Consultant: $100 million Expo building replacement would secure fairgrounds future

A $100 million investment in the W.H. Lyon Fairgrounds Expo building would translate into another 100 days of use each year and another half-million dollars in economic impact for the Sioux Falls area.

Those figures represented just a few of the conclusions from a consultant who presented to a Monday meeting of the Minnehaha County Commission and its fairgrounds task force. The county-owned W.H. Lyon Fairgrounds plays host to the most well-attended fair in South Dakota each summer and a wide range of events throughout the year. 

The county is the owner, responsible for upkeep and management, but does not see a share of the sales tax revenues generated by the events. State law directs sales tax revenues to the state and cities, while counties rely on property tax revenues.

That’s one reason the commission convened the task force and hired consultants Charles D. Smith Architecture and Planning, and CSL International, to assess the fairgrounds’ future. Another push for a consultant review came in the form of a $65 million offer from Knife River Corp. to buy the land for an expanded quarry in July.

The deed for the fairgrounds specifies that it be used for the fair, so some commissioners dispatched the idea of a sale right away. But state law does allow such land grant covenants to be broken if meeting the expectations becomes economically untenable. The cost of upgrades, the potential of a sale and rapidly expanding slate of event center options in the area and around the state each factored into the decision to hire a consultant.

The county has always been in a difficult place with regard to the fairgrounds funding, Commissioner Dean Karsky said. Nothing in the report changes that. 

“The county owns the property and is expected to maintain it, but the county’s not the winner with these events,” Karsky said. “The city and the sales taxes get the benefit.”

Location a plus for Sioux Falls fairgrounds

On Monday, CSL’s Joel Feldman told commissioners and members of the 15-person study group that the fairgrounds have a great location and are well-utilized – for now.

Beyond the fair, the fairgrounds hosts a weekly food giveaway, monthly flea markets, livestock shows, an annual dog show, a renaissance festival and a model train show. Most non-fair events are housed in the Expo building.

It all adds up to 54 events, 139 event days and half a million visitors each year. Taken together, they contribute $1.1 million in state sales taxes annually, as well as $496,000 in city sales taxes and $311,000 in tourism and business investment district taxes.

Event organizers like the location just off Interstate 29, as well as the wealth of entertainment and recreational opportunities afforded by South Dakota’s largest metropolitan area.

The fairgrounds’ reputation could suffer without investment, though, Feldman told the group.

“We’re not up to industry standards in many respects at the fairgrounds,” he said.

Surveys with event-holders revealed some concerns about the 80-year-old fairgrounds. Facilities comparable to the Expo building around the country that have invested in modernization are now better positioned to host a wider range of events, he said.

E-sports tournaments, augmented reality/virtual reality events or drone racing competitions count as just a few of the new opportunities on the table if the county were to invest in an upgrade. 

Feldman’s report recommended a new Expo building with 50,000 square feet for events, 100,000 square feet for exhibits and 7,500 square feet of meeting rooms. Cost estimates ranged from $84 million to $105 million, though Feldman cautioned that price volatility could push actual costs far higher.

The fair has already lost business to state-level competition, according to Sioux Empire Fair Manager Scott Wick. A new building at the South Dakota State Fair has drawn interest from multiple organizers that formerly rented the Expo building. 

“We’ve had events book at the DEX in Huron, even though it’s not even built yet,” Wick said.

Return on investment questioned

Study group members peppered Feldman with questions about the cost of current operations, survey results and the wisdom of an investment that would force the county to charge higher rent to event organizers to recoup costs.

“There may be some of those events where the attractiveness now is the low rate,” said Bob Thimjon, a Sioux Falls hotelier and member of the study group.

But higher rents or dynamic pricing based on event type might not scare off the kinds of events the county could target with newer facilities, said group member Jeff Eckhoff, director of planning and development services for the city of Sioux Falls.

“With a higher-end facility, you’d get the kinds of events that can pay more,” Eckhoff said.

Commissioner Jean Bender, meanwhile, was among those who pointed out that the event-related economic impact to the state and local economy doesn’t necessarily translate into county revenue. The county budget is built from property taxes; sales taxes go elsewhere.

Operating expenses for a new facility would put the fair in the red during construction and in the first three years thereafter, but would rebound to manageable levels, Feldman told the group. Four years out from a new building’s opening, once operational expenses stabilize, the area would see an additional $29 million of economic activity a year.

Those projected figures are only appealing under an assumption that the county finds the cash to pay for the upgrade, though. Were the burden to fall on the back of the county alone, “we can’t afford it,” said Commission Chair Cindy Heiberger.

The consultant report did lay out a number of pathways to funding beyond county coffers. Grants and donations, sales tax contributions from the city, naming rights sales or higher registration fees could help fill in funding gaps.

Amy Pokela, a community representative on the study group, said she’s excited to learn about the area’s reaction to the proposal. That reaction will help the county decide if the legwork and negotiation will be worth the effort.

“If the community supports this, all those other things will work themselves out,” Pokela said.