Economic Impact Analysis of the Proposed Diamond Na on Sports Complex Presented to: The Economic Development Authority of the City of Fredericksburg, Virginia February 25, 2015 February 25, 2015
Mr. Bill Freehling
Assistant Director, Economic Development Authority
City of Fredericksburg
706 Caroline Street
Fredericksburg, VA 22401
Dear Mr. Freehling:
BKP Consulting is pleased to present this report summarizing the findings of the economic
impact analysis for the proposed Diamond Nation baseball and softball complex in
Fredericksburg. The attached report summarizes our research, methodologies and analyses and
is intended to provide the City of Fredericksburg with insights regarding the potential economic
and fiscal impacts generated by the proposed complex. This information will enable the City to
make fully-informed decisions regarding the public incentives potentially available to assist with
facility development.
The information contained herein is based on estimates and assumptions derived primarily
from our knowledge of the sports facility development industry and other information,
including certain information provided by the City or other sources. All information provided to
BKP Consulting by other entities is assumed to be correct and was not otherwise audited or
verified. Because procedures were limited, BKP Consulting expresses no opinion or assurances
of any kind on the achievability of any projected information presented herein, and this report
should not be relied upon for that purpose. As with any projections, because events and
circumstances frequently do not materialize as expected, there will be differences between
estimated and actual results, and those differences may be significant. BKP Consulting has no
responsibility to update this report for events or circumstances occurring after the date of this
report.
We sincerely appreciate the opportunity to assist you with this project, and will be pleased to
be of further assistance in the interpretation and application of the report’s findings.
Sincerely,
Brian Parker
BKP Consulting
1265 Hickory Creek Drive, New Lenox, IL 60451
Tel: 630.800.5364 Email: bparker@bkpconsultingllc.com Website: www.bkpconsultingllc.com
Table of Contents
Executive Summary
i
1.0 Introduction
1
2.0 Diamond Nation Operations Review
3
3.0 Project Budget Review
10
4.0 Economic Impact Analysis
14
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Executive Summary
Executive Summary
Diamond Nation, a New Jersey-based baseball and softball training organization, has
approached the City of Fredericksburg about the possible development of a new multi-sport
tournament and training complex. As currently contemplated, the facility, estimated to cost
approximately $25.0 to $30.0 million, would be privately financed and funded, with the City
possibly participating in the form of a variety of financial incentives tied to the estimated
economic and fiscal impacts the project would generate.
In order to evaluate the possible incentives the City may be willing to contribute, the
Fredericksburg Economic Development Authority engaged BKP Consulting to conduct a limited
economic impact analysis related to the project. The following report presents the findings of
this analysis and is intended to assist the City in making fully-formed decisions regarding the
potential investment in the Diamond Nation project. It is important to note that this section
provides only a summary of the key findings related to the economic and fiscal impacts
contained in the full report. However, the full report addresses several other areas of concern
identified by the City. Therefore, the full report should be read in its entirety to ensure that all
analyses and findings are considered.
Consistent with Diamond Nation’s existing facility in Flemington, New Jersey, the proposed
Fredericksburg facility will host a variety of events, including in-house leagues, travel team
practices, private lessons, tournaments, camps, showcases and other events. As the primary
goal of this analysis is to understand the potential net new spending and related impacts that
would be generated by the proposed complex, the focus of the analysis is on those events that
will draw a significant portion of facility patrons from outside the City limits. For purposes of
this analysis, it is assumed that tournaments, camps, and showcases will drive the majority of
new visitors to the market, including overnight visitors. The other events at the complex will
likely attract primarily local visitors, with minimal additional new spending related to those
events. The table on the following page summarizes the primary assumptions regarding new
non-local overnight visitors to the complex.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |i
Executive Summary
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Estimated Visitor Days - Non-Local/Overnight Stays ONLY
Event Type
Total
Participants/
Coaches (a)
1,000
Camps/Clinics
Showcases
300
Youth Baseball/Soft Ball Tournaments
7,500
Weekday
37,500
Weekend
Lacrosse Tournaments
4,000
Adult Softball Tournaments
2,250
500
Scouts
Totals
Spectators per
Participant (b)
Total Spectators
% Visitors
(c)
Total
Visitors (c)
Average
Length of
Stay (d)
Total Visitor
Days (e)
1.5
1.5
1,500
450
25%
75%
625
563
5.0
2.0
3,125
1,125
1.5
1.5
1.5
1.5
0.0
11,250
56,250
6,000
3,375
0
85%
85%
85%
85%
75%
15,938
79,688
8,500
4,781
375
5.0
2.5
2.0
2.0
1.0
79,688
199,219
17,000
9,563
375
53,050
78,825
110,469
310,094
(a) reflects total participants and coaches for each event type, based on estimates provided by Diamond Nation
(b) represents estimated participants per each participant/coach; typically includes parents, siblings and other relatives.
(c) reflects the estimated percentage of total attendees derived from outside the local market area and staying overnight in Fredericksburg area
(d) reflects the average days each visitor is assumed to stay in the Fredericksburg market
(f) reflects the estimated total non-local, overnight visitor days generated by the complex each year
As shown, it is estimated that the facility will draw approximately 53,000 individual participants
and coaches on an annual basis. Assuming an average of 1.5 spectators will accompany each
participant results in a total of approximately 79,000 individual spectators per year at the
complex. Of these visitors, it is assumed that between 25 percent and 85 percent will stay
overnight in the Fredericksburg area. Based on an average stay for these people ranging from
one night to five nights, these events will draw approximately 310,000 non-local, overnight
visitors to the City of Fredericksburg. Consistent with industry surveys and trends, it is
conservatively estimated that each overnight visitor would spend a total of $100.00 per person,
per day on lodging, food and beverage and retail.
In addition to these new overnight visitors, these events will draw approximately 64,000 day
trip visitors to the City. While these visitors will not stay overnight, they will typically spend
money in the area on food and beverage and retail. For purposes of this analysis, it is assumed
that these visitors will spend a total of $15.00 per person, per day.
These spending assumptions are utilized to estimate the net new spending taking place in the
area, with a subsequent reduction to account for the estimated spending that takes place
within the City boundaries. The exhibit on the following page summarizes the gross new visitor
spending, net new spending taking place within the City and the related economic impacts on
the City. The exhibit also includes facility operating expenses that directly impact the local
economy through salaries and wages and the purchase of good and services within the City.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |ii
Executive Summary
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Economic Impact Summary - Net New Impacts
Spending Type
Facility Operations
Direct
Spending (a)
Direct Spending
% Spent in
Fredericksburg
(b)
Economic Impacts
Net New Direct
Spending (c)
Total
Output (d)
Earnings
(e)
Jobs (f)
$2,500,000
75%
$1,875,000
$3,107,000
$723,000
40
Event Related Spending
Hotel/Lodging
Food and Beverage
Retail
Sub-Total
12,404,000
13,042,000
6,521,000
$31,967,000
60%
60%
60%
7,442,000
7,825,000
3,912,000
$19,179,000
11,369,000
12,352,000
6,053,000
$29,774,000
2,494,000
2,927,000
1,429,000
$6,850,000
90
140
50
280
Total
$34,467,000
$21,054,000
$32,881,000
$7,573,000
320
(a) Represents total direct spending by facility and visitors on various goods and services on-site and throughout the community
(b) Reflects percentage of direct spending captured by entities within the City of Fredericksburg
(c) Represents estimated Net New Spending impacting the City of Fredericksburg
(d) Total net new economic activity generated by the complex in the City of Fredericksburg
(e) Total net new personal income generated within the City of Fredericksburg by presence of the complex
(f) Total net new local full-time equivalent jobs created in the City of Fredericksburg
It is estimated that the Diamond Nation facility will generate approximately $34.5 million in
new gross direct spending in the greater Fredericksburg area. However, it is likely that at least a
portion of this spending would take place outside the Fredericksburg city limits. For purposes of
this analysis, it is assumed that the City would capture approximately 60 percent to 75 percent
of the gross spending, resulting in a total of approximately $21.1 million in net new spending in
the market. This level of net new spending would generate approximately $32.9 million in total
economic output in the City, $7.6 million in new personal earnings and would support
approximately 320 full-time equivalent jobs within the City.
It is important to note that these estimates reflect a stabilized year of operations for the
complex. Based on discussions with Diamond Nation representatives, this stabilized level of
operations is assumed to be achieved within the first three years after opening and is assumed
to be achievable for the foreseeable future. However, unanticipated changes to the travel
sports marketplace, the local economy and market in Fredericksburg or national and
international events could have a direct impact on these estimates.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |iii
Executive Summary
In addition to the overall economic impacts that will benefit the greater Fredericksburg
community, the City will realize new revenues from the spending related to the facility’s
operations and new visitor spending in the community. The following exhibit summarizes the
estimated local revenue impacts generated by the complex and visitor spending.
Fredericksburg - Diamond Nation Sports Complex
Economic Impact Analysis
Economic Impact Summary - Net New Fiscal Impacts
Spending Type (a)
Facility Operations (e)
Net New
Spending (b)
Tax Rate (c)
Net New Tax
Revenues (d)
$281,000
1.0%
$3,000
Event Related Spending
Hotel/Lodging
Food and Beverage
Retail (f)
Sub-Total
7,442,000
7,825,000
3,912,000
$19,179,000
6.0%
6.0%
1.0%
447,000
469,000
192,000
$1,108,000
Total
$19,460,000
$1,111,000
(a) Reflects primary taxable spending sources generated by the complex.
(b) Represents net new taxable spending occuring within the City, generated by
the complex
(c) City tax rates for Retail, Hotel/Lodging and Food and Beverage.
(d) Reflects net new tax revenues generated by the activity at the complex
(e) Assumes 15% of local facility operations spending is taxable, with the remaining
85% comprised of payroll, advertising and other services
(f) Applies to all retail sales, food and beverage sales, and hotel/lodging sales.
Visitor spending is estimated to generate approximately $1.1 million per year in new tax
revenues for the City, including approximately $447,000 in new lodging taxes, $470,000 in new
food and beverage taxes and $192,000 in new retail sales taxes. It is important to note that
these revenues are based solely on the net new direct spending related to the presence of the
Diamond Nation facility. The indirect and induced spending generated by this initial round of
spending will also generate at least some level of new tax revenues for the City. However,
consistent with the conservative approach to this analysis, those indirect and induced tax
impacts have not been quantified.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |iv
Executive Summary
Historically, the City has approached projects seeking tax incentives by establishing a baseline
revenue amount from specific sources. Once the baseline is established, the City considers the
incremental new revenues generated by the project to determine the amount of incentives to
be provided to the project developer. The ultimate process for determining the incentives
provided to Diamond Nation will be determined through joint negotiations with the City.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |v
1.0 Introduction and Background
1.0 Introduction and Background
In 2012, the owners of the Hagerstown Suns, a Class A minor league baseball team, and
Diamond Nation approached the City of Fredericksburg about the possible development of a
new baseball stadium and adjacent tournament and training facility in Fredericksburg. The
initial proposal involved the Suns and Diamond Nation forming a joint venture to privately fund
and finance the stadium and adjacent complex, with an initial total budget of approximately
$42 million. The City of Fredericksburg would have contributed approximately $8 million to the
project through the purchase and improvement of an adjacent parcel for facility parking,
rebates of tax revenues generated within the facilities and a share of incremental hotel tax
revenues generated by the facility.
However, due to the challenging topography of the site and other issues, the initial construction
bids pushed the budget closer to $60 million, approximately $18 million over the initial budget.
The City agreed to increase their investment to $10 million total, and worked with adjacent
Spotsylvania County to fund the remaining gap. On October 1, 2014, the Suns terminated their
purchase agreement with Diamond Nation, leading to a separation of efforts, with the Suns
electing to pursue a publicly funded stadium elsewhere, and Diamond Nation electing to
continue to pursue the proposed tournament and training complex in Fredericksburg.
The 38 acre site is part of the Celebrate Virginia South Development, a large mixed-use
development with a focus on meeting local needs while also offering a destination for visitors
to the area. The synergies between the potential tourism draw of Diamond Nation and
Celebrate Virginia South have led the City and Diamond Nation to continue to pursue potential
development opportunities. As with the initial proposal with the Suns, it is anticipated that the
Diamond Nation complex would be privately financed and funded, with the City contributing to
the project through a variety of tax rebate incentives.
In order to evaluate the potential level of incentives the City may be willing to contribute to the
project, the Fredericksburg Economic Development Authority (EDA) issued a Request for
Proposals seeking a limited economic impact analysis of the proposed Diamond Nation
development.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |1
1.0 Introduction and Background
After a public solicitation process, the EDA selected BKP Consulting LLC, an Illinois-based
advisory services firm, to conduct a limited market and economic impact analysis, which
addresses the following key areas of concern for the City and the EDA:
•
•
•
•
Diamond Nation Operations – review the operations of the existing Diamond Nation
facility in Flemington, New Jersey, and the projected Fredericksburg facility operations,
and address the following questions or topics:
o How do those operations related to the proposed Fredericksburg facility
operations?
o How realistic are the Fredericksburg facility utilization and financial projections?
o What makes Fredericksburg a viable location for the proposed facility?
o Research the economic impact of the existing Diamond Nation facility in New
Jersey
Project Budget – review the latest project budget provided by Diamond Nation, identify
potential areas of concern within the budget
Review Previous Economic Impact Analysis – review the findings presented by Stephen
S. Fuller, Ph.D. in the report entitled “The Economic and Revenue Impacts of the
Proposed Diamond Nation Baseball & Softball Tournament & Training Complex on the
City of Fredericksburg, Virginia” and identify potential areas for further research and
analysis
Estimate Economic and Fiscal Impacts of the Proposed Fredericksburg Complex –
develop economic impact model reflecting estimated utilization and spending trends of
the proposed facility; estimate net new economic and fiscal impacts generated by the
presence of the proposed complex
It is important to note that the research and analyses conducted as part of this engagement are
limited in nature, relying primarily on information provided by the City and/or Diamond Nation,
with no direct market research conducted to determine overall market demand or project
viability.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |2
2.0 Diamond Nation Operations Review
2.0 Diamond Nation Operations Review
As the City contemplates the potential incentive package that could be provided to Diamond
Nation to assist in facility development, it is helpful to understand the background and
historical operations of Diamond Nation’s existing facility as well as the projected operations
for the proposed Fredericksburg facility. The information and insights developed through this
analysis will form the basis for the economic impact model and assumptions developed later in
this report.
Diamond Nation Background
Diamond Nation was established in Flemington, New Jersey in 2009. The complex is on the site
of the original Jack Cust Baseball Academy, which was founded in 1997 by Jack Cust Sr. and his
son Jack Cust Jr, who continues in a management role at the current facility. The Flemington
complex is home to the Jack Cust Baseball Academy as well as the Jennie Finch Softball
Academy, two of the premier baseball and softball training academies in the country.
The 65 acre campus encompasses 250,000 square feet of indoor training and practice facilities
as well as five 90’ baseball fields and two 59’/70’ baseball/softball fields. The unique
configuration of the fields enables the larger fields to be subdivided into two Little League-size
fields, each with separate backstops, bullpens and dugouts. This ability allows the complex to
host up to 12 games simultaneously. All of the fields feature artificial turf, minimizing the wear
and tear on the playing surface and the impact of rain or foul weather, maximizing the facility’s
capability to host events as scheduled. The Healthquest Sports Dome is the largest air structure
in the United States provides year-round playing and training capabilities to the complex. In
addition, the complex is home to the Healthquest Fitness Club, a 104,000 square foot health,
fitness, wellness and athletic facility open to the public. The Fitness Club offers strength training
equipment, 25 meter indoor and outdoor pools, a three-lane indoor track, two full basketball
courts, two exercise studios and a full array of support services and space.
Flemington, New Jersey Facility – Historical Operations Review
In evaluating the potential operational viability of the proposed Fredericksburg complex, it is
helpful to gain an understanding of the historical operations of the Flemington facility. Diamond
Nation has provided historical operating information for this facility under a Non-Disclosure
Agreement that prohibits specific details to be disclosed publicly. Therefore, the historical
analysis will focus on overall trends in revenues and utilization for the Flemington facility.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |3
2.0 Diamond Nation Operations Review
Flemington – Historic Financial Results
Diamond Nation provided detailed operating pro forma statements for the three most
recent years of operations (2012, 2013 and 2014). The following trends were identified:
•
•
Facility Revenues and Gross Profit
o Overall facility gross revenues are fairly consistent year over year, with Travel
Team revenues and Tournament Registration Fee revenues comprising the
largest revenue drivers.
o It is important to note that these revenues reflect a facility that is operating in a
stabilized environment. Discussions with Diamond Nation representatives
indicate that the facility experienced significant growth from its inception in
2009 through 2011, with annual revenue growth of 25 percent or more as the
facility established itself as an attractive destination for travel baseball
tournaments. A similar growth pattern may be expected in Fredericksburg.
o Gross revenues increased significantly from 2012 to 2013, primarily due to an
increase in Tournament Registration Fee revenues. Per discussions with
Diamond Nation representatives, this increase was generated by the increased
emphasis on longer, weekday tournaments taking place throughout the summer,
as well as an overall increase in registration fees of $25 per team.
o Gross revenues were fairly steady from 2013 to 2014, with slight growth in
Tournament Registration Fees and a slight decrease in Travel Team revenues.
Diamond Nation representatives indicated decline in Travel Team revenues was
related to a reduction in the number of travel teams per age group in an effort to
maintain the highest quality of training and playing at each age group.
Tournament Registration Fees were kept consistent with 2013 fees in 2014, with
no price increase.
o Gross Profit (revenues less cost of goods sold) has been fairly consistent and
fluctuates accordingly with the revenues discussed above. Overall Gross Profit
increased from 2013 to 2014, due largely to the increase in Tournament
Registration Fee revenues.
Facility Operating Expenses
o Overall facility (fixed) operating expenses have remained steady over the three
year period reviewed here. The largest expense item is related to salaries, wages
and payroll taxes.
o Utilities and Real Estate Taxes comprise the other primary expense categories,
followed by Advertising and Insurance expense.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |4
2.0 Diamond Nation Operations Review
Flemington – Historic Event Utilization
While the Flemington Diamond Nation facility is used year round for practice, training,
camps, local leagues and games, the primary revenue driver is related to tournaments held
at the facility. Diamond Nation provided detailed tournament utilization for the 2014
season only. However, based on the consistency in revenues, this season is considered
representative of the stabilized operations experienced starting in approximately 2011 and
2012.
•
•
•
•
•
•
The primary outdoor tournament season at Diamond Nation runs from early March
through late October, spanning approximately 36 weeks per year. While the facility
incorporates artificial turf to minimize the impact of rain on the ability to play games
on schedule, early and late season snows can negatively impact the ability to host
games, driving potential fluctuations in revenues accordingly.
As noted previously, in 2013, Diamond Nation placed more emphasis on hosting
longer, weekday tournaments while maintaining a steady slateof weekend
tournaments. In 2014, the facility hosted nine weekday tournaments throughout the
summer months. These events are particularly important to both Flemington and
the proposed Fredericksburg facility as they drive longer visitor stays in the
community, increasing the overall economic fiscal impacts of the events
significantly.
Overall, the Flemington facility hosts over 3,000 tournament teams each year,
representing over 45,000 players and coaches. The tournaments draw teams of all
youth age groups from 9U to 18U.
Assuming an average of 1.5 additional spectators per player/coach travels with the
team, this means over 110,000 visitors to the community each year, often spending
multiple days in local hotels and spending money at local restaurants and retail
establishments.
In 2013 and 2014, the facility attracted teams from over 20 states as well as Canada.
While the majority of these teams were drawn from the northeastern United States,
several teams from California, Florida, Georgia, Texas and elsewhere throughout the
country were also attracted.
While Diamond Nation does not specifically track which teams stay overnight in the
Flemington area, industry trends indicate that teams from outside a 1.5 to 2.0 hour
drive time are generally more likely to stay overnight. It is likely that over 85 percent
of the teams drawn to Flemington would be outside of this drive radius.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |5
2.0 Diamond Nation Operations Review
Fredericksburg – Projected Financial Results
The proposed Fredericksburg facility will be similar to the Flemington facility, with six
artificial turf fields and a 16,000 square foot indoor academy building with batting cages,
training space, classrooms and office space. As with the review of the Flemington facility,
the following analysis will focus on overall projection trends for the Fredericksburg facility’s
financial operations.
•
•
•
•
•
•
•
Year one projections for Fredericksburg reflect total gross revenues approximately
equal to 70 percent of the 2014 Flemington facility revenues, with projected growth
increasing those revenues to 80 percent of Flemington’s 2014 revenues in year two
and 90 percent of Flemington’s 2014 revenues by year three.
Similar to the Flemington pro forma, the primary revenue stream for the
Fredericksburg facility is projected to be Tournament Registration Fees.
First year Tournament Registration Fees are projected to be consistent with the
revenues generated at the Flemington facility in 2012. While this may be aggressive,
Diamond Nation representatives contend the Fredericksburg facility will have the
benefit of Diamond Nation’s existing presence in the youth baseball and softball
travel market, whereas the Flemington facility was starting without an existing
presence.
Tournament Registration Fee revenues are projected to grow at approximately 10
percent per year over the first three years of operations, at which point these
revenues will stabilize and grow at a slower rate consistent with the Flemington
facility.
While the Fredericksburg facility will also serve as the home to several travel
baseball and softball teams, the financial projections assume these revenues will
comprise a smaller percentage of gross facility revenues compared to the
Flemington facility.
Fixed operating expenses (general and administrative costs, advertising expenses,
fixed salaries and wages) for the Fredericksburg facility are consistent with the
Flemington facility.
Net EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) for the
Fredericksburg facility is consistent with the historical EBITDA achieved at
Flemington.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |6
2.0 Diamond Nation Operations Review
•
Overall, Diamond Nation has proven to have a solid, profitable operation in
Flemington. Based on their historical success, the projected financial results for the
Fredericksburg facility appear consistent with historical operations of the Flemington
Diamond Nation facility, although with an increased focus on hosting tournaments in
Fredericksburg.
Fredericksburg – Projected Utilization Levels
As noted previously, the Fredericksburg Diamond Nation complex will operate with a similar
focus to the Flemington facility, although there will be a higher concentration on
tournaments relative to in-house travel teams in Fredericksburg. The following is an
overview of the projected utilization levels for the Fredericksburg facility.
•
•
•
As with the Flemington facility, the Fredericksburg facility will operate primarily
between March and October. However, given the more southern location of
Fredericksburg, it is likely that the season can start two or more weeks earlier and
run two or more weeks later in the fall than Flemington.
Similar to the Flemington facility, the Fredericksburg complex will draw participants
and spectators from across the United States, with the majority of the visitors drawn
from the East Coast, with a concentration on the mid-Atlantic states in particular. In
general, sports tourism participants who drive more than approximately 90 minutes
to the location are likely to stay overnight rather than drive back and forth. While
there will be some overlap in drawing area between Flemington and Fredericksburg,
there is assumed to be minimal cannibalization as the Flemington facility is currently
operating at or near capacity.
The primary visit driver to the facility will be tournaments hosted throughout the
spring, summer and fall. Initial projections assume approximately 3,000 teams per
year would participate in weekend and weekday tournaments at the complex,
representing approximately 45,000 total players and coaches per year. This is
consistent with the 2013 and 2014 utilization and participation levels achieved at
Flemington as well as other established facilities around the country in similar
locations. As discussed in the Financial Operations analysis previously, it may be
aggressive to assume that the Fredericksburg facility will operate at a level
consistent with established facilities in its initial years. However, given Diamond
Nation’s existing presence in the market and established operations in Flemington,
this is deemed a reasonable projection for purposes of this analysis.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |7
2.0 Diamond Nation Operations Review
•
•
In addition to youth baseball and softball tournaments, Diamond Nation has found
success hosting youth lacrosse and adult softball and soccer tournaments, a benefit
derived from having artificial turf fields that allow for easy reconfiguration to
accommodate rectangular playing surfaces. The initial projections for the
Fredericksburg facility include a limited number of these events, but this market
could represent significant growth potential in the future, particularly as lacrosse is
one of the fastest growing youth sports in the country and represents an
underserved market for tournament opportunities.
The Fredericksburg facility is also projected to host a variety of camps, clinics, local
leagues, showcases and will serve as the home to several travel baseball and softball
teams. As these uses will primarily be comprised of participants residing within a
one or two hour driving radius, the ability of the Fredericksburg facility to
differentiate itself from existing regional facilities will be critical to its ultimate
success. The following chart summarizes the primary existing baseball complexes
located throughout Virginia.
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Virginia Baseball/Softball Complexes
Complex Name
Location
Virginia Sports Complex
Potomack Lakes Sportsplex
Bolen Park Sports Complex
Petersburg Sports Complex
Dinwiddie Sports Complex
Warhill Sports Complex
York County Sports Complex
Princess Anne Athletic Complex
Botetourt Sports Complex
Moyer Sports Complex
Rivers Edge Sports Complex
Harkrader Sports Complex
Ruther Glen
Sterling
Leesburg
Petersburg
Sutherland
Williamsburg
Yorktown
Virginia Beach
Troutville
Salem
Roanoke
Christiansburg
Fields (Baseball/Softball) (a)
Driving Distance
from Fredericksburg
(miles)
8 total, all natural turf
4 total, all natural turf
9 total, all natural turf
5 total, all natural turf
4 total, all natural turf
7 total, all natural turf
5 total, all natural turf
8 total, all natural turf
4 total, all natural turf
4 total, all natural turf
3 total, all natural turf
3 total, all natural turf
25
70
80
85
90
100
120
155
175
185
185
205
(a) Field total includes 70' and 90' fields. Does not include multi-purpose/rectangular fields that may also be at same facility
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |8
2.0 Diamond Nation Operations Review
•
•
•
•
As shown, a number of existing baseball and softball complexes are located
throughout Virginia, with the Virginia Sports Complex in Ruther Glen the closest to
Fredericksburg, approximately 25 miles away. While this facility will present the
most direct competition to the proposed Fredericksburg facility, the facilities in
Sterling, Leesburg, Petersburg, Sutherland and Williamsburg also represent likely
direct competition, particularly for locally derived uses such as hosted travel teams,
camps and private lessons.
The Fredericksburg facility will have a significant advantage over all of these facilities
as it will feature artificial turf on all fields, minimizing lost time due to rain. This
higher level of availability certainty will appeal to players and parents who may have
to drive an hour or more and may be delayed or unable to play at all at natural grass
facilities. In addition, the operational experience and background of the Diamond
Nation management team will play a key role in the facility’s potential success.
Overall, the Diamond Nation utilization projections assume a total of over 600,000
individual visits to the complex on an annual basis. This projection assumes an
average spectator per participant ratio of 1.5, which accounts for parents and
siblings that may attend practices and games. While this projection is appropriate, if
somewhat conservative, for “visitor” driven events such as tournaments, it is likely
aggressive for more local events such as league games, travel team practices and
private lessons.
For purposes of the economic impact analysis presented later in this report, we will
focus solely on the primary “visitor” driven events, as these will generate the vast
majority of the net new local spending in Fredericksburg generated by the presence
of the facility.
Summary
Overall, Diamond Nation has exhibited a strong ability to operate a successful, profitable sports
complex, as evidenced by their history in Flemington. This experience will translate well to the
proposed Fredericksburg facility, enabling the facility to achieve a higher penetration of the
market earlier in its operations than was achieved in Flemington. The financial and utilization
projections for the proposed Fredericksburg facility are consistent with the historical
experience of Diamond Nation’s Flemington facility.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |9
3.0 Project Budget Review
3.0 Project Budget Review
As part of this analysis, the City has requested a review of the current budget for the project.
The intent of this limited analysis is to provide the City with insights into the appropriateness of
the project and to identify the potential for cost overruns that could be impact Diamond
Nation, the City or other stakeholders.
In conducting this review, BKP Consulting coordinated with a representative from a large
construction management firm with extensive experience building sports and recreation
facilities of all sizes. The goal of this was to identify potential budget line items that appeared,
at first review, to be outside the normal range of expectations for a project of this size and type.
The review was conducted solely on the preliminary budget provided by L.F. Jennings dated
December 1, 2014. It is understood that this budget was developed based off of a previous
budget developed by Gilbane when reviewing the original joint minor league baseball stadium
and Diamond Nation complex concept plan. The current review was limited in nature and relies
solely on the information provided by the City and Diamond Nation.
Based on our discussions with City and Diamond Nation representatives, it is further
understood that the site being considered for the proposed complex, while very attractive from
a location and visibility perspective, presents significant site work challenges. These site issues
include the need for significant amounts of retaining walls to be installed and large amounts of
earth to be moved or removed from the site. Both of these factors require significant costs, well
outside the normal range for a project located on a more level site. Diamond Nation
representatives have indicated that they continue to work with L.F. Jennings and HKS, the
design architect currently involved with the project, to refine the concept and minimize the cost
associated with earth moving/removal and retaining walls.
A summary of the findings of this initial review is presented on the following pages.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |10
3.0 Project Budget Review
The following table summarizes the primary cost areas for the proposed Diamond Nation
complex in Fredericksburg.
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Preliminary Budget - Prepared by L.F. Jennings
Item
Sitework (a)
Fields, Batting Cages, Training Area, Etc. (b)
Amateur Academy Building (c)
Total Hard Costs (d)
Estimated Cost
$7,400,000
10,300,000
2,800,000
$20,500,000
Source: L.F. Jennings Preliminary Budget, dated 12/1/14
(a) includes all site preparation, including earthwork, clearing, demolition,
parking lots, retaining walls, utility infrastructure, etc.
(b) includes all costs associated with construction of the fields, lighting,
training area, batting cages, concession stand, landscaping, etc.
(c) includes all hard costs associatd with construction of the indoor
academy building
(d) represents estimated total hard construction costs for the project.
Does NOT include site acquisition; design, engineering and other
soft cots; or any off-site infrastructure improvements that may be
required.
As shown, it is estimated that hard costs for the project will total approximately $20.5 million. It
is important to note that this budget does NOT include any site acquisition costs or soft costs
associated with design, engineering, legal or other professional services. The site acquisition
andsoft costs are projected to total an additional $5.0 million to $10.0 million to the project
cost. Finally, it is important to note that any off-site infrastructure improvements that may be
required to accommodate the complex, such as intersection signaling and improvements,
roadway widening, utility expansion or similar services, are not contemplated in this
preliminary budget nor in this review as part of this engagement.
Sitework Budget Review
•
As noted previously, the sitework budget for this project is considerably higher than
other comparable projects due to the challenging topography of the site. As the
project progresses, Diamond Nation will continue to work with the architects and
contractors to value engineer and reduce these costs as much as possible.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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Page |11
3.0 Project Budget Review
•
•
One area to be cognizant of as the planning progresses is the Contingency line item,
which currently allows for only a three percent contingency factor. At this early
stage, this is likely a low allowance due to the unknown factors of the project. An
allowance of five to 10 percent may be more appropriate, with the knowledge that
this can be reduced as planning progresses and potential challenges are addressed.
Based on this budget, the total sitework cost per acre is estimated at approximately
$200,000 per acre, but appears reasonable based on this limited review and
understanding of the site challenges.
Fields, Cages, Training Area, etc. Budget Review
•
•
•
•
The largest line item in this budget category relates to field construction and lighting
installation. The budget currently allows approximately $1.0 million per field,
including turf, subsurface, drainage, spectator seating, dugouts, fencing. This is
generally consistent with professional artificial turf surfaces and may be slightly high
based on comparable facilities. However, Diamond Nation representatives indicated
they received multiple bids for the turf installation and are comfortable with this
estimate.
Lighting for the fields and playing areas is estimated to total approximately $1.6
million, or approximately $270,000 per field. This is slightly high compared to other
similar facilities. However, given the need to be able to reconfigure the fields to
accommodate two little league games, with adequate lighting in two home plate
areas rather than just one for a typical field, the estimate appears reasonable in this
initial review.
The budget also allows for approximately $625,000 in general conditions, which
equates to approximately six to seven percent of hard costs for field construction.
An allowance of five percent, or approximately $450,000, would be in line with
comparable projects.
The preliminary budget also includes allowances of $500,000 for hardscape and
$250,000 for landscape improvements. These items are often overlooked in the
early planning stages and are often subject to “budget creep” as they are typically
completed near the end of the project and face time pressures that require added
costs. Diamond Nation should continue to work with the design architects to ensure
these costs are appropriate and managed effectively to avoid overages.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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Page |12
3.0 Project Budget Review
•
•
Finally, the budget includes an allowance of approximately one percent ($102,000)
for contingencies. As with the sitework, this allowance appears low, particularly at
this early planning stage. It is recommended that the budget increase this allowance
to at least five percent or more to offset the potential challenges of building on this
site.
It is not clear if any equipment or other fixtures necessary to operate the complex,
such as turf grooming equipment, portable batting cages, pitching nets, etc. are
included in this budget. This could add significant expense to the project if not
included elsewhere.
Amateur Academy Budget Review
•
•
•
The L.F. Jennings budget includes only a single line item for this component for the
project, so it is difficult to provide a high level of insight into the overall costs of this
component.
As budgeted, the 16,000 square foot facility is estimated to cost $2.8 million, or
approximately $175.00 per square foot. While this cost estimated would likely be
high for a basic pre-engineered metal building, it may be appropriate for a more
traditional, concrete block or similar structure. Additional information is necessary
to determine the type of construction being contemplated.
As with the previous budget item, it is unclear if this line item includes the furniture,
fixtures and equipment necessary to utilize the amateur academy as currently
envisioned and planned. These include turf practice areas, batting cages/tunnels,
bats, balls, helmets, office furniture and equipment, etc. Again, these items, if not
accounted for elsewhere, could add significant cost to the overall project budget.
Summary
Overall, the budgeted hard construction costs for the project appear generally reasonable,
although the sitework improvements push the budget higher than most similar facilities. In
addition to the specific areas identified above, it must be noted that the hard cost budget
provided by L.F. Jennings does not include soft costs or land acquisition. These costs could push
the overall budget to $25.0 million to $30.0 million or more.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
Page |13
4.0 Economic Impact Analysis
4.0 Economic Impact Analysis
The estimated economic and fiscal impacts generated by the events held at the proposed
Diamond Nation complex will play a significant role in the City’s decision to proceed with the
negotiation of an incentive package to assist Diamond Nation with construction of the project.
These impacts, which take the form of one-time impacts generated during construction of the
facility and on-going impacts related to operations of the complex, represent the increased
economic activity related to the presence of the complex.
Of critical importance in Fredericksburg is the incremental, net new economic and fiscal impact
generated by the construction and operations of the proposed complex. With that concept in
mind, the following analysis will focus on the construction period spending and the spending
generated only by those visitors to the complex who reside outside the local economy.
The following analysis is comprised of the following primary components:
•
•
•
•
Economic and Fiscal Impact Overview,
Review of Previous Economic Impact Analysis,
Economic Impacts, and
Intangible Impacts.
Economic and Fiscal Impact Overview
The economic impacts of a project include the direct spending, total output, personal earnings
and employment generated by the specific project. These measures are defined below:
•
Direct spending reflects the spending generated by the proposed project, including
spending during the construction period on labor and materials, and spending during
operations related to in-facility spending on facility rental, concessions and advertising
and out-of-facility spending on hotels, restaurants, retail, entertainment, transportation
and other expenditures. For purposes of this analysis, the focus will be on the estimated
out-of-facility spending and related impacts derived from new complex events. While
spending inside the complex will generate some additional impacts in the community,
the amount is estimated to be nominal.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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Page |14
4.0 Economic Impact Analysis
•
•
•
•
•
Indirect spending represents the re-spending of the initial, direct round of spending
throughout the local economy. As recipients of the initial spending in turn incur and
expend a portion of this spending on goods and services within the local economy. As
the cycle progresses through subsequent rounds of spending, the amount impacting the
local economy decreases, a progression defined as leakage.
Induced spending reflects the changes in local consumption related to the personal
income and spending earned by employees by the direct and indirect spending related
to the complex.
Total output reflects the combined direct, indirect and induced spending impacts of the
proposed complex.
Personal earnings reflect the wages and salaries earned by employees of businesses
related to the construction and ongoing operations of the proposed complex.
Employment measures the number of jobs supported within the local area related to
the direct, indirect and induced spending generated by the proposed complex.
Employment is measured in person years, defined as one year of employment, or 2,080
hours per year, and includes both full- and part-time positions.
The economic impacts related to the proposed Diamond Nation complex are calculated by
applying an economic multiplier to the initial direct spending to estimate total economic
output, which represents the total spending which takes place due to activity related to the
complex, from the initial direct round of spending through each successive round of respending.
The economic multipliers utilized to estimate the impacts are determined based on specific
regional characteristics and the nature of the expenditure. These multipliers are generally
higher in areas capable of producing and providing a wide variety of goods and services within
its borders, indicating a highly self-sufficient economy and resulting in increased re-spending
throughout the economy. Areas in which a significant portion of goods and services must be
imported from another region generally have lower economic multipliers as much of the initial
and subsequent rounds of spending occur outside the local economy.
For purposes of this analysis, the economic multipliers utilized herein are developed by the U.S.
Department of Commerce’s Bureau of Economic Analysis (BEA) for the City of Fredericksburg.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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4.0 Economic Impact Analysis
In addition to the economic impacts generated by the construction and operations of the
proposed complex, it is also important to understand the estimated benefits to the public
sector through increased tax revenues. For purposes of this analysis, tax revenues generated by
the initial round of spending as well as the induced and indirect rounds of spending have been
calculated based on current applicable tax rates, as follows:
•
•
•
Sales Tax – the total sales tax in Fredericksburg is 5.3 percent. Of this total, the City of
Fredericksburg retains 1.0 percent. The sales tax is applicable to almost all retail sales
and services.
Food and Beverage Tax – in addition to the sales tax, the City of Fredericksburg imposes
a tax of 6.0 percent on prepared food and beverage sales. This tax is in addition to the
sales tax rate.
Hotel Occupancy Tax (HOT) –the City of Fredericksburg also levies a tax of 6.0 percent
on all short-term lodging rentals, including hotels, motels, inns and similar
establishments. This tax is in addition to the sales tax rate.
With the development of the proposed complex, other tax revenues will likely experience
increases due to increased activity in the area. These taxes may include, but are not limited to,
business license taxes, real estate and personal property taxes, utilities fees, car rental
revenues, user fees and other taxes. While the City may experience some increase in these
revenues, they have not been included herein as the impact of the Diamond Nation complex is
not directly quantifiable for these specific tax streams.
Review of Previous Economic Impact Analysis
As part of their efforts to secure funding incentives from the City, Diamond Nation
commissioned an analysis of the potential economic impacts of the proposed facility by
Stephen S. Fuller, Ph.D, Director of the Center for Regional Analysis at George Mason
University. This study, entitled “The Economic and Revenue Impacts of the Proposed Diamond
Nation Baseball & Softball Tournament & Training Complex on the City of Fredericksburg,
Virginia” was completed and presented in November, 2014. As this study was commissioned
and paid for by Diamond Nation, the City has requested a review of the previous study by an
independent third party. The following comments summarize the review conducted as part of
this engagement.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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Page |16
4.0 Economic Impact Analysis
•
•
•
•
•
•
The overall methodology utilized by Dr. Fuller in his analysis is consistent with the
approach taken by BKP Consulting as part of this engagement. Namely, both
approaches identify the initial round of spending at a gross level first, then attempt to
identify factors that reduce that gross spending to the actual net new spending that
directly impacts the local economic in Fredericksburg.
Both analyses utilize the RIMS II economic impact multipliers provided by the BEA. The
source for the economic impact multiplier factors.
The Fuller analysis assumes that 85 percent of all visitors to the facility will be derived
from outside the City of Fredericksburg.
o The BKP Consulting analysis focuses only on those visitors drawn by events that
primarily draw overnight visitors, and assumes 85 percent of all players and
spectators would be from outside the local market and would stay overnight
during the event.
The Fuller analysis uses a visitor spending amount of $66 per person per day, derived
from a Commonwealth of Virginia survey conducted from 2011 to 2012. This spending
amount is assumed to apply to all visitors to the complex, and attempts to adjust for
both overnight visitors and day trip visitors to the complex.
o As discussed later in this report, the BKP Consulting analysis utilizes a spending
amount of $100 per person, per day, derived from a National Association of
Sports Commissions survey of over 30 tourist-driven events in markets around
the country. The study actually identified a range of daily per person spending
from a low of approximately $100 to a high of over $300. As a conservative
approach, BKP Consulting utilizes the lower estimate of spending for overnight
visitors. Day trip visitors are assumed to spend a total of $15 per person per day.
The Fuller analysis applies the Sales Tax rate only to estimated retail sales generated by
visitor spending at the complex, which includes both on-site and off-site spending, and
does not apply the City’s Sales Tax rate to food and beverage sales or hotel/lodging
sales. Per the City’s Revenue department, the sales tax is also applicable to all prepared
food and beverage sales as well as hotel/lodging sales.
o The BKP analysis applies the Sales Tax rate to all retail sales, food and beverage
sales and hotel/lodging sales taking place within the City of Fredericksburg.
The Fuller analysis does not apply any taxes to the indirect or induced spending related
to the visitor spending taking place in the City due to the presence of the complex.
While the majority of all sales in the community are subject to sales tax, the indirect
and induced spending, while quantifiable in total, is difficult to quantify in terms of
taxability. In order to present a conservative estimate of net new tax revenues for the
City, the BKP analysis follows a similar methodology.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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Page |17
4.0 Economic Impact Analysis
Economic Impacts
As noted above, there are several differences in assumptions between the Fuller analysis and
the analysis conducted by BKP Consulting. Based on discussions with the City, it is understood
that the primary goal of this analysis is to understand the potential net new spending and
related fiscal impact from ongoing operations that will benefit the City of Fredericksburg. For
this reason, the BKP analysis focuses on those events that will draw a significant portion of
facility patrons from outside the City of Fredericksburg, with a significant portion of those
patrons staying overnight in the Fredericksburg area. The following table summarizes the
events, utilization and visitor levels assumed for this analysis.
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Estimated Visitor Days - Non-Local/Overnight Stays ONLY
Event Type
Total
Participants/
Coaches (a)
1,000
Camps/Clinics
300
Showcases
Youth Baseball/Soft Ball Tournaments
Weekday
7,500
37,500
Weekend
Lacrosse Tournaments
4,000
Adult Softball Tournaments
2,250
Scouts
500
Totals
Spectators per
Participant (b)
Total Spectators
% Visitors
(c)
Total
Visitors (c)
Average
Length of
Stay (d)
Total Visitor
Days (e)
1.5
1.5
1,500
450
25%
75%
625
563
5.0
2.0
3,125
1,125
1.5
1.5
1.5
1.5
0.0
11,250
56,250
6,000
3,375
0
85%
85%
85%
85%
75%
15,938
79,688
8,500
4,781
375
5.0
2.5
2.0
2.0
1.0
79,688
199,219
17,000
9,563
375
53,050
78,825
110,469
310,094
(a) reflects total participants and coaches for each event type, based on estimates provided by Diamond Nation
(b) represents estimated participants per each participant/coach; typically includes parents, siblings and other relatives.
(c) reflects the estimated percentage of total attendees derived from outside the local market area and staying overnight in Fredericksburg area
(d) reflects the average days each visitor is assumed to stay in the Fredericksburg market
(f) reflects the estimated total non-local, overnight visitor days generated by the complex each year
As shown, it is estimated that the facility will draw approximately 53,000 individual participants
and coaches on an annual basis. This assumption does not include events that draw primarily
day trip patrons, such as travel league practices, in-house league games and private lessons.
Based on a variety of surveys of similar facilities, the typical travel party size, including
participants and spectators, is between two and six people. For purposes of this analysis, it is
assumed that an average of 1.5 spectators will accompany each participant, resulting in a total
of approximately 79,000 individual spectators per year at the complex. Of these visitors, it is
assumed that between 25 percent and 85 percent will stay overnight in the Fredericksburg
area. Based on an average stay for these people ranging from one night to five nights, these
events will draw approximately 310,000 non-local visitors to the City of Fredericksburg.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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Page |18
4.0 Economic Impact Analysis
In addition to these new overnight visitors, these events will draw approximately 64,000 day
trip visitors to the City. While these visitors will not stay overnight, they will typically spend
money in the area on food and beverage and retail. The following table summarizes the
estimated spending per person, per day for both overnight visitors and day trip visitors.
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Average Daily Spending Per Person
Spending Category
Overnight
Visitors
Lodging
Food and Beverage
Retail
$40.00
$40.00
$20.00
n/a
$10.00
$5.00
Total Daily Spending
$100.00
$15.00
Day Trip Visitors
Source: NASC and industry averages
Overnight visitors are assumed to spend a total of $100 per person, per day, including $40.00
on lodging, $40.00 on food and beverage and $20.00 at retail establishments. Day trip visitors,
those who drive in only for the day return to their homes each evening, are estimated to spend
approximately $10.00 per person on food and beverage and $5.00 on retail per person.
These spending assumptions are utilized to estimate the net new spending taking place in the
area, with a subsequent reduction to account for the estimated spending that takes place
within the City boundaries. The following exhibit summarizes the gross new visitor spending,
net new spending taking place within the City and the related economic impacts on the City.
The exhibit also includes facility operating expenses that directly impact the local economy
through salaries and wages and the purchase of good and services within the City.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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4.0 Economic Impact Analysis
City of Fredericksburg
Economic Impact Analysis - Diamond Nation Sports Complex
Economic Impact Summary - Net New Impacts
Spending Type
Facility Operations
Direct
Spending (a)
Direct Spending
% Spent in
Fredericksburg
(b)
Economic Impacts
Net New Direct
Spending (c)
Total
Output (d)
Earnings
(e)
Jobs (f)
$2,500,000
75%
$1,875,000
$3,107,000
$723,000
40
Event Related Spending
Hotel/Lodging
Food and Beverage
Retail
Sub-Total
12,404,000
13,042,000
6,521,000
$31,967,000
60%
60%
60%
7,442,000
7,825,000
3,912,000
$19,179,000
11,369,000
12,352,000
6,053,000
$29,774,000
2,494,000
2,927,000
1,429,000
$6,850,000
90
140
50
280
Total
$34,467,000
$21,054,000
$32,881,000
$7,573,000
320
(a) Represents total direct spending by facility and visitors on various goods and services on-site and throughout the community
(b) Reflects percentage of direct spending captured by entities within the City of Fredericksburg
(c) Represents estimated Net New Spending impacting the City of Fredericksburg
(d) Total net new economic activity generated by the complex in the City of Fredericksburg
(e) Total net new personal income generated within the City of Fredericksburg by presence of the complex
(f) Total net new local full-time equivalent jobs created in the City of Fredericksburg
Diamond Nation estimates that total operating expenses for the Fredericksburg facility will be
approximately $2.5 million per year, of which approximately 75 percent will be spent locally.
This spending generates approximately $3.1 million in total output (direct spending plus
induced and indirect spending taking place in subsequent rounds of spending), $723,000 in new
personal earnings and will support approximately 40 full-time equivalent jobs.
Visitor spending, generated by non-local visitors to the community, is estimated at
approximately $32.0 million per year. Due to the complex’s proximity to existing and planned
developments, it is conservatively assumed that entities within the City of Fredericksburg will
capture approximately 60 percent of this spending, or approximately $19.2 million per year.
This level of spending will generate approximately $29.8 million in net new total output, $6.9
million in new earnings and will support approximately 280 full-time equivalent jobs. Note that
this spending and related impacts do not include spending from participants and spectators
attending the facility for travel league practices and games, local league games or other
primarily single-day events, as the daily spending from these patrons is assumed to be relatively
small. In addition, as Celebrate Virginia South and the surrounding retail developments are
already established as a regional trade draw, a large portion of spending from these patrons is
likely to already occur in the market, and would simply be displacing existing spending.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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4.0 Economic Impact Analysis
As discussed previously, these estimates reflect a stabilized year of operations for the complex.
Based on discussions with Diamond Nation representatives, this stabilized level of operations is
assumed to be achieved within the first three years after opening and is assumed to be
achievable for the foreseeable future. It is important to note that unanticipated changes to the
travel sports marketplace, the local economy and market in Fredericksburg or national and
international events could have a direct impact on these estimates.
In addition to the overall economic impacts that will benefit the greater Fredericksburg
community, the City will realize new revenues from the spending related to the facility’s
operations and new visitor spending in the community. The following exhibit summarizes the
estimated local revenue impacts generated by the complex and visitor spending.
Fredericksburg - Diamond Nation Sports Complex
Economic Impact Analysis
Economic Impact Summary - Net New Fiscal Impacts
Spending Type (a)
Facility Operations (e)
Net New
Spending (b)
Tax Rate (c)
Net New Tax
Revenues (d)
$281,000
1.0%
$3,000
Event Related Spending
Hotel/Lodging
Food and Beverage
Retail (f)
Sub-Total
7,442,000
7,825,000
3,912,000
$19,179,000
6.0%
6.0%
1.0%
447,000
469,000
192,000
$1,108,000
Total
$19,460,000
$1,111,000
(a) Reflects primary taxable spending sources generated by the complex.
(b) Represents net new taxable spending occuring within the City, generated by
the complex
(c) City tax rates for Retail, Hotel/Lodging and Food and Beverage.
(d) Reflects net new tax revenues generated by the activity at the complex
(e) Assumes 15% of local facility operations spending is taxable, with the remaining
85% comprised of payroll, advertising and other services
(f) Applies to all retail sales, food and beverage sales, and hotel/lodging sales.
As shown, it is assumed that only 15 percent of the facility operating expenditures will be
subject to sales tax, with the remaining potentially subject to other taxes, including income tax,
use taxes and fees, property taxes and others. Based on this assumption, facility expenditures
are estimated to generate approximately $3,000 per year in new tax revenues for the City.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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4.0 Economic Impact Analysis
Visitor spending is estimated to generate approximately $1.1 million per year in new tax
revenues for the City, including approximately $447,000 in new lodging taxes, $470,000 in new
food and beverage taxes and $192,000 in new retail sales taxes. It is important to note that
these new tax revenues are based solely on the net new direct spending related to the
presence of the Diamond Nation facility. The indirect and induced spending generated by this
initial round of spending will also generate at least some level of new tax revenues for the City.
However, consistent with the conservative approach to this analysis, those indirect and induced
tax impacts have not been quantified.
Historically, the City has approached projects seeking tax incentives by establishing a baseline
revenue amount from specific sources. Once the baseline is established, the City considers the
incremental new revenues generated by the project to determine the amount of incentives to
be provided to the project developer. The ultimate process for determining the incentives
provided to Diamond Nation will be determined through joint negotiations with the City.
Intangible Impacts
While the quantified economic and fiscal impacts of the proposed Diamond Nation complex are
important considerations when evaluating the development of the facility, there are other,
non-quantifiable benefits associated with such development. In many cases, the development
of facilities like the proposed complex serve as a catalyst for other private sector development,
particularly in the lodging, restaurant, retail and entertainment sectors. The fiscal impacts that
may benefit the public sector from such private development can be substantial, but cannot be
predicted given the private sector nature of such projects.
In addition, the presence of a new, state-of-the-art Diamond Nation complex that can host a
wide variety of visitor events while also providing a home to local sports organizations, can
generate significant intangible benefits for Fredericksburg. Some of these benefits may include,
but are not limited to:
•
•
•
•
Enhanced and improved sports and recreation opportunities for local adult and youth
organizations,
Synergies with existing or planned entertainment venues, leading to increased tourism
activity,
Improved community pride, self-image, exposure and reputation, and
Regional and national exposure as a quality destination for sports and recreation.
While these impacts and benefits cannot be quantified, they should also be considered when
evaluating the development of the proposed Diamond Nation complex.
Economic Impact Analysis of the Proposed Diamond Nation Complex
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4.0 Economic Impact Analysis
Summary
As shown throughout this report, the economic and fiscal impacts related to the development
of the proposed Diamond Nation complex can be significant, both for the City of Fredericksburg
and its citizens and businesses and the greater regional area as well. As with any study of this
type, the underlying assumptions and presented results are based on the information available
as of the date of this report. Changes in the youth travel sports marketplace, macroeconomic
changes affecting the United States or the world or other unforeseen issues could have a direct
impact on the ability of the City to generate the revenues and impacts identified herein.
Economic Impact Analysis of the Proposed Diamond Nation Complex
Prepared for the City of Fredericksburg
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