Is it time to tap the brakes on city/private financial partnerships? That question has been on my mind the past two weeks. The city of Janesville may well have the perfect storm of financial issues brewing, but much like a thunderstorm watch, no one is really paying attention.
Plans for funding road maintenance have been getting a lot of attention, as has the revival of efforts to build an indoor sports complex. The city is ready to get involved in both. But my question is, “Should it?”
Roads are critical to maintaining commerce and development goals, but they offer no other financial return on investments. The city rightly recognizes that borrowing for “routine expenses” is unsustainable.
The proposed sports complex, on the other hand, comes with myriad potential positive revenue streams for the area. Once completed, there would be space rental income. Restaurateurs, hotel owners and retailers alike would also benefit from more “sports tourism” and potential conventions.
I admire and support the vision. I also have an inquisitive nature. If all these financial benefits come with the building of a facility, why wouldn’t a private entity come forward in partnership with Friends of the Indoor Sports Complex to complete and own the project? A private investor would only incur 75% of the cost to construct the facility (FISC adds $7 million) and get 100% of the profitability. I believe it is fair to wonder why the city is eager to jump in with both feet when few private investors seem to show much interest.
For the city’s part, my best guess is they will end up needing to borrow somewhere near $30 million. The feasibility study conducted in 2018 suggests that the city will incur operating losses in the first two years and then operate between a $49,000 loss and a $62,000 profit each year thereafter. At that rate, the facility wouldn’t pay for itself for 450 years.
I realize this oversimplifies the financial impacts to the community. Increased hotel, restaurant, gasoline, retail and other sales will benefit employers and could add upwards of 200 jobs to the community. Those positives, however, do not translate back to direct city revenues. Increases in sales tax go to the state and are run through the woefully outdated formula that dictates our level of state aid. Janesville would only see a fraction of those incidental increases in sales tax and income tax revenue.
This is all happening while residents are trying to digest the necessary added expenses that will help pay to keep our streets in good shape and while a currently high inflation rate are pinching those with low incomes. It’s time for a gut check here.
I believe the sports complex would benefit the city in ways the consultants outlined. Unfortunately, those benefits might be akin to a person buying a new Cadillac Escalade when they can only afford a Chevy Spark. It will be new, shiny and offer comforts and potential and generate a lot of head turns. But the financial burden on the owners—the residents of Janesville—might simply prove too much for some to bear.
A finance plan could be constructed in time to be presented as a referendum on the ballot next April, however.
I advocate neither for nor against the development. I simply believe that it is time to let the potential owners have a say in whether they believe it is a good investment by putting the matter to referendum. Best case, the complex moves forward. Worst case, we tap the brakes and give it a second look.