Sanford Center operating costs not unique to Bemidji; hospitality tax being explored

BEMIDJI--Since opening its doors in 2010 the Sanford Center has annually attracted more than 100,000 people to Bemidji and produced yearly economic impacts in the millions of dollars.


BEMIDJI-Since opening its doors in 2010 the Sanford Center has annually attracted more than 100,000 people to Bemidji and produced yearly economic impacts in the millions of dollars.

However, a report recapping 2018 shared with the Bemidji City Council Monday showed lower than average attendance numbers for the facility, coming to 115,217 for the year. Partially as a result, the Sanford Center's annual operating loss came to $421,734, rather than the budgeted $398,865.

The attendance was the lowest for the Sanford Center since 2012, which saw 122,295 people come through the doors. In 2016 there were 132,859 attending events and in 2017, 130,812 people came to the event center. The Sanford Center saw its highest attendance in 2015 with 171,824.

A major factor when analyzing the attendance for the city-owned building, though, is how many attend Bemidji State hockey games. The BSU men's and women's hockey teams call the 4,373-seat arena home and often bring tens of thousands of fans to the facility.

Fewer home games were slated for both teams in 2018, which meant the number of sporting event attendees saw a drop.


"Last year we had less games and when the games were scheduled, there were less students in town," Sanford Center Executive Director Jeff Kossow said.

On an annual basis, sporting event attendance has seen some fluctuation:

• 2011 - 71,125

• 2012 - 50,912

• 2013 - 73,349

• 2014 - 72,716

• 2015 - 72,150

• 2016 - 51,572


• 2017 - 68,749

• 2018 - 38,350

According to Kossow, fewer games in 2018 are only part of the equation, though, when looking at attendance shifts at sporting events. Another factor in the numbers changing over time is the era of college hockey realignment where several programs once in the Western Collegiate Hockey Association left for other conferences.


"When the building first opened, our revenues were typically double what they are. Now, you are going to have more staff in the building and more costs, but selling out games has a huge impact on your bottom line," Kossow said. "The bigger challenge has been the change from the WCHA. You don't have to be a mathematician to see the reality. You used to have UND, Wisconsin and (the Minnesota) Gophers. All of those traveled well. So it's been a game changer."

If more games are added to the schedule, Kossow said he expects the attendance numbers to boost back up and that the Sanford Center will initiate efforts to have more group ticket sales this season. Additionally, City Manager Nate Mathews said the Sanford Center Board of Directors is working with the university to boost attendance.

Responding to losses

In 2018 the Sanford Center generated a revenue of $2.3 million while the expenses came to $2.7 million, resulting in the operating loss of $421,734. On an annual basis, though, the city transfers an amount of $400,000 for operations, meaning the loss comes to $21,734.


Since opening in 2010, the event center has operated with losses, which are reimbursed by the city with an operating transfer of $400,000 to cover the shortfall and reinvest in the building.

Over the years, the operating losses have gone as follows:

• $378,316 in 2011

• $377,992 in 2012

• $367,513 in 2013

• $342,960 in 2014

• $315,835 in 2015

• Because of $244,000 related to adjustments from 2015, the 2016 loss was reported at $770,410.


• $399,770 in 2017

In 2019, the city's operating transfer was budgeted at $450,000. Additionally, the city budgeted $230,000 for capital replacements and repairs as well as $324,000 for south shore land bond expenses. In total, the amount comes to $1.004 million, equating to 17 percent of the city's property tax levy.

According to City Finance Director Ron Eischens, the event center's situation of operating with a deficit is common with other communities in the region. However, Bemidji is unique in covering those costs with property taxes.

Other regional cities with event centers include the following, according to Eischens:

• Duluth has the Duluth Entertainment Convention Center, with Amsoil Arena attached. Home of University of Minnesota Duluth hockey, the building operates with a loss of $1.7 million. The city of Duluth collects $1.7 million through special taxes to assist in funding the building.

• Grand Forks with the Alerus Center. The main tenant is the University of North Dakota football program and the center had an overall profit of more than $250,000. Grand Forks collects $8.5 million in revenue through special taxes.

• Mankato has the Mankato Civic Center, operating with a loss of $1.9 million. The tenant for the building is Minnesota State University hockey. Mankato uses special taxes in the amount of $6.1 million to support the building.

• St. Cloud with the River's Edge Convention Center, which operates with a loss of $823,000. The city of St. Cloud collects $2.1 million in revenue from special taxes to support the building.


• In Rochester there's the Rochester International Event Center, operating with a loss of $1.6 million. To support the building, Rochester uses special taxes which collect $1.7 million in revenue.

Special taxes for these communities are usually related to sales, restaurants and lodging. Eischens said the city of Bemidji does collect $2.3 million with special taxes, but they are used for paying construction debt costs.

Because of the existing operating transfer and growing maintenance costs related to the building's age, city officials have suggested the idea of a hospitality tax. The goal of the tax would be to collect more dollars from visitors to help offset the costs primarily paid for at the Sanford Center.

In January, the council approved forming a committee to explore the hospitality tax idea and consider what the best options are with starting one.

"Basically, the committee is following up on the initial two meetings we had. The goal is to get the community input and engagement on whether we want to do something different than what we're doing right now," Eischens said. "The will of the committee is to take their time, get the community involved, and my guess is meet over the next several months before bringing a recommendation to the council in fall."

If the process is followed, Eischens said the hospitality tax proposal would then be sent to the state government during the 2020 legislative session for approval. Additionally, Eischens said such a tax may require a local referendum.

According to data from Eischens, potential hospitality taxes in Bemidji could be:

• A 1 percent tax, which would generate either $584,000 from restaurants, $132,000 from lodging, or both for $716,000.


• A 1.5 percent tax, which would generate either $876,000 from restaurants, $198,000 from lodging, or both for $1.07 million.

• A 2 percent tax, which would generate either $1.16 million from restaurants, $264,000 from lodging, or both for $1.4 million.

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