July 5, 2022

Knife River Corp., owner of the former Concrete Materials Co., has offered Minnehaha County $65 million for the  William H. Lyon Fair Grounds.

The Minnehaha County Commission established a 15-member task force to study the property’s history, community need and future vision earlier this year. The work is expected to take about a year.

Winona Axtell gifted the land for the fairgrounds in memory of her husband, William, in 1938 and 1942.

More than 600,000 people attend an event there annually, the commission estimates. The site, which is commonly referred to as the W.H. Lyon Fairgrounds, is at 100 N. Lyon Blvd., near Interstate 29 and 12th Street.

Knife River Sioux Falls president Clark Meyer spoke during the public input segment at this morning’s Minnehaha County Commission meeting and made the county the $65 million offer for the land.

Meyer said he was concerned the task force was “given a very narrow and restricted scope in exploring all options and opportunities for the future of the fair. They have been directed that ‘only solutions that include the fair remaining on the existing grounds will be explored and considered.’”

Knife River’s quarry, corporate office and other facilities border the fairgrounds on three sides, and the surrounding properties are an active mine.

“We believe that under the fairgrounds is a large deposit of high-quality construction aggregates,” Meyer said. “We have requested access to verify these reserves but have been denied.”

Meyer noted that an appraisal done in November 2020 valued the fairgrounds property at approximately $6.5 million. The county director of equalization has the property valued at approximately $6.9 million, he said.

The Knife River offer has some conditions, including verifying the reserves it believes exist on the property.

“This offer is intended to kick-start the conversation and have the task force study all options, including relocating the fair and leveraging the largest asset the current fairgrounds has, which is the aggregate reserves it allegedly sits on,” Meyer said.

“Knife River is not only interested in ‘Saving the Fair,’ but we are passionate about creating modern, state-of-the-art agri-tourism facilities, with a long-term, fiscally responsible and sustainable plan that will benefit the entire Sioux Empire and yet continue the legacy of the Lyon family,” he said.

A 1999 task force went through a similar exercise with consultants and concluded the fair needed $31 million in capital improvements, but the county didn’t identify a source for the funds, Meyer said.

“It also struggled to develop an operating business model that made the fair self-sustaining and no longer continually dependent upon county subsidies as it is today,” he said.

Meyer spoke at the same meeting when the commission was to consider moving forward with a consultant’s agreement to advance the task force process with market and economic impact studies, master planning, civil engineering and other support.

Commissioner Jean Bender, who is an attorney, said the county does not have a clear legal path to sell the property.

“That land was a gift to the county, and that gift is very tightly constrained, and the risk is if we sell that property that that property would go back to the heirs, and the county would get nothing,” she said. “So there are very significant legal impediments, which is why it hasn’t been done in the past.”

The county also can’t just make a deal with one buyer for the property even if there were a path forward, she said.

“We can’t pick one person and sell it. The statutes lay out specific ways counties can sell property,” Bender said.

Assuming there were a way to sell the property, the options to sell it would be “a sealed bid, a Realtor or an auction,” Commissioner Cindy Heiberger said. “So Knife River’s offer to us is really not worth the paper it’s written on because we can’t even consider it.”

Even $65 million likely isn’t enough to build a new fairgrounds, she said.

But the county doesn’t have the money for major improvements or rebuilding it, commissioners said.

Task force member Bob Thimjon testified that some guidance in that area would be helpful as the task force continues its work.

“If we come back to you and say it’s got a $40 million price tag, what is your appetite for that?” he asked. “If your appetite is more in the $4 million range, I think we have to change how we look at things.”

No one talked numbers or offered that sort of direction in response, though multiple commissioners said they could give the task force better direction.

Heiberger hinted that donors might be an option.

“We don’t have the money in Minnehaha County to do a huge renovation of that property, but there are people in this community that believe in the fairgrounds, and they will figure out where it should be and how it should be built,” she said. “We have people telling us they’re willing to invest money if we come up with a decent plan.”

The county still does not have a source to fund operations of the fairgrounds because the sales tax revenue generated from it doesn’t go to the county.

“If you ever want to bankrupt somebody, give them a white elephant,” Commissioner Dean Karsky said. “We have something we have to take care of, but we have no revenue source to do that.”

There are broader implications of not working with Knife River on its offer, said Craig Lloyd, co-founder and board chairman of Lloyd Cos., who spoke at the meeting.

If Knife River is unable to find a source for mining in Sioux Falls, it will have to haul those materials through town from out of town by rail car or truck.

“A group of us have invested over $1 billion in downtown, and if Knife River doesn’t find a source on the west side of Sioux Falls that they have to bring in materials … all those trains are going to come through downtown,” he said. “If that train noise goes from what it is today to eight to 10 trains a day, it’s going to affect the (economy) of downtown.”

The county ultimately likely would need a court ruling to determine if it could sell the fairgrounds, Karsky said.

“We’re not even to the point” of seeking such an opinion, Heiberger said.

For now, the county deferred voting on a contract with Charles D. Smith Architecture & Planning that would have cost $165,000 plus 15 percent and actual expenses related to it. Commissioners asked the firm to come back with a slimmed down version that would focus first on a market analysis and economic impact study.

There wasn’t a date set for further considering the item.