I. Executive Summary

Introduction

Economics Research Associates (ERA) was retained by the City of Corbin, Kentucky to provide an economic analysis of potential events at the Southeastern Kentucky Agricultural & Exposition Center, to be located at Exit 25 off of Interstate 75.  This evaluation is intended to provide decision-making information for the City of Corbin as it considers investment requirements and opportunities associated with the site.  It will also be used to inform the facility’s design effort being undertaken by Bullock Smith & Partners. 

ERA performed a detailed market analysis, including demographic evaluation, comparable and competitive event analysis, and interviews with stakeholders and potential facility users. Based on estimated levels of demand, ERA developed a potential schedule of events for the facility and provided program recommendations.  ERA then evaluated the financial performance and economic impact of the facility’s operations.  The results of the analyses are summarized in the Key Findings section below and presented in their entirety in the subsequent report and attached Appendix tables.

Key Findings

ERA’s market analysis involved an evaluation of the future site of the Southeastern Kentucky Agricultural & Exposition Center and the surrounding region. ERA also evaluated the market for potential events by reviewing comparable facilities and interviewing numerous potential users.  Overall, our findings regarding the new facility in Corbin are positive. The Southeastern Kentucky Agricultural & Exposition Center can expect to attract a mix of sporting events, family shows and concerts, trade shows and conventions, as well as support the facility needs of the local community.
Following is a brief description of ERA’s key findings.

Market Analysis

 The proposed site has excellent regional access and visibility via Interstate 75, the main north/south corridor between Lexington and Knoxville and Interstate 80 from east to west. It is located just 15 miles from Cumberland Falls State Park, one of Kentucky’s leading tourist destinations.  In addition, Corbin has a strong visitor services infrastructure in place with approximately 800 hotel rooms and numerous restaurants and pubs.

 Corbin’s primary market, defined as the area within 50 miles of the site, has over 500,000 people.  While smaller than the markets of Lexington or Knoxville, it is comparable with the demographics of the new Eastern Kentucky Exposition Center, located in Pikeville, as well as similar facilities identified in this report.

 There is strong local and regional demand for the facility as Corbin lacks a large, indoor, multi-purpose space.  While local facilities are heavily utilized, their size limits the number and type of events that can be held in the area.  This forces Corbin citizens to travel to Lexington and Knoxville for events like entertainment and youth sports on a regular basis, which is not only inconvenient to area residents but has a negative fiscal impact on the city.

 Potential new events were wary of Corbin’s proximity to the Knoxville and Lexington markets but were optimistic about its location, lack of competitive facilities within 50 miles, and sizeable primary market.

 Corbin has the power to draw visitors to the region as evidenced in the attendance of local events. The NIBROC Festival, a four-day event held in August, attracts approximately 50,000 to 60,000 people.  Other major events include the Corbin High School Christmas Basketball Tournament and the Rally in the Valley Motorcycle Show, both attracting approximately 2,500 to 2,700 people over three days.

 There are virtually no competitive facilities within 50 miles of Corbin.  While numerous area facilities like the Corbin Civic Center, Laurel Fairgrounds, Daniel Boone Motocross Park, and London/Laurel Optimist Club Sports Center will continue to support specific events, no facility in the area can accommodate large regional attractions. Knoxville and Lexington will continue to be the primary locations for major shows because of cities larger, more accessible facilities and larger market area population.  

 The Southeastern Kentucky Agricultural and Exposition Center’s closest competition will be the Eastern Kentucky Exposition Center in Pikeville.  While Pikeville’s location is inferior to Corbin because of lack of immediate access to a major highway, it will be a competitor for certain events because of its proximity and similar market size.  Its success in attracting and hosting major events will likely affect the programming in Corbin, which thus far has been positive.  The Pikeville facility may help change the perception that secondary and tertiary markets cannot support major events.

 Several facilities in southeastern United States were considered as models for the development of a Corbin facility based on their size and location.  Seating capacity at these facilities range from 3,500 to 10,000, with the average size around 5,200 fixed seats. Exhibit space ranges from 16,000 to 49,000 square feet with arena sizes varying from 130’ x 102’ SF to 300’ x 150’. Event days range from between 62 to 199 days with an average of 139 days.

 Based on event promoter interviews, market research, and demographic analysis, ERA estimates that the new facility can expect to host between 80 to 100 events, or 120 to 150 event days, given the hiring of a capable facility director and the scheduling of an appropriate mix of events.  

 Approximately one quarter of the potential identified events are already taking place in Corbin. There is the potential to attract about 50 regional events that are either looking for a new facility or rotate on an annual basis.  In addition, based on scheduling and market interest, there is potential to attract approximately 30 new events.

 While the majority of events will attract between 1,000 and 3,000 people, no events are projected to attract over 7,000 people.  Approximately 5 percent of all events will attract more than 5,000 people, however these are concerts and graduations which accommodate seating on the floor.

 Based on the market analysis, ERA concludes that Corbin could support an indoor, multipurpose facility.  Because secondary markets fare better with a mixture of event types, event programming should be varied.  ERA recommends the following facility program:

-     5,000 fixed seats (This number can accommodate market growth)
-     Minimum 125’ x 250’ ring/arena floor
-     25,000 SF to 30,000 SF +/flat floor space (accommodates on arena floor)
-     4 to 5 meeting rooms with capacity for 50 to 200 people
-     1,800 parking spaces
-     Concrete pad (for portable stalls)
-     50 RV hookups

Financial Analysis

  ERA’s financial analysis was based on a stabilized schedule of 149 event days, estimated to attract approximately 255,000 spectators in the third year of operation.  The analysis of financial performance has been structured using revenue and expense parameters that were developed by ERA based on the following: fees and charges at comparable facilities, modified to meet local requirements and needs; and the operating experience of comparable civic center facilities in terms of event financial performance.

  Total operating revenues are estimated to be $566,510 in the first year, rising to $737,420 by Year 3.  Concession sales represent the single largest revenue source, approximately 55 percent of the total, while rental revenues account for 38 percent of total revenues.

  Operating expenses are estimated to total $902,988 in Year 1, growing to $1,063,844 by Year 3.  Salaries and wages account for 31 percent of total expenses, while other expenses account for nearly 70 percent.  Concessions represent the largest single expense.

  The Southeastern Kentucky Agricultural and Exposition Center is expected to operate at a deficit of $336,478 in its first year, decreasing slightly by Year 3 to $326,424, and declining every year thereafter.  This can be attributed to the stabilization of the facility through the addition of revenue-generating event days.  As is typical for almost all civic center facilities, the deficit must be made up from a dedicated funding source, such as the restaurant tax, and if necessary through public appropriations.

Economic Analysis

  The construction and operation of the Southeastern Kentucky Agricultural and Exposition Center are anticipated to have a significant economic impact on the City of Corbin, the greater Tri-County region, and the state of Kentucky

 Based on a projected construction cost of $12 million, the total area construction expenditure impact is nearly $7.8 million.  This project is estimated to be able to support 86 full time construction jobs during a construction period of 1.5 years.

 The Southeastern Kentucky Agricultural and Exposition Center is projected to generate a total of $26 million in direct and indirect expenditures annually.  Total annual state sales tax revenue generated by the new facility is estimated at $675,000, while local restaurant and lodging taxes are expected to total nearly $231,000 annually.