Bemidji City Council to engage with community before deciding future of Sanford Center funding

BEMIDJI -- Members of the Bemidji City Council expressed an openness Monday to supporting a special use tax to help fund the Sanford Center, but want community feedback first.

The building, owned by the city, has been in operation for just over a decade, having opened in October 2010. The 193,000 square-foot facility is home to BSU's hockey program and is managed by VenuWorks, a company from Ames, Iowa.

The building includes an arena with more than 4,000 seats as well as conference space. It was originally known as the Bemidji Regional Events Center and was made possible after a citywide vote in 2006.

By a count of 2,227-2,182, Bemidji voters approved extending a half-cent sales tax to assist in the building's construction, which broke ground in April 2009. From its conception to the vote and through its operation, the building has been the subject of discussion and debate.

On an annual basis, the city makes an investment of hundreds of thousands of dollars to cover operating losses. In 2020, the city invested an operating amount of $450,000 .

While the facility experiences losses, according to city data, the Sanford Center also generates an economic impact of $19 million. The impact is a mix of spending on retails, meals, entertainment, travel expenses and overnight stays from visitors, as well as employee wages, third party advertising opportunities and local business contracts.

Despite the economic impact, the building has remained a point of contention in the community. In his comments during a work session Monday, May 24, Mayor Jorge Prince noted the issue.

"As I've talked among our citizens and business owners, I don't hear many people who are happy with the Sanford Center," Prince said. "I hear from the people who voted for it and don't believe it serves its purpose. I hear from people who didn't vote for it and say 'that's exactly what we said was going to happen.'

"There's this dissatisfaction with how things have turned out. When I look at our community, I want to say 'if you were in favor of it, come alongside us and help us fulfill its promise. If you were against it, come alongside us and help us make lemonade.' We need it to be successful for all of us."

For Ward 3 Councilor Ron Johnson, the major problem needing to be addressed is how VenuWorks operates the building.

"The issue is we have never really looked at any other management option," Johnson said. "There was never a look at another management company that maybe could offer a better guarantee. Or, there are a lot of cities that do it themselves and eliminate that management fee. We have a bigger overhead than many of the places around us since they don't have management companies."

Ward 4 Councilor Emelie Rivera said a key factor moving forward with the building is making it accessible to all of Bemidji.

"This is supposed to be an event center for our city, and so many in our community can't access it," Rivera said. "Ideally, we would be able to reach a good compromise between the community use and balance that with events. I think in the last year, we saw what VenuWorks can do to assist the community. I think we can find that balance if we can balance the expense with not just our taxpayers, but also our visitors."

A funding option to improve how the event center operates financially that was widely discussed Monday was a special use tax. Such taxes can come in the form of a sales tax or a hospitality tax, the latter having a focus on food and beverage establishments.

In the past, both city elected officials and staff have supported a special use tax, but it has not been established. Either type of tax requires approval by the Minnesota Legislature, and a sales tax requires an additional referendum approval requirement by the city residents in a vote.

The argument for a special use tax is that it can collect dollars from visitors to the community who use the Sanford Center for events. Doing so would allow the city to provide property tax relief to residents as its main funding source for the building.

A hospitality tax for the city would generate different levels of money depending on what level is set:

• A 1% tax on restaurants would produce $584,000, while a 1% tax on lodging would generate $132,000.
• A 1.5% tax on restaurants would generate $876,000 while one on lodging would produce $198,000.
• A 2% tax on restaurants would produce $1.16 million from restaurants and $264,000 from lodging.

If a sales tax were to be implemented, it would create the following amounts:

• An 1/8% sales tax generates $600,000.
• A 1/4% sales tax generates $1.2 million.
• A 1/2% sales tax generates $2.4 million.

Ward 5 Councilmember Nancy Erickson expressed her support for a hospitality tax during the meeting.
"You need to tax the user of this event center," Erickson said. "People who are coming here, they're staying overnight in hotels, maybe because they're going to the Sanford Center. We don't know what actually fills up its hotels, but they are using our city in general. If they are not here for the Sanford Center, they're in our parks, at our lakes, shopping and using our streets. They are using our services. So, I see nothing wrong with saying to these folks, 'you're using our services, and there's nothing wrong with a hospitality tax.'"

During his time to speak, Ward 2 Councilmember Josh Peterson said getting support from residents and business owners will be critical if such a tax proposal is to get traction at the Legislature.

"There has to be community buy-in for anything to ever improve at that facility," Peterson said. "When I was out there on the campaign trail, the constituents were very loud, they want to be heard. They're not being heard if we just go down the same road again. I'm not against a hospitality tax, but if we don't take their thoughts and concerns into our consideration, we're not going to be successful."

Ward 1 Councilor Audrey Thayer agreed with Peterson's comments.

"I think we need to go for the hospitality tax, but we have to figure out a strategic plan to listen to the community and answer those questions," Thayer said. "I think we do that as a group and we move forward together. That's the responsibility of us as a council."

Following the discussion, the council came to a consensus to hold a town hall type of event to listen to citizens and business owners in July and engage with the public until then. The council then intends to use the findings from the event to determine how to move forward on the hospitality tax subject.