Below is the face book postings of Paula Spinas EXCELLENT Review of the Langley Fairgrounds Strategic Plan and Jeffs additional comment. Please send this to everyone you know and ask them to attend the upcoming meeting on Wednesday, April 2nd at 7:00 p.m. at the North Whidbey Middle School, 67 NE Izett Street, Oak Harbor. We will be there. Paula is right on the mark! She only missed one thing. The suspect, inflated, exaggerated participation rates are displayed as percentages. They neglected to divide their displayed fractions by 100 (since 1 per cent =1/100) when multiplying the primary market number. That error flows throughout the document making all attendance and revenue figures in error (high) by a factor of 100. Accordingly even exaggerated and inflated the corrected revenue numbers are not pretty. Review and Analysis of the March 12, 2014 Island County Fairgrounds Strategic Plan (Landerman-Moore Associates & LRS Architects, Inc.) Reviewed by: Paula Spina (retired attorney and owner of the Crockett Farm Rural Event Center) Pspina02@aol / P.O. Box 250, Coupeville, WA 98239-0250 / 206-265-0981 Dated: March 20, 2014 Preface... Off traveling for the winter, I was first made aware of the Island County Fairgrounds Strategic Plan by way of a telephone call the evening of March 18, 2014 from a resident of Langley who is a long-time Island County Fair volunteer. The next day I received a phone call inquiring about the number and cost of events annually at the Crockett Farm. Following that call I was provided with a link to the Island County Economic Development Council (hereinafter EDC) webpage which included a digital copy of the Island County Fairgrounds Strategic Plan (hereinafter the “Plan”) along with comments from Island County residents. Among the comments was an incorrect reference by Ron Nelson, Executive Director of the EDC, to the pricing of events at the Crockett Farm and an accurate (albeit incomplete) comment from the woman who had telephoned me. As background, I have been running the Crockett Farm Rural Event Center since 2005 and consequently have a unique knowledge of the event and wedding industry on Whidbey Island. My partner, Lance D. Loomis, in addition to running the Crockett Farm with me, has been a board member of the Concerts on the Cove organization for several years. I was formerly a member of the Coupeville Chamber of Commerce board of directors. We are intrinsically involved in the event and tourism industry on Whidbey Island. From the comments attached to the EDC site we knew immediately that the information being commented on could not be accurate. As a result we decided to read the Plan and provide a running review and analysis of the same. One other point, the Crockett Farm is not and would not be in competition with the new event center. The vast majority of our business today comes from hosting weddings. Our wedding parties come to us because of the unique historic structures and views offered by the Crockett Farm. Accordingly, I did not review the Plan with business competition in mind, lest anyone think otherwise. The following is my review and analysis of the EDC Plan: Review and Analysis The Introduction of the plan accurately recognizes the difficulties our changing society and economic structure poses for organizations such as the Fair. However, the Plan reads like a justification for a pre-ordained outcome as opposed to an analysis of what could be done to improve conditions for the Fair as it exists today. In other words, the Plan starts out advocating for the creation of a PDA which makes its following analysis suspect. On page (iii) the Plan talks about sustainable markets and references the “10.6 million people that live in the Pacific Northwest region.” It then claims that 4 million of those people are the “primary market” [for what?] and states the annual visitor population to Whidbey Island is 980,000 people. The use of these numbers is misleading as will be discussed below. On page (iv) under the section Organizational Structure a statement is made that “it is essential that the [Fair] Association be released from its property management responsibility.” A Public Development Authority (PDA) is stated to be the “most appropriate organization to operate and maintain the property.” This is followed by an economic model described as “revenues earned plus public services rendered equals self-sufficiency.” This same formula is found on page (vii) where it is claimed that revenue must offset public service. In my opinion, this mantra is nonsense. The Plan is essentially advocating turning the operation of the fairgrounds into a “for profit business” that will be initially financed by selling bonds and soliciting donations. There can be no “public services rendered” aspect in that business model unless there is going to be a public subsidy. Bondholders will not accept a continuing use of the fairgrounds for the public good at the expense of profits. The ultimate end of this Plan will have to be the termination of the use of the fairgrounds for the Fair. Most tellingly in this regard is that on page (vi) it is stated that the Fair “is a four day event requiring nearly 30 days of site use.” The Plan states that in 2012 there were 184 non-fair event days. However the vast bulk of that use was for horse training and exercise—131 event days. These types of uses are inconsistent with a self-sustaining revenue model and will not long be tolerated when finances become difficult to maintain. So a first big question is: if the public uses are going to be allowed to continue, who is going to pay for them? Or put another way: can the public uses (the Fair, animal husbandry, etc.) be allowed to continue for long? The discussion of the two current revenue streams at the fairgrounds on page 7 is interesting. Ostensibly the reason for this Plan is the dire financial shape of the Fair. Yet the revenue numbers combined show a net operating loss of only $3,000 (I note that it is unclear whether both sets of numbers are for 2013 or only those for the “second ledger”). This is not a significant loss given the total numbers. One has to assume that the dire nature of the Fair’s financial affairs are not its operating finances but rather the lack of “retained earnings” and the fact that the infrastructure is aging. In other words, the buildings need work. But isn’t the public’s paying for this the same as having the public pay for the public services rendered component of the Plan? If public services rendered is important then it will have to be paid for with public funds, whether it is to fix the old buildings or to subsidize the payment for new ones. It seems disingenuous to say the public should pay for new buildings but not for the repair of older ones. Either way the public will pay. The discussion of the potential markets for the new event center beginning on page 9 is similarly misleading. The Plan claims that there is a 4 million primary market population with a secondary market population of 10.8 million. These numbers result from drawing a circle on a map with the center of the circle being Whidbey Island. This type of approach in determining markets might be workable for contiguous inland areas but it clearly does not factor in the transportation difficulties faced by visitors to Whidbey Island. We are an island and must be analyzed differently than the mainland. Similarly the numbers given by the Plan for “visitor population” in 2012 are misleading and very likely exaggerated. First of all, who is included in “visitor population?” This term is not defined. Does this figure of 980,000 include people who come from off-island to work on Whidbey? Does it include relatives visiting family members residing on Whidbey with no other significant use of Whidbey facilities? Does it include visitors to Camano Island? Does it include those who come to Whidbey for military purposes? The same questions can be asked about the 115,000 figure used for Langley. Another question is what time of year do these visitors come? Where do these numbers even come from? The Plan never provides that background information. Then on page 10, for one time only, the term “tourist” is used instead of “visitor population.” Did one million tourists actually visit Whidbey Island [and in what year?]? Without more detail these numbers are suspect in their support of the later analysis of how many people a new event center might attract. On page 12 the Plan does state that projections will vary by “distance, time of year and type of event or use activity” but then goes on to use “probable” penetration percentages times 11.7 million people to come up with a series of projections (Tables 9 through 12). What are these “probable” percentages based upon? The Plan does not provide that information. Accordingly, there is no way to gauge the reliability of such percentages. For all we know these numbers could have been pulled out of thin air. Certainly, no intelligent public discussion can be had about these projections without knowing where the numbers come from. Anecdotally, I can tell you that being one of only two licensed Rural Event Centers on Whidbey Island our visitor numbers don’t indicate this type of “visitor population” for event purposes. On page 15 there is an interesting paragraph that states “[b]ecause PDA’s are separate legal entities, all liabilities incurred by the PDA must be satisfied exclusively from assets accrued by the PDA…. PDA creditors do not have a right of action against or recourse to the county….” If the PDA will have to be completely self-sufficient then it is unlikely that the PDA will continue functions described as public services rendered (e.g. the Fair). And what happens if the PDA’s actual number of uses/revenues do not meet the Plan’s projections? [Later we will see that the Plan actually anticipates a County guarantee of the PDA’s liabilities.] On the next page the Plan states that initial salaries for the event center will be around $621,810 to “rise as conditions allow.” Anyone in the event industry on Whidbey Island will tell you that those salary figures are unsupportable. The answer, as we keep reading, is to form a Charitable Organization. This is clearly recognition that the “self-sustaining” model espoused by the Plan is not actually foreseen as being self-sustaining. Why not form this same charitable organization to fund the renovation of the current buildings at the fairgrounds? Was a renovation plan even considered? The laundry list of possible events included in Table14 (beginning on page 20) reads as if someone Googled events from around the country. Anyone who has been involved in organizing or holding events knows how unrealistic this list is. On Whidbey Island tourism season (with a few exceptions such as Coupeville’s Musselfest) is limited to the summer months. There are only about 12 prime weekends. Add to that perhaps one other weekend per month and this event center may be able to hold 20 prime events per year (using the Plan’s calculations—40 event days). However, the tourist pool in the Pacific Northwest, even were it as large as claimed, will be split up by events that take place throughout the region. Every small community sets up events to try to bring the tourist dollar into its economy. It is telling that nowhere in this Plan is there a mention of the total number of events currently taking place throughout the region and no projection as to what this event centers share of the total number of regional events is likely to be. Similarly there is absolutely no discussion of the events currently held on Island in the other communities--no analysis of attendance or revenue. What will happen to these events in the other communities if this Plan were to be realized? It is not discussed. There is another point to consider: tourist burnout. Tourists will not come to the same community weekend after weekend. Moreover, if this new PDA were to hold major events at the fairgrounds every weekend during the prime season (let alone throughout the year) the residents of Langley would quickly revolt. The reason most communities hold no more than one event every month or couple of months is because of the toll it takes on the community. These projections of number of events are neither viable nor, in the long run, politically desirable. As for the “Public Non-Revenue Events & Activities” section (beginning on page 23) I can tell you from experience that as you gear up for revenue producing events it becomes impossible to host other events. When we first started, the Crockett Farm was able to do charity events at little or no cost to the charities. As the demand for the prime weekends for weddings grew over time, our ability to offer those same weekends to charities was eliminated. The cost to maintain and run the Crockett Farm on a level attractive to wedding parties escalated to the point where we could no longer afford to give a prime weekend away. The same will happen with the fairgrounds. The cost to run and maintain this new PDA will ultimately mean that the Fair (and other non-revenue events) will have to go. Is this really the intent? Table 16 on page 26 needs a better reference. The legend says that the attendance numbers are for “Various Leisure Activities in Western Washington.” These numbers are meaningless without more detail. What is meant by “Western Washington?” Similarly, what are the use day projections in Table 17 based upon? Being in this business, these numbers seem highly exaggerated to me. The tables following this one are also without substantiation and very likely to be exaggerated. The Following sections deal with demolition, construction, etc. This is not my area of expertise so I make no comments about the same. The next section, beginning on page 45 entitled “Economic Performance,” provides a series of tables and projections. The problem with all of these projections is that they are based upon unsupported numbers. The drafters of the Plan relied upon numbers that are either national (see the note on page 46) or are for Western Washington (see the note on page 50) in scope. Numbers including Seattle, Everett, Tacoma and Olympia are not applicable to Whidbey Island. An examination of actual Whidbey Island events should have been done to determine a set of base projections for this new event center. Because the projections were based upon Western Washington they are very likely to be highly exaggerated. Langley is not Seattle and will not draw numbers of festival goers that Seattle will. Not now, not ever! As a result, all of these projections are meaningless. The next section on Maintenance is beyond my scope, however there is a telling note to Table 41 on page 55, where it is acknowledged that the “margins are narrow and every effort should be taken to maintain an aggressive production schedule and manage operations and maintenance effectively.” If the margins are narrow based upon use projections that are un-supportably high, the reality is likely to be that the cost of maintenance and operations will result in operating losses. The section entitled “Revenue, Expense & Debt Service” (beginning on page 61) is interesting. The Plan’s analysis anticipates an initial five year “stabilization” period (which one assumes means operating at a loss) followed by the possibility of retained earnings of nearly one million dollars “[a]t build-out and during the ten years of production.” This is noted in discussing how the project would not qualify for a single 15 or 20 year $10 million dollar capital debt bond. Instead, four separate bond issues are posited in years one, five, eight and ten. What happens if the projected revenues fail to be achievable? If after the first phase of the Plan it becomes obvious that the projections cannot be met, will the Plan be abandoned or continued? If the numbers cannot be met who will pay the bill? On page 64 it is noted that “[r]esponsibility for securing capital and operating funds is primarily that of the IECDA with the cooperation and support of Island County” [emphasis added]. But then it is stated that “[c]apital project revenue bonds are often backed, at least initially, by the County through a contingent loan agreement or guarantee.” Despite earlier assurances, this Plan anticipates that the ultimate surety for this project will be the taxpayers of Island County. And on page 65 it is noted that “the margins of achieving debt service capacity to qualify for the second bond issue is extremely narrow in that the combined annual debt payment would be $520,663.” Once again, this projection is based upon unsubstantiated use and revenue projections. Knowing bond underwriters, the Plan as presented would not qualify for any bond issuance. Bond underwriters are going to demand much more detail in projections before agreeing to issue bonds. They will not be satisfied with percentages of national numbers. The County should likewise be careful before guarantying any bond issue based upon the fuzzy numbers utilized by this Plan. Technical Memorandum No. 1 is interesting in that it recognizes the lack of available parking for the event center planned. The attendance numbers projected will require much more than the 250 parking spaces available by lease from the Langley School District. Even if the numbers of attendees are significantly less than projected in the Plan (as I suggest they will be) 250 spaces will still not be sufficient. If the event center can produce even half of the event days projected, on street parking will become a constant irritant to the residents of Langley. During the small number of events Langley currently hosts it is obvious that the residents are annoyed by visitors’ parking. Multiply the number of events and you can also multiply the irritation factor. For any event center like the one proposed to be politically viable, it must be able to provide sufficient parking on site. It is interesting in this regard to note that the County Ordinance that authorizes Rural Event Centers such as the Crockett Farm requires that sufficient parking for all attendees be provided on site. The information provided on how to attract visitors to events in Technical Memoranda No. 4 Part Two is a useful set of information that should be used by organizers of current events on Island. Groups that put on these events should pay attention. However, it clearly points out just how difficult it is to put on events and draw visitors. Nobody in this process should be deluded into thinking that “if you build it, they will come.” The authors of this Plan know that is not the case. It points out just how difficult it will be to draw the number of events and attendees projected as necessary. Conclusion It is clear that something needs to be done to improve the facilities at the Fairgrounds. However, the projections in this Plan are unrealistic. No consideration has been given to the difference in attracting visitors to an event in Langley versus a similar event in Seattle. No consideration has been given to the difference in spending by visitors to the two event venues. There is no supporting documentation whatsoever to the numbers projected. To base any major decision upon this Plan would be to act without due diligence. Furthermore, there are some very real problems with a project of this sort if it could be pulled off. Were the numbers of visitors projected to be achieved, the nature of the Town of Langley would be changed dramatically. Before any such plan were put into effect the residents of Langley should be provided with a clear understanding of how their community would be impacted and then they should be given a vote on the same. The beautiful little seaside community would lose its charm, its quiet and its livability. It would become a commercial center first and foremost. Traffic and parking would become a major nightmare. Langley’s streets would be overflowing with traffic and parked cars. Residents wouldn’t be happy with the situation for long. My major concern with this Plan is that the financial numbers are not realistic. What happens when the IECDA cannot pay its bills? We already have one “event center” on Whidbey Island in financial trouble – the Greenbank Farm. I know from personal experience just how difficult it is to attract event business to Whidbey and how difficult it is to turn a profit. Decisions of this sort should be based upon hard numbers not pie in the sky projections. This Plan needs to be reworked with realistic projections. Paula Spina March 20, 2014
Posted on: Fri, 28 Mar 2014 18:33:29 +0000