STURGIS, S.D. (KELO) — Roughly eight years ago, a number Sturgis Motorcyle Rally vendors were taking cash for sold items and sticking that cash in their pockets, Sturgis city manager Daniel Ainslie said.
The city decided to curb that activity and collect what was owed, Ainslie said.
“It began when we started to see a significant amount of sales occur and the reported sales (did not) correlate,” Ainslie said.
The city started working with state Department of Revenue agents to make sure vendors were properly recording point of sales to accurately reflect sales, Ainslie said. Undercover officers are checking vendor sales transactions.
The sales tax revenue from the rally has significantly increased since about 2012 and 2013.
“Now, because they know people are watching, everyone is using a point of sale…,” Ainslie said.
The sales tax generated in 2013 was $569,116 and it was $606,706.01 in 2019.
“We saw a 30% to 40% increase in the first year. That’s a tremendous increase,” Ainslie said of sales tax revenue.A Flourish chart
The change to collect more sales tax revenue has directly led to an increase income from the annual event.
The net profit from the rally was $1,165,687.73 in 2019. It was about $100,00 more than the $1,075,030 collected in 2013.Latest Sturgis Rally news and live video
The city’s own growth and the growth in rally income have allowed the city to cut the property tax rate by 22% since 2014, Ainslie said. Rally income made up about 11% of the city’s 2019 $8.6 million general fund budget.
But the city has likely hit the ceiling on income from the rally, Ainslie said.
“Over the past six years, the net income has been fairly consistent,” Ainslie said. “From 2008 to 2012, we saw some substantial change. In 2008 and in the five years prior, the net income was about $300,000 annually.”
“I think we are capping out on any additional revenue we can make…,” Ainslie said.A Flourish chart
This is after the city has increased sponsorships and made changes to operate the rally more efficiently. The city of Sturgis is the official sponsor or host for the annual Sturgis Motorcycle Rally. The city organizes a series of rally events in the city. While Ainslie said Sturgis is the epicenter of the rally, he stressed that many neighboring communities, and even those on major routes to Sturgis, have their own activities before, during and after the 10-day rally.
The rally has been good to Sturgis in terms of allowing it to cut the property tax rate and build the Harley-Davidson Rally Point which is the site of weekly concerts, kids movie nights and other community events. Back, in 1992, rally money was used to help pay for building the community center.
The city has benefitted from the rally but “most residents understand that (net income isn’t going to increase to $2 million or $2.5 million in the future),” Ainslie said.
For 10 days, a town of about 7,000 people has to shoulder a rally that increases the city’s size to more than 400,000. The 2019 attendance was 490,000.
Even during a pandemic the city was unofficially expecting 300,000 to 350,000 attendees, Ainslie said.
“We change entirely for two weeks,” Ainslie said.
Garbage trucks start hauling waste from the city’s main street at 2 a.m. each day during the rally. The waste is hauled about 50 miles away to a landfill in Belle Fouche.
By 7 or 7:30 a.m. the city employees can take a break before they start hauling residential garbage. Residential garbage pick up is needed daily because many residents rent lawns or lease houses to rally goers, Ainslie said. The city also continues to pick up garbage throughout the day.
The city also hires additional police officers to help with the rally. This year the city has hired officers from about eight states outside of South Dakota, Ainslie said.
The library is closed during the rally so that library staff can answer phones in the city’s rally department.
The fire department is a volunteer department but for two weeks it converts to a 24 hour a day seven days a week service, Ainslie said.
The city needs to feed employees and house those who travel from out of town to work for the city during the rally.
The costs add up to about $1.5 million in 2019. It was $1.3 million in 2018. And during record attendance in 2015, the cost was $1.5 million.
The city will still have costs for this year’s rally even though it made some major changes, Ainslee said.
City officials had been anticipating since March a drop in the rally attendance and a related drop in income, Ainslie said.
City officials considered not having the rally because of the coronavirus pandemic, he said. But when it learned that businesses and organizers of events in nearby towns still planned to have events and invite motorcyclists, Ainslie said the city knew that attendees would end up in Sturgis.
“It was very obvious that every business outside of Sturgis was going to promote the rally anyway,” Ainslie said.
The city would still have needed to have law officers and pick up extra garbage without officially hosting the rally this year, Ainslie said.
That would likely have resulted in a total net loss of $1.7 million this year. As it is the city anticipates using a chunk of the city’s general fund reserve account to make up for losses from this year’s rally, Ainslie said.
So, the city went ahead with the rally but has canceled most public events. It even pulled outdoor information booths to lessen social contact between people, Ainslie said. It hasn’t been promoting the rally through any of the usual methods, he said.
The city hopes its measures will blunt attendance and reduce some COVID-19 transmission risks, Ainslie said.
But, Ainslie said on Monday it doesn’t appear that attendance numbers have dropped much from last year.
“Anyone here in Sturgis who has seen the crowds here, it doesn’t seem like there is a significant reduction,” Ainslie said.
The South Department or Revenue said Monday that rally vehicle counts from Aug. 7 through Aug. 9 were down by about 6,400 from 2019 or 3.85%. The count total was 160,788 compared to 167,222.A Flourish chartA Flourish chart
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