Fact Checks

Check the Claims

claim  "The State Theatre is no longer usable as a theater."

Check  Watch this three minute video filmed in September 2011, eight months before the Confluence project was proposed. Judge for yourself whether the theater should be closed forever (it would no longer be utilized as a performing arts theater - click here for more details).

 

claim  "The State Theatre needs $7.2 million in immediate improvements just to bring it up to building code
                         standards." Is that true?

Check  The referenced $7.2 million was from a study conducted in 2006.  Although several of the items listed are needed, most fell into the category of “it would be nice” rather than true requirements.  The $7.2 million expenditure was to be used to completely reconfigure all interior walls and called for new restrooms, dressing rooms, offices etc. in response to the desires of the study participants.  Even the theater seats were to be reconfigured and replaced.  There is no question that both fundraising and maintenance are needed, as the owner of the facility, ECRAC, has been largely focused on supporting the Confluence project instead of maintaining the theater.  A major fundraising campaign had been planned for 2012.  With the announcement of the Confluence project, however, it was never conducted.

    Documents From the 2006 Study:
    -Wishlist   -   click here to view.
    -Prioritized Wishlist   -   click here to view.
    -Feasibility Study  -   click here to view.
    -Proposal   -   click here to view.
    -Plan Sketches  -   click here to view.

 

claim  "It’s not that far from campus."

Check  This is Wisconsin. Music students often have instruments that would sometimes need to be in Davies, sometimes in Haas Fine Arts and, now, sometimes at the Confluence.  Many instruments are sensitive to the cold.  Also, practice time is critical to being an accomplished performer.

First year students will be excluded from the Confluence Project's student housing facility.
(Source: http://www.uwec.edu/News/more/confluenceprojectFAQs.htm )

Google Maps shows the locations of the Davies Center, Haas Fine Arts and the Confluence below.  This map estimates a distance of 1.2 miles and a walk time of 24 minutes from the Davies Center to the approximate location of the Confluence.  The Davies Center is at 77 Roosevelt Avenue.  Haas Fine Arts is at 121 Water Street.  The approximate Confluence location is 120 Graham Avenue. 

 

claim  "The university is going to spend the money anyway."

Check  The University’s master plan, found at https://www.uwec.edu/facprojects/upload/MPPrefAlternative092810.pdf, does include a performing arts center to be built across from Haas Fine Arts Center on Water St.  The money for that has not been approved.

 

claim  The city reported 177% return on its then $17.2 million investment for the North Barstow project which
                         includes Phoenix Park (TIF No. 8, the TIF District in which the Confluence Project is planned).

Check  The calculation treated as profit the $30.5 million in increased PRIVATE property values.  The City of Eau Claire does not own the properties in question.  Its rights are limited to the increased taxes the properties generate.  Currently, the City receives no property taxes on the increased values.  Nor will it receive any until after the TIF is closed.  If the Confluence project proceeds, the TIF will remain open until 2039 – in excess of 37 years.  During those years, the City’s return on investment will be negative.  All property taxes will be paid to the bondholders and revenues are thus zero; city services will be provided with no recompense.

 

claim  "Eau Claire County’s $3.5 million investment in the Confluence Project will produce $2.8 million in new sales
                        tax revenue over its 10-year repayment period."

Check  This would mean that the anticipated 29% increase in theater patrons, would generate a 10 fold increase in county taxes from the arts.   That doesn’t add up.   A proportional 29% increase in sales would actually generate a total of $8,120 of sales tax.  It would take 2,087 years to pay back the debt with those proceeds. 

Click here to show the details of the calculation.

Calculation: The County sales tax is 0.5%. To generate $2.8 million in new sales tax, the arts would have to supply an additional $560 million of revenue ($2.8 million divided by .005) or an average increase of $56 million per year.  That is a 10 times increase over the $5.6 million that is currently generated per year by the arts. The VenuWorks feasibility report (the report relied on by the Pro-Confluence group) anticipated that there would be a total audience of 176,400 per year. That would mean, at most, an increase in attendance over current numbers (125,950) of 50,500 or 29%. A 29% increase in arts-related revenue generates an additional $1.62 million of taxable revenue. Applying the 0.5% sales tax rate, to that figure results in increased sales tax of $8,120.

Hide the calculation.

In fact, the County is authorized by law to raise taxes by the amount that its debt service increases.  The ability to increase the tax levy as a result of the increase in debt was actually cited by the representative of the Chamber of Commerce as a positive benefit of the Confluence project.

 

claim  "All remaining costs associated with the county’s $3.5 million up-front investment in the Confluence Project
                        will be recovered within the first 5 years.  County property taxes are paid by the project’s mixed use
                        building."

Check   Wrong – the Student Housing/Mixed Use Building is in a TIF District.  The county will not see a dime of tax money from that building for approximately 20 years. Once built, however, the building will be placed on the tax rolls and the County will have a "use it or lose it" option to increase its tax levy.  It is a forgone conclusion that the County will select the "use it" option.  The increase will be borne by property owners outside the TIF district.  Effectively, the county taxpayer will bear the tax twice – once in the form of debt and a second time in the form of the new building construction tax levy increase.

 

claim  "New room tax revenues produced by downtown’s two renovated hotels (projects directly attributable to
                        the Confluence PAC) will pay interest expenses for the Confluence Project’s new market tax credits and
                        cover its reserve fund."

Check  To provide those revenues, the two hotels would have to rent out 157 rooms per day at $100/per room for 365 days per year.  Given the fact there are only 110-120 rooms planned for the two hotels (30 for the Green Tree and 80 to 90 for the Hotel Eau Claire), that is a physical impossibility.  Moreover, the Eau Claire market is a very competitive one.  Rooms are typically rented for far less than $100 per night.  Note that the total number of hotel rooms rented for arts-related activities, according to Visit Eau Claire, is 2,850 rooms per year or 8 per day in contrast to the required 157 rooms per day.  To reach that figure, hotel stays would have to increase by more than 1,907%.

Click here to show the details of the calculation.

Calculation: The interest on the market tax credit and the annual reserve fund for ordinary maintenance total $200,000 per year. That would require the two hotels to generate room taxes of $458,000 annually as Visit Eau Claire, under Wisconsin State law, must receive 56.3% of the hotel taxes collected. At an 8% rate, the hotel would have to receive revenue of $5,725,000. At $100 per room, the two hotels would have to sell 57,250 rooms ($5,725,000 divided by $100) or 157 rooms per day versus the 110-120 total rooms combined for the two facilities.

Hide the calculation.

 

claim  "In 1995 the valuation of taxable property in the Confluence Project’s tax increment district (TID) was
                         $1,494,118. In 10 years, it has grown to $46,000,000, by 30 times, due to commercial and residential
                         development that has recently occurred in the TID. "

Check   Those numbers are incorrect by more than a factor of ten.  The property value in the TIF was $10.4 million as of 2002 prior to development, and as of the end of 2012, the increased value was $30.5 million, not $46 million.  The ratio of private property increase to the City’s 17.2 million investment was very low – 1.77 to 1, indicating that the private sector is not stepping up and developing property in the district at an adequate rate.  The more “successful TIFS had a ratio of 8 to 10 of private property value increase to 1.

 

claim  "It’s not appropriate to use as a comparison the return on a 30 year Treasury Bond investment with the
                         actual return on a TIF investment because by law, a city or a county cannot borrow money and invest it
                         in Treasury bonds."

Check   No one is advocating borrowing money at the taxpayer’s risk and placing the funds in 30-year Treasury Bonds.  The point is that if the City’s return on its investment is less than that which a taxpayer could secure by placing funds in that type of bond, then the pay back is very poor indeed.  An investment in a 30-year Treasury is a risk-free investment for the brain dead.  If the TIF’s cannot even match a 30-year Treasury pay back (and none has been close, even those which are deemed highly successful), then it is a very questionable investment.  Of greater concern, is the apparent inability of the City Council persons and staff who are making the investment decisions, to grasp this very basic investment principle.

 

claim  "Without this project, downtown will not progress."

Check   The properties for the proposed arts center and much of the student housing/mixed-use building (first block of Graham Avenue and first block of Eau Claire Street) were previously owned by Reinhart Real Estate of La Crosse.  They were purchased by local developers in May 2012.  These developers do have a history of developing the property they own.  Given the fact that the properties are currently standing empty, it is reasonable to assume that they will be developed if the Confluence project does not proceed. http://www.uwec.edu/News/releases/12/05/0523ConfluenceProjectMM.htm

 

claim  "We will be able to bring in bigger shows."

Check   The largest of the proposed theaters was originally planned to have 1200 seats, which is only about 100 seats more than the State Theatre.  The number of seats proposed is now a range of 1200-1500.  At 1500, the theater would have only 25 more seats than the Memorial High School Auditorium.

 

claim  The VenuWorks report projects that the arts center will have a small profit the first year.

Check  The VenuWorks report treats a City subsidy ($300,000 from room taxes) as revenue in calculating the “profit”.  But for that subsidy, the theater would be producing a sizable loss for each of the years covered in the report.  Smaller town theaters traditionally have large deficits that must be offset somehow.  Many rely on private philanthropy, while others use taxpayer funds.  Those that make money are sizable venues (2000+ seats) in big cities with large populations that enable them to run the same show for 4-6 weeks at a time. Here’s a sampling of how theaters in smaller towns fare:

 Theater  Annual Revenue  Annual Loss  Contributions Received
 Fox Valley PAC, Appleton   $11.8 million   $3.9 million   $5 million (includes $1.3 million of interest
  from an endowment fund)
 *Grand Theatre, Wausau   $1.4 million   $468,000   $641,000
 **Rendondo Beach, CA   $745,000   $300,000   $300,000**
 *Burnsville, MN PAC   $1.1 Million   $1.1 million   $1.1 million**

*Programming comparable to Eau Claire’s State Theatre. Source: IRS Form 990’s, City CAFR’s or budgets, PAC Web sites.

**City-owned primarily funded by tax dollars; Redondo Beach includes no provision for capital or major maintenance items.