the Glacier Ice Rink, which offers public skating as well as youth and adult hockey leagues to Missoula residents. The facility is also home to the Missoula Maulers, a Junior A team (players retain amateur status) in the Northern Pacific Hockey League. The hockey association agreed to pay the mortgage on the $1.5 million loan that the county incurred to improve the facility for ice events and to add the outdoor rink. The association may rent the space for any ice events without additional payment to the county, but the fairgrounds is to receive a percentage of any rental for events that do not involve ice. The facility is used for some non-ice events such as flat shows. It is possible that in the future, the Maulers could use a new events center, but not until its obligations at the fairgrounds are complete.

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The fairgrounds has been undergoing a master planning exercise for the last year and is considering a major renovation, most likely on the same site. It is thought that an events center could potentially sit on the fairgrounds site, although this would only work if parking issues were solved and the arena was relatively small (under 6,000 seats).

Missoula Hotel Meeting Space Missoula has several hotels that have meeting space. The hotels are located throughout the city and work with the Missoula Convention and Visitors Bureau to draw meetings and other events. The following table lists the hotels that have meeting space in Missoula.

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T abl e 5- 9 Missoula Hotel Meeting Space Facility

Missoula Hotel Meeting S

Size (Sq. Ft.)

Divisions

Hilton Garden Inn Grant Creek Ballroom Bitterroot River Room Clark Fork River Board Room Blackfoot Board Room Total

13,195 1,340 675 150 15,360

7 3 1 1 12

Holiday Inn Missoula Downtown Garden City Ballroom Montana Boardroom National Parks Meeting Area Three rivers Meeting Area Total

5,537 1,564 1,564 1,674 10,339

4 1 2 3 10

Doubletree Hotel Missoula Ballroom Canyon Room Riverside Room Montana Room University Room Total

6,345 760 247 400 400 8,152

5 1 1 1 1 9

Ruby's Inn & Convention Center Five Valleys Conference Center Blackfoot Room Rattlesnake Room Bitterroot Room Boardroom Total

3,136 1,248 1,064 684 445 6,577

2 1 1 1 1 6

Best Western Grant Creek Inn Ballroom Aspen Room Total

2,400 1,381 3,781

3 2 5

Wingate Missoula Airport Ballroom Missouri Room Clark Fork Board Room Total

2,100 1,276 264 3,640

3 1 1 5

Quality Inn & Conference Center South Big Sky Room Breakout Room Breakout Room 1 Total

2,500 220 540 3,260

2 1 2 5

Rooms 146

200

171

128

126

100

81

Source: Mpoint, Various hotels

Three hotels in Missoula have more than 8,000 square feet of meeting space, the Hilton Garden Inn, the Holiday Inn Missoula Downtown, and the Doubletree Hotel Missoula. The Missoula Hilton Garden Inn has the most hotel meeting space in Missoula. Located in the North Reserve Avenue corridor, the Hilton Garden Inn opened in 2008. The figure below is a picture of the hotel.

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Fi gur e 5- 4

The hotel has 146 rooms and 15,360 square feet of meeting space. The meeting space includes the Grant Creek Ballroom, with 13,150 square feet that can be divided into seven smaller meeting areas. The following figure is a picture of the ballroom. Fi gur e 5- 5

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The ballroom is the largest ballroom space in Missoula. The hotel also has a certain amount of pre-function space that it rents if necessary. The Holiday Inn Missoula Downtown is located on South Pattee Street in downtown Missoula. The figure below is a picture of the hotel. Fi gur e 5- 6

The hotel is the largest in Missoula, with 200 rooms. It has a 5,537-square foot ballroom and two meeting rooms. The following figure shows the ballroom.

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Fi gur e 5- 7

The hotel also has two “meeting areas� totaling more than 3,000 square feet. These areas previously were pre-function space, part of the hotel lobby, which have been converted to meeting space. The Doubletree Hotel Missoula is located just southeast of downtown Missoula on East Front Street. The figure below is a picture of the hotel.

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Fi gur e 5- 8

The Doubletree has 171 rooms and over 8,000 square feet of meeting space. It has a 6,345 square foot ballroom and four meeting rooms with a total of 1,750 square feet of space. Many of the rooms overlook the river, a strong selling point for the property. It also features a full-service fine dining restaurant with a good area reputation. A locally owned hotel, Ruby’s Inn and Conference Center, has 6,500 feet of event space, and three hotels, the Best Western Grant Creek, the Wingate Missoula Airport, and the Quality Inn and Conference Center South, have ballrooms with more than 2,000 square feet and a total of more than 3,000 square feet of meeting space. The Courtyard Missoula has three meeting rooms and a total of more than 2,000 square feet of space. The Missoula CVB may soon benefit from a Tourist Business Improvement District for the hotels in the city. The hotels recently voted to form the TBID and charge themselves a fee of $0.75 per room night, which fee is passed to the customers of each hotel. That amount is used to fund the Missoula CVB. The decision to form the TBID will greatly assist the CVB to grow and more readily market the community, including group travel in the form of meetings, conventions and conferences.

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Performance Space Missoula has several facilities that offer performance space for theater groups, concerts, and other events. The following table lists the performance space in Missoula and the surrounding area. T abl e 5- 10 Missoula Performance Space Facility

Seating

Adams Center

7,500

U of M University Theatre Wilma Theatre U of M Montana Theatre Missoula Children's Theatre U of M University Center Theater U of M Masquer Theatre

1,140 1,066 499 324 300 80

Type Gym and Events Center Theater Theater Theater Theater Theater Theater

Souce: Individual Theaters, HSP

The performance facilities range from the Adams Center, with as much as 7,500 seats, to the University of Montana Masquer Theater, with 80 seats. Most facilities are on the University of Montana campus. U of M Adams Center As discussed above, the Adams Center is the largest facility that hosts performances. The center advertises a seating capacity of 7,500, but most performances and concerts, with a stage set at one end of the floor, would have a seating configuration with approximately 5,500 seats. The facility has hosted several big-name concerts in the past three years, including Elton John, Carrie Underwood and James Taylor. The Adams Center also hosts Mannheim Steamroller, the Moscow Ballet Nutcracker Suite and other family events and shows. U of M University Theatre The University of Montana University Theatre has seating for 1,140, with 794 in the orchestra and 346 in the balcony. It is located in the Fine Arts Building and opened in 1935. The theater hosts plays and Broadway musicals, lectures, and concerts such as the Missoula Symphony Orchestra, as well as university and student events and productions. The following figures are pictures of the stage and seating of the University Theatre.

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Fi gur e 5- 9

Fi gur e 5- 10

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The following table lists the rents for the use of the University Theatre by private groups and university groups. T abl e 5- 11 University of Missoula University Theatre Rental Fee Schedule Type of Event Theatrical Productions Commercial Events, Admission Charged Non-Profit Events, Admission Charged University Events, Admission Charged Private Events, No Admission Charged University Events, No Admission Charged Meetings, Lectures and Films Off-Campus Events University Events

Sun-Thu Fee

Fri-Sat Fee

$1,225 $1,050 $950 $650 $550

$1,325 $1,225 $1,050 $750 $650

$650 $550

$750 $550

Source: University Theatre

Theatrical and musical productions generate the highest per day rental prices, from $550 for university events during the weekdays that do not charge admission, to $1,325 for private commercial events on Friday or Saturday that charge admission. Meetings, lectures and films have a lower cost, from $550 to $750 depending on the type and day of the event. These fees do not include a box office fee, generally $1.00 per ticket sold, and a custodial fee of $250 per day and other equipment, merchandise and technical fees. Wilma Theatre The historic Wilma Theatre is located on the southern edge of downtown Missoula, on the bank of the Clark Fork River. Built in 1921 and most recently renovated in 2007, the Wilma has an ornate interior both for the main theater and the lobby and stairwells. The eight-story building is one of the most historic and important pieces of architecture in the city. The following figures are pictures of the exterior and interior of the Wilma Theatre.

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Fi gur e 5- 11

Fi gur e 5- 12

The Wilma has two small theaters with 125 seats each, one large theater seating 1,067, as well as banquet rooms and two floors of offices. The upper five floors consist of residential space. The basement houses a bar and restaurant. The small theaters show first-run, foreign and documentary films. The large theater hosts concerts, shows and other events, and all public space is available for private rental. Other University of Montana Theaters The University of Montana has three additional theaters that have less than 500 seats each for smaller performances. The U of M Fine Arts Center houses both the Montana Theatre, a proscenium theater with 499 seats, and the U of M Masquer Theatre, a space with adjustable seating arrangements and a maximum of 80 seats. The School of Fine Arts uses both theaters for

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performances and events for the students in the school. The theaters are the home of the Montana Repertory Theatre, a national touring theater company. As described in the section above, the U of M University Center Theater is a multi-use theater on the third floor of the University Center. It has multi-medial capabilities, including LCD displays and a satellite downlink. The facility has a seating capacity of 300 and is used for lectures, speakers, meetings and special events both for the campus and for private groups. Montana Children’s Theatre As stated in the section above, the Montana Children’s Theatre Center for the Performing Arts seats up to 324 people in its permanent theater-style configuration. It is home to the touring company of the Montana Children’s Theater. The facility also hosts the MCT Community Theatre, a local theater group that produces several performances each season, including “South Pacific,” “A Christmas Carol” and “Grease.” The facility is available for private rental, as set out more fully in the section above. Other Meeting and Event Venues in Missoula Area Several other facilities in Missoula and the surrounding area host events and meetings, mostly social and fundraising events. The facilities include: !

The Missoula Art Museum rents its gallery space for special events and receptions. It also has two classrooms and a library that can be used for breakout meetings. The cost to rent the facility during non-gallery hours is $1,000 per day.

!

The Ranch Club, a private golf and social club in Missoula that hosts social functions and other events at the clubhouse and an “event barn”. The Ranch Club advertises that it can host dinners and meetings for up to 300 guests.

!

The Minuteman Aviation Hanger at Missoula International Airport is used for fundraisers, dances and gala dinners for non-profit and private organizations. The Hospice Care Foundation Ball, the recent Korean War Veterans dance and other events have been held at the Minuteman Hanger.

!

The University of Montana Department of Continuing Education has a Conference Center that has six meeting rooms, ranging in size from 280 square feet to 1,584 square feet. All conference rooms have state-of-the-art audiovisual equipment, including SMART Board whiteboard technology, videoconferencing capabilities and high-speed Internet access.

!

The old Florence Hotel in downtown Missoula, now known as the Glacier Building, has a meeting space on the second floor called the Governor’s Room. The space hosts smaller meetings, including the local rotary club and the City Club.

!

The Snowbowl Ski Resort, twelve miles from Missoula, is available for events at the Last Run Inn and the Snowbowl Lodge.

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!

The Montana Island Lodge, at Seeley Lake, Montana, is approximately forty miles east of Missoula. The lodge hosts small conferences in its Great Room and two smaller meeting rooms.

!

The Double Arrow Resort, also in the Seeley Lake area and approximately 55 miles east of Missoula, has four conference or meeting rooms that can host a variety of events. The largest room, the Mountain View Pavilion, is 1,920 square feet, an outdoor space that can be refigured into an indoor facility with retractable exterior panels.

Summary of Missoula Events and Meeting Facilities The meeting and events facilities in Missoula are concentrated at the University of Montana campus. The university has event and meeting space including the Adams Center, which can seat up to 7,500 people in the arena and hold flat shows and conventions in the arena and gymnasiums. The University Center has over 20,000 square feet of conference and meeting space, and the university has a variety of performance space in addition to the Adams Center. The University Theater seats 1,140 and the Montana Theater seats 499. While the facilities accommodate non-collegiate events, their primary objective is university usage and there are many events that cannot use the space, especially during the winter and spring. Non-university options for events and meetings include the Missoula Children’s Theater Center for the Performing Arts, with approximately 20,000 square feet of space, and the Western Montana Fairgrounds, with various buildings that can be used for a variety of purposes. Several other smaller event spaces exist in the area. Hotels in Missoula offer some meeting space, including the Hilton Garden Inn with a 13,000 square foot ballroom and a total of 15,000 square feet of meeting space, the Holiday Inn Missoula, with 10,000 square feet of space, and the Doubletree Hotel, with 8,000 square feet of space. Other hotels have additional meeting space, including 6,500 square feet at Ruby’s Inn & Conference Center. These accommodate most of the group needs in the market, but are not large enough in terms of space or rooms to host major regional events. Almost all of the local meeting and events facilities in the Missoula area would not compete with the proposed events center because of the difference in size and type of events that use the facilities. The two facilities that may compete with the proposed events center are the Adams Center and the University Center, both on the University of Montana campus. The Adams Center markets to the size of events that would use the events center, such as trade shows, consumer shows, sporting events and concerts. The University Center has meeting space for groups of the size that might use an events center for conferences and meetings. The university facilities will provide some competition for events and meetings that may come to the proposed events center.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


C OMPETITIVE F ACILITIES HSP has completed a review of the competitive supply in the area and region as well as the demand that is accommodated at those facilities. Based on interviews, we have also established an understanding of the unaccommodated demand that currently is not occurring in Missoula or its competitive supply. The following map shows the regional competitors’ locations.

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Fi gur e 6- 1

The following table summarizes the regional competition, in descending order of seating capacity.

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T abl e 6- 1 Missoula Events Center Regional Competitors Date Opened

Seating Capacity

Spokane Arena Rimrock Auto Arena, MetraPark MSU Brick Breeden Fieldhouse Butte Arena Four Seasons Arena, ExpoPark Belgrade Special Events Center

1995 1975 1956 1952 1979 1996

12,210 10,000 8,900 6,250 5,434 4,800

32,000 30,000 38,000 19,623 33,000 n/a

41,500 50,000 50,000 29,623 53,000 n/a

196 343 202 119 204 194

Average

1976

7,932

30,525

44,825

210

Location Spokane, WA Billings, MT Bozeman, MT Butte, MT Great Falls, MT Belgrade, MT

Facility

Arena Floor Space Total Exhibit Space (Sq. Ft.) (Sq. Ft.)

Distance from Missoula (Miles)

Source: Various Facilities, HSP

Perhaps the most striking data point from the above is the minimum and average distance of the competitors from Missoula. Given that Missoula is the largest media market in the state and essentially ties for largest MSA, the absence of a dedicated events center for an average of 210 miles in any direction is notable. The closest and least competitive facility is a 120-mile distance and the most competitive facilities are between 200 and 343 miles from Missoula. This is a wide swath of territory and population unaccommodated by a public events facility. The largest regional competitor is the Spokane Arena, with a seating capacity of 12,210. The Spokane Arena is part of the Spokane Public Facilities District project in downtown Spokane, which includes the Performing Arts Center and the Spokane Convention Center. The facility has an arena football af2 team and a minor league hockey team as tenants, and it also hosts concerts, family shows and other events. The highest attendance in 2008 was for hockey, but the highest revenue gross came from family shows. The largest facility in Montana is the Rimrock Auto Arena in Billings, Montana, part of the MetraPark complex. The arena has a seating capacity of 10,000 with an arena floor space of 32,000 square feet and a total exhibit space of 50,000 square feet. The facility holds many sports events, as well as being a central part of the nine-day Montana Fair that is held at the MetraPark. The facility can hold events that need exhibit space that exceeds the arena floor and the additional space in the building, because it can use the other facilities in the MetraPark adjacent to the facility. The Rimrock Auto Arena 2009 calendar lists a total of 29 events in 2009, with a total of 60 eventdays, not including set-up and take-down. The event-days include the nine-day Montana Fair, with concerts and rodeos that take place during the fair. Additionally the arena hosted seven home games and two playoff games for the Billings Outlaws, of the Indoor Football League. Including the football games, but no practices or other football events in the facility, the Rimrock Auto Arena scheduled 69 event-days for 2009. Montana State University, in Bozeman, Montana, has several facilities that host events. The major competitive facility is the Brick Breeden Fieldhouse, the home of the university’s men’s and women’s basketball teams. The facility has a seating capacity of 8,900 with an arena floor space of 38,000 square feet and a total event space of 50,000 square feet. The main mission of the

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fieldhouse is to foster and support university and student events, but the facility also hosts nonuniversity events such as concerts and sports tournaments. The university has renovated the fieldhouse so that it has a theater configuration for large performances, called “Theatre at the Brick.” This use of large curtains and movable stage seats 3,300 and hosts theater events such as the “Broadway in Bozeman” series. The consolidated City-County of Butte-Silver Bow, Montana, owns the Butte Civic Center. Built in 1952 and renovated several times since construction, the Butte Civic Center can seat 6,250 for basketball and 5,100 for ice events. The arena floor has 19,623 square feet of space and has an attached “Annex” that has 10,000 square feet of space. The facility is projecting a total of 84 event-days in 2009 for the civic center, with 25 days of sports and 25 days of consumer shows leading the event categories. The Four Seasons Arena is located in the Montana ExpoPark, the Montana state fairgrounds site in Great Falls, Montana. The arena has a seating capacity of 5,434 with an arena floor space of 33,000 square feet and a total event space of 53,000 square feet. The facility hosts sporting events, concerts and trade shows. The Belgrade Special Events Center is an arena that hosts many high school regional and state competitions and tournaments. The Belgrade School System opened the facility in 1996, and it seats 4,800 for basketball and other like events. The facility also holds community and other school-related events but does not appear to market actively for private events, concerts or trade shows. Other facilities that have event space include outdoor and fairground arenas such as the Kalispell Arena, the outdoor arenas at the MetroPark in Billings and the ExpoPark in Great Falls and the fairgrounds at Coeur d’ Alene, Idaho. Certain hotels in the region have event space, including the Hilton Garden Inns in both Billings and Kalispell, the Billings Hotel and Convention Center, and the Coeur d’ Alene Resort in Coeur d’ Alene, Idaho, as well as several hotels in Spokane, Washington. One possibility that Missoula must consider is that Coeur d’ Alene, Idaho, is in the process of considering development of a multi-use events center. That city, which is 160 miles northeast of Missoula on Interstate 90, has completed a study that recommended a 6,000-seat sports and events arena for many of the same considerations and conditions that exist in Missoula. Such facility, if built, would be a primary competitor to a proposed Missoula events center, offering many of the same amenities, meeting space and arena availability. However, it would not be as convenient for the bulk of the Missoula media market nor would it compete for state association and sports tournament activity. Pocatello, Idaho is also studying a new arena, which if built, would be a secondary threat to Missoula.

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Regional Competitive Facilities MetraPark, Billings, Montana The MetraPark (Metra) in Billings, Montana, is the largest events complex in Montana. Located on 185 acres in the northeastern area of Billings, with good access to Interstate 90 and close to the Billings Logan International Airport, the facility began as the site of the Montana Fair. The fair is still held each year on the property, but the facility has expanded to include over 150,000 square feet of event space. The following figure is a map of the Metra, showing the major facilities buildings on the campus. Fi gur e 6- 2

The following table lists the major event meeting space at the Metra.

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T abl e 6- 2 Billings MetraPark Event Facilities Facility

Size (Sq. Ft.)

Rimrock Auto Arena Arena Exhibit Hall Expo Center Large Bay Small Bay Montana Pavilion Large Bay Small Bay

50,000

Total

155,800

Divisions

Daily Rental Rate*

30,000 20,000 77,000 63,000 14,000 28,800 18,000 10,800

$4,000 $3,000 $1,500 $4,000 $3,250 $1,000 $2,000 $1,400 $1,000

155,800

*Added to Daily Rental Rate is 20% for non-ticketed events or fee per ticket. Source: Billings MetraPark

The three major facilities at the Metra are the Rimrock Auto Arena, the Expo Center and the Montana Pavilion. Events can use each building as a whole or one of the divisions of each facility. The Rimrock Auto Arena is a sports and large event arena that seats over 10,000 people for basketball and concerts, or 8,700 for rodeos, hockey and indoor football. The floor of the arena without the temporary seating has 30,000 square feet for flat floor events, and the arena has an exhibit hall on the first floor that adds 20,000 square feet of space. The floor plan of the Rimrock Auto Arena is shown in the figure below.

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Fi gur e 6- 3

Rental for the arena is $3,000 per day for just the arena or $4,000 per day for the arena and exhibit hall, plus an “Improvement Fee� of between $1.25 and $4.00 per ticket, depending on ticket price. For non-ticketed events the Improvement Fee is twenty percent of the rental rate. The following table lists the events that occurred or been scheduled in 2009 at the Rimrock Auto Arena.

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T abl e 6- 3 MetraPark Rimrock Arena Events 2009 Date

Event

January 17 January 20 February 7 February 12-14 February 19-21 February 26-28 March 6-8 March 12 March 17 March 20-21 March 28 April 17-19 April 28 May 2 May 6 May 8 May 15-16 May 22 May 29 May 31 May 31 June 1 June 18 July 29 August 7-15 August 26 Sept. 29-Oct. 4 October 10-17 December 19

Hot Rod Mud Bog Races New & Used Car Clearance Playhouse Disney Live All Class State Wrestling NRA Rodeo Boys & Girls Eastern A Divisional Basketball Disney's High School Musical Ice Tour State Class C Boys Basketball Rock and Worship Roadshow Monster Truck Show Montana Open Wrestling NILE Rodeo Invitational Lippizzaner Stallions MSU-Billings Graduation David Copperfield Larry the Cable Guy Women of Faith: Grand New Day Watchtower Society Annual Meeting Can't Stop the Rocking Tour Skyview High School Graduation West High School Graduation Senior High School Graduation Jeff Dunham Concert Staind, Chevelle and Shinedown Concert Montana Fair Slipknot Concert Wrangler Team Roping Finals NILE Rodeo Chase Hawks Rodeo

Total Events Total Event-Days

29 60

Source: MetraPark

A total of 29 events, including the nine-day Montana Fair were or will be held in the Rimrock Auto Arena in 2009, with a total of sixty event-days at the arena. The event-days do not include setup and take-down days. Thirteen of the sixty event-days were rodeo events, not including the rodeo during the fair, while eight event-days were high school sports events in February and March, 2009. In addition to the above events, the Rimrock Auto Arena is the home field for the Billings Outlaws, a member of the Indoor Football League. In 2009 the Outlaws held seven home games at the arena, with an average 2009 attendance of 4,099. The Outlaws hosted championship game of the IFL at the Rimrock Auto Arena on August 15, 2009, with an attendance of 8,351. The Outlaws defeated the River City Rage 71-62 to win the 2009 IFL championship.

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The Expo Center is a large multi-use exhibit building with a total of 77,400 square feet of space. The facility has heat and air conditioning and can be divided into two separate areas. The building is used for trade shows and other flat floor events. The following figure is the floor plan of the Expo Center. Fi gur e 6- 4

Rental for the Expo Center is $4,000 per day for the entire building, $3,250 per day for the large bay or $1,000 per day for the small bay. The Improvement Fee is between $1.25 and $4.00 per ticket, depending on ticket price. For non-ticketed events the Improvement Fee is twenty percent of the rental rate. The Metra 2009 calendar of events lists several events at the Expo Center, as set forth in the table below.

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T abl e 6- 4 MetraPark Expo Center 2009 Events Date

Event

February 19-21 Februay 27 March 6 April 24 May 13 May 1-2 June 16 August 7-15 September 18-20 September 11-13 October 10-17 November 6-8 November 21-22 December 11-12

MATE Show and Home & Health Expo 13th Annual RV & Boat Show Home Improvement Show Billings Market Association FSA Food Show Time out for Women YVKC Dog Show Montana Fair Billings Market Association Home Improvement Show NILE Stock Show Market Place Magic Holiday Food & Gift Festival Montana Stockgrowers Association Convention

Total Events Total Event-Days

14 40

Source: MetraPark

The Expo Center has a total of fourteen events on the 2009 Metra calendar, including eight consumer shows. The facility ha a total of forty event-days, excluding setup and take-down. The Montana Pavilion is a multi-purpose exhibit building with 28,800 square feet of space. Like the larger Expo Center described above, the pavilion has heat and air conditioning and can be divided into two separate areas. Several large events use both facilities for their trade or consumer show space needs. The combined space is over 100,000 square feet of exhibit space. The figure below is a floor plan of the Montana Pavilion.

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Fi gur e 6- 5

The rental cost of the facility is $2,000 per day for the entire building, $1,400 per day for the large bay and $1,000 per day for the small bay. The Improvement Fee is the same as the other two major facilities, between $1.25 and $4.00 per ticket, or twenty percent for non-ticketed events. The following table lists the other facilities on the campus that can be rented. T abl e 6- 5 Billings MetraPark Other Facilities Facility Grandstands Yellowstone Room Chiesa Plaza Super Barn Cedar Hall

Size (Sq. Ft.)

Daily Rental Rate*

NA

$2,000

2,904 3 acres 960 10,125

$450 $250 $450 $350

Type Outdoor Grandstand Meeting Hall Outdoor Park Barn Meeting Hall

*Added to Daily Rental Rate is 20% for non-ticketed events or fee per ticket. Source: Billings MetraPark

The Montana Fair is the major user of the facilities listed in the above table. The Grandstands also hosts horse racing and rodeo-type events in the summer. The Super Barn has other agricultural events, and the Yellowstone Room and Cedar Hall have additional meetings.

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The MetraPark is owned and operated as a part of Yellowstone County, Montana, with the County Commissioners acting as supervisors of the facility. The Montana Fair Board is an advisory board that acts on behalf of MetraPark and the fair. The staff consists of a general manager, marketing director, operations manager and several other staff positions. At the July 14, 2009, meeting of the Board of County Commissioners, the Yellowstone County Comptroller reported that the MetraPark had a budget of $5.2 million and revenues of $5.5 million. For the fiscal year 2008, ending June 30, 2008, the Yellowstone County Financial Statement shows that the “METRA Fund� had operating revenues of $4.1 million and operating expenses of $5.8 million. The Finance Director of Yellowstone County reports that approximately two-thirds of the revenue and two-thirds of the expenses of the METRA fund directly relate to the arena (suggesting $2.8 million in arena revenue and $3.8 million in expenses). The financial statement lists non-operating revenues, including taxes, of $1.6 million, an addition so that the financial statement showed that the METRA Fund balanced at the end of the year. The MetraPark in Billings has the facilities that make it the most competitive with any other facility in the state that looks to market to major events, conventions, trade shows and consumer shows. With a large arena and over 100,000 square feet of exhibit space, the MetraPark can provide facilities for large consumer and trade shows as well as concerts and large sports events. Because it is not part of a university the facility has no conflicts with university events and calendars.

Montana State University, Bozeman, Montana Montana State University at Bozeman, Montana, has several facilities that would be competitive with the proposed event center in Missoula. The following table is a list of the major event, performance and meeting space at Montana State University. T abl e 6- 6 Montana State University Event and Large Meeting Space Facility Brick Breeden Fieldhouse Shroyer Gymnasium Strand Union Ballroom SOB Barn Procrastinator Theater Black Box Theater Total

Size (Sq. Ft.) 50,000 14,500 13,010 5,203 2,700 2,500 87,913

Seating 8,900 1,600 1,300 NA 190 200

Daily Rental Rate* $2,500 $1,000 $1,800 $30/hour $470 unknown

*Added to Daily Rental Rate is $1.50 fee per ticket. Source: MSU, HSP

The Brick Breeden Fieldhouse, built in 1956, is the largest sports and event facility in Montana, seating 8,900 in the arena. The facility hosts basketball games, concerts and exhibits and shows. Rental of the facility is $2,500 per day minimum plus a $1.50 fee per ticket.

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The second largest event facility is the 14,500 square-foot Shroyer Gymnasium, which hosts NCAA volleyball and smaller concerts, seating 1,00 to 1,600 depending on type of event. The “Save Our Barn� (SOB) Barn is a building that the university almost removed in the 1980s before deciding to turn it into an event space. Receptions, meetings and other events are held in the 5,203 square foot space. The two major theaters on campus are the Procrastinator Theater in the Strand Union Center and the new Black Box Theater, completed in 2008, both of which seat approximately 200 people. The Strand Union Center, the student center of the university, also markets the ballroom and meeting rooms in the facility as a private conference and meeting center. The table below sets out the square footage of the ballroom and meeting rooms. T abl e 6- 7 Montana State University Strand Union Center Facility Ballroom Meeting Rooms 271 272 273 274 275 276 106E 251 Total

Size (Sq. Ft.) 13,010

Divisions 4

Daily Rental Rate $1,800

168 345 345 378 1,470 1,470 672 756 18,614

1 1 1 1 1 1 1 2

$30 $30 $30 $30 $150 $150 $113 $55

Source: MSU, HSP

The ballroom and all meeting rooms except Room 106E are on the second floor of the Strand Union Center. The figure below is an outline of the second floor of the facility.

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Fi gur e 6- 6

The 13,010 square foot ballroom can be broken into four divisions, and the largest two rooms, 275 and 276, can be joined together for a larger meeting room. Taken together the facilities at Montana State University are similar to those at the University of Montana in Missoula. These facilities would be a competitor to several of the events that a proposed events center in Missoula would seek to obtain.

Spokane, Washington Spokane, Washington, located 200 miles west of Missoula on Interstate 90, has several facilities that offer a wide range of meeting and event space. Spokane, with an estimated MSA population

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in 2008 of 462,677, is the largest city between Seattle and Minneapolis. The facilities in Spokane would be a major competitor with an events center in Missoula. Washington State has a unique method of funding major public facilities, including arenas, event centers, convention centers and exposition halls. The state allows cities and counties to establish Public Facilities Districts that will collect a small amount of sales tax and apply it to development or renovation of major projects. The Spokane Public Facilities District has developed three separate facilities, all of which will me major competitors to a proposed events center in Missoula. The Spokane PFD has filed its 2007 Annual Report, which has data that Missoula can use to assist in the determination of its new facility. The PFD has not yet filed its 2008 Annual Report. The table below summarizes the three facilities that the Spokane Public Facilities District operates. T abl e 5- 8 Spokane PFD Facilities Facility

Capacity/Size

No. of Events

2007 Attendance

2007 Revenue

2007 Expenses

2007 Net Income

Spokane Arena INB Performing Arts Center Spokane Convention Center

12,200 seats 2,700 seats 157,870 sq. ft.

514 202 477

865,589 197,447 291,211

$6,994,674 $4,326,149 $3,926,058

$5,814,867 $3,955,084 $4,405,662

$1,179,807 $371,065 ($479,604)

Source: Spokane PFD

Both the Spokane Arena and the INB Performing Arts Center have a positive net income for 2007, and based on prior reports the two facilities have had positive income for the past few years. However, revenue of each facility includes a line item for renewal and replacement revenue that appears to originate not from facility revenue but from the PFD itself. Spokane Arena The Spokane Arena is located in downtown Spokane on the north side of the Spokane River near Riverfront Park. Opened in 1995, the facility replaced the City Coliseum, which was demolished. The Spokane PFD build the Spokane Arena through several revenue bonds that were funded through a voter-approved 0.1 percent sales tax increase in Spokane, generating a revenue stream supporting $44.8 million in bonds. The following figure is a picture of the Spokane Arena.

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Fi gur e 6- 7

The Arena is the home field for the Spokane Shock arena football team, a member of the af2 Arena Football League, and the Spokane Chiefs hockey team, a member of the Western Hockey League. The facility seats 12,210 for basketball, 10,440 for hockey, and 12,124 for end-stage concerts. The facility also rents to private events. The following table lists the available space in the arena. T abl e 6- 9 Spokane Arena Area Arena Floor Spotlight Landing Meeting Rooms A & B Kalispel Club Champions/Press Room Total

Size (Sq. Ft.) 32,000 800 1,800 2,400 4,500 41,500

Notes Size with all seating retracted Concourse level area Two divisions Private Club Multimedia capabilities

Source: Spokane Arena

The arena has 32,000 square feet of floor space for flat-floor shows. It also has two meeting rooms that can combine for 1,800 square feet of space or be divided into two 900 square foot meeting rooms. The Kalispel Club is a private club that can be rented for receptions and events, as can the Champions Room/Press Room, a 4,500 square foot space.

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The facility held 514 events in 2007, which the arena broke into 160 major and 354 minor events. The attendance for 2007 was 865,589 guests. The table below lists the Spokane Arena attendance from 2003 through 2007. T abl e 6- 10 Spokane Arena Attendance 2003-2007 Event Type

2003

2004

2007

Hockey Sports Family Shows Community Events Concerts Football Other

269,314 118,190 124,814 98,871 60,734 17,558

242,301 74,563 129,489 126,320 121,342 14,917

241,660 192,773 144,274 107,992 95,114 75,015 8,761

Total

689,481

708,932

-

865,589

Source: Spokane PFD

The attendance has increased significantly from 2003 to 2007, and the introduction of football appears to have been a major boost for attendance. Revenue for 2007 for the Spokane Arena was $7 million, with expenses of $5.8 million, and a net income of $1.2 million. The Spokane PFD also reported revenue per type of event, the total of which is smaller than the gross revenue because it did not include other sources of revenue not specifically identified with an event. The table below lists the revenue per event for 2003 through 2007. T abl e 6- 11 Spokane Arena Revenue 2003-2007 Event Type Hockey Sports Family Shows Community Events Concerts Football Other Total

2003

2004

2007

$428,850 $528,818 $550,707 $283,109 $285,815 $53,837

$383,977 $277,565 $566,549 $424,206 $645,149 $65,190

$439,353 $820,400 $874,109 $347,513 $582,724 $281,644 $44,545

$2,131,136

$2,362,636

-

$3,390,288

Source: Spokane PFD

Revenue from events has increased from $2.1 million to $3.4 million from 2003 to 2007. A large part of the increase was football, but an increase in sports, family shows and concerts revenue

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was another major reason for the increase in revenue. The increase in sports revenue in 2007 was in large part due to the Spokane Arena hosting the 2007 NCAA Men’s Basketball Tournament first and second rounds, an event that will not take place every year. Hockey has the greatest attendance, but consistently over the years reported family shows have been either first or second in revenue. Concerts have another large impact on revenue while having a smaller impact on attendance. INB Performing Arts Center The INB Performing Arts Center (PAC) is located in downtown Spokane, on the Spokane River next to the Spokane Convention Center. The Spokane PFD has managed the facility since 2003. The City of Spokane built the facility as part of the 1974 World’s Fair in Spokane. It is the premiere performance space in Spokane. The following figure is a picture of the PAC. Fi gur e 6- 8

In 2007 the PAC had attendance of 197,447, with a total of 202 events, of which 124 were considered major events and 78 minor events. The largest attendance was for six performances of the Broadway show “Annie”, with 14,680 guests. The following table lists the attendance and revenue for each category of events at the PAC.

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T abl e 6- 12 Spokane INB Performing Arts Center 2007 Attendance and Revenue by Event Type Attendance

Percent of Total

Revenue

Percent of Total

Broadway Shows Other Entertainment Spokane Symphony Community Events Conventions

75,559 31,038 46,917 37,857 6,106

38% 16% 24% 19% 3%

$209,537 $138,445 $85,543 $62,311 $16,467

41% 27% 17% 12% 3%

Total

197,477

100%

$512,303

100%

Type

Source: Spokane PFD

The largest type of events, both in attendance and revenue, is Broadway touring shows. The revenue of $512,000 that the PAC generates from the performances and other events is only twelve percent of the $4.3 million in revenue that the facility generated in 2007. The majority of the revenue for 2007, $3.2 million, originated from the renewal and replacement funds from the PFD. Another large amount, $228,000, originated from the admission tax. Spokane Convention Center The major exhibit and meeting facility in the city is the Spokane Convention Center Complex, the largest meeting and events facility between Missoula and Seattle. The facility has a total of over 150,000 square feet of meeting space in downtown Spokane along the Spokane River. The Spokane Convention Center was part of the original construction of facilities for the 1974 World’s Fair. In 2003 the facility transferred to the Spokane PFD, which then renovated and expanded the facility at a cost of $77 million, funded by bonds that were voter-approved. The expanded and renovated Spokane Convention Center reopened in phases in 2006 and 2007. The following figure is a picture of the Spokane Convention Center.

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Fi gur e 6- 9

The campus consists of several facilities for various sizes of events and meetings. The following figure is a map of the various buildings. Fi gur e 6- 10

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The following table lists the types and size of the facilities at the Spokane Convention Center. T abl e 6- 13 Spokane Convention Center Facilities Size (Sq. Ft.)

Divisions

Group Health Exhibit Halls Ballroom Bays (Junior Ballroom) Meeting Rooms Room 101 Room 102 Room 103 Room 201 Room 202 Room 203 Room 205 Room 206 Room 207

100,100 25,310 13,730

5 3 3

560 2,240 560 1,650 1,650 550 1,510 5,800 1,510

1 4 1 3 3 1 1 4 1

Total

155,170

30

Performance Space Conference Theater

Seating Capacity 270

Facility

Source: Spokane Convention Center

The center has the Group Health Exhibit Halls that total over 100,000 square feet of contiguous exhibit space. Halls A, B and C have a ceiling height of thirty feet and each adjoins the loading dock area. Hall D can also serve as an entrance hall to the other halls and has a 22-foot ceiling. The ballroom has over 25,000 square feet of space with three divisions and ceiling heights of between twelve and 24 feet. The Bays is a space that could be a junior ballroom or exhibit/meeting space, with 13,730 square feet that can divide into three rooms. The Bays space has a ceiling height of 17 to 24 feet. The Bays are adjacent to the Conference Theater, a 270-seat multimedia theater with tiered seating. The center has ten meeting rooms that can divide into a total of twenty rooms. The meeting rooms are on two levels, with the music room attached to the Performing Arts Center. Other space for events can utilize the outdoor areas such as the Arbor, the Plaza, or the Roofdeck Patio. The center is attached to the INB Performing Arts Center, which groups can use as an additional facility for large events and conventions. The following table is the 2007 attendance and revenue by type of event.

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T abl e 6- 14 Spokane Convention Center 2007 Attendance & Revenue by Event Type Type

Attendance

Percent of Total

Revenue

Percent of Total

Conventions and Trade Shows Consumer Shows Meetings Community Events Sporting Events Entertainment

82,921 123,343 25,780 30,189 28,578 400

28% 42% 9% 10% 10% 0%

$817,778 $329,568 $254,683 $224,204 $81,529 $4,084

48% 19% 15% 13% 5% 0%

Total

291,211

100%

$1,711,846

100%

Source: Spokane PFD

The largest event type by revenue is conventions and trade shows, with 48 percent of total revenue. The type of event that had the largest attendance was the consumer shows, with 42 percent of total attendance. The 2007 revenue sources for the Spokane Convention Center are listed in the following table. T abl e 6- 15 Spokane Convention Center 2007 Revenue Type

Amount

Percent

Rental Income Concessions Event Misc. Advertising Contracts Parking Box Office Forfeited Deposits Miscellaneous Operating Revenue Subtotal

$853,784 $422,431 $437,316 $50,000 $28,962 $1,257 $1,400 $668 $1,795,818

22% 11% 11% 1% 1% 0% 0% 0% 46%

Admission Tax $18,214 Arena Admission Tax $795,777 Lodging Tax $998,399 R&R Transfer $317,850 Tax & Other Revenue Subtotal $2,130,240

0% 20% 25% 8% 54%

Total

100%

$3,926,058

Source: Spokane PFD

The largest source of revenue for the Spokane Convention Center is the Lodging Tax, which supplies 25 percent of the total revenue. The lodging, admission and arena admission taxes and

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the renewal and renovation transfer funds totaled 54 percent of the total revenue in 2007. Rental income, concessions and miscellaneous event income total 44 percent of the revenue. Doubletree Hotel Spokane-City Center The Spokane Convention Center attaches to and surrounds the Doubletree Hotel Spokane-City Center, which offers additional meeting space. The privately-owned and operated hotel has 375 rooms, including 6 suites. The table below lists the meeting space at the hotel. T abl e 6- 16 Doubletree Hotel Spokane-City Center Room Grand Ballroom Spokane Falls Ballroom Shades Conference Room Evergreen Parkside I Parkside II Executive Boardroom Total

Size (Sq. Ft.) Divisions 10,080 5 3,360 4 656 1 552 1 463 1 416 1 396 1 15,923

14

Source: Spokane Doubletree

The hotel has over 15,000 square feet of meeting space, including a Grand Ballroom with over 10,000 square feet that can be divided into five separate rooms. This meeting space supplements the space at the convention center. Spokane Hotels Spokane has hotels that have additional meeting space. The table below lists the hotels that have over 10,000 square feet of meeting space.

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T abl e 6- 17 Spokane Hotel Meeting Space Size (Sq. Ft.)

Divisions

Red Lion Hotel at the Park Riverfront Ballroom Riverfront Exhibit Hall Skyline Ballroom Meeting Rooms

9,800 8,600 4,143 6,471

4 0 2 11

Total Space

29,014

17

Davenport Hotel and Tower Pennington Grand Ballroom Isabella Ballroom Marie Antionette Ballroom Meeting Rooms

6,240 3,139 3,066 10,949

4 1 1 14

Total Space

23,394

20

Mirabeau Park Hotel & Convention Center Doubletree Ballroom Meeting rooms

8,832 4,897

4 8

Total Space

13,729

12

Red Lion Templin's Hotel on the River Meeting Rooms

11,000

15

Best Western University Inn Meeting Rooms

11,000

11

Type

Source: Mpoint

The hotel with the largest meeting space is the Red Lion Hotel at the Park, with almost 30,000 square feet of meeting space. The hotel has two ballrooms and a small exhibit hall with 8,600 square feet of space. The Davenport Hotel and Tower has three ballrooms and more than 10,000 square feet of meeting rooms. The Mirabeau Park Hotel & Convention Center, located in the Spokane Valley on Interstate 90, ten miles east of downtown Spokane, has over 13,000 square feet of meeting space, including an 8,800-square foot ballroom. The Red Lion Templin’s Hotel of the River and the Best Western University Inn both have meeting rooms with 11,000 square feet of space.

Butte Civic Center The Butte Civic Center, in Butte, Montana, is the closest large events facility to Missoula. Butte is 120 miles southeast of Missoula on Interstate 90, less than a two-hour drive. Butte had 33,892 residents in the 2000 census, and its claim to fame is that it is the largest community in the United States on the Continental Divide.

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The following table is a summary of the statistics for the Butte Civic Center. T abl e 6- 18 Butte Civic Center Summary Arena Seating Capacity Concerts Basketball Ice Events

7,000 6,250 5,100

Arena Size (Sq. Ft.) Flat Floor Events Annex

19,623 10,000

Total

29,623

Arena Daily Rates Arena Annex

$2,000 $750

Source: Butte Civic Center

The Butte Civic Center is an arena that seats 7,000 people for concerts and up to 6,250 for sporting events. The facility also has an annex that has 10,000 square feet of space, which can combine with the flat floor space of the arena to total almost 30,000 square feet of exhibit space. The facility hosts family shows, part of the county fair, car shows and other consumer shows, meetings, concerts and sporting events. It is the home ice of the Butte Roughriders of the Northern Pacific Hockey League. In the 2008-09 season the Butte Roughriders played 24 home games at the Butte Civic Center. The following table lists the event-days set out on the Butte Civic Center calendar for 2009. T abl e 6- 19 Butte Civic Center 2009 Event-Days Type Sports Consumer Show Family Shows Community Events Fairs Meetings Concerts Total

Total 25 25 12 7 6 5 4 84

Source: Butte Civic Center

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The largest number of event-days in 2009 is for sports and consumer shows. The Butte Civic Center hosted several high school basketball games, including the home games of the Butte High School boys’ and girls’ teams, as well as the Girls’ State A Basketball Tournament and the Boys’ and Girls’ State AA Basketball Tournaments. The consumer shows included a new car show and a jewelry show. The Butte-Silver Bow City-County consolidated government owns and operates the Butte Civic Center. The 2008-09 budget for the civic center included expenses of $817,744. The budget lists $105,000 in civic center use fees and $160,000 in concessions fees.

Four Seasons Arena, Montana ExpoPark, Great Falls, Montana The Montana ExpoPark is the site for the Montana State Fair as well as the location of the Four Seasons Arena. The table below shows the various facilities at the ExpoPark. T abl e 6- 20 Montana ExpoPark, Great Falls, Montana Facility

Size (Sq. Ft.)

Four Seasons Arena Main Arena Side 2 Exhibition Hall Trades & Industries Bldg. Family Living Center Fine Arts Center Montana Lottery Club Paddock Club Atrium

53,000

Total

102,624

Divisions (Sq. Ft.) 33,000 17,000

15,000 16,000 5,000 2,600 5,000 5,000 1,024

Daily Rental Rate* $3,000 $2,250 $1,300 $975 $575 $400 $200 $200 $150 $200

*Added to Daily Rental Rate is 10% or fee per ticket. Source:

The Four Seasons Arena is the major facility on the campus. The arena has a 5,434-seat capacity for basketball and 4,354 for ice hockey and rodeos. Built in 1979, and owned and operated by Cascade County, the facility has seen several renovations. It hosts concerts and sporting events in addition to the concerts and other events that occur in the building during the state fair. The facility has 53,000 square feet of space for trade and consumer shows, with 33,000 square feet on the main floor and 17,000 square feet in an exhibition hall attached to the arena. The following figure is a map of the grounds of the ExpoPark.

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Fi gur e 6- 11

The following table lists the other facilities at the ExpoPark that can be rented. T abl e 6- 21 Montana ExpoPark, Great Falls, Montana Agricultural and Other Buildings Facility Livestock Pavilion Mercantile Building Heritage Building Grandstand and Arena

Size (Sq. Ft.) 51,000 15,000 14,700 *

Type Unheated Indoor Pavilion Unheated Building Unheated Building Outdoor Arena

Daily Rental Rate $650 $200 $350 $1,000

*Grandstand seats 2,420 Source: Montana ExpoPark

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Belgrade Special Events Center The Belgrade Special Events Center is located in Belgrade, Montana, a small city located on Interstate 90, fifteen miles west of Bozeman and approximately 200 miles southeast of Missoula. The city had a population in 2000 of 5,728. The city is the home to Gallatin Field Airport, which serves the city of Bozeman, as well as Big Sky ski resort and Yellowstone National Park. The table below describes the specifics of the Belgrade Special Events Center. T abl e 6- 22 Belgrade Special Events Center Arena Seating Capacity Owner Date Opened Uses Location

4,800 Belgrade Public Schools 1996 Indoor Sports, Meetings Belgrade High School

Source: Belgrade Public Schools

The Belgrade Public School System constructed the facility, which opened in 1996. The Special Events Center is the home court of the Belgrade High School Panthers and hosts several district, regional and state sporting events. It is one of the largest high school indoor facilities in the state.

Other Regional Competitive Facilities Several other facilities in the region would have a lesser impact on a new events center in Missoula but would still be competition for some events. The following are facilities that may be regional competition: Majestic Valley Arena, Kalispell, Montana – The arena in Kalispell. It hosts concerts, banquets, and events. The facility has a 39,000 square foot flat “warm-up” arena of 20,000 square feet. The arena for rodeos and some trade shows.

Majestic Valley Arena is an indoor equestrian tradeshows as well as rodeos and equestrian floor with an additional attached exhibit and could compete with a Missoula events center

Kootenai County Fairgrounds and Events Center, Coeur d’Alene, Idaho – The fairgrounds holds the North Idaho Fair each year and rents three exhibit buildings on a year-round basis. The buildings range from 9,600 square feet to 2,400 square feet and have concrete floors. The facilities could hold small consumer and trade shows that might compete with a Missoula events center. Qwest Center, Boise, Idaho – the Qwest Center, in Boise, Idaho, described more fully in Chapter 3 as a comparable facility, is more than 500 miles from Missoula. Therefore it would not compete with an events center for most events and shows due to the distance to Boise. However, the facility is fairly new, built in 1997, seats 5,300 for sporting events and up to 6,800 for concerts,

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and has exhibit space of 58,247 square feet. The facility is attached to the Grove Hotel, which has additional meeting and event space. Regional Hotels with Meeting Space – Certain hotels in the region have meeting space that would compete for certain events, tradeshows and banquets that the Missoula events center might host. These hotels include: !

Hilton Garden Inn Billings

!

Hilton Garden Inn Kalispell

!

Billings Hotel and Convention Center

!

Mountain Lake Lodge, Bigfork, Montana

!

Coeur d’Alene Casino Resort Hotel, Coeur d’Alene, Idaho

!

Red Lion Colonial Hotel, Helena, Montana

Canada Regional Facilities Two facilities in Alberta, Canada, are close enough to Missoula to create some competition for the event center. Those facilities are: !

Medicine Hat Arena - 4000 seating capacity, 17,000 square foot floor, built 1970

!

Enmax Centre, Lethbridge, Alberta - 5,200 seats, 30,000 square foot floorspace, built 1975

Demand Each of the competitive facilities listed above has several types of events that use the facility. Several facilities have anchor tenants, including ice hockey minor league professional teams and arena football teams. Most competitive facilities in the region also work with promoters to bring family shows, concerts and other events to the area. With the events that each facility hosts, demand clearly exists for extensive use of the proposed facility. A new Missoula events center could likely capture many event types that utilize competitive facilities as well as host events not currently occurring in the region. High school sports in Montana have several winter tournaments that use regional facilities. Several facilities, including the MetraPark Rimrock Auto Arena and the Butte Civic Center, host regular season high school basketball games as well as holiday tournaments and conference and regional championships. The Montana High School Association determines the state tournaments two years in advance, based on location, cost and availability. Missoula would have major consideration for the tournaments, but scheduling concerns hamper the Adams Center from bidding on the tournaments. The following table is a list of the winter state tournaments that the MHSA has scheduled from 2004 through 2011.

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T abl e 6- 23 Montana High School Association 2004-2011 State Tournaments By Location Location Billings MetraPark Butte Civic Center Belgrade Special Events Center Great Falls (Four Seasons Arena) Hamilton High School Bozeman (MSU Field House) Miles City (Custer Co. High School) Missoula (Adams Center) Shelby High School Total

Tournaments 17 14 11 9 8 3 1 1 1 65

Source: MHSA, HSP

The Billings MetraPark has scheduled the most tournaments, a total of 17, of which eight are allclass state wrestling tournament. For state basketball tournaments, the 6,250-seat Butte Civic center has scheduled the most events, with the 4,800-seat Belgrade Special Events Center hosting almost as many. Both have hosted an average of more than one tournament per year. Within that time period the Adams Center in Missoula has hosted only one tournament. Another popular event type for the regional facilities is the rodeo. The Professional Rodeo Cowboys Association (PRCA) is the largest organization that manages and promotes rodeos throughout North America. The PRCA promotes the Missoula Stampede, the annual rodeo that occurs during the fair, as well as more than 500 professional rodeos throughout the year. The following table is a summary of the rodeos throughout the country that the PRCA sponsors.

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T abl e 6- 24 Professional Rodeo Cowboys Association Rodeos Oct. 2008-Sept. 2009 Month Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Total

Rodeos 21 6 2 19 23 25 25 48 96 124 106 65 560

Montana Rodeos 1 0 0 1 0 0 0 0 5 11 8 3 29

Rodeos in Northwest* 1 1 0 1 1 0 1 2 11 31 25 14 88

*Washington, Oregon, Idaho, Montana and Wyoming Source: PRCA, HSP

The PRCA conducts 560 events throughout the year, many of which are during the winter months. However, only two rodeos occur in Montana from October through May. Seven events occur in the northwestern states of Washington, Oregon, Idaho, Montana and Wyoming throughout that time period, and several others occur in Canada. Demand exists for an indoor rodeo in Missoula if a facility existed. Implications. There are many factors contributing to the potential success of an events facility. In this chapter, several were identified, including the distance to other event facilities, the level of activity at those facilities and the lost opportunity for business that would exist in Missoula but for the existence of an events facility. Smaller markets with lesser facilities support a wide range of events and these are all hundreds of miles from Missoula. If an event center is built in Missoula, it suggests that it could host at least the number of events supported in any of the competitive venues except for Spokane, given its market size and location.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


C OMPARABLE F ACILITIES The purpose of investigating comparable facilities is two-fold. It is important to understand if and how such facilities have performed in similar markets and what implications their performance or physical program should have on what is recommended in Missoula. Also, investigating their demand history (attendance, event types and number of events) as well as specific line item revenue and expense detail provides a top-down and bottom-up approach to understanding how a similar facility could perform in Missoula. HSP has reviewed a number of facilities and discusses them as well as implications below. T abl e 1 Comparable Facility Summary Facility Swiftel Center Heartland Events Center Mayo Civic Center Verizon Wireless Center Average

Location Brookings, SD Grand Island, NE Rochester, MN Mankato, MN

MSA Population

Year Open

Seating Capacity*

Event Space (Sq. Ft.)**

29,688 70,694 182,924 92,498 93,951

2001 2006 1938 1995 1985

3,500 6,000 5,200 5,280 4,995

42,577 38,000 68,830 38,880 47,072

*Seating Capacity for Basketball **Exhibit and Meeting Room Space Source: HSP

The City of Brookings, South Dakota, with a Micropolitan Statistical Area population of 29,688, developed the Swiftel Center in 2001. The Swiftel Center is a multi-purpose events center that consists of an arena with a seating capacity of 3,500 for sports and up to 7,000 for concerts, as well as meeting space of a 6,800 square foot banquet room and three meeting rooms. The facility competes with the arena at the major university in the city, South Dakota State’s Frost Arena. The Swiftel Center has been so successful that the city has decided to expand it to attract larger trade shows and meetings by developing a ballroom and more meeting rooms. The City of Grand Island, Nebraska, in cooperation with the Fonner Park Racetrack, developed the Heartland Events Center, which opened in 2006. Grand Island has a Micropolitan Statistical Area population of 70,694, which includes Hall County and two adjacent counties. The facility consists of Eihusen Arena, with 6,000 seating capacity for sports and 7,000 for concerts, and a flat floor area of 20,909 square feet, as well as the Bosselman Conference Center, with 8,000 square feet of space. The facility competes with the Viaero Event Center in Kearney, Nebraska, fifty miles west of Grand Island, as well as the events facilities in Lincoln, including those at the University of Nebraska, located 100 miles east of the city. The facility has been a catalyst for the city to develop and recruit the new state fairgrounds adjacent to the Heartland Events Center. The Mayo Civic Center in Rochester, Minnesota, is an important facility for the city and the area. Rochester has a Metropolitan Statistical Area population of 182,924, the third largest city in the state behind Minneapolis and St. Paul. The Mayo Civic Center consists of Taylor Arena, which has

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a seating capacity of 5,200 for sports events and 7,200 for some concerts. The facility also has an exhibit hall with 25,200 square feet of space, a 4,294 square-foot ballroom, and nine meeting rooms that total 14,294 square feet. The Mayo Civic Center began in 1938 but has been renovated several times, including a major renovation in 2001. In 2008, there were 379 events that took place with over 314,000 attendees. Concerts and entertainment events boasted the highest number of visitors with nearly 130,000 attendees and generated over $775,000. The Verizon Wireless Center in Mankato, Minnesota, is a major competitor of the Mayo Civic Center, and of the Swiftel Center in Brookings, South Dakota 150 miles west of Mankato. Home of Minnesota State University-Mankato, a university with approximately 15,000 students, Mankato is 85 miles southwest of Minneapolis-St. Paul and has a Micropolitan Statistical Area population of 92,498. The Verizon Wireless Center, opened in 1995, has the seating capacity of 5,280 for sports and up to 7,300 for some concerts, with 20,909 square feet of flat floor space on the arena floor. The facility also has ballroom space of 13,290 square feet and six meeting rooms with a total of 4,681 square feet of space. The facility, which the City of Mankato owns and operates, is a major venue for concerts, meetings, banquets and other events in the city. It competes with the Taylor Center at Minnesota State University, which opened in 2000 and hosts the university basketball, volleyball and other sports teams, as well has holding concerts and graduations.

Specific Comparable Facilities Swiftel Events Center – Brookings, South Dakota The Swiftel Events Center is located in Brookings, South Dakota. The City of Brookings constructed the facility in 2001 to host conventions, trade shows, concerts, banquets and athletic events. The size, location in a smaller city with a regional draw, the competition with a university facility in the same city, and several types of function capabilities of the facility make it a good comparison for a proposed event center in Missoula. The figure below is a picture of the Swiftel Events Center.

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Fi gur e 7- 1

The following table shows the key data points for the facility. T abl e 7- 2 Swiftel Center Location Ownership Management Year Complete Facilities

Cost of Construction Funding

Brookings, South Dakota City of Brookings VenuWorks 2001 Arena Daktronics Banquet Rooms Conference Rooms $7 Million City of Brookings Bonds, paid by "2nd Penny" City Sales Tax

Annual City Supplement

$300,000

2007 Attendance

104,830

Source: Heartland Event Center, HSP

The City of Brookings, South Dakota, is located in eastern South Dakota, approximately 60 miles north of Sioux Falls, South Dakota, and 225 miles west of Minneapolis-St. Paul, Minnesota. Brookings had a population of 18,504 in the 2000 census, while the Micropolitan Statistical Area of Brookings, consisting of the city and the surrounding counties, had an estimated 2008 population of 29,688. Facilities The following table describes the Swiftel Center facilities.

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T abl e 7- 3 Swiftel Center Function Space

Exhibit Space Arena Meeting Space Daktronics Banquet Room County Room Mezzanine Conference Room R&T Conference Room Subtotal Other Space Concourse Total

Total (SF) 30,000

By Division (SF) 30,000

12,577

42,577 4,000

6,800 4,777 300 700 42,577 4,000

46,577

46,577

Seating Capacity Sporting Events Concerts

3,500 7,000

Total Exhibit Space Total Meeting Space Total Events Space Other Space Total Function Space

30,000 12,577 42,577 4,000 46,577

Total Exhibit Space Divisions Meeting Room Divisions

1 6

Total Divisions

7

Source: Swiftel Center, HSP

The Arena includes 30,000 square feet of exhibit space the floor of the arena with the portable seats retracted. The arena can accommodate up to 7,000 spectators for festival seating concerts, or 3,500 for sporting events. The meeting space totals 12,577 square feet, including the Daktronics Banquet Room with 6,800 square feet, which can divide into two meeting rooms of 3,900 square feet and 2,900 square feet. The County Room has 4,777 square feet and can divide into two breakout rooms, and the facility has two small conference rooms. The concourse provides an additional option for exhibits and other events, with 4,000 square feet of space The following figure is the floor plan of the Swiftel Center.

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Fi gur e 7- 2

The Swiftel Center has been so successful that the management group that runs the facility, VenuWorks, has brought a plan to the City of Brookings to expand the facility to include more convention and meeting space. VenuWorks submitted a $7 million expansion plan to the city in 2008, including a ballroom, several meeting rooms and additional storage and parking. An independent consultant confirmed the need for expanded space, suggesting that 17,500 square feet of space be added, along with development of a 100 to 150-room hotel. The goal of the expansion is to be able to market to and attract larger conventions and other meetings. The city council is presently considering funding options for the expansion. Events The table below shows the event statistics for the Swiftel Center for the years 2004 through 2007.

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T abl e 7- 4 Swiftel Center Event Demand Events Assemblies Banquets Concerts & Entertainment Meetings & Conferences Consumer Shows Conventions & Tradeshows Sports Other Total

2004

2005

2006

2007

1 21 10 62 13 1 26 37 171

1 26 10 95 13 0 23 55 223

1 37 12 188 19 0 26 83 366

2 42 12 81 13 3 28 103 284

150 330 937 141 739 125 985 490

1,150 339 1,298 79 638 0 1,226 400

1,150 271 1,305 52 440 0 1,282 270

1,800 255 1,055 114 630 440 909 225

150 6,930 9,370 8,742 9,607 125 25,610 18,130 78,664

1,150 8,814 12,980 7,505 8,294 0 28,198 22,000 88,941

1,150 10,027 15,660 9,776 8,360 0 33,332 22,410 100,715

3,600 10,710 12,660 9,234 8,190 1,320 25,452 23,175 94,341

Estimate of Average Attendance Assemblies Banquets Concerts & Entertainment Meetings & Conferences Consumer Shows Conventions & Tradeshows Sports Other Estimate of Total Attendance Assemblies Banquets Concerts & Entertainment Meetings & Conferences Consumer Shows Conventions & Tradeshows Sports Other Total Source: Swiftel Center

Regional Competitors The Swiftel Center competes with other facilities in the city and surrounding region. South Dakota State University, the largest university in the state, is located in Brookings. The university has an enrollment of approximately 12,000. The university has several facilities that provide event space, including the Frost Arena, a 6,500 seat multi-purpose arena that is home to the men's and women's basketball teams, as well as the volleyball and wrestling teams. The facility mainly hosts university sporting events but also hosts university events such as graduations and trade fairs.

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Sioux Falls, South Dakota, is located south of Brookings. The Sioux Falls Arena has a capacity of 8,000, with an NBA D-League team, a minor league hockey team and an indoor football team as anchor tenants. The facility also hosts concerts, family shows and other events. The Sioux Falls Convention Center has a 16,800 square foot ballroom, 33,200 square foot exhibit hall, and 12 breakout rooms. The convention center connects to the arena as well as a full-service hotel. Financial The City of Brookings owns the Swiftel Center, and VenuWorks, a national event center management company, operates the facility. Development of the Swiftel Center cost $7 million, part of the city bond issued in 2001 to fund both the center and the new public library. The bond will be retired in 2013 and the debt as of January 1, 2009, was $4.6 million. The city funds the bond debt service through the “2nd penny” sales tax. The state of South Dakota permits a municipality to charge up to three percent in sales tax. The first percent, or “penny” can go to general obligations, while 75 percent of the second penny has to go to major facilities and other projects. The city can charge a third “penny” and those funds have to go to promote tourism and new business for the area. That part of the tax in Brookings is divided between the Chamber of Commerce, the Economic Development Commission, and the Downtown Brookings organization. The City of Brookings also supplements ongoing operations of the Swiftel Center. The city budgets $300,000 per year for operational expenses of the facility, as well as providing approximately $70,000 per year in capital improvement expenses. In 2008 the city gave additional sums for capital expenses that totaled $200,000, and it anticipates budgeting $300,000 for improvements of the Swiftel Center in 2010. The operations costs and current and 2010 capital expenses are part of the general obligations budget. The expansion plans mentioned above would not be funded by the operational budget. The city plans to fund that expansion by the “second penny” sales tax, especially because the current bonds that funded the original development will be retired in 2013. Implications for Missoula The Swiftel Center compares to the proposed facility in Missoula in several ways. It is located in a smaller population center that is nonetheless a larger city for the area and therefore a regional center. The city has the largest university in the state, with all the event space and other meeting capabilities that a larger university has to offer. The university has an arena that would compete for certain events with the arena in the Swiftel Center. Brookings is less than 50 miles from Sioux Falls, which has its own multi-use arena and convention center. The finances of the Swiftel Center are important to note when considering a potential events center of similar size. The facility cost $8 million to develop in 2004, and the City of Brookings funded the center with sales tax revenue that pay the bonds that the city issued for the development. The city also contributes $300,000 per year for the operations of the facility and pays an additional amount yearly for capital improvements, an amount that is normally $70,000 per year but will be $300,000 in 2010.

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Heartland Events Center – Grand Island, Nebraska Located in Grand Island, Nebraska, the Heartland Events Center was constructed in 2006 to host conventions, trade shows, concerts, banquets and athletic events. The size, location in a smaller city with a regional draw, and functional capabilities of the facility make it a good comparison for a proposed event center in Missoula. The figure below is a picture of the Heartland Events Center. Fi gur e 7- 3

The following table shows the key data points for the facility.

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T abl e 7- 5 Heartland Events Center Key Data Points Location Ownership Year Complete Facilities Cost of Construction Funding Fonner Park Land Donation Private Contributions City of Grand Island Hall County Annual City Revenue Supplement

Grand Island, NE Fonner Park Exposition and Events Center, Inc. 2006 Eihusen Arena Bosselman Conference Center $30 Million $11.5 Million $10 Million $7.5 Million $1 Million $150,000

Source: Heartland Event Center, HSP

The City of Grand Island, Nebraska, is located in central Nebraska, approximately 150 miles west of Omaha. Grand Island itself had an estimated 2008 population of 42,940, while the Micropolitan Statistical Area of Grand Island, consisting of the city and the counties of Hall, Howard and Merrick, had an estimated 2008 population of 70,694. Facilities The following table describes the Heartland Events Center facilities.

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T abl e 7- 6 Heartland Events Center Function Space

Total (SF) Exhibit Space Eihusen Arena Meeting Space Bosselman Conference Center

Seating Capacity Total Exhibit Space Total Meeting Space Other Space Total Function Space Total Exhibit Space Divisions Meeting Room Divisions Total Divisions

30,000 8,000 38,000 6,000 - 7,000 30,000 8,000 0 38,000 1 5 6

Source: Heartland Event Center HSP

The Eihusen Arena includes over 30,000 square feet of exhibit space on the floor of the arena with the retractable lower deck seats removed. When the lower deck is open, the arena floor has 17,000 square feet of space. Eihusen Arena can accommodate between 6,000 and 7,000 spectators, depending on the type of event and the seating configuration. The Bosselman Conference Center provides five break out rooms with 8,000 total square feet of meeting space and can host up to 400 guests. The facility includes 12 box suites that can accommodate up to 24 guests, multiple concession stands and restroom facilities, six locker rooms, gift shop, ticket office, and more amenities. The following figures are floor plans of the first and second levels of the Heartland Events Center.

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Fi gur e 7- 4

Fi gur e 7- 5

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The Heartland Events Center is adjacent to Fonner Park, the premiere thoroughbred horse racetrack in Nebraska. The facility hosts live horseraces from February through early May, including the Bosselman/Gus Fonner Stakes that is considered a warm-up race for the Kentucky Derby. The park also has year-round simulcast races from around the country, as well as having kino games on the location. The Heartland Events Center connects to the Fonner Park concourse and the facilities can be combined to provide an additional 33,000 square feet of exhibit or trade show space in certain situations. Regional Competitors The Heartland Events Center competes with other facilities in the state and region for events. The University of Nebraska's central campus is located in Lincoln, 95 miles east of Grand Island on Interstate 80. That campus has several event facilities, including the 13,595-seat Bob Devaney Sports Center Arena and the Nebraska Coliseum, which seats 4,030 spectators. Lincoln also is home to the Lancaster Event Center, a multi-use facility that includes a 35,000 square foot arena, two large pavilions and an exhibit hall. Kearney, Nebraska, 50 miles west of Grand Island on Interstate 80, is home to the Viaero Event Center. That facility is a 5,000-seat arena that is the home ice of the Kearney Storm hockey team and hosts concerts and other events. The Kearney arena has a major focus on ice hockey and skating and has limited meeting space. It does, however, draw shows such as Disney on Ice and Broadway tours such as 'Hairspray.' Financial The project cost nearly $30 million. The City of Grand Island contributed $7.5 million to the project while Fonner Park contributed $11.5 Million in property and infrastructure. The facility also raised an additional $10 Million in private contributions. The State of Nebraska, through its Local Civic, Cultural, and Convention Center Financing Fund, contributed $500,000 over five years. Hall County, Nebraska, contributes $150,000 per year from its Keno Fund to the debt service of the facility, with a total of more than $1 Million anticipated from the county. The Fonner Park Fairground and Exposition Center, Inc., a 501(c)(3) non-profit organization, owns the Heartland Events Center. It has a lease/purchase agreement with the City of Grand Island, so that when the debt is retired in 2024, the city will own the property. The debt as of September 30, 2010, is scheduled to be $6.27 million, and the debt service that the city will pay in the 2009-10 fiscal year is $572,000. Implications for Missoula The Heartland Events Center is an excellent comparable facility for Missoula to consider. It is located in a smaller population center that has a larger regional population base. The arena has 30,000 square feet of floor space and seats 6,000 to 7,000 depending on seating configuration, and it has meeting space in the conference center area of the facility. While the events center does not have local competition from a university, Grand Island is less than 100 miles from Lincoln and the University of Nebraska as well as the events center in Lincoln and the Viaero

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Events Center only 50 miles west in Kearney. All of these factors suggest that a facility in Missoula could succeed.

Mayo Civic Center – Rochester, Minnesota The Mayo Civic Center is located in Rochester, Minnesota, the state’s third largest city. With a population of just over 95,000, Rochester is located in southwestern Minnesota. The city is home to the internationally recognized, non-profit organization known as Mayo Clinic, which specializes in medical research. The following table shows the key data points for the facility. T abl e 7- 7 Mayo Civic Center Key Data Points Location Ownership Year Opened Facilities

2008 City Contribution

Rochester, MN City of Rochester 1938 Arena, Auditorium, Ballroom, Exhibit Hall, Meeting Rooms, Presentation Hall $621,530

Source: Mayo Civic Center, HSP

The Mayo Civic Center originally opened in 1938 and has undergone several expansions since, the most recent in 2001. The facility is owned and operated by the City of Rochester’s Department of Parks and Recreation. The Taylor Arena portion of the center was the site of weekly television broadcasts of the American Wrestling Association from 1989 to 1990 and was also the shooting location of Bon Jovi’s 1986 music video for “Livin’ on a Prayer.” Facilities The table below shows detailed facility information on the Mayo Civic Center.

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T abl e 7- 8 Mayo Civic Center Function Space Total (SF) By Division (SF) Exhbit Hall Hall I Hall II Hall III Hall IV Arena Floor Total Exhibit Space

25,200

Ballroom Space Ballroom A Ballroom B Meeting Rooms

4,136

14,294

Subtotal Presentation Hall Auditorium Total

68,830 5,760 11,800 86,390

3,570 2,660 3,570 15,400 25,200 50,400 2,068 2,068

Arena Seating Capacity Total Exhibit Space Total Ballroom Space Total Meeting Space Other Space Total Function Space Total Exhibit Space Divisions Total Ballroom Space Divisions Meeting Room Divisions Total Divisions

86,390 5,200 - 7,200 50,400 4,136 14,294 17,560 86,390 1 2 9 12

Source: Mayo Civic Center, HSP

The Mayo Civic Center includes an exhibit hall, ballroom, arena, presentation hall, auditorium and several meeting rooms. The exhibit hall consists of 25,200 square feet of space while two ballroom sections total 4,136 square feet. The exhibit hall divides into four theater sections, the largest of which is 15,400 square feet. There are nine meeting room divisions totaling 14,294 square feet and an 11,800 square foot auditorium and a 5,760 square foot presentation hall. The Taylor Arena floor encompasses 25,200 square feet of space. The figure below shows the layout of the Mayo Civic Center.

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Fi gur e 7- 6

Events The table below shows the number of events and attendees in 2008.

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T abl e 7- 9 Mayo Civic Center Events 2008 Number of Events

Number of Attendees

Revenue

Concerts & Entertainment Conventions Sporting Events Corporate Events Mayo Clinic Events One-day Meetings & Social Events Tradeshows/Public Consumer Shows

73 44 17 9 18 198 20

129,339 63,894 50,791 3,395 13,297 40,457 13,003

$776,020 $773,836 $133,191 $55,284 $310,647 $171,609 $89,428

Total

379

314,176

$2,310,015

Event Type

Source: Rochester Parks and Recreations Department, HSP

In 2008, there were 379 events that took place with over 314,000 attendees. Concerts and entertainment events boasted the highest number of visitors with nearly 130,000 attendees and generated over $775,000. Conventions attributed to over $770,000 in revenue with over 63,000 attendees. Financials The following table shows the annual revenue and expenses at the Mayo Civic Center. T abl e 7- 10 Mayo Events Center Revenue & Expenses 2006 Revenue Expenses Net Income

$1,837,070 $2,378,045 ($540,975)

2007 $2,023,974 $2,641,191 ($617,217)

2008 $2,293,840 $2,915,370 ($621,530)

Source: Rochester Parks and Recreations Department, HSP

Between 2006 and 2008, revenue increased by over $450,000 while expenses increased by over $535,000. The deficit for 2008 was about $620,000. The annual deficit is offset using part of the City of Rochester’s lodging tax, which currently stands at four percent. This tax is taken on top of the statewide sales tax. Revenue from the lodging tax is split between the city’s convention and visitors bureau and the city’s general fund. The original building constructed in 1938 consisted of an auditorium and presentation hall. The Taylor Arena was built in 1984, the Grand Ballroom was constructed in 1997 and the exhibit hall was developed in 2001. The most recent expansion in 2001 cost about $8 million, which was funded by 50/50 bonds. Fifty percent of funds were generated by local hotel taxes, sales taxes and food and beverage taxes while the other fifty percent was provided by the State of Minnesota. A newly proposed expansion to nearly double the size of the facility would cost roughly $75

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million. The center has submitted a proposal to the state to receive another 50/50 bond to help fund the expansion of which $35 million would be provided locally. Regional Competitors The following table shows the competitive facilities in the region. T abl e 7- 11 Regional Competitors Facility Rushmore Plaza Civic Center Fargo Dome Duluth Entertainment Convention Center Sioux Falls Arena Verizon Wireless Center La Crosse Center

Location

Type

Size (SF)

Rapid City, SD Fargo, ND Duluth, MN Sioux Falls, SD Mankato, MN La Crosse, WI

Conventions, Entertainment, Concerts, Hockey Conventions, Concerts, Tradeshows, Football Conventions, Entertainment, Concerts, Hockey Conventions, Entertainment, Concerts, Hockey Conventions, Entertainment, Concerts, Hockey Conventions, Entertainment, Concerts, Hockey

150,000 115,000 61,228 57,400 45,000 31,632

Source: Mayo Civic Center, HSP

The regionally competitive facilities are located in Minnesota, Wisconsin, North Dakota and South Dakota. All of the facilities have an anchor sport tenant; most are minor league hockey teams. The largest of the competitive arenas is the Rushmore Plaza Civic Center in Rapid City, South Dakota, which happens to be the furthest away. The La Crosse Center is located just across the state border from the Mayo Civic Center in Wisconsin. Implications The Mayo Civic Center is a great comparable facility for Missoula to consider. It is located in a city with a smaller population that has a larger regional base for demand. The facility is mixeduse with several elements including an exhibit hall, presentation hall, ballroom and an arena. Since opening nearly 75 years ago, the facility has managed to grow and expand to adapt for an anticipated increase in demand. The Mayo Civic Center has done a great job of securing local and state funding for various renovations and expansions.

Verizon Wireless Center, Mankato, Minnesota The Verizon Wireless Center is located in Mankato, Minnesota, a city with a 2008 population of 36,000. The city, located in south central Minnesota, is part of the Mankato Micropolitan Statistical Area over two counties with a population of 85,700. The following table is the data summary for the Verizon Wireless Center in Mankato, Minnesota.

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T abl e 7- 12 Verizon Wireless Center Key Data Points

Location Ownership Year Opened Seating Capacity Cost of Construction Funding

Mankato, MN City of Mankato 1995 4,832 $20 million $0.05 City Sales Tax

Source: Verizon Wirelss Center, HSP

Minnesota State University-Mankato is based in the city and the facility is home to the university’s hockey team. Prior to the building of the arena, MSU played their home games at All Seasons Arena, built in 1974, which is now their main practice facility. The table below shows information about the university. T abl e 7- 13 Minnesota State University Mankato Location 2008-2009 Enrollment General Programs Faculty/Student Ratio: Founded Campus

Mankato, MN 14,747 (12,826 undergrads) Public University Coed undergraduate, graduate and doctorate schools 1:28 1868 303 acres, 25 academic and residential buildings

Source: Minnesota State University, HSP

The university enrolls nearly 15,000 students, similar in size to the University of Montana. The table below lists the function space of the Verizon Wireless Center.

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T abl e 7- 14 Verizon Wireless Center Function Space

Exhbit Hall/Arena Floor

Total (SF) By Division (SF) 20,909 20,909

Ballroom Space Banquet East Banquet West Reception Hall Meeting Rooms

13,290

4,681

5,578 5,562 2,150 4,681

Subtotal

38,880

38,880

Arena Seating Capacity Total Exhibit Space Total Ballroom Space Total Meeting Space Other Space Total Function Space Total Exhibit Space Divisions Total Ballroom Space Divisions Meeting Room Divisions Total Divisions

5,280 - 7,300 20,909 13,290 4,681 n/a 38,880 1 3 6 10

Source: Alltel Center, HSP

The facility includes an arena floor of nearly 21,000 square feet, a ballroom of 13,290 square feet and meeting rooms totaling nearly 4,700 square feet. Events In 2008, the Verizon Wireless Center hosted about 760 events. This includes meetings of at least ten people to large concerts or family shows which can have anywhere from 3,000 to 8,000 attendees. The facilities main tenant is the Minnesota State University Mavericks ice hockey team. The Mavericks play between 15 and 20 games at the facility each year, depending upon their annual schedule and on their positing in play-off tournaments. There were about 15 concerts with at least 3,000 attendees. There are four to five large family shows that take place annually with at least 3,000 attendees as well. The facility hosts a number of large tournaments which are mostly non-ticketed so it is difficult to count the number of participants. In total, the Verizon Wireless Center has between 300,000 and 400,000 attendees per year, 200,000 of which can be documented.

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Financials In 2008, the Verizon Wireless Center generated about $2.5 million in revenue, not including ticket sales. About 20 percent of revenue is generated from food and beverage sales. Since the facility is not located on the campus of Minnesota State University-Mankato, they are allowed to sell alcohol at most events. The facility receives another 20 percent of its revenue from sponsorships, generating roughly $500,000 per year including $110,000 from Verizon Wireless for naming rights. Expenses are between $2.6 and $2.7 million leaving the facility with a deficit between $100,000 and $200,000. In recent years, this deficit has been closer to zero. The facility turned a profit only one year since its opening. That profit was about $17,000 for the year. Regional Competition The following table shows the regional competitors for the Verizon Wireless Center. T abl e 7- 15 Regional Competitors Facility Taylor Center Mayo Civic Center La Crosse Center Duluth Entertainment Convention Center Sioux Falls Arena

Location

Type

Size (SF)

Mankato, MN Rochester, MN La Crosse, MN Duluth, MN Sioux Falls, SD

Meetings, Ceremonies, Concerts, Athletic Events Conventions, Entertainment, Concerts, Basketball Conventions, Entertainment, Concerts, Football Conventions, Entertainment, Concerts, Hockey Conventions, Entertainment, Concerts, Hockey

142,951 86,390 75,275 61,228 57,400

Source: Verizon Wireless Center, HSP

The facilities listed represent venues of a similar size and feature space for sporting events (i.e. basketball, football or hockey) as well as arena and exhibit space for concerts, family shows and meetings. The Verizon Wireless Center also competes with events that take place at some of the larger arenas in the Minneapolis-St. Paul-Bloomington MSA area including the Xcel Energy Center in St. Paul and the Target Center in Minneapolis. Implications The Verizon Wireless Center is a good comparable facility for Missoula to consider. The facility offers function space for conventions, meetings, sporting events and concert shows. The City of Mankato manages to attract an audience from across the region. The facility helps the local economy generate an additional $30 million per opening, the number of hotel rooms has doubled from about 600 to 1,200. The restaurants and shops has nearly doubled as well. Though the facility has operating income there is a great economic impact to the surrounding area significantly for any loss at the actual facility.

year. Since its number of area a negative net that makes up

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


Interview and Survey Results HSP conducted a number of group and individual interviews with stakeholders and potential users of a multi-purpose facility. In addition, HSP and Tradeshow Week conducted a survey of regional and national planners, producers and other potential users to understand their desire to host an event in Missoula and the facility that would induce them to do so. The results of these efforts are discussed below. Missoula has clearly not been a major destination for planners of major events, which is not surprising given that it has no dedicated non-university event facility. Despite this, a majority of the consumer show and trade show planners responding to the survey had a very positive view of Missoula. Trade show and consumer show planners showed interest in holding events in Missoula if a facility existed to meet their needs, and those planners needed at least 60,000 square feet of total space for their events. The great majority of the planners stressed the importance of a facility within walking distance of a hotel and restaurant options. Individual comments ranged from the need for kitchen amenities and better air access to the request for good unloading and loading access at the facility. HSP has conducted extensive interviews, both in-person and by telephone, with persons and groups interested in Missoula, the proposed arena, tourism in Montana, and competitive and comparable arenas. Based on these interviews, the following comments should be noted: !

Almost everyone that HSP interviewed had a positive view of a possible events center in Missoula.

!

The University of Montana is very supportive of a new events center. While the Adams Center has some similar space and amenities, that facility’s first priority is to the students and student-athletes of the university. A new events center would provide space and amenities that the university welcomes and may use.

!

Event promoters and producers suggest that hosting events in Missoula can be difficult due to current conditions. A new, efficient facility would be attractive for events.

!

Local, regional and state tourism organizations express the need for additional event and meeting space.

!

Many individuals interviewed expressed the need for a regional location for events that currently occur outside the region that require major travel and expense for the participants and spectators.

Montana Region Meeting Planner Survey Responses HSP has worked with several groups to survey meeting planners in the Montana region concerning a possible events center in Missoula. Two types of meeting planners responded to the

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survey: those who plan conferences, large group meetings and conventions and those who plan consumer shows and trade shows. The following table shows the percentage of responses from each type of meeting planner. T abl e 8- 1 Missoula Event Planners Survey Type of Events Planned Events Group Meetings, Conventions and/or conferences. Consumer shows and/or trade shows. Concerts, family shows and other spectator shows. Total

Percent of Responses 33% 64% 3% 100%

Nearly two-thirds of planners plan consumer or trade shows, while one third plan conventions, conference and group meetings. Concert, family show and other spectator shows accounted for only three percent of responses. As a result, the implications from the survey should be directed to flat floor events and conference events, not arena-style events.

Meeting and Convention Planners The following table shows the results of major meeting planners’ interest in holding an event in Missoula. T abl e 8- 2 Missoula Event Planners Survey Group Meeting Planners' Interest in Missoula Interest No Interest May have Interest

69% 31%

About three in ten planners may have an interest in meeting in Missoula if a suitable facility existed. Given the small size of Missoula, lack of air connectivity/lift and lack of reputation compared the destinations usually used by these planners, the 31 percent positive response should be viewed positively when considering all of the destinations in the U.S. and Canada. The following table shows the diversity of group sizes represented in the survey results.

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T abl e 8- 3 Missoula Event Planners Survey Group Meeting Planners: Number of Attendees Less than 50 50-100 101-250 251-500 501-1,000 1,001-2,500 More than 2,500 Total

10% 0% 20% 10% 10% 20% 30% 100%

Half of the respondents planned for groups under 1,000 people and half planned for groups over 1,000 people. The larger groups likely make up the majority of respondents who stated no preference to meet in Missoula as the community would not be able to host them due to lack of hotel rooms for large groups. The next table shows the gross square feet of event space needed by group meeting planners. T abl e 8- 4 Missoula Event Planners Survey Gross Square Feet Event Space Needed Less than 20,000 20,000-40,000 40,000-60,000 60,000-80,000 80,000-100,000 More than 100,000 Total

40% 10% 20% 0% 0% 30% 100%

Seventy percent of planners need less than 60,000 square feet of event space, while 30 percent require more than 100,000 square feet of event space. Again, the larger groups would not be suitable for Missoula in almost any circumstance. The next table shows the ballroom size needed by event planners who responded to the survey.

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T abl e 8- 5 Missoula Event Planners Survey Gross SF Ballroom Needed Less than 5,000 5,000-10,000 10,000-15,000 15,000-20,000 More than 20,000 Total

9% 27% 18% 18% 27% 100%

More than half of respondents need a ballroom of 15,000 square feet or less, while another 18 percent need a ballroom of 15,000 – 20,000 square feet. The next table shows the number of meeting rooms needed by planner responding to the survey. T abl e 8- 6 Missoula Event Planners Survey Meeting Rooms Needed Less than 4 Four to eight Eight to twelve Twelve to sixteen More than 16 Total

8% 25% 25% 0% 42% 100%

Half of the respondents need between four and twelve meeting rooms. The larger groups, which represent between one-third and one-half of the respondents, need 16 or more meeting rooms. The vast majority of groups require a host hotel as well as a large room block for their events. The following table shows the amenities that are most important to meeting planners for their host hotel.

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T abl e 8- 7 Missoula Event Planners Survey Importance of Hotel Amenities Meeting Rooms Business Center Three-meal Restaurant Bar/Lounge Ballrooms Boardrooms Fine Dining Restaurant Room Service Fitness Center Pool Spa Other, please specify

100% 89% 78% 78% 67% 56% 44% 44% 44% 33% 22% 22%

Meeting rooms, a business center, three-meal restaurant, a bar/lounge and ballrooms are the most required items by meeting planners for their host hotel. In Missoula, only one hotel, the new Hilton Garden Inn, provides all of these items. The next table shows the favorability rating for Missoula. It should be noted that only one third of respondents were familiar with Missoula, while two-thirds were not. T abl e 8- 8 Missoula Event Planners Survey Missoula Destination Rating 10 - Highest 9 8 7 6 5 4 3 2 1 Total

0% 0% 0% 22% 0% 11% 0% 11% 33% 22% 100%

When considering the 33 percent that know Missoula, they rated the community as a seven and a five, averaging approximately 6.5. Those that do not know Missoula ranked the community low. This suggests that with a new event center the community will need to introduce itself to many meeting and event planners from outside the region.

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The following table states the percentage of responses for the group meeting planners’ (GMP) preferences for driving distances and proximity to amenities. T abl e 8- 9 GMP Importance of Drive Distance Within a one-hour drive for the majority of the group Within a three-hour drive for the majority of the group GMP Importance of Location of Amenities Facility within walking distance of hotel Facility within walking distance of restaurant options Facility within walking distance of shopping/entertainment options

Most important

4

3

2

Least important

33% 25%

0% 12%

11% 12%

33% 12%

22% 38%

Most important

4

3

2

Least important

67% 33% 11%

33% 56% 22%

0% 11% 56%

0% 0% 11%

0% 0% 0%

Missoula’s location is not important to approximately half of the respondents in terms of driving distance to the attendees, while it is very important to approximately one-third.

Consumer and Trade Shows The following table lists the questions that the consumer show and trade show planners’ answers, along with the percentage for each response. T abl e 8- 10 Missoula Consumer Show/Trade Show Survey Type of Event Consumer Shows Trade Shows Both Consumer and Trade Shows Total

13 6 3 22

59% 27% 14% 100%

Nearly sixty percent of respondents plan consumer shows, while 27 percent plan trade shows. Fourteen percent plan both. The next table shows the interest of these planners in hosting an event in Missoula. T abl e 8- 11 Missoula Consumer Show/Trade Show Survey Interest in Missoula Yes No Maybe Total

Missoula Events Center Feasibility Study

5 11 6 22

23% 50% 27% 100%

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While half of the respondents do not have an interest in Missoula, half either do or may have an interest in hosting an event at a new facility in Missoula. The next table shows the amount of gross square footage needed for consumer and tradeshow events. T abl e 8- 12 Missoula Consumer Show/Trade Show Survey Gross Square Feet Event Space Needed Less than 20,000 20,000-40,000 40,000-60,000 60,000-80,000 80,000-100,000 More than 100,000 Total

1 0 2 3 4 11 21

5% 0% 10% 14% 19% 52% 100%

Approximately thirty percent of responses need 80,000 square feet of space or less, while twothirds need more than 80,000 square feet. Other results included the need by half of groups for some meeting rooms onsite. In addition 63 percent are not familiar with Missoula. Despite this figure, 53 percent gave Missoula a favorability rating of between five and nine (out of ten total). The following table states the percentage of responses for the consumer show and trade show planners’ preferences for driving distances and proximity to amenities. T abl e 8- 13 CS/TS Planners Importance of Drive Distance Within a one-hour drive for the majority of the group Within a three-hour drive for the majority of the group

CS/TS Planners Importance of Location of Amenities Facility within walking distance of hotel Facility within walking distance of restaurant options Facility within walking distance of shopping/entertainment options Facility with easy loading and unloading access

Most important

4

3

2

Least important

37% 11%

5% 6%

16% 44%

16% 17%

26% 22%

Most important

4

3

2

Least important

42% 16% 11% 68%

26% 53% 16% 26%

5% 16% 16% 5%

11% 11% 26% 0%

16% 5% 32% 0%

The results for this group were decidedly more mixed. Typically, consumer shows attract most of their customers from within the local region, which in Montana, is up to three hours drive. For tradeshows, attendees can come from all over a multi-state region. Hotel, restaurant and loading options are important for a majority of planners. Shopping and entertainment options are of less importance to these planners.

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Implications There are many planners and groups that are not aware of Missoula and what it has to offer. For those who know the community, it receives generally high destination ratings. The results suggest that if the proper package of facilities is developed specific to the type of event (convention, consumer, trade shows) for each group type, Missoula could attract its fair share of events. For the optimal event center facility, it should include a large flat floor area up to 80,000 square feet, a ballroom of up to 20,000 square feet and up to twelve meeting rooms. The facility should be close to restaurants and hotels and secondarily, shopping. Access and loading is also a key factor, suggesting a location with easier access and loading would be preferable to a site without such amenities.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


Potential Site Analysis Depending upon the final physical program of the building, the footprint will range slightly, but will likely be near 100,000 square feet. With landscaping and sidewalks, etc., the acreage for the building and surrounding improvements is at minimum three acres and up to five acres. Assuming a 5,500-seat facility and 3.3 persons per car (also as a mid-point), there is a need for approximately 1,700 spaces, or approximately 14 acres in parking. The facility may require as many as 2,200 spaces. For planning purposes, the facility site at this point should have a minimum of 20 acres, unless structured parking is planned, in which case the acreage could be much less, but parking costs would likely quadruple. Four potential site areas have been discussed and analyzed for an events center and these areas are shown below. Fi gur e 9- 1

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The following figure is Site 1 at Western Reserve Street and I-90 Interchange. Fi gur e 9- 2

The following figure is Site 2 at I-90 and Airport Interchange.

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Fi gur e 9- 3

The following figure is Site 3, at the Western Montana Fairgrounds Site. Fi gur e 9- 4

The following figure is Site 4, the Roundhouse site that is adjacent to downtown Missoula.

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Fi gur e 9- 5

The following table is a matrix of the ranking of the possible sites for the facility.

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T abl e 9- 1 Site Matrix and Ranking I-90 Sites by Reserve

I-90 Sites by Airport

Fairgrounds

Roundhouse/ Downtown

Critical Design Factors Adequate Site Area & Dimensions Ability to Expand Access - Attendees Access - Trucks Configuration Attendee Experience Visibility Safety & Security, including emergency access Relationship to Existing Buildings Subtotal

5 5 5 5 5 4 5 5 3 42

5 5 4 5 5 2 5 5 3 39

4 2 3 3 4 4 2 3 4 29

4 2 2 2 2 3 5 3 3 26

Site & Utility Factors Utility Infrastructure Environmental Quality Subtotal

5 4 9

5 5 10

5 5 10

4 1 5

Financial & Economic Factors Impact on Facility Performance Property Availability & Relative Costs Displacement & Relocation Development Costs Leverage Community Assets Ability to Induce Additional Developments Subtotal

5 5 5 5 4 4 28

4 5 5 5 3 4 26

4 5 4 4 4 4 25

3 2 3 2 3 3 16

Timing Factors Acquisition Timing Approvals Ownership Issues Subtotal

4 5 4 13

4 5 4 13

5 4 5 14

2 2 2 6

Grand Total (out of 100)

92

88

78

53

Source: HSP

Based on the review of site options, HSP recommends focusing on sites off of I-90 near West Reserve Street, although if the facility fits on the fairgrounds site, it should perform relatively well. It would not have the visibility and advertising capability from I-90, which suggests that revenues would be lower. Several sites should be in play to ensure a competitive and fair pricing process. Also, the development plan should include options for walk-able retail and restaurant activity onsite to create a complete experience that captures as much economic activity as possible before and after events. This will help to keep spending in Missoula.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


Hotel Market The hotel market is important as a support structure for event facilities, especially for conventions and tradeshows. HSP completed an analysis of the local hotel market and a summary of the results is shown below. The market has seen significant hotel investment of late, which has kept the overall level of quality high in the market. The table below shows the competitive set of higher quality hotels in the market. T abl e 1 Missoula Hotel Market Hotel Holiday Inn Missoula Downtown @ The Park Doubletree Missoula Edgewater Hilton Garden Inn Missoula Ruby`s Inn & Conference Center Best Western Grant Creek Inn Hawthorn Suites by Wyndham Missoula Staybridge Suites Missoula Wingate By Wyndham Missoula Holiday Inn Express Missoula Riverside Courtyard Missoula Quality Inn & Conference Center Missoula La Quinta Inn Missoula Red Lion Missoula Inn Hampton Inn Missoula Sleep Inn Missoula Comfort Inn Missoula Total Average

Open Date

Rooms

Sep 1988 Jun 1997 Feb 2006 Nov 1994 Jun 1996 Feb 2009 Jul 2008 Jul 2003 May 1996 Dec 2005 Apr 2005 May 2007 Mar 1972 Feb 1996 Jan 1996 Jan 1996 -1999

200 171 146 126 126 101 101 100 95 92 81 80 76 61 59 52 1,667 104

Source: Smith Travel Research

There are 1,667 hotel rooms in the quality set of hotels, which is a healthy amount of rooms for the market size and this is attractive when considering hosting an event in Missoula. There are several hundred additional rooms in smaller, lesser quality hotels. While there are no very large full-service hotels, the analysis did not uncover a major gap in the size or quality of the room population in Missoula. The newest large hotel is the Hilton Garden Inn and it features a significant amount of function space for a hotel of its size. The table below shows a summary of hotel performance over the last several years.

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T abl e 2 Historical Supply, Demand, Occupancy, ADR, and RevPar for Competitive Hotels Year

Annual Avg. Available Rooms

2003 2004 2005 2006 2007 2008

1,178 1,228 1,236 1,454 1,452 1,516

2009 YTD (July) CAGR* (2003-2008)

-5.7%

Available Room Nights

% Change

Room Nights Sold

% Change

Occ.

% Change

ADR

% Change

RevPar

% Change

430,120 448,220 451,072 530,564 529,904 553,309

-4.2% 0.6% 17.6% -0.1% 4.4%

289,241 288,002 291,414 331,115 343,433 338,275

--0.4% 1.2% 13.6% 3.7% -1.5%

67.2% 64.3% 64.6% 62.4% 64.8% 61.1%

--4.4% 0.5% -3.4% 3.8% -5.7%

$71.49 $76.34 $81.02 $85.51 $92.95 $97.86

-6.8% 6.1% 5.5% 8.7% 5.3%

$48.08 $49.05 $52.34 $53.37 $60.24 $59.83

-2.0% 6.7% 2.0% 12.9% -0.7%

350,273

7.2%

196,639

1.9%

71.3%

-4.9%

$93.51

-2.5%

$52.49

-7.3%

--

3.4%

--

-1.8%

--

7.4%

--

4.9%

--

5.7%

*Compound Annual Growth Rate Sources: STR, HSP

The supply of hotel rooms has outpaced room demand over the period, yet until the current recession, the hotels have performed well and the new, higher quality hotels have helped the market overall. Average daily rate has increased at an annual average rate of 7.4 percent, leading to revenue per available room growth of nearly five percent per year. While the current period is a difficult one, the market is generally healthy relative to the national economy and should rebound from its current slump by 2011. The following figure shows the seasonality of demand. Fi gur e 1

As would be expected for a market with a strong outdoor tourism market, the summer months are the strongest for the hotel sector. Multipurpose events facilities are often busiest during fall, winter and spring months, which is complimentary to the hotel market, which will have availability during these times of the year to host events at the events center.

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The following figure is a chart setting forth the monthly supply and demand from January 2003 for Missoula hotels. Fi gur e 9- 2

Demand has been fairly consistent over the period, even in 2009. The following figure is a chart that shows the percent change in room revenue since January 2003.

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Fi gur e 9- 3

After a strong run over in revenue growth in 2005 and 2006, revenue growth has been mixed since spring of 2007. The following figure is a chart that shows the revenue per available room from January 2003.

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Fi gur e 9- 4

Revenue per available room is a measure combining occupancy and room rate. In Missoula, it has increased from $50 to $60 from 2004 to 2007, and has remained steady since then. The following figure is a chart that sets out the percent of occupancy and the year-over-year change for Missoula hotels from January 2003.

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Fi gur e 9- 5

Occupancy has generally decreased over the past two years as the economy has been in recession. The following figure is a chart of the monthly market room demand, as well as the average monthly rate, for Missoula hotels from January 2003.

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Fi gur e 9- 6

Average daily rate has increased over the past several years and did not retreat until the beginning of 2009. Monthly demand has been steady since the beginning of 2007. The following figures show the seasonality of rate, occupancy and RevPAR for 2003 through 2008 for the hotels in Missoula.

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Fi gur e 9- 7

Fi gur e 9- 8

As expected, the Missoula tourism economy peaks in the summer and hotels are nearly sold out every day in August. Average daily rate increases in the summer, but not at the same rate as occupancy.

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Fi gur e 9- 9

Revenue per available room peaks in August at as much as $100, as would be expected. The winter months are toughest for hoteliers in Missoula, with RevPAR lower than $40. The following two figures show the average daily rate by day of the week and the average occupancy by the day of week for the past year in Missoula hotels. Fi gur e 9- 10

Rate is fairly consistent during the week, but is generally higher on weekends, suggesting that Missoula is a regional center for shopping, entertainment and leisure travel for the region.

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Fi gur e 9- 11

Occupancy is highest during the weekend, again suggesting a strong leisure component. However, the commercial demand during the week is also strong relative to weekend demand.

Unaccommodated Demand Unaccommodated demand is defined as demand that would have been captured by the market, but for a lack of available rooms. This demand is therefore deferred to later dates, accepts lesser accommodations, moves just outside the competitive set, moves its business to another area, or cancels plans altogether. As new properties are added to the market, it is expected that this demand will be accommodated in the new supply. In most markets, average monthly demand in excess of 70 percent indicates unaccommodated demand. For every month that occupancy was greater than 70 percent, it is assumed that a portion over that amount was unaccommodated. The following figure shows the estimated number of unaccommodated room nights in the competitive set historically.

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Fi gur e 9- 12

While unaccommodated demand has decreased over time, there appears to still be some demand for additional hotel growth in Missoula, despite the economy.

Implications An events center requires a decent crop of upscale limited and full-service hotels in order to attract certain types of events, such as conventions and tradeshows. Ultimately, the community should seek a 200+room hotel with full-service amenities to enhance the community’s position as an event location. While not imperative for arena events, such a hotel would be necessary for the conventions and tradeshows that could come to Missoula.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


Recommendations Based on the analysis, Missoula is a logical location for a regional events facility. The facility should not act as a single facility type, such as a fixed-seat arena, but be multi-purpose in nature to host a variety of event types. Larger markets can support single-purpose facilities, but a multipurpose facility is best for Missoula’s regional market. Discussion of Strengths, Weaknesses, Opportunities and Threats. When considering the idea to develop a multi-use events center or any other business plan, the interested parties need to analyze the proposal in a clear and rational manner. One method used to evaluate a business plan is the “SWOT analysis,” a technique that applies critical thinking to four areas. The method evaluates the proposal by considering the strengths, weaknesses, opportunities and threats of the plan. HSP has used the “SWOT analysis” to evaluate the proposed events center, drawing on the facts surrounding the proposal, the City of Missoula and the surrounding community, the existing facilities in the city, the facilities that may be considered as competitors in the region, and events centers throughout the United States that would be considered comparable examples to the proposed facility. The application of that analysis is as follows: Strengths (Existing attributes that are helpful to building an events facility.) !

Quality of Life. The city and the region have an excellent quality of life, with an educated populace, a large and well-known university presence, beautiful surroundings, a thriving music and performance scene, and unlimited possibilities for outdoor activities.

!

Committed and Interested Leadership. A committed civic, community and business leadership within the city of Missoula is forward-thinking and acts in the best interests of Missoula and the area.

!

Positive and Supportive University of Montana Leadership. The University of Montana has a good relationship with the City of Missoula and the region, and the leadership of the university is supportive of the proposed multi-use events center. This is critical given that their arena, the Adams Center, is the only other similar facility in Missoula.

!

Community Interest. Interviews within the Missoula community reveal a great deal of support for projects that will enhance the city and area, including a possible multiuse events center. This was true even of professionals whose business included potentially competing with a new facility.

!

Population Base. While the population of the Missoula Metropolitan Statistical Area is approximately 100,000, the regional population, those who live within 150 miles of the city, is over 300,000, and the media reach is approximately 450,000. The population of the local and regional areas has grown over the last ten years and continues to increase at a rate greater than the state or nation. This increasing

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population provides a growing base of businesses and individuals who would attend functions and events at a new events center. The increasing business base provides expanded opportunities for sponsorship, advertising and special event usage. !

Easy Automobile Access. Interstate 90 gives drivers easy access to the City of Missoula from many of the regional population centers, including the cities of central and eastern Montana, as well as the Spokane, Washington and Coeur d’Alene, Idaho metropolitan area to the west.

!

Downtown Redevelopment. Downtown Missoula has seen improvement based on private investment and public leadership. A vibrant downtown consists of popular restaurants, shops and clubs, providing a more visible face of the city and drawing more visitors from the surrounding areas. This helps the community as a whole and proves to visitors that it is serious about a vision for itself, regardless of where the events center is located.

!

Hotels in Missoula. Recent additions to the number of hotels in the West ReserveInterstate 90 interchange area, as well as strong and successful established hotels in and near downtown, creates a block of hotel rooms in the city that can support events in Missoula.

Weaknesses (Existing attributes that may hurt the success of an events center.) !

Air Access. The Missoula International Airport provides regional and national access to the city, with over 500,000 passengers traveling through the airport in the past year. However, the cost of airfare and the relative lack of direct flights compared to other airports in the Mountain West combine to have a negative impact on travel to Missoula for those interested in hosting an event here. This suggests that the events center will need to rely primarily on drive-in based business, such as concerts, family shows, consumer shows and state-oriented events.

!

Present Lack of Events in Missoula. Due to lack of facilities in the Missoula area promoters have not considered the city a prime location for a variety of events, including family shows and major concerts. The Adams Center at the University of Montana holds some events and concerts but that facility’s major focus is the university programs, especially team sports. This is more of a challenge to overcome than a long-term weakness.

!

Current Lack of Event Marketing. Missoula has had no need to actively market the existing facilities for events because of the lack of availability of facilities. Again, this is a challenge to be overcome with funding and expertise and does not present a long-term weakness.

!

Event Planners’ Lack of Knowledge of Missoula. Many of the meeting planners and promoters surveyed expressed limited knowledge of Missoula, both the existing facilities of the city and the offerings of the city and region generally. This will require a strong, long-term marketing and sales effort to overcome.

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Opportunities (external conditions that will help the operations of an events center.) !

Lack of Current Facilities. The city (and region) has only limited event facilities, and those that exist cannot accommodate the number and size of events that would consider Missoula. The Adams Center, the only large facility that could host large events, has date conflicts with University of Montana sports and other events. It must first serve the student population and only then can consider other opportunities.

!

Lack of Regional Newer Facilities of Similar Capacity. While the state and region have several facilities that will compete for events, no new or modern mixed-use events center exists in the region. The closest events centers to Missoula are the Butte Arena in Butte, Montana, which was built in 1952, the Four Seasons Arena at the Great Falls, Montana, ExpoPark, built in 1979, and the Spokane Arena, built in 1995. Of these facilities, only the Spokane Arena was constructed in the last two decades, although the other facilities have had several renovations. The lack of newer facilities provides the proposed events center with an opportunity to offer state-ofthe-art and modern amenities that groups and events seek.

!

Stronger Local CVB Provides More Marketing Possibilities. The Missoula Convention and Visitors Bureau recently has benefited from the Tourist BID that will provide for greater funding for the organization. The result is a stronger organization that will be able to partner with a new events center that would promote events in Missoula and at the events center.

Threats (External conditions that are a threat to a new events center.) !

U.S. Economy and Weaker Demand. The U.S. economy has been in recession, which hurts demand for events. However, by the time such a facility opens, the economy will have likely rebounded.

!

Competition from New Venues. A new facility has advantages over the older regional facilities but would lose the advantages and gain a major competitor if another city within the region develops a new events center or other facility. Coeur d’Alene, Idaho, is considering development of a new multi-use arena, with a completed study released in March 2009, recommending such a facility in that city. A similar facility study is underway in Pocatello, Idaho.

!

Lack of Resources. The State of Montana and Missoula have very few financing tools for a major public facility of this sort. As such, the recommendations include a variety of development options.

Based on the SWOT analysis and the findings in this report, HSP recommends several scenarios for the facility, depending on funding.

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T abl e 11-1 Recommendations Multi-Purpose Events Facility Arena Component 5,000 - 7,000 Retractable Seats Basketball Seating

Scenario A Scenario B Scenario C Scenario D 4,500 5,000

5,600 6,100

7,000 7,500

7,000 7,500

38,000

46,000

54,000

54,000

0 0 0

0 0 0

0 0 0

9,100 4,000 13,100

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Exposition Component 35,000 SF using Arena Floor Ballroom & Meeting Component 9,000 SF Divisible Conference/Ballroom 4,000 SF Other Meeting Rooms 13,000 SF Total Meeting Rooms Other Components Full-Service Kitchen Concession Stands Green Room Dressing Rooms (4) Lobby & Pre-Function Areas Source: HSP

The optimal facility is Scenario D, the 7,000-retractable-seat facility with 13,100 square feet of additional ballroom and meeting room space. However, depending on the facility that could be funded, a facility as small as 4,500 retractable seats is recommended, with a total capacity of 5,000 when 500 chairs on the floor are included for basketball. It is not recommended that an events center with fewer than 5,000 seats be developed.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


C ONCEPTUAL D RAWINGS AND P RELIMINARY B UDGET Populous, an internationally renowned events center design group, was engaged to complete a conceptual drawing for the largest optimal facility (Scenario D), with 7,000 retractable seats, a ballroom and meeting rooms. The figure below shows the drawings associated with that concept.

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Fi gur e 12- 1

The following figure shows the layout of the facility with the seats fully functional for an arena event.

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Fi gur e 12- 2

The following figure shows the layout of the facility with the seats retracted for a flat-floor show.

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Fi gur e 12- 3

As shown, in this scenario, the event space boasts 54,000 square feet of exhibition space, suitable for up to 270 booths for a standard convention or tradeshow set-up. The budget for this scenario is the highest of the scenarios. A detailed breakdown is shown below.

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T abl e 12-1 Missoula Events Center - All Scenarios Estimated Development Costs Cost

Method

Scenario A

Method

Scenario B

Method

Scenario C

Method

Scenario D*

Retractable Seats

4,500 Seats

5,600 Seats

7,000 Seats

Floor Seats

500 Seats

500 Seats

500 Seats

500 Seats

Total Seats

5,000 Seats

6,100 Seats

7,500 Seats

7,500 Seats

Site Costs (Land Acquisition, Site Prep) Construction Costs Ancillary Construction Public Areas/Streetscape Surface Parking

NA 81,168 Sq. Ft. at $185 PSF Allowance 1,500 Spaces, $2,250 per space

Ancillary Construction Subtotal

NA 103,600 Sq. Ft. at $15,000,000 $185 PSF $200,000

Allowance

1,650 Spaces, $3,400,000 $2,250 per space $3,600,000

NA 129,500 Sq. Ft. at $19,200,000 $185 PSF $200,000

Allowance

1,800 Spaces, $3,700,000 $2,250 per space $3,900,000

7,000 Seats

NA 154,000 Sq. Ft. at $24,000,000 $185 PSF $300,000

Allowance

1,800 Spaces, $4,100,000 $2,250 per space $4,400,000

Not Included $28,500,000 $400,000 $4,100,000 $4,500,000

Other Project Costs Furnishings, Fixtures and Equipment

8.0% of Construction Costs

Telescoping Sectator Seating

4,518 seates at $375 per seat

Testing & Inspection

0.8% of Construction/ Ancillary Costs

Design, Engineering, Other

7.5% of total project costs

Subtotal Other Project Costs Project Contengency Total Project Cost

8.0% of $1,200,000 Construction Costs $1,700,000

5,580 seates at $375 per seat

$100,000

0.8% of Construction/ Ancillary Costs

$1,500,000

7.5% of total project costs

$4,500,000 10% of Total Project Costs

2,310,000

8.0% of $1,500,000 Construction Costs $2,100,000

6,992 seates at $375 per seat

$100,000

0.8% of Construction/ Ancillary Costs

$1,800,000

7.5% of total project costs

$5,500,000 10% of Total Project Costs

$2,860,000

9.0% of $1,900,000 Construction Costs $2,600,000

$2,700,000

$200,000

0.8% of Construction/ Ancillary Costs

$250,000

$2,500,000

8.0% of total project costs

$7,200,000 10% of Total Project Costs

$2,600,000

6,992 seates at $385 per seat

$3,560,000

$2,900,000 $8,450,000

10% of Total Project Costs

$4,150,000

$25,410,000

$31,460,000

$39,160,000

$45,600,000

$5,082

$5,243

$5,594

$6,514

Cost per Seat

*Includes ballroom and meeing space as well as higher quality finishes inside and out. Source: Populus, HSP

The cost for the optimal facility, Scenario D, is projected at $45.6 million plus the cost of land acquisition, or approximately $6,500 per seat. In order to save development costs, a version of the 7,000-seat facility could be built without ballroom and meeting space and with basic finishes for approximately $39 million (plus land), or about $5,600 per seat. To lower the costs even more, a 5,600 seat facility (with basketball seating for 6,100) is estimated to cost $31.5 million. The smallest recommended facility (4,500 seats plus 500 chairs) is estimated to be built for $25.4 million, or approximately $5,100 per seat.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


D EMAND P ROJECTIONS HSP projected the demand for the events center for each of the four scenarios and also developed financial projections for the events center for a ten-year period, shown in the following chapter. It is assumed that the events center will be owned by a newly-created public authority with private management to maximize performance. There are assumed to be no resident tenants, such as basketball, hockey, football or soccer teams. If a sports tenant is secured, the results of the facility are likely to improve compared to the figured shown here and in the following chapters. There is assumed to be no ice capability in the facility initially. A description of events is provided below. Family Shows are ticketed, public events that provide entertainment for a variety of demographic groups. These events include children’s themed traveling shows, circus events, ice shows and other events. Concerts. This projection is based on a comparison of facilities and the fact that Missoula is a regional market within a the northern mountain west serving a radius of at least 150 miles in any direction. However, the facility will have the benefit of the built-in student population on campus to help drive events and attendance. Other Sporting Events include WWE events, monster truck events, high school wrestling, volleyball and basketball tournaments, regional NCAA tournaments, Extreme Games events, and sports exhibitions. This is based on a weighted average of comparable facility attendance, combined with our judgment of market potential. Community Events. Community events include local charitable, social, religious, civic and other events of a large nature that would require facilities larger than any that currently exist. Flat-Floor Events include consumer shows and trade shows as well as events center-based conventions that use the events center floor and/or its meeting rooms. The events center could host a number of events oriented to local residents (such as consumer shows) in order to maintain facility occupancy and generate revenue when the events center is not being used for other events or the university. Meetings/Banquets. These are larger meetings and banquets held by renting customers or meeting planners for their social, reunion, religious, fraternal, educational, company or other events.

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Scenario A The table below summarizes the projected event demand for the 5,000-seat events center in Missoula. T abl e 13-1 Projected Schedule of Events by Category and Year Category Family Shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

14 20 18 6 12 0

13 19 20 6 13 0

12 18 21 6 14 0

12 17 22 6 14 0

12 17 22 6 14 0

12 17 22 6 14 0

12 17 22 6 14 0

12 17 22 6 14 0

12 17 22 6 14 0

12 17 22 6 14 0

70

71

71

71

71

71

71

71

71

71

Source: Hunden Strategic Partners

The facility is projected to host 70 events in the first year, increasing to 71 events annually by stabilization. The novelty effect will cause some event levels to start strong and then decrease while others will increase over time.

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The next table summarizes the projected paid attendance at the events center by type of event. T abl e 13-2

Paid attendance is projected to increase from 238,000 to 241,000 over the period. Flat floor and meetings/banquets do not produce ticket revenue, but instead pay flat rent for the portion of the facility used. The following table shows average turnstile attendance per event. T abl e 13-3

Average Turnstile Attendance Turnstile

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Family Shows Concerts Sporting Events Community Events Flat-Floor Events

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

3,420 3,800 4,370 475 1,800

Source: Hunden Strategic Partners

Average attendance per event type ranges from 475 for community events to nearly 4,400 for sporting events.

Scenario B The table below summarizes the projected event demand for the 6,000-seat events center in Missoula.

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T abl e 13-4 Projected Schedule of Events by Category and Year Category Family Shows Concerts Sporting Events Community Events Flat-Floor Events Total

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

15 21 19 6 12

14 20 20 6 13

13 19 22 6 14

13 18 23 6 14

13 18 23 6 14

13 18 23 6 14

13 18 23 6 14

13 18 23 6 14

13 18 23 6 14

13 18 23 6 14

73

73

74

74

74

74

74

74

74

74

Source: Hunden Strategic Partners

The facility is projected to host 73 events in the first year, increasing to 74 events annually by stabilization. The next table summarizes the projected paid attendance at the events center by type of event. T abl e 13-5

Paid attendance is projected to increase from 288,500 to 293,400 over the period. The following table shows average turnstile attendance per event. T abl e 13-6

Average Turnstile Attendance Turnstile

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Family Shows Concerts Sporting Events Community Events Flat-Floor Events

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

3,515 4,465 5,320 618 2,000

Source: Hunden Strategic Partners

Average attendance per event type ranges from 618 for community events to 5,300 for sporting events.

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Scenario C The table below summarizes the projected event demand for the 7,000-seat events center in Missoula with no additional function space. T abl e 13-7 Projected Schedule of Events by Category and Year Category Family Shows Concerts Sporting Events Community Events Flat-Floor Events Total

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

15 21 19 6 12

15 21 21 6 13

14 19 23 6 15

13 18 24 6 15

13 18 24 6 15

13 18 24 6 15

13 18 24 6 15

13 18 24 6 15

13 18 24 6 15

13 18 24 6 15

73

76

77

76

76

76

76

76

76

76

Source: Hunden Strategic Partners

The facility is projected to host 73 events in the first year, increasing to 76 events annually by stabilization. The next table summarizes the projected paid attendance at the events center by type of event. T abl e 13-8

Paid attendance is projected to increase from 329,000 to 344,400 over the period. The following table shows average turnstile attendance per event.

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T abl e 13-9

Average Turnstile Attendance Turnstile

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Family Shows Concerts Sporting Events Community Events Flat-Floor Events

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

3,990 4,940 6,270 760 2,200

Source: Hunden Strategic Partners

Average attendance per event type ranges from 760 for community events to 6,300 for sporting events.

Scenario D The table below summarizes the projected event demand for the 7,000-seat events center in Missoula with significant additional function space. T abl e 13-10 Projected Schedule of Events by Category and Year Category

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Family Shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets

15 21 19 6 12 114

15 21 21 6 13 116

14 19 23 6 15 120

13 18 24 6 15 120

13 18 24 6 15 120

13 18 24 6 15 120

13 18 24 6 15 120

13 18 24 6 15 120

13 18 24 6 15 120

13 18 24 6 15 120

187

192

197

196

196

196

196

196

196

196

Total Source: Hunden Strategic Partners

With the meeting and ballroom space, the facility is projected to host 187 events in the first year, increasing to 196 events annually by stabilization. The next table summarizes the projected paid attendance at the events center by type of event.

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T abl e 13-11

Paid attendance is projected to increase from 374,000 to 392,000 over the period. The following table shows average turnstile attendance per event. T abl e 13-12

Average Turnstile Attendance Turnstile

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Family Shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

3,990 4,940 6,270 760 2,200 400

Source: Hunden Strategic Partners

Average attendance per event type ranges from 400 for meetings and banquets to 6,300 for sporting events.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


F INANCIAL P ROJECTION Described below is HSP’s projection for the events center under the various scenarios. The analysis is based on comparable facility operations, input from arena management companies, and the consulting team’s experience. Revenues include all revenues of the facility that can be used for operations and debt service. Expenses are categorized into two groups: 1) Fixed operating expenses, which are incurred regardless of the level of activity at the facility, and 2) Variable operating expenses, which are expenses related directly to the operation and demand of the facility that vary depending on the volume of activity. Some expenses have both a fixed and variable component. The center’s projection uses inflated dollars and accrual-based accounting, wherein revenues are recognized when they are earned and expenses are recognized when they are incurred. Revenues and expenses are adjusted for inflation at a 3.0 percent annual rate, unless otherwise specified. The following section describes the assumptions and methodology used to estimate the financial performance of the facility. This projection is shown from the facility’s perspective. The following text describes the individual line items in more detail.

Operating Revenue Gate and Rent – The first line item displays the gross ticket sales for all ticketed events. The following table displays the assumptions of daily rental fees and average ticket prices by type of event. The arena will charge either a flat fee or a percent of ticket sales as rent for non-sports events. The specific method used, and the amounts charged, are often negotiable with the event promoter and will likely vary from event to event. The amounts will differ by scenario. Family shows, concerts, and sporting events are projected to pay rents of eight percent of gross ticket sales. As previously mentioned, these amounts would likely differ from event to event, but the figures listed above are assumed averages and are typical amounts for a host arena to receive from an event promoter. For events such as concerts and family shows, ticket prices will vary depending on the act. Concessions – The facility is assumed to contract for its concessions operation through an agreement with a national concession services provider. Revenue projections are based on event attendance, and reflect a percentage of gross sales that the concessionaire pays the arena for the rights to be the exclusive provider of concessions. The projected per capita revenues for each type of event are based on actual revenues from other arenas that host similar events. It is assumed that the facility will receive 35 percent of concessions revenue, as this commission commonly ranges from 30 to 40 percent.

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Novelties – The projection assumes that arena management will contract for novelty sales and will collect a commission of 15 percent of gross revenue. Per capita novelty revenue is generally greater during concerts, family shows, and non-recurring sports events, as compared to tenants’ sports events. Sales at tenants’ games are generally lower because fans often attend multiple games per season and will not make repeat purchases of the same novelty items. Parking – It is assumed that most will drive to events. 1,500 – 2,000 spaces are expected to be made available at a parking lot and the cost per car is assumed to be $3. Premium Seating – The projections assume that there is no premium seating in the facility. Advertising and Sponsorship – revenues are generated from the inventory of signage located within the center. Many advertising contracts are long-term and for a constant annual amount until renewal, but for the purposes of this projection, advertising revenues are inflated each year. It is assumed that expenses related to the procurement of advertising revenue are ten percent of gross revenue sold. Naming Rights – Based on finalized naming rights contracts in similar markets and facilities, the projections assume that the arena secures a naming rights sponsor or donor. Facility Service Fee and/or Box Office Rebate – Facility service fees are often found in arenas and other public-assembly facilities as a way to financially support operations and debt service payments. In some instances, the arena negotiates a rebate from their box office service provider. Such fees are commonly $0.50 to $1.50, and appear at numerous major professional, collegiate, and minor league facilities. Additionally, it is common for ticketing agencies to rebate up to 30 percent of their convenience surcharge. It is assumed that the facility places a service fee and earns a box office rebate resulting in a combined total of $1.00 per ticket sold for all ticketed arena events. Other Revenue – consists of revenue from box office fees and a share of revenue generated from ticket sales through outside agencies, such as TicketMaster or TicketWeb. It is assumed that this revenue will be 1.5 percent of total ticket sales revenue.

Operating Expenses The bases for the non-departmental operating expenses are described below. Fixed Expenses As mentioned previously, fixed expenses are those that do not vary based on the specific number of events or attendees at the arena. These expenses are salaries and benefits, general and administrative, the arena management fee, a portion of utilities, repairs and maintenance, insurance, advertising, communications, and miscellaneous expenses.

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Salaries – The facility will have to have a small group of permanent employees, including a general manager, chief financial officer, marketing and sales professionals and events services staff, as well as security and engineering. The remainder of staff can be brought on per event. Salary Benefits – Benefits for full-time staff members are projected to be 28 percent of salary expense throughout the projection. General and Administrative – General and administrative expenses include several categories, such as supplies, travel, trash, professional services, and others. Utilities – the fixed component of utilities expense will not be related to the number of events in the arena, as a certain level of expense will be incurred regardless of event demand. This amount is inflated in future years. The variable portion of utility expense is projected based on facility event activity. Repairs and Maintenance – This item consists of expenses incurred to repair or maintain the arena and its facilities, such as landscaping, plumbing and electrical work, seat repairs, and exterminating. Insurance – Is based on insurance expense of arenas of similar size and level of activity. Communications – expense is related to telephone services throughout the arena, as well as television service and Internet access. Advertising - Advertising expense is primarily related to advertising in industry publications and local media outlets, as well as various promotions. Miscellaneous Expenses – include taxes and licenses, publications, uniforms, and other various expenditures. Variable Expenses Variable expenses are those that fluctuate based on the usage of the arena. These expenses are utilities (not including the fixed portion) and hourly salaries and benefits. Utilities – Based on the size of the arena, the projection estimates variable utilities per event. Hourly Labor and Benefits – This item is dependent on the number of events held in the arena, as temporary workers are needed for event security, set-up, administration, cleaning, and other tasks. However, much of these expenses are charged to tenants and reimbursed to the facility owner, and this revenue is accounted for in gate and rent revenue. Deposit to Maintenance Reserve Account – The maintenance reserve account funds major planned projects such as carpet, equipment, and roof replacement, as well as other scheduled maintenance programs that are not routine or paid for by the facility’s repairs and maintenance

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account. Although facilities often have unique schedules for funding their maintenance reserve account, the annual amount deposited generally increases as a facility ages. Management Fee – The projections assume that a professional facility management firm is hired to operate the new arena. Management fees paid to this type of firm can vary, with guaranteed fees and/or incentives based on the facility’s performance. It is imperative to the assumptions that a private professional management company is hired and personnel expenses kept low in order to maintain a healthy financial result.

Scenario A The table below shows the projection for Scenario A, with 5,000 seats. T abl e 14-1 Scenario A: Missoula Event Center Financial Projection (thousands of inflated dollars) Fiscal Year Item

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Operating Revenue Gate and Rent Concessions Novelties Parking Advertising and Sponsorship Naming Rights Facility Service Fee Total Revenue

$658 323 136 115 79 175 213

$685 334 139 116 89 186 215

$702 339 139 114 97 191 212

$719 348 142 114 100 197 212

$741 358 146 171 103 203 212

$763 369 151 171 106 209 212

$786 380 155 171 110 215 212

$809 392 160 171 113 222 212

$834 403 165 229 116 228 212

$859 416 170 229 120 235 212

$1,700

$1,763

$1,795

$1,833

$1,936

$1,982

$2,030

$2,080

$2,187

$2,240

$500 140 173 105 35 115 18 38 28

$515 144 178 108 36 118 19 39 29

$530 149 184 111 37 122 19 40 30

$546 153 189 115 38 126 20 42 31

$563 158 195 118 39 129 20 43 32

$580 162 201 122 41 133 21 44 32

$597 167 207 125 42 137 21 45 33

$615 172 213 129 43 141 22 47 34

$633 177 219 133 44 146 23 48 35

$652 183 226 137 46 150 23 50 37

$121 215

$126 225

$130 232

$134 239

$138 246

$142 253

$146 261

$151 269

$155 277

$160 285

$1,488

$1,538

$1,584

$1,631

$1,680

$1,731

$1,783

$1,836

$1,891

$1,948

$212

$226

$211

$202

$255

$251

$247

$244

$296

$292

$51

$53

$54

$55

$58

$59

$61

$62

$66

$67

$150

$155

$159

$164

$169

$174

$179

$184

$190

$196

$11

$18

($17)

$28

$18

$7

$40

$29

Operating Expense Fixed Salary - Permanent Staff Benefits - Permanent Staff General and Administrative Utilities Repairs and Maintenance Insurance Communications Advertising Misc. Variable Utilities Hourly Salaries and Benefits Operating Expenses Net Operating Income (Deficit) Deposit to Maintenance Reserve Account Management Fee Net Income

($2)

($3)

Source: Hunden Strategic Partners

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The events center in this scenario is projected to gross $1.7 million in the first year and increase to nearly $2.0 million by the fifth year of operation. After all expenses are paid, the facility is expected to essentially break even, with a range of net from -$17,000 to a positive $40,000.

Scenario B The table below shows the projection for Scenario B, with 6,000 seats. T abl e 14-2 Scenario B: Missoula Event Center Financial Projection (thousands of inflated dollars) Fiscal Year Item

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Operating Revenue Gate and Rent Concessions Novelties Parking Advertising and Sponsorship Naming Rights Facility Service Fee Total Revenue

$746 395 165 135 84 200 261

$767 403 168 133 95 212 259

$796 416 170 134 104 219 261

$815 427 174 134 108 225 262

$840 439 179 201 111 232 262

$865 453 184 201 114 239 262

$891 466 190 201 118 246 262

$917 480 195 201 121 253 262

$945 495 201 268 125 261 262

$973 509 207 268 129 269 262

$1,987

$2,041

$2,100

$2,144

$2,263

$2,317

$2,373

$2,430

$2,556

$2,617

$550 154 183 115 43 122 20 42 29

$567 159 188 118 44 126 21 43 30

$583 163 194 122 46 129 21 45 31

$601 168 200 126 47 133 22 46 32

$619 173 206 129 48 137 23 60 33

$638 179 212 133 50 141 23 61 34

$657 184 219 137 51 146 24 63 35

$676 189 225 141 53 150 25 65 36

$697 195 232 146 54 155 25 67 37

$718 201 239 150 56 159 26 69 38

$141 248

$146 255

$152 267

$157 275

$161 283

$166 291

$171 300

$176 309

$181 318

$187 328

$1,647

$1,697

$1,753

$1,806

$1,872

$1,928

$1,986

$2,046

$2,107

$2,171

$340

$345

$347

$338

$391

$389

$387

$384

$449

$447

$60

$61

$63

$64

$68

$70

$71

$73

$77

$79

$165 $115

$170 $113

$175 $109

$180 $93

$186 $137

$191 $128

$197 $118

$203 $108

$209 $163

$215 $153

Operating Expense Fixed Salary - Permanent Staff Benefits - Permanent Staff General and Administrative Utilities Repairs and Maintenance Insurance Communications Advertising Misc. Variable Utilities Hourly Salaries and Benefits Total Expenses Net Operating Income (Deficit) Deposit to Maintenance Reserve Account Management Fee Net Income Source: Hunden Strategic Partners

The events center in this scenario is projected to gross $2 million in the first year and increase to nearly $2.3 million by the fifth year of operation. Net income after expenses is projected to be between $100,000 and $150,000 in most years.

Scenario C The table below shows the projection for Scenario C, with 7,000 seats and no meeting space.

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T abl e 14-3 Scenario C: Missoula Event Center Financial Projection (thousands of inflated dollars) Fiscal Year Item

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Operating Revenue Gate and Rent Concessions Novelties Catering Parking Premium Seating Advertising and Sponsorship Naming Rights Facility Service Fee Other Revenue Total Revenue

$780 447 187 0 164 0 84 200 298 0

$836 479 199 0 172 0 95 212 311 0

$865 489 200 0 171 0 104 219 309 0

$878 497 201 0 169 0 108 225 307 0

$904 512 207 0 254 0 111 232 307 0

$931 528 213 0 254 0 114 239 307 0

$959 543 220 0 254 0 118 246 307 0

$988 560 226 0 254 0 121 253 307 0

$1,018 577 233 0 339 0 125 261 307 0

$1,048 594 240 0 339 0 129 269 307 0

$2,161

$2,305

$2,358

$2,385

$2,527

$2,586

$2,647

$2,709

$2,859

$2,925

$600 168 190 125 45 125 20 45 31

$618 173 196 129 46 129 21 46 32

$637 178 202 133 48 133 21 48 33

$656 184 208 137 49 137 22 49 34

$675 189 214 141 51 141 23 60 35

$696 195 220 145 52 145 23 61 36

$716 201 227 149 54 149 24 63 37

$738 207 234 154 55 154 25 65 38

$760 213 241 158 57 158 25 67 39

$783 219 248 163 59 163 26 69 40

$165 271

$176 291

$184 303

$187 308

$193 318

$199 327

$205 337

$211 347

$217 357

$224 368

$1,785

$1,857

$1,919

$1,970

$2,038

$2,099

$2,162

$2,227

$2,294

$2,362

$376

$448

$439

$415

$489

$487

$485

$482

$565

$563

$65

$69

$71

$72

$76

$78

$79

$81

$86

$88

$180 $132

$185 $193

$191 $177

$197 $147

$203 $211

$209 $201

$215 $191

$221 $180

$228 $251

$235 $240

Operating Expense Fixed Salary - Permanent Staff Benefits - Permanent Staff General and Administrative Utilities Repairs and Maintenance Insurance Communications Advertising Misc. Variable Utilities Hourly Salaries and Benefits Total Expenses Net Operating Income (Deficit) Deposit to Maintenance Reserve Account Management Fee Net Income Source: Hunden Strategic Partners

The events center in this scenario is projected to gross $2.2 million in the first year and increase to nearly $2.5 million by the fifth year of operation. Net income is projected to range from $132,000 to $251,000 over the period.

Scenario D The table below shows the projection for Scenario C, with 7,000 seats and 13,000 square feet of ballroom and meeting space.

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T abl e 14-4 Scenario D: Missoula Event Center Financial Projection (thousands of inflated dollars) Fiscal Year Item

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Operating Revenue Gate and Rent Concessions Novelties Catering Parking Premium Seating Advertising and Sponsorship Naming Rights Facility Service Fee Other Revenue Total Revenue

$840 447 187 213 164 0 84 200 298 0

$900 479 199 223 172 0 95 212 311 0

$932 489 200 238 171 0 104 219 309 0

$947 497 201 245 169 0 108 225 307 0

$976 512 207 252 254 0 111 232 307 0

$1,005 528 213 260 254 0 114 239 307 0

$1,035 543 220 268 254 0 118 246 307 0

$1,066 560 226 276 254 0 121 253 307 0

$1,098 577 233 284 339 0 125 261 307 0

$1,131 594 240 292 339 0 129 269 307 0

$2,434

$2,591

$2,663

$2,699

$2,851

$2,920

$2,990

$3,063

$3,223

$3,301

$750 210 203 135 50 130 20 50 31

$773 216 209 139 52 134 21 52 32

$796 223 215 143 53 138 21 53 33

$820 229 222 148 55 142 22 55 34

$844 236 228 152 56 146 23 60 35

$869 243 235 157 58 151 23 61 36

$896 251 242 161 60 155 24 63 37

$922 258 250 166 61 160 25 65 38

$950 266 257 171 63 165 25 67 39

$979 274 265 176 65 170 26 69 40

$180 362

$192 386

$201 405

$205 413

$211 425

$217 438

$224 451

$230 464

$237 478

$244 493

$2,120

$2,204

$2,281

$2,343

$2,416

$2,489

$2,564

$2,641

$2,720

$2,801

$314

$387

$382

$357

$435

$431

$427

$422

$503

$499

$73

$78

$80

$81

$86

$88

$90

$92

$97

$99

$190 $51

$196 $113

$202 $101

$208 $68

$214 $135

$220 $123

$227 $110

$234 $97

$241 $166

$248 $152

Operating Expense Fixed Salary - Permanent Staff Benefits - Permanent Staff General and Administrative Utilities Repairs and Maintenance Insurance Communications Advertising Misc. Variable Utilities Hourly Salaries and Benefits Total Expenses Net Operating Income (Deficit) Deposit to Maintenance Reserve Account Management Fee Net Income Source: Hunden Strategic Partners

The events center in this scenario is projected to gross $2.4 million in the first year and increase to nearly $2.85 million by the fifth year of operation. Net income is projected to range rom $51,000 to $166,000 over the period.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


E CONOMIC , F ISCAL AND E MPLOYMENT I MPACT This section analyzes the economic, fiscal and employments benefit that would accrue to Missoula by the activities at the proposed events center, upon stabilization. It also reviews the potential economic and fiscal impacts induced through the construction of the project.

Definitions For the purpose of this analysis, impact totals are discussed in terms of the Missoula economy. The levels of impacts are described as follows: !

Direct impacts - are an expression of the spending that occurs as a direct result of the events and activities that occur in the events center. For example, a hotel guest’s expenditures on hotel rooms and meals are a direct economic impact.

!

Indirect impacts - consist of re-spending of the initial or direct expenditures, or, the supply of goods and services resulting from the initial direct spending in the events center. For example, a guest’s direct expenditure on a restaurant meal causes the restaurant to purchase food and other items from suppliers. The portion of these restaurant purchases that are within the local, regional, or state economies is counted as an indirect economic impact.

!

Induced impacts – represent changes in local consumption due to the personal spending by employees whose incomes are affected by direct and indirect spending. For example, a waiter at the restaurant may have more personal income as a result of the hotel guest’s visit. The amount of the increased income the waiter spends in the local economy is considered an induced impact.

!

Personal income – measures increased employee and worker compensation related to the operations of the new facility. This figure represents increased payroll expenditures, including benefits paid to workers locally. It also expressed how the employees of local businesses share in the increased outputs.

!

Employment impact – measures the number of jobs supported in the study area related to the spending generated as a result of the events occurring in the events center. Employment impact is stated in job years.

The total impacts of the proposed project in Missoula presented in this analysis are expressed through the net new spending to Missoula County.

Summary of Findings The following table summarizes the estimated economic and fiscal impact of the proposed development, from annual operations based on the facilities’ stabilized operations, and from the construction activity.

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T abl e 15-1 Missoula Event Center Annual Impact

Scenario A

Scenario B

Scenario C

Scenario D

From Operations Economic Impact Direct Spending Indirect Spending Induced Spending Total

$12,775,998 $4,352,291 $5,295,436 $22,423,725

$15,909,753 $5,419,252 $6,593,494 $27,922,499

$18,957,885 $6,456,501 $7,854,818 $33,269,204

$19,675,925 $6,702,779 $8,149,891 $34,528,595

$4,284,059 $1,398,497 $1,696,420 $7,378,976

$5,332,997 $1,741,731 $2,112,347 $9,187,076

$6,351,836 $2,075,477 $2,516,558 $10,943,870

$6,596,964 $2,154,333 $2,611,335 $11,362,632

8 157 52 67 285

9 196 65 83 353

11 233 77 99 421

15 242 80 103 440

$299,717 $53,986 $572,974 $926,677

$375,004 $66,866 $675,377 $1,117,247

$449,123 $79,028 $800,366 $1,328,518

$464,430 $82,325 $840,570 $1,387,326

$10,164,000 $2,701,591 $1,218,418 $14,084,009

$12,584,000 $3,344,827 $1,508,517 $17,437,344

$15,664,000 $4,163,491 $1,877,735 $21,705,226

$18,240,000 $4,848,192 $2,186,535 $25,274,727

Personal Income Employment (Job Years)

$4,303,438 90

$5,328,066 111

$6,632,138 138

$7,722,816 161

Income Tax State of Montana

$1,051,974

$1,302,444

$1,621,224

$1,887,840

Personal Income from Direct Personal Income from Indirect Personal Income from Induced Total Employment Employment Employment Employment Total

within Event Center from Direct from Indirect from Induced

Fiscal Impact Lodging Tax Auto Rental Tax Income Tax Total Fiscal Impact From Construction Direct Construction Spending Indirect Spending Induced Spending Total Spending

Source: HSP

For each scenario, the net impact on the community is different and it increases as the size of the facility increases. Therefore, Scenario A has the least impact and Scenario D has the most impact. For Scenario A, net new direct spending is nearly $13 million and total new spending is $22 million annually. Personal income from the spending increases by $7.4 million annually. Employment in Missoula increases by 285 in Scenario A and the net increase in taxes is nearly one million. The impact from construction is $4.3 million in personal income and 90 job-years (one job for one year).

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For Scenario B, net new direct spending is nearly $16 million and total new spending is nearly $26 million annually. Personal income from the spending increases by $9.2 million annually. Employment in Missoula increases by 353 in Scenario B and the net increase in taxes is $1.1 million. The impact from construction is $5.3 million in personal income and 111 job-years. For Scenario C, net new direct spending is nearly $19 million and total new spending is $33 million annually. Personal income from the spending increases by $10.9 million annually. Employment in Missoula increases by 421 in Scenario C and the net increase in taxes is $1.4 million. The impact from construction is $6.6 million in personal income and 138 job-years. For Scenario D, net new direct spending is nearly $20 million and total new spending is nearly $35 million annually. Personal income from the spending increases by 11.3 million annually. Employment in Missoula increases by 440 in Scenario D and the net increase in taxes is $1.1 million. The impact from construction is $7.7 million in personal income and 161 job-years.

Assumptions The economic and fiscal impact analysis includes a number of variables for each scenario, the type of spending by event type, by visitor type (overnight/daytripper) and other variables. The following table shows the spending assumptions for the various events and attendees at the events center. T abl e 15-2 Assumptions % of Visitors Staying Overnight % of Visitors as Daytrippers Visitors per Hotel Room Night Average Daily Hotel Rate Food & Beverage Spending Outisde Events Center Retail Spending Outside Events Center Transportation Spending Other Spending

3% - 48% 52% - 97% 1.2 - 2.8 $109 $3.00 - $15.75 $2.00 - $12.60 $3.00 - $19.00 $2.00 - $15.20

Depending on Event Type Depending on Event Type Depending on Event Type Depending Depending Depending Depending

on on on on

Event Event Event Event

& & & &

Visitor Visitor Visitor Visitor

Type Type Type Type

Source: Hunden Strategic Partners

The table below shows the assumptions for number of day-trip attendees and the number of overnight attendees.

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T abl e 15-3 Overnighters vs. Daytrippers for Events Center Events (Annual, Stabilized) Scenario A Projected Annual Attendance Family shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total

Overnighters 41,040 64,600 96,140 2,850 25,200 0 229,830

5,335 14,858 43,263 86 2,268 0 65,810

35,705 49,742 52,877 2,765 22,932 0 164,020

45,695 80,370 122,360 3,705 28,000 0 280,130

Overnighters 5,940 18,485 55,062 111 2,520 0 82,119

Daytrippers 39,755 61,885 67,298 3,594 25,480 0 198,011

51,870 88,920 150,480 4,560 33,000 0 328,830

Overnighters 6,743 20,452 67,716 137 2,970 0 98,018

Daytrippers 45,127 68,468 82,764 4,423 30,030 0 230,813

51,870 88,920 150,480 4,560 33,000 48,000 376,830

Overnighters 6,743 20,452 67,716 137 2,970 2,400 100,418

Daytrippers 45,127 68,468 82,764 4,423 30,030 45,600 276,413

Scenario B Projected Annual Attendance Family shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total

Scenario C Projected Annual Attendance Family shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total

Scenario D Projected Annual Attendance Family shows Concerts Sporting Events Community Events Flat-Floor Events Meetings/Banquets Total

Daytrippers

Source: Hunden Strategic Partners

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Fiscal Impact Analysis Fiscal impacts are tax revenues that result from the spending and income related to the activities at the Missoula events center. This analysis estimates fiscal impacts for the governmental units that levy taxes in the jurisdiction. Like the annual spending estimates on which they are based, fiscal impacts are based on event demand and attendance in their stabilized year of operation. The fiscal impacts are the public sector’s return of investment. Fiscal impacts provide a partial offset to the capital and operating expenditures required to support the development of the facility. However, in the case of Missoula, it does not collect similar types of taxes to other municipalities and Montana as a state does not collect as many types of taxes as other states. Their tax rates are also generally lower than most states, save for the income tax. Based on the spending shown above, HSP estimated the fiscal impacts from major categories of tax revenues that are directly affected by the development’s activity. !

Lodging Tax – is 4.0 percent and flows through the state and back to the community for tourism promotion efforts.

!

Auto Rental Tax – is 4.0 percent and flows to the state.

!

Income Tax – is 6.9 percent and flows to the state.

Construction Impact In addition to the ongoing impacts from the operation of the facilities, the construction of the events centers would create a one-time influx of spending. The construction spending also results in employment in many sectors of the local economy. The total project is expected to cost between $25 and $46 million. An industry standard ratio of 60 percent labor, 40 percent materials is used to determine the spending and employment and income impacts. Labor costs will generate direct labor impacts and materials will generate other new income in the community.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


G OVERNANCE One of the most important decisions for a public entity that is considering a multi-purpose events center project is the structure of ownership and management of the facilities after completion. The manner in which a municipality structures the ownership of the development and the type of management of the facilities are central to the success of the project. The entity that develops the property will need to establish the best ownership and management structure under which the proposed events center would operate to best suit the needs of the city and to foster the success of the project. Ownership of arenas and multi-use facilities throughout the United States varies depending on the type of facility, the nature of development of the property, and the needs of each community. However, large publicly-oriented facilities in general, whether arenas, multi-purpose buildings, exhibit halls, conference centers or major convention centers, usually have one of three ownership structures. Many facilities, including most convention centers and larger arenas, are publicly owned, either by a municipality or a county. Some exhibit halls, multi-use and sports arenas are quasi-public by establishing a not-for-profit corporation, run by a board that the locality appoints or for which it has some oversight. The last ownership structure is a totally private facility that a private corporation owns and often operates. Fewer facilities of this type exist in the United States, and even fewer internationally, where most facilities are publicly owned. No complete survey exists of all arenas and multi-use facilities similar to the project that Missoula is considering. A large number of the arenas in the United States are part of a state university system, designed to benefit and serve the indoor sports and other events of the university. Municipalities generally own smaller municipal arenas, often older facilities designed mainly for sports but also attempting to recruit trade and consumer shows. Other multi-use facilities are owned through a non-profit foundation or corporation. Few facilities have purely private ownership, although some NBA arenas are held by private for-profit companies. More than one-third of U.S. exhibition halls are privately owned, but private management companies operate over 60 percent of the facilities. Public ownership of exhibit hall facilities often occurs because the facilities usually do not generate profits to an owner. The public sector will take ownership as a service in order to capture the related economic benefits within its jurisdiction. Private management is common because, unlike the public sector, private companies have professional expertise in managing and operating facilities and often have longstanding relationships with vendors, suppliers, and other industry organizations. In addition, a private management company’s experience and efficiency can help insulate a facility’s operations from political issues and can help to reduce annual deficits as much as possible. The ownership structure and net income for some regional facilities is described in the table below.

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T abl e 16-1 Comparable Events Center Ownership and Management Name Spokane Arena

Location Spokane, WA

Ownership Spokane Public Facilities District

Management Spokane Public Facilities District

Net Profit (Loss) $1,179,805

Rimrock Auto Arena, MetraPark

Billings, MT

Yellowstone County, Montana

City of Billings and Yellowstone County

($530,000)

MSU Brick Breeden Fieldhouse

Bozeman, MT

Montana State University

Montana State University

Unknown

Butte, MT

Butte-Silver Bow City-County

Butte-Silver Bow CityCounty

($650,000)

Four Seasons Arena, ExpoPark

Great Falls, MT

Cascade County, Montana

Cascade County, Montana

$246,000

Belgrade Special Events Center

Belgrade, MT

Belgrade Public School District

Belgrade Public School District

Unknown

Butte Arena

Source: Various facilities, HSP

Each of the facilities described in the table above has an ownership structure that is in some manner a public entity. The Butte Arena, the Four Seasons Arena in Great Falls, and the Rimrock Auto Arena and MetroPark in Billings are owned by the county in which each is located. The Brick Breeden Fieldhouse at Montana State University is part of the Montana university system and therefore owned by the state, while the Belgrade Special Events Center is part of the Belgrade, Montana Public School District. The only competitive facility that is outside of Montana is the Spokane Arena, part of the complex of facilities that the Spokane Public Facilities District owns and manages. The Public Facilities District is a construct unique to Washington State. The District is a taxing entity that exists to develop, own and manage public facilities such as convention centers and arenas. In Spokane the SPFD owns and manages the Spokane Arena, the Performing Arts Center and the Spokane Convention Center. The above table also sets out the net yearly income of each facility when available. The two school-based facilities do not break out the income and expenses of the facilities from the total budgets of the entities, so the net profit or loss is not reported. The Spokane Arena had a good net income in 2007 (the last year reported), more than $1.1 million in profit. The SPFD reports that the arena has had a net profit each of the past five years, which balanced the net losses that the Spokane Convention Center has had yearly over the same period. The local Montana facilities have not fared well on a net income basis. The Rimrock Auto Arena is part of the MetraPark, which Yellowstone County owns and operates. The entire MetraPark, which also consists of exhibition halls, meeting rooms and other facilities, had an annual shortfall of $1.6 million in fiscal year 2008. The financial officer for the county stated that the arena finances are not separated but that the arena has approximately two-thirds of revenue and expenses of the entire facility. Therefore, the arena itself had an estimated $530,000 in losses in fiscal year 2008. The City of Butte and Silver Bow County Consolidated Government owns and operates the Butte Civic Center. The 2008-09 budget for the city and county listed expenses of $817,744 and

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income of $265,000, for a shortfall of approximately $650,0000 to be paid by other city and county resources. Cascade County, the owner and operator of the Four Season Arena, reported for fiscal 2008 reported that the budget was for $14,000 in non-tax revenues and $261,000 in expenditures, with an approximate shortfall of $246,000. The budget also listed $266,000 in tax revenues for the facility to cover the deficit. In Appendix 6 of the Phase I report HSP has analyzed several multi-use events centers that are comparable to the facility that Missoula is proposing. The ownership structure and net profit or loss of each facility is described in the table below. T abl e 16-2 Comparable Events Center Ownership and Management Name

Location

Ownership

Management

Net Profit (Loss)

Brookings, SD

City of Brookings

VenuWorks

($300,000)

Grand Island, NE

Fonner Park Exposition and Events Center, Inc.

Fonner Park Exposition and Events Center, Inc.

($150,000)

Rochester, MN

City of Rochester

City of Rochester

($621,530)

Alltel Center

Mankato, MN

City of Mankato

City of Mankato

($2,348,014)

Qwest Arena

Boise, ID

Block 22 LLC

Block 22 LLC

unknown

Swiftel Center Heartland Events Center Mayo Civic Center

Source: Various facilities, HSP

The facilities outlined in the table above are a representative sample of smaller multi-purpose facilities in the United States. The locality owns three of the facilities, the Swiftel Center in Brookings, South Dakota, the Mayo Civic Center in Rochester, Minnesota, and the Alltel Center in Mankato, Minnesota. Two of the municipal owners also manage their respective facilities through municipal employees hired for that purpose. The third, the Swiftel Center, has hired the private company VenuWorks to manage the facility. VenueWorks is a management company that manages many events centers and arenas throughout the United States. The Heartland Events Center, in Grand Island, Nebraska, has an agreement between the City of Grand Island and the Fonner Park Exposition and Events Center, Inc., a private not-for-profit corporation. The owner of the facility is Fonner Park, which also owns and operates the equestrian racetrack adjacent to the facility. Fonner Park has agreed to convey the facility and grounds to the City of Grand Island once the bonds that the city issued to develop the property have been paid in full. Fonner Park also manages the facility in conjunction with the racetrack. The only facility that is not publicly owned is the Qwest Arena in Boise, Idaho. The private, forprofit company Block 22, LLC, owns and operates the facility in conjunction with the Grove Hotel, a full-service hotel that provides additional meeting space as well as a full ballroom. Because it is a private facility it does not have to report to the locality or follow any recommendations of the local CVB or governments.

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Ownership Options As shown in the competitive and comparable facilities shown above, three types of ownership options exist for an arena or mixed-use facility, or for any other large destination property. The municipality, either city or county (or rarely unless a university property the state) can own the property outright. A second, often-used ownership structure is through a private, not-for-profit foundation or corporation, with a board appointed by the municipality or, less often, through a volunteer organization. The third option, most rarely used, is for the facility to have private, forprofit corporation ownership. Positives and negatives exist for all of the options. County governments or other public entities own all of the competitive arenas and mixed-use facilities in the region around Missoula, as well as three of the five national comparable facilities listed above. The major advantage of public ownership is control; the governmental entity owning the facility is ability to determine the management structure, the usage, and the finances. With that control comes the responsibilities of ownership, however, including oversight and day-to-day management issues unless the owner hires an outside management company. The not-for-profit corporation structure is the other popular ownership type. This structure is popular for several reasons: !

The corporate structure mitigates the political pressures that can exist. For example, one challenge that any public facility faces is the number of groups that want to use the facility free or at a reduced cost. If the municipality or county owns the facility, those pressures become real, with the elected officials dealing with groups who need or want cost reductions. While those pressures would still exist with a corporate structure, the organization can set policies that treat all groups consistently. Because the organization has to live up to its financial goals, it would truly weigh the costs of giving away space or setting below-market rental structures.

!

The organization has a separate budget that requires revenue and net income to survive. The municipality or county may have to contribute each year but would set the allotment and the fair board would have to set the budget accordingly. The board would have to implement a business model that has a balanced budget each year.

!

The government would not have to supervise and oversee all aspects of the facility. The board’s responsibility would be to oversee a successful facility and a balanced budget, and the County or City would only become involved if the board fails.

Of course negatives in this structure also exist. Among them is perceived lack of control or recourse over what remains a public amenity. The County or City would have little recourse if the not-for-profit corporation fails to oversee and manage the property. The board for such an organization takes one of three forms: !

A board solely consisting of members that the City or County appoints.

!

A board solely consisting of members of a volunteer association.

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!

A board with some politically appointed members and some members from the volunteer association.

Each of the types of board structure has challenges. The board with only political appointees might not have the knowledge or expertise that is needed to run the organization and manage the facility. While having business acumen, the board may not understand the inner workings of an arena events center. The board consisting solely of volunteers might have an excellent understanding of the workings of an events center but may not make the best financial or business decisions because of the members’ personal interests in the facility. Each of the members might have one specific interest in one of the aspects of the events center, sports for example. Therefore each may act for the best interest of that specific part of the events center instead of working for the facility as a whole. Finally, a board mixed with volunteers and political appointees may cause a division between the two groups, each seeing the other as not having the necessary skills for appropriate event center management. However, if the board can work together this structure can be the most successful, with both business and event center expertise combining to run a successful facility. The third type of ownership structure is private ownership. In this structure a for-profit corporation owns and manages the facility, with the goal of making a profit for the corporation. The Qwest Center in Boise, Idaho, is an example of this type of ownership. This structure would not be recommended for Missoula because the multi-use center would not act in the best interests of the community. The private facility works to make a profit so the ownership and management would consider not what is best for Missoula, instead making decisions that would create a profit for the owner.

Pros and Cons of Management Structures Facilities can be effectively run within any structure if the right, qualified management personnel are in place and the incentives and expectations are appropriate for such management. Also, it is critical that the owner (whether a City, Authority, etc.) understands the events, convention and hospitality industry. An uneducated owner coupled with any management team provides an opportunity for economic and mission failure. Within any structure, safeguards and expectations must be in place to ensure everyone is operating with the same goals. The two dominant types of event center management are public operation through the owner’s employees, or private management that contracts with the municipal owner. As with ownership structure, pros and cons exist for both types of management of events centers.

Private Management The following are implications of choosing a private management company:

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!

Competition drives improvements. There are several management companies for arenas, events centers and similar facilities. By making them compete initially for a contract, the owner has a choice of vendors who will commit to excellence. Then, by reviewing and re-bidding the contract every 4 to 5 years, the threat of continued review and competition will keep the existing manager on point and allow the other bidders to offer something better.

!

Such companies specialize in public assembly facility management, including convention centers and arenas, are generally members of the trade association IAAM and should be able to operate the facilities in a competent and creative manner.

!

Management companies know how to maximize revenue and minimize expenses without hurting service. They also know how to staff the building with the minimum amount of manpower (which is the largest portion of expenses for a convention center). Because staff is generally non-union, they can be terminated if they are not performing and are not artificially protected from the consequences of their actions. And if labor is union, companies are in a better position to negotiate than city staff who may have political concerns. This leads to lower costs.

!

Because private management companies manage other facilities, they typically train managers over time through junior roles and advance them to manage facilities only when adept at the job. They also have a network of resources to assist if the local building should need additional resources.

!

Private managers should be well versed in negotiating food and beverage contracts, advertising and sponsorship deals, and related deals for the building. In many cases, the company offers their own catering company and this should be reviewed carefully to ensure each entity stands on its own merits.

!

If an owner (city or authority) is unhappy with the job of management, they have several options to remedy the situation, including requesting the removal of the manager through the management company. The management company can then provide options to the owner for replacing the manager in question.

!

Private management companies have relationships with national and regional event promoters, planners and other facility users and this provides several benefits: !

Private management should be able to fill space within their booking window due to their relationships with such event promoters.

!

Such companies can develop custom shows and events with these promoters specifically for the market if a gap exists in the market.

!

Multi-venue deals can decrease costs for the facility.

!

Because of performance-based compensation, operating results should be stronger.

!

Generally speaking, private management companies have a more efficient and quick procurement process for goods and services.

!

Private management companies do charge fees above and beyond the cost of their general manager. The management fee is typically a flat amount with a bonus that

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can be achieved by meeting certain goals annually. These deal points are critical to the building’s success and should be reviewed carefully. Ultimately, the efficiency, customer service, and financial results produced via the management company should more than make up for their fee. Deal negotiation is critical. !

There can be a concern of lack of control by the municipal owner over a private management company, but those checks and balances are recommended by HSP and can be properly calibrated with the right agreement.

!

General managers could potentially turn over at a higher rate as new opportunities present themselves within the company’s other facilities. However, this can also occur amongst public managers.

Public Management The following are discussion items related to public management: !

Managers working directly for the public sector owner can be successful and effective in terms of operations if they have been trained in the industry and have excelled in other markets. However, it is key that their contract have the same stipulations that a private management company’s would, in terms of management, marketing, revenue generation, expense control, customer service, etc. Also, it is imperative that the owner, if it is a not-for-profit corporation or the municipality directly, either be competent in arena/events center and hospitality management and marketing and/or retain an owner’s rep/asset manager who can review and interpret performance of management for the owner. Managers, whether public or private, control the data and message related to that data for the convention center and it is therefore very important that someone who knows the industry can ask the right questions and review compliance with performance objectives. This can also be mitigated somewhat through the management contract.

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If the manager and staff are extensions of the public sector, they can be influenced by political and other public sector personalities and decisions. One administration may not want to retain a past administration’s manager and could demand the change, despite good performance by the manager. Or the opposite could occur, if the municipal leaders, due to personal relationships, keep the non-performing manager in place to the detriment of the building’s performance.

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When arenas and events centers are extensions of city departments and are not stand-alone enterprises, their revenues and expenses (and subsidies) can get mixed in with other department funds and be hard to determine. This occurs in certain municipalities and can cause great financial strain. Setting up the building as an enterprise keeps the responsibility for its performance within the building.

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Recommendations Ownership. The facility should be owned and funded by a separate not-for-profit corporation or authority independent of the City or County, and separate from the municipal budget. The number of board members should be at least five and no more than nine. A majority of board members should have a background in financial management, hospitality or events center/tourism operations or marketing, or related experience that would provide excellent oversight to the events center. The appointments should be a minimum of three years, staggered and would be made by the City or County. This will allow the board to function with continuity beyond the political tides. It is also recommended that the board retain a third party expert on convention centers for a once per quarter review of the performance of the management, marketing/CVB, and hotel simply to provide perspective and help the owner ask the right questions. HSP does not recommend that the City or County own the facility directly. Management. Based on HSP’s experience and the pros and cons associated with each approach, the recommendation is for private management of the events center that reports to a board of the authority/owner. The contract should be put out for competitive bid and negotiated to provide the owner the leverage it needs. It should also be a limited-time contract that requires a re-bid every four to five years. Marketing. The events center must be marketed effectively to ensure long-term business that generates economic impact. The CVB is typically responsible for this marketing and sales effort. Since the CVB has not marketed a facility in the past, this will require additional expertise and leadership, and potentially funding, at the CVB. If the existing CVB is not interested in taking on this role, the City or County may want to consider other options (including directing funding to a City CVB or to the building directly). This is a critical issue and should be investigated. In any case, the investment in an events center requires a professional sales team to obtain the shows, events and sports necessary to make the facility a success.

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T ABLE OF C ONTENTS Chapter 1

Introduction, Report Layout & Summary of Conclusions

Chapter 2

Economic, Demographic & Tourism Analysis

Chapter 3

Meeting, Convention & Conference Industry Trends

Chapter 4

Concert, Arena Sports & Ticketed Event Industry Trends

Chapter 5

Local Event Facilities

Chapter 6

Competitive Facility Analysis

Chapter 7

Comparable Facility Analysis

Chapter 8

Interviews and Survey Results

Chapter 9

Site Analysis

Chapter 10

Hotel Analysis

Chapter 11

Recommendations

Chapter 12

Conceptual Drawings and Preliminary Budget

Chapter 13

Demand Projection

Chapter 14

Financial Projection

Chapter 15

Economic, Fiscal & Employment Impact Analysis

Chapter 16

Governance Discussion

Chapter 17

Financing Options


F INANCING Financing the development and ongoing operations of an events center is a challenge overcome in a unique way in every city that has succeeded in developing such projects. Municipalities or other public entities typically develop, own and finance multi-use events centers, as well as other large public facilities such as arenas and convention centers because such facilities do not generate net income to pay for their development costs (and often do not generate net income). The facilities require upfront and ongoing investment, which requires a revenue stream or streams to constantly service the debt and ongoing capital improvements of the facility. The rationale for such expenditure is the net benefit the project brings to the community in terms of jobs, economic impact, and fiscal impact from visitor spending, improved reputation, and use by the taxpayers and local population.

Local Project Financing Options The primary types of local event center financing mechanisms are described below. !

Pay-as-you-go financing - Projects that are relatively small or that are financed in municipalities with rapidly growing tax bases are sometimes paid for directly out of appropriated funds. The majority of facilities, however, are financed with long-term debt so that the payment of capital costs corresponds to the period over which the facility is used and its economic benefits are realized. The project cost is higher than Missoula could afford to pay out of annual budgeted funds and it would cause political risk to obligate general fund revenue to the project.

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Special Taxing District – This is the most common form of financing for events centers. Many states allow communities to have a special taxing district where sales, hotel, income and real estate taxes (or some combination) are collected within the district – like a TIF – and applied to w a facility financing.

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General Obligation Bond Financing - Long-term bonding using the general obligation of the city, county, and/or state, either directly as part of a capital outlay program or as guaranteed debt of an authority, would provide a strong credit and relatively low borrowing costs for the project. General obligation bonding is typically reserved for projects perceived to benefit the population as a whole, such as educational, environmental, transportation, or correctional facilities, and has not as often been used directly for public facility financing in the last ten years. Some alternative uses of general obligation debt might include: (i) restricting it to a portion of the project costs such as land acquisition, site preparation, and transportation access; (ii) creating a short-term means of paying for some or all construction costs until revenues triggered by the new facility are realized; and/or (iii) providing a guarantee to back-stop a new revenue source that is not initially creditworthy on its own or results in a lower bond rating without the general obligation backing.

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In Montana the state legislature allows a local governmental entity to issue bonds, up to 2.5 percent of the total assessed value of the taxable property in the jurisdiction. If the debt is more than $2 million, the bond has to have approval of a majority of the voters in the jurisdiction before the bond is issued. The term of the bonds can be no longer than twenty years. !

Revenue Bond Financing – Similar to a special taxing district. Various taxes, fees, or other dedicated revenues could secure revenue bonds for the new events center. The revenue streams can be from various tax levies directed to the project, project net revenues (if they exist), and lease payments if a private entity leases portions of the facility or the property. Options for dedicated revenue streams are discussed below. Repayment of both types of bonds could be through differing revenue sources, including revenue from the capital project. However, public facilities such as events centers and arenas often do not generate enough revenue to meet ongoing operations costs, so no net revenue may exist to pay the ongoing debt obligations of the issued bonds. HSP has projected a possible breakeven scenario for the events center, at best, for the long term, with deficits in the initial years. Therefore, other revenue will be necessary.

The lack of sales tax in Montana, combined with the reliance of the local governmental authorities on real property taxes as the major source of local revenue, leaves few options for a municipality or county. Major public facility projects appear to need the general obligation bond method of financing as the preferred option in the state. For example, Lewis & Clark County upgraded its fairgrounds grandstand and added an exhibit hall in the past decade. It funded the project through a $5.7 Million general obligation bond that increased taxes on the real property in the county. Other sources of revenue currently exist that could provide part of the funding or financial assistance for major developments. Such sources include:

Tax Increment Financing Tax increment financing (TIF) permits a municipality to finance major improvements or redevelopment projects by applying new tax revenue (growth of the tax base) to the project directly. To make use of TIF, the governmental entity creates a district, usually one that is in need of development or redevelopment. A development project within that district could receive public financing by capturing certain taxes that the municipality normally would receive. Usually the revenue consists of all or part of the increased amount of property taxes that the development would pay above the amount charged on the undeveloped property (the “increment�). Montana has created a TIF program through the Urban Renewal Law. The statutes permit a locality to establish Urban Renewal Districts and fund limited incentives for infrastructure and other public improvements that would assist a development, but the statute does not permit direct funding of private construction or other direct development expenses.

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The City of Missoula already has established specific areas that use TIF financing for redevelopment. The city established the Missoula Redevelopment Agency (MRA) to spur renewal of certain underserved and blighted urban areas, and that commission makes decisions concerning the TIF and oversees the current TIF projects. Using tax increment financing methods, the MRA has assisted in encouraging development in specific areas that have been declared as Urban Renewal Districts in Missoula. URD III is along Brooks Street, near the fairgrounds site. However, none of the current possible sites is within an existing urban renewal district. A TIF would be of limited use for the proposed events center. Since the sites considered for the events center are not within existing Urban Renewal Districts, Missoula would have to declare the proposed area as a new district in need of urban renewal. Also, a municipally-owned events center would generate no property taxes. Tax revenues from other new developments in the renewal district would be necessary to fund the project.

Other Local Funding Avenues Nationally Most states have allowed municipalities, counties, and other local taxing authorities to generate income from taxes other than personal and real property taxes that are the major source of revenue for Missoula City and County. Below are listed some of the major revenue-producing taxes that localities nationally use for funding public facilities such as events centers.

Hotel Occupancy Taxes Hotel occupancy/lodging taxes have the major advantage of primarily taxing out-of-town visitors rather than local residents. Convention centers in Orlando, Los Angeles, New Orleans, Atlanta, Charlotte, Houston, Indianapolis, Miami, Philadelphia, St. Louis, and San Francisco have their debt service paid totally or in part by dedicated hotel tax revenues. Smaller cities also use hotel taxes to fund the Convention and Visitors Bureau and apply part of the revenue to fund the annual expenses of the convention center. The hotels and other tourist attractions in the area benefit from the CVB and the convention center, so that application of revenue is logical. Currently Montana has a hotel occupancy tax, called the Lodging Facility Use Tax, of four percent, but it is only dedicated to certain state agencies, regional nonprofit tourist corporations, and if enough is collected to the local nonprofit convention and visitors bureau. Another three percent is collected as the Lodging Facility Sales Tax, with those funds deposited to the state’s general fund. The state does not permit a locality to increase those taxes to benefit the locality.

Sales Tax Sales taxes provide strong credit structures because they are relatively predictable and tend to track inflation and economic growth. They also can fund TIF districts in some states that allow TIF financing through sales tax increments. The State of Montana does not have a sales tax, so that this option is not currently available for Missoula to consider as a revenue source.

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Food & Beverage Tax Many states allow localities to tax prepared food and beverage as another means to create a local revenue stream. Often the “F&B tax” can be dedicated to a specific project or dedicated expense. Montana does not have a food and beverage tax or permit localities to impose the tax as an additional revenue generator.

Land Assembly Municipal and county governments have the ability to assist a developer through methods other than financing all or part of the project, which places the locality at risk financially if the project fails or the developer is unable to repay the debt. One method of assistance is to have the public entity assemble the land for a new development. Land assembly can assist the developer that has had difficulty finding a location with enough land to make the project feasible, a developer who does not have the funds available to buy the parcels needed, or an underutilized area that needs redevelopment. The public role in land purchase can be an important factor in development, especially for a blighted or other target area. Often the issues involved in real property purchasing in specific target areas can best be handled by the locality, using its resources to deal with the logistical and legal issues involved with various real estate issues, including: !

Unwilling sellers

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Unknown owners or large number of heirs of the original owner who is now deceased

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Blighted properties

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Owners who are delinquent on real estate taxes.

Often a locality will assemble property in a specific area even though a specific project has not been developed. This “land banking” method is an effective tool to gradually obtain several properties that can be aggregated into a large tract for development. !

Municipal and county governments have several methods by which they can obtain the property necessary for a project, including:

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Purchase

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Tax Foreclosure

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Foreclosure due to liens by municipality for demolition or cleanup costs

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Land swaps

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Escheat (property unclaimed by any owner transferred by legal action to locality or state)

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Eminent Domain or condemnation (states define these two terms in a similar manner).

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One of the most controversial and time-consuming tools that a locality may use to assemble land is the eminent domain or condemnation process. Every state has the ability to take property for a public purpose, within strict guidelines and through judicial processes. Most states also have passed legislation that permits a locality to use eminent domain procedures to acquire land in blighted areas as a remedy for the issues that such areas create. This process has been determined to be constitutional if a public purpose exists and the process has a proper due process and just compensation to the landowners. However, eminent domain is costly and takes many months per parcel so localities use it only as a last resort.

Other Local Incentives Localities use other methods to provide developers with incentives to create and develop projects, especially in underdeveloped areas. These incentives include: !

Air Rights – Transferring the right to develop above or below public land, including public parking garages and public transit locations.

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Land Write-Downs – Selling land for less than market value to the developer, often after the locality has assembled the land as described above.

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Technical Support – Localities can offer developers assistance through the employees of the locality, everything from real estate and legal assistance to preparation of feasibility studies on the property.

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Grants – Some communities offer limited amounts of grants and other funds for development of infrastructure, public areas, facades, and other aspects of the project.

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Permit Fee Waivers – Localities could waive certain fees normally required for construction, such as building permits and zoning variance fees.

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Zoning Incentives – Localities may grant incentives to encourage development in certain types of zones, including possible bonuses for a change in the density of the zone due to a project.

Localities have used these and other incentives to encourage development in areas determined to be in need of development, as well as to assist specific projects that a local government wants to attract to the area. Often the local incentives work in coordination with the state incentives discussed above to create successful developments. The local incentives can be an effective tool to assist development that otherwise might not be able to occur.

State Project Financing Options Montana has several limited financing assistance and incentives available for local governments that wish to create a new development project. The incentives include the following:

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Montana Board of Investments The Montana Board of Investments (MBOI) is a state agency that has the goal of providing financial assistance that will encourage new and expanded businesses in the state. The MBOI offers several incentives to new and expanding businesses in the state, including business loans from the Permanent Coal Tax Trust. Another duty of the MBOI is to administer the United Investment Program to allow diversity and expert management of retirement and other equity accounts. One major incentive that the MBOI offers to local governments is the INTERCAP program, which lends funds to local governments for a variety of purposes. The variable rate loan may be used for the following municipal projects: !

New and used Equipment and vehicles

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Real property purchase

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Real property improvements such as boilers, roofs and elevators

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Interim financing for construction

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Preliminary engineering and grant writing costs

The INTERCAP program loans funds for interim or permanent financing through issuance of taxfree bonds. The revenue of the project must produce income to pay the bond debt. This program may assist as a guarantor of a loan from the private sector for a proposed Missoula events center. However, the maximum length of time for the loan is fifteen years, which may be too short a period for any loan that would be enough to fund the facility. The MBOI also provides incentives for certain school districts through a Qualified Zone Academy Bond fund, and to municipalities to assist private businesses through the In-state Loan Program that uses the Permanent Coal Tax Trust funds to give low-interest loans. However, the In-state Loan Program requires that the new “basic sector� be at least fifty percent from outside the state. This requirement appears to exclude the In-state Loan program

Other State Incentives Montana offers other state incentives to local governments and private businesses for various types of new projects and expanded developments. The Big Sky Economic Development Trust Fund provides grants and loans to local governments for economic development projects that create new jobs. Each project could obtain up to $7,500 for each new job created for a new project. Several departments and agencies have various grants and loans for local governments to fund infrastructure construction for new developments. The Treasure State Endowment Program provides grants and loans for water and sewer systems. Other programs also provide some assistance.

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Federal Project Financing Options Several federal programs can provide development projects with assistance that states can consider when creating or amending state incentives. States that have incentives that mesh well with the federal incentives create a more conducive situation for development. Project developers can explore using both state and federal programs that lower project costs than those projects in states in which the federal incentives cannot be used in conjunction with state programs. Several federal incentives and programs are popular with large development projects that could produce tourist destinations: Build America Bonds, New Market Tax Credits, Recovery Zone Bonds and the large package of programs that the 2009 Stimulus Funds created. The different types are discussed below.

Build America Bonds Build America Bonds (BOBs) are taxable municipal bonds that carry special tax credits and federal subsidies for bond issuers or bond holders. Created in 2009 by the American Recovery and Investment Act, the purpose of the incentive is to reduce the cost of borrowing for state and local government issuers. The state or locality issues the bonds and then receives a federal subsidy of 35 percent of the interest to be paid over the life of the bond. Another option that BOBs offer is a tax credit bond that gives the tax credit directly to the bondholder. BOBs were enacted to stimulate the economy due to the recent recession. They are available only for bonds issued before January 1, 2011. As of October 31, 2009, $48.5 billion in bonds had been issued.

Recovery Zone Bonds Recovery Zone Bonds (RZBs) are similar to BOBs but provide a higher direct federal subsidy payment within qualifying recovery zones. Also created by the American Recovery and Investment Act, these bonds receive similar incentives, through a federal subsidy of 45 percent of the interest paid over the life of the bond. The RZB incentive applies to two types of bonds: !

Economic development bonds for capital expenditures within the qualifying recovery zone, for public infrastructure and for job training and education programs. States, localities receive the subsidy, which allows the issuer to provide bonds that are more marketable.

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Facility bonds that act as direct tax credits to private entities that create business within the zone, except for rental property and golf courses. The business or property must be required after the zone was designated as a Recovery Zone.

Similar to the BOBs, the RZBs apply only to bonds issued before January 1, 2011.

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New Market Tax Credits In 2000 the federal government passed the Community Renewal Relief Act, establishing the New Market Tax Credit Program to encourage investments in low-income communities. Various large investors, including banks, can use the credits to partially fund various large development projects, including many downtown or other urban developments. Congress extended the program in 2009. A developer who wants to use NMTC as a funding tool must be sure that the development is in a Qualifying Low-Income Community (QLIC). In reality most downtown or other urban areas are in QLICs, because the definition of a low-income community is one that has a poverty rate of at least 20% and median income of 80% of the area or state median income. Most downtown or urban mixed-use projects would qualify for NMTC financing. The developer will then search for a lender or investor that has invested in a fund that allows the investor to receive the tax credits. The investor, called the Community Development Entity (CDE), often a bank, has received tax credits from the federal government by agreeing to use the income from the qualified investment for developments that qualify as low income. These tax credits total 39 percent of the cost of the investment to the creditor of its investment. The investor will lend funds to the developer at an interest rate lower than market rate, will require interest-only payments for a seven-year period, and will forgive a substantial portion of the debt after a certain number of years. The developer can use New Market Tax Credit financing as a “gap filler” or additional financing, but normally the developer would not be able to finance the entire project with NMTC financing. In this instance, the program would only apply to the convention hotel and would apply to the private debt/loan on the project. The value of the NMTC’s will vary depending on the size of the loan for the project, which will depend on the ultimate cost of the project and the public’s role in the financing.

EDA Stimulus Act Funds The American Recovery and Reinvestment Act appropriated $150 million for the Economic Development Authority’s American Recovery Program. Of the $150 million, $100 million will be allocated the Public Works and Economic Development Facilities Program and/or the Economic Adjustment Assistance Program. The Economic Development Authority provides financial assistance to distressed communities which can exist in a variety of forms including those with high levels of unemployment, low income levels, large concentrations of low-income families, significant declines in per capita income, high rates of business failures, sudden major layoffs, reduced tax bases, or significant decline in population caused by lack of employment opportunities.

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The Public Works and Economic Development Facilities Program aids the construction or rehabilitation of public infrastructure and facilities necessary to generate or retain private sector jobs and investments, attract private sector capital, and promote regional competitiveness, including investments that expand and upgrade infrastructure to attract new industry, support technology-led development, accelerate new business development, and enhance the ability of regions to capitalize on opportunities presented by free trade. It is not clear that this project would qualify for these funds. The Economic Adjustment Assistance Program provides a wide range of technical, planning and infrastructure assistance in regions experiencing adverse economic changes. The amount of the EDA grant may not exceed 50 percent of the total project cost; however projects may receive an additional amount not to exceed 30 percent, based on the relative needs of the community. EDA will give preference to applications that include cash contributions as the matching share. Public entities or nonprofit organizations engaged in economic development are eligible to apply. For this project, it would be difficult for Jeffersonville to be approved for funds, but it is worth further investigation as many cities are applying for funding presently.

Conclusion The financing of the proposed events center in Missoula appears to be a challenge. Montana has a tax and revenue system that relies heavily on income taxes at the state level and real property taxes for counties and municipalities. Some limited state incentives and assistance may be available, including possible grants and loans for infrastructure, and loan guarantees, depending on the type of governance structure and the length and structure of the debt. Some federal financing opportunities exist, including Build America Bonds and New Market Tax Credits. Many of the “Stimulus Funds� that include Build America Bonds and Recovery Zone Bonds have to be issued before January, 2011. The New Market Tax Credits require the project to be in a qualified zone and have other hurdles before a project would qualify. Montana does not have the best tools for the development of a new public facility. Other states have the advantage of state and local incentives that would more readily encourage development of public facilities. Washington is a neighboring state that has a liberal incentive package for public development. Montana should consider providing more options that would better encourage public facility development.

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Missoula Events Center  

Missoula Events Center Plan

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