A Response to John Patterson's Optimistic Predictions for the Fieldhouse

By: Dan Schroeder
February 3, 2011

John Patterson, Ogden’s Chief Administrative Officer, has distributed a written “rebuttal” (attached) to my Independent Analysis of the Fieldhouse Feasibility Study (which is now posted at http://wcforum.blogspot.com/2011/01/weber-county-forum-special-independant.html ). His rebuttal is a welcome addition to the dialog on this important proposal, so I would like to continue this dialog by responding to Mr. Patterson’s points. I will refrain, however, from responding to his ad hominem remarks.

Mr. Patterson provides a long list of reasons why he feels the Fieldhouse will be “far more profitable” than is projected in the HLA Study Report. Some of these reasons sound plausible, while others would have negligible effects and still others are purely speculative.

Expenses

The most credible suggestion is that the two largest Fieldhouse expenses--labor and utilities--might be less than projected because both labor and utility rates are significantly lower in Ogden than the national averages. The HLA Report does not explicitly say whether these regional cost variations were taken into account, but one would think that a consulting firm with HLA’s credentials would be aware of these variations. In any case, the accuracy of these projections is easy to check.

For labor, the projected full-time-equivalent annual salaries are displayed on page E-8 of the Study Report: $60,000 for six management positions, $45,000 for four marketing positions, and $18,000 for everyone else including lifeguards, food/beverage sellers, and maintenance workers. These salaries are in inflated dollars for the year 2013. For comparison, according to the latest data on UtahsRight.com, Ogden City in 2009 employed 130 individuals at annual salaries above $60,000, including job titles such as Maintenance Supervisor, Recreation Supervisor, and Special Events Coordinator. The city employed an additional 187 individuals at salaries above $45,000, including such job titles as Maintenance Technician, Assistant Project Coordinator, and Administrative Assistant. Essentially all of the city’s full-time employees earned more than $18,000 per year in 2009. Thus, the wages assumed in the Study Report do not seem to be above Ogden’s prevailing rates and could very well be too low.

For utilities, Page E-11 of the Study Report states that existing indoor waterparks have annual utility expenses ranging from $10 to $13 per square foot. Because nearly all existing indoor waterparks have been built within the last decade, this utility cost range represents reasonably modern facilities with up-to-date efficiency standards. If we put Ogden’s facility at the extreme low end of this range during its first year (2013), the utility expense for the aquatic area alone would be $800,000. Adding 50%, or $400,000, for all the rest of the Fieldhouse (that is, for the other two thirds of the floor space and all associated lighting, heating, air conditioning, restroom, and shower use) brings the total up to the projected value of $1.2 million. As a reality check, the WSU Dee Events Center, which is comparable in size to the velodrome portion of the Fieldhouse and which is used only sporadically for games and special events, is budgeted to have a total utility bill of approximately $240,000 in fiscal year 2012. So $400,000 for the velodrome and tennis areas combined, both of which will be used all day long for 360 days per year, is not obviously too high or too low.

Mr. Patterson also suggests that savings can be found within the projected expenses for management, marketing, maintenance, and “reserve for replacement”. But he provides no specifics on why any of these projections might be too high, so his suggestion seems to be pure speculation. We could just as easily speculate that the projections are too low. Even if savings can be found in these areas, they would be small because none of these expenses are especially large to begin with.

Revenue

On the revenue side, Mr. Patterson states that the projections in the Study Report are “very conservative.” His principal arguments for this view consist of statistics that compare the numbers of projected users to the entire populations of Weber County, or the Wasatch Front, or Weber County hotel guests. These statistics sound impressive but are so out of context that it is impossible to evaluate them without doing considerable arithmetic.

For example, Mr. Patterson points out that on an average day, fewer than 1/2 of one percent of Weber County residents are projected to be using the waterpark. This sounds like a small number, although it also equals 700 daily waterpark visitors (just from Weber County), which might sound larger. But is this truly a conservative estimate, as Mr. Patterson claims? How can we even tell? As a reality check, we might compare to the number of Weber County residents who use the Salomon Center on a given day, or the Marshall White Center, or perhaps Ogden’s East Bench trails, or even the library. But none of these are similar enough to give reliable estimates, so we need a better approach. Because the waterpark would generate well over half of the total Fieldhouse revenue, we must be as careful as we can.

The approach taken in the HLA Study Report is to work at a finer level of detail. So, for example, the Report points out that the waterpark will be most popular among children under 18 years old, of whom there are 70,522 in Weber County. It then estimates (on Page D-3) that 15% of these children will use the waterpark during a given year, and that each of these will visit an average of 12 times. These two numbers--15% and 12--presumably have some basis in the consultants’ experience with other waterparks. But the Report provides no justification for using these particular numbers, nor does the Report provide any data that can be used to estimate the range of uncertainty in either of these numbers. The same is true of the usage fractions applied to other age groups, residents of other counties, and hotel guests. If Mr. Patterson believes that any of these numbers are too low, then he should tell us by how much, and why. Without additional information, we could just as easily guess that the numbers are too high.

Fortunately, the Study Report does provide one additional type of information: The average total attendance per square foot at eight existing waterparks that are considered to be comparable. This is the only empirical data in the Report that can be used as a reality check on the projected waterpark attendance, and to estimate the uncertainty range in that projection. My own Analysis focused on this data simply because it was the only relevant data available. As is documented in that Analysis, the data indicate that the projected attendance is near the upper limit of the range of documented possibilities.

Meanwhile, Mr. Patterson believes that the HLA Report has underestimated the revenue from the other Fieldhouse venues: velodrome, tennis, and infield. His only documented reason for this belief consists of two anecdotal usage statistics: one from the Ogden Athletic Club and one from the velodrome in Los Angeles. But the Study Report makes it clear that the consultants were well aware of these two statistics and of many others besides. Rather than basing their projections on two cherry-picked examples, they clearly made an effort to consider all of the readily available data.

In my own Analysis, therefore, I took the HLA projections for these venues as average values and merely tried to estimate the amount by which the projections could be off in either direction. Even when there is no preference for optimism or pessimism, decision makers need to plan for a range of possible outcomes. And because HLA has relatively little expertise in these types of venues, it is prudent to assume that the range of possibilities is fairly wide.

Finally, Mr. Patterson claims that the Study Report has completely neglected two sources of income: fees from using “several venues ... like the walking/running track,” and income from special events. But it is simply not true that the Report omits special event revenue, which is included, for instance, in the “league play” and “non-tennis rental” line items on Page D-11 and in the velodrome rental income on Page D-14. The track was presumably omitted because its revenue would be even less than the 2% that the infield would generate. If there are other revenue-producing venues besides these, then the burden is on Mr. Patterson to at least tell us what they are.

Conclusion

Although Mr. Patterson has highlighted many ways in which the HLA projections might very well be wrong, in most cases these errors are equally likely to be wrong in either direction. In no case has Mr. Patterson demonstrated that the projections are overly pessimistic. Furthermore, Mr. Patterson has made no attempt to rebut the four specific reasons for pessimism that are documented in the HLA Report itself and/or in my own Analysis:

1. The attendance/SF data for comparable waterparks tends to be significantly lower than what is projected for Ogden;

2. The Fieldhouse might not be as effectively managed and marketed as the consultants have explicitly assumed;

3. The recent boom in waterpark popularity might be temporary, as new recreational trends develop;

4. A competing indoor waterpark could be built in another location along the Wasatch Front.

As a final point, it should be mentioned that the Ogden City Mayor’s Office, where Mr. Patterson sits, has a proven track record of overly optimistic projections for large downtown projects. For example, in mid-2007 the Mayor’s Office projected that The Junction would generate over $3.2 million in annual property tax revenue by 2010. The actual Junction property tax for 2010 was approximately $1 million. Decision makers would be well advised to focus on documented facts and their own judgment, rather than the authority of the Mayor’s Office.