Where is the Rock Chalk Park bump? Sales tax numbers create questions about how much Junior Olympics visitors spent in Lawrence
There is no doubt that the Junior Olympics held at Rock Chalk Park in late July was a great event. More than 8,000 athletes competed, thousands of additional fans attended, and having track and field legend Carl Lewis as a guest speaker gave me an excuse to wear my 1980s sprinter shorts. But as new numbers suggest, there is quite a bit of doubt about how much the big event added to the Lawrence economy.
Every month I track Lawrence sales tax collections. For the last couple of months, I’ve been waiting to see a large spike in sales tax collections related to the influx of Junior Olympic attendees, who presumably were spending a lot of money in town. Thus far, there has been no spike.
And now the city’s top tourism official says he’s not necessarily surprised. He thinks about two-thirds of all the spending generated by the event probably went to other communities because Lawrence had only a fraction of the hotels needed to serve all the visitors.
“I think it was a bit of a learning curve in terms of what our expectations should be,” said Michael Davidson, executive director of Explore Lawrence, the local CVB organization.
More on that learning curve in a moment, but first let’s look at the numbers. Based on the sales tax figures, it is hard to see how even a third of the spending occurred in Lawrence.
Shortly after the event, Davidson’s group estimated the event pumped about $25.8 million into the economy. That number, though, should have an asterisk. It estimated direct sales from the event were about $17.7 million, but those sales created other indirect sales that brought the total to $25.8 million. Regardless, the report estimated the coffers of local governments would get about $450,000 in sales tax revenues.
There are two months the city of Lawrence would have expected to see their sales tax checks from the state reflect that bump. Because of the time it takes for the state to process and distribute sales tax money to the city, the October check is the one that is most likely show the bump. Instead, the city’s October sales tax collections actually were down slightly from October of 2016. They were down by about $16,000, meaning that total sales in Lawrence for that time period were down by $1 million compared with the same period last year.
Conceivably, some of the impact could have shown up in the September sales tax check. That month’s collections were up by about $45,000 compared with September 2016. The $45,000 in sales taxes equates to about $3 million in sales. That represented about a 2 percent increase, which is a fairly ho-hum month for the city.
And, it is a long ways from $25.8 million. To be fair, it was never realistic to think Lawrence was going to capture all the economic impact from the Junior Olympics. It was known early on that many people would be staying in Topeka and the Kansas City area because of a lack of hotel rooms in Lawrence. But when you actually see the numbers, it is a little stunning. Davidson estimates that about 41,000 hotel room nights were booked as a result of the weeklong event. Lawrence had a little more than 7,000 of them.
That’s under 20 percent of all the rooms. If you remember, Davidson is estimating that Lawrence captured about a third of all the spending from the event. But did it really? It is hard to see that in the sales tax numbers.
I think the hope was that even though people may have been staying in a hotel elsewhere, they would do a lot of exploring and spending in Lawrence. The city even created a special bus route to take people from the Junior Olympics event to downtown. But Davidson said that bus didn’t attract large numbers of riders most days.
“We didn’t see a lot of activity,” Davidson said. “We learned these were really serious athletes. They stayed on site a lot.”
Davidson said he did hear from discount retailers and other such stores that they had an uptick in business with spectators buying everything from bottled water to umbrellas. I’m sure restaurants were busy too. Our eyes didn’t deceive us; there were a lot of people in town.
I’ll be honest. I don’t understand why the sales tax collections didn’t see a bump. I’m just telling you that they haven’t received one thus far. (It is possible the event provided a boost, but sales were sluggish in all other parts of the month. I don’t think that is what happened because that would mean normal retail sales plunged by about 15 percent, which would be concerning for other reasons.)
But the numbers do give Lawrence leaders something to think about. If the event business is going to be a major part of our economic development efforts, we need to understand the paybacks. The city and the CVB spent more than $200,000 attracting the event to Lawrence. As we’ve noted, it is not clear the city’s coffers have received enough of a boost to cover those upfront expenses.
While sales taxes appear stagnant during the period, the city’s transient guest tax — a special tax charged on hotel rooms — has received a boost. But depending on which month you look at, the boost is closer to $25,000 to $50,000 in new revenue.
"Our hotel business was strong," Davidson said, pointing to those numbers.
Davidson said his office certainly is working on a strategy to convince area communities to help pay for some of the upfront costs associated with events. The pitch is that communities like Topeka and Kansas City benefit from the overflow visitors. While the number of hotel rooms in Lawrence is growing, it is unrealistic to think we’ll build enough to handle an event of this size. But, speaking of realistic, will governments in area towns really agree to provide funding to help Lawrence win a bid for a major event? Davidson thinks so.
“We definitely will have to educate, but I don’t think there will be a lot of hurdles,” he said. “They will be able to look at how their transient guest taxes go up during that time. The nice thing about this is the numbers don’t lie.”
If that is true, Lawrence needs to better understand what our numbers are saying.
For those of you who follow my monthly reports on sales taxes, here are those basic numbers:
Lawrence sales tax collections for the October period fell by 0.7 percent. For the calendar year, sales tax collections in Lawrence are still 2.2 percent ahead of where they were last year. The city is still on pace to collect more in sales tax revenues than what the city budgeted to collect for 2017. Lawrence sales, though, have been slower in the later part of the year, which creates questions heading into the holiday shopping season.
Here’s a look at how Lawrence’s sales tax collections year to date compare with other major retail areas in the state:
— Lenexa: up 7.2 percent
— Shawnee: up 4.4 percent
— Olathe: up 2.6 percent
— Lawrence: up 2.2 percent
— Topeka: up 0.7 percent
— Overland Park: up 0.6 percent
— Saline County (Salina): down 0.1 percent
— Kansas City, Kan.: down 0.7 percent
— Sedgwick County (Wichita): down 1.1 percent
— Riley County (Manhattan): down 2.5 percent