Consultant finishes arena analysis

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BY DEENA WINTER / Lincoln Journal Star

Six months of research into the viability of a new arena in Lincoln resulted in this conclusion by a consultant: It’s financially feasible and needed.

John Kaatz of Convention, Sports & Leisure, which is based in Minnesota, told an arena study group Tuesday that only 17 percent of national touring events can squeeze into the city’s outdated, 50-year-old Pershing Center. And so the city is missing out on a “a tremendous amount of market,” he said.

His company interviewed about a dozen event promoters, and there was a lot of interest in booking more Lincoln events, Kaatz said. Most of them said they’d prefer to see an arena with at least 11,000 seats, with the flexibility to do smaller events.

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Kaatz recommends the city build a 13,000- to 16,000-seat arena with 600 club seats and 20 suites — if the University of Nebraska-Lincoln’s basketball team is a tenant. An amendment limiting Lincoln’s arena to 16,000 seats was recently tacked onto a bill in the Legislature that would help Lincoln finance an arena.

That’s OK by Kaatz; he says beyond 18,000 seats the city would see diminishing returns. Only 5 percent of Omaha Qwest Center events fill more than 15,000 seats, he said.

He estimates the city would have to subsidize the arena to the tune of $400,000 to $900,000 annually. Currently, the city subsidizes the Pershing Center at a rate of $525,000 per year.

While it seems logical to base the size of a new arena on the population of a city, he said the presence of a university and proximity to a metropolitan area are bigger factors.

The Husker basketball team has a chance to “go to the next level,” he said, with a new arena. Nebraska is selling 78 percent of capacity, which is about the midpoint for Big 12 conference basketball arenas, Kaatz said. A quality new arena could push Nebraska to the top five, he said.

City and UNL representatives (including Athletic Director Tom Osborne) have been meeting regularly and talking seriously — about things like rent, concessions proceeds, suites — in the past couple months. But no formal, public commitment has been made by UNL.

A thorny issue will be whether alcohol will be allowed in the arena. Kaatz said Fargo, N.D., Fargodome officials say it’d be a lot easier to sell suites and club seats if alcohol were permitted.

The city could host a minor league sports team in the arena, too — likely an indoor football team, Pershing manager Tom Lorenz said.

The consultant wasn’t as optimistic about the need for a new convention center. (An arena is for big events like concerts; convention centers are more for meetings and conferences.)

Kaatz said the city’s existing conference space can handle most of the state and regional events, but a new convention center would likely attract a modest number of bigger national conferences, maybe a half dozen annually.

He said the return wouldn’t justify the “very, very high” cost of a new convention center, so the city should pursue a public-private partnership with a developer.

The city could buy the land, provide infrastructure improvements and finance the development of a portion of the convention center, for example. And a private entity could build a hotel and operate both with no city subsidy, perhaps.

Operating losses for convention centers range from a couple hundred thousand dollars to more than $1 million annually, Kaatz said. But cities build them because they’re considered an investment to attract out-of-towners who come to town, drop a load of cash and leave.

He recommends the city work with a private developer to build a 30,000-square-foot convention center and at least 250-room hotel. The bigger the hotel, the better, but the bigger the hotel, the bigger the city subsidy, is usually the way it goes, Kaatz said.

During Kaatz’s briefing to the arena committee, Osborne asked whether practice fields associated with the arena couldn’t be used for convention space, but Kaatz said they would probably only be suitable for a limited number of events.

And the total cost of all this? Prior estimates have varied, but Kaatz puts the total for an arena, parking garage, convention center, roads, land and other costs at between $217 million and $254 million.

Kaatz said the city of Lincoln has done its homework, and the project is financially feasible if the city succeeds in obtaining the bulk of a list of 17 possible revenue sources. Some of those sources are big ifs, though, since they require legislative or voter approval.

The city is looking at everything from an increase in the hotel occupancy tax to a general obligation bond to naming rights to generate between $11 million and $18 million annually to pay off the projects.

Kaatz said the city has tapped all the typical funding sources. The only other idea he suggested is to do something like Oklahoma City did, by convincing voters to agree to a temporary 1 percent increase in the sales tax to do a laundry list of projects, including schools.

So while Kaatz came to the conclusion that a new arena is needed and doable, ultimately he said it’s up to Lincoln voters to decide whether it’s worth the cost.

Reach Deena Winter at 473-2642 or dwinter@journalstar.com.