Where is the Rock Chalk Park bump? Sales tax numbers create questions about how much Junior Olympics visitors spent in Lawrence
There is no doubt that the Junior Olympics held at Rock Chalk Park in late July was a great event. More than 8,000 athletes competed, thousands of additional fans attended, and having track and field legend Carl Lewis as a guest speaker gave me an excuse to wear my 1980s sprinter shorts. But as new numbers suggest, there is quite a bit of doubt about how much the big event added to the Lawrence economy.
Every month I track Lawrence sales tax collections. For the last couple of months, I’ve been waiting to see a large spike in sales tax collections related to the influx of Junior Olympic attendees, who presumably were spending a lot of money in town. Thus far, there has been no spike.
And now the city’s top tourism official says he’s not necessarily surprised. He thinks about two-thirds of all the spending generated by the event probably went to other communities because Lawrence had only a fraction of the hotels needed to serve all the visitors.
“I think it was a bit of a learning curve in terms of what our expectations should be,” said Michael Davidson, executive director of Explore Lawrence, the local CVB organization.
More on that learning curve in a moment, but first let’s look at the numbers. Based on the sales tax figures, it is hard to see how even a third of the spending occurred in Lawrence.
Shortly after the event, Davidson’s group estimated the event pumped about $25.8 million into the economy. That number, though, should have an asterisk. It estimated direct sales from the event were about $17.7 million, but those sales created other indirect sales that brought the total to $25.8 million. Regardless, the report estimated the coffers of local governments would get about $450,000 in sales tax revenues.
There are two months the city of Lawrence would have expected to see their sales tax checks from the state reflect that bump. Because of the time it takes for the state to process and distribute sales tax money to the city, the October check is the one that is most likely show the bump. Instead, the city’s October sales tax collections actually were down slightly from October of 2016. They were down by about $16,000, meaning that total sales in Lawrence for that time period were down by $1 million compared with the same period last year.
Conceivably, some of the impact could have shown up in the September sales tax check. That month’s collections were up by about $45,000 compared with September 2016. The $45,000 in sales taxes equates to about $3 million in sales. That represented about a 2 percent increase, which is a fairly ho-hum month for the city.
And, it is a long ways from $25.8 million. To be fair, it was never realistic to think Lawrence was going to capture all the economic impact from the Junior Olympics. It was known early on that many people would be staying in Topeka and the Kansas City area because of a lack of hotel rooms in Lawrence. But when you actually see the numbers, it is a little stunning. Davidson estimates that about 41,000 hotel room nights were booked as a result of the weeklong event. Lawrence had a little more than 7,000 of them.
That’s under 20 percent of all the rooms. If you remember, Davidson is estimating that Lawrence captured about a third of all the spending from the event. But did it really? It is hard to see that in the sales tax numbers.
I think the hope was that even though people may have been staying in a hotel elsewhere, they would do a lot of exploring and spending in Lawrence. The city even created a special bus route to take people from the Junior Olympics event to downtown. But Davidson said that bus didn’t attract large numbers of riders most days.
“We didn’t see a lot of activity,” Davidson said. “We learned these were really serious athletes. They stayed on site a lot.”
Davidson said he did hear from discount retailers and other such stores that they had an uptick in business with spectators buying everything from bottled water to umbrellas. I’m sure restaurants were busy too. Our eyes didn’t deceive us; there were a lot of people in town.
I’ll be honest. I don’t understand why the sales tax collections didn’t see a bump. I’m just telling you that they haven’t received one thus far. (It is possible the event provided a boost, but sales were sluggish in all other parts of the month. I don’t think that is what happened because that would mean normal retail sales plunged by about 15 percent, which would be concerning for other reasons.)
But the numbers do give Lawrence leaders something to think about. If the event business is going to be a major part of our economic development efforts, we need to understand the paybacks. The city and the CVB spent more than $200,000 attracting the event to Lawrence. As we’ve noted, it is not clear the city’s coffers have received enough of a boost to cover those upfront expenses.
While sales taxes appear stagnant during the period, the city’s transient guest tax — a special tax charged on hotel rooms — has received a boost. But depending on which month you look at, the boost is closer to $25,000 to $50,000 in new revenue.
"Our hotel business was strong," Davidson said, pointing to those numbers.
Davidson said his office certainly is working on a strategy to convince area communities to help pay for some of the upfront costs associated with events. The pitch is that communities like Topeka and Kansas City benefit from the overflow visitors. While the number of hotel rooms in Lawrence is growing, it is unrealistic to think we’ll build enough to handle an event of this size. But, speaking of realistic, will governments in area towns really agree to provide funding to help Lawrence win a bid for a major event? Davidson thinks so.
“We definitely will have to educate, but I don’t think there will be a lot of hurdles,” he said. “They will be able to look at how their transient guest taxes go up during that time. The nice thing about this is the numbers don’t lie.”
If that is true, Lawrence needs to better understand what our numbers are saying.
For those of you who follow my monthly reports on sales taxes, here are those basic numbers:
Lawrence sales tax collections for the October period fell by 0.7 percent. For the calendar year, sales tax collections in Lawrence are still 2.2 percent ahead of where they were last year. The city is still on pace to collect more in sales tax revenues than what the city budgeted to collect for 2017. Lawrence sales, though, have been slower in the later part of the year, which creates questions heading into the holiday shopping season.
Here’s a look at how Lawrence’s sales tax collections year to date compare with other major retail areas in the state:
— Lenexa: up 7.2 percent
— Shawnee: up 4.4 percent
— Olathe: up 2.6 percent
— Lawrence: up 2.2 percent
— Topeka: up 0.7 percent
— Overland Park: up 0.6 percent
— Saline County (Salina): down 0.1 percent
— Kansas City, Kan.: down 0.7 percent
— Sedgwick County (Wichita): down 1.1 percent
— Riley County (Manhattan): down 2.5 percent
Local aviation business to undertake large expansion; city to consider spending $215k in tax funds to support big sporting events
Vinland — that small southern Douglas County farming community that is home to the Vinland Fair, old timey tractor pulls and chicken noodle dinners that leave me wringing out my tie for days — is again proving it also is a growing high-tech hub.
Vinland-based McFarlane Aviation Products has filed plans with county officials to build a $1.2 million expansion of its facilities that design, manufacture and distribute specialty aircraft parts. The plans are the latest signs of growth for the longtime family-owned business. Back in 2011, we reported on the company’s last significant expansion. In 2011, we reported the company had 38 employees. Company owner Dave McFarlane told me the business now has 63 employees. McFarlane said the expansion will allow for additional employee growth in the coming years.
“We’re continuously adding a few people at a time,” McFarlane said. “That’s our plan — slow and steady growth.”
McFarlane estimated that the expansion would allow the company to grow to 90 employees over the next five to seven years, although history suggests the timeline could change. McFarlane said the company is growing rapidly enough that this expansion is happening about 1.5 years ahead of schedule.
McFarlane said the company’s business has remained steady, even as the aviation industry as a whole has suffered through some downturns. McFarlane said that is because the company focuses on making parts for existing aircraft. As times tighten, aircraft owners look to keep their existing aircraft operational rather than buying new aircraft. That means buying more parts.
“Our part of the market is saving people money by improving the replacement parts so they last longer,” McFarlane said. “We’re a much more stable market because customers have planes that they have to keep in the air, and we can help them do that.”
The company has about 3,000 different parts it sells, with most focusing on smaller general aviation and business class aircraft, although some of the parts are for larger jetliners, too.
The company has ended up being a nice boost to the county’s economic development efforts. McFarlane said about half the business is related to the manufacturing process, but he said the other half is related to distribution, administration and engineering. The company employs its own engineers to design products, and it also has several technical people to deal with issues such as FAA approvals and communication with the approximately 20 international distributors that the McFarlane has contracts with.
As for the proposed expansion, plans filed with the Lawrence-Douglas County Planning Department call for a new 24,000 square-foot building at the business’ current location at 696 E. 700 Road. That will be the third building on the site for the company. McFarlane said the company will move a portion of its manufacturing lines to the new building and also will run its shipping operations out of the new facility.
The site plan filed with the county also shows the location for another 17,000 square-foot building to be constructed in the future. McFarlane said he expects the company’s next expansion will be needed in five to seven years.
The current project already has the necessary zoning approvals and is just awaiting some technical approvals related to the layout of the site. McFarlane said he hopes to break ground before winter and to be operating in the new facility before summer.
In other news and notes from around town:
• Move over basketball. Lawrence may become a track and field town, or at least spend some money in an effort to become one.
City commissioners on Tuesday will consider spending about $215,000 in transient guest tax money to either attract or support a trio of track and field events that are either considering coming to Lawrence or already have announced they will host an event in the community.
The biggest one is the 2017 USA Track and Field Junior Olympic Championship. As we’ve previously reported, the city would like to host that weeklong event at Rock Chalk Park, but the Junior Olympic folks haven’t yet selected a site for the competition.
City officials are now saying they want to apply for the event, but it will take some money to do so. The nonprofit Lawrence Sports Corp. is seeking $150,000 over three years to apply and support the event. But the group also is touting that the event could bring more than 40,000 athletes and families to the city over a multiday period. Recent host cities — Jacksonville, Houston and Greensboro — have reported estimated economic spending ranging from $14 million to $20 million. All three of those cities have significantly more hotel rooms to sell than Lawrence does, which is a big part of the economic equitation, but the event would no doubt create significant spending in Lawrence. For planning purposes, the city is estimating $11 million in direct spending would be created by the event.
Commissioners will have to decide whether they want to use transient guest tax money — which comes from a special sales tax charged on hotel rooms — to try to lure the event. The sports corporation is asking for $40,000 this year, which includes a $25,000 application fee that has to be paid to be considered as a host city. If the city were awarded the event, the sports corporation would seek $55,000 in transient guest tax money in 2016 and $55,000 in 2017 to help cover a portion of the $460,000 of expenses that are expected to be part of hosting the event.
The city also is being asked to partially fund two other events that already have announced they are coming to the area. As we previously reported, the NCAA Division I track and field Midwest regional is set for May 28-30 at Rock Chalk Park. Local organizers are requesting nearly $57,000 in transient guest tax money to help pay about a third of the expenses expected as part of that event. The city is expecting about 3,200 athletes, coaches and spectators will attend that multiday event. The city is planning for the event to create about $1 million in direct spending.
The other event is the NCAA Midwest cross country regionals on Nov. 13. The event will be at Rim Rock Farms, which is in Jefferson County just a few miles north of Lawrence. In case you haven’t noticed, Jefferson County doesn’t have much in the way of hotel rooms, so Lawrence will be the big beneficiary of that event. Organizers are asking for about $8,300 of transient guest tax money to help pay for roughly a third of the event’s budget.
Commissioners will discuss the requests at their 5:45 p.m. meeting on Tuesday. The city has used tax dollars before to support or lure events to town, but usually you don’t see such requests come in threes. It is likely though that such requests will become more frequent in the future. When the city decided to be a partner in constructing the Rock Chalk Park sports complex, it was envisioned that the facilities would be used to attract regional and national events. Local communities often have to bear some of the costs to host those events.