VIRGINIA BEACH, Va. (WAVY) — On Tuesday afternoon, the economic impact of 2023 festivals such as Something in the Water, Jackalope and Beach It! was revealed for the first time showing an overall positive impact.

The Virginia Beach City Auditor’s Office has also done a review of the city’s sponsorship agreement of Something in the Water and Beach It!, and found they will not receive the money city council initially set aside for them.

When Virginia Beach native Pharrell Williams agreed to bring his festival back to the Oceanfront in 2023, there was much excitement.

The city offered up a different kind of financial incentive than they did during the inaugural festival in 2019.

Instead of a lump sum of $250,000 as sponsorship, the council members agreed to allow the festival organizers to keep all admissions, meals and the local portion of state sales taxes for all transactions that occur on festival grounds.

That equates to 10% of ticket sales, 5.5% of food and beverage, and 1% of sales. Festival grounds included 4th Street to 15th Street.

At the time, council estimated that could amount to $2 million, and voted to set that money aside, with $500,000 given to the festival up front to help pay for marketing costs.

However following the auditor’s review, the total amount the festival made in those taxes, is less than half that.

The festival collected just over $970,000 for what was billed as a three-day run. Though in reality Something in the Water only operated within festival grounds for a day and a half because of the weather. The festival ended up refunding a third of the festival ticket price.

The sponsorship agreement also included “in-kind” services that other festivals in the past have had to reimburse the city for.

The festival, which is a partnership between Williams and Live Nation, the world’s largest entertainment company, was able to use various resort area stages, agreed-upon public parking lots, public safety, public works, and other city support for free. Initially, use of Virginia Beach City Public School buses for free was also part of the deal, but former Deputy City Manager Taylor Adams said that offer was nixed following City Council’s vote, once Live Nation began charging $50 for shuttle passes.

The auditor’s review found if charged for all the services the financial value would amount to roughly $809,000. When you add that amount with a $2,500 sponsorship from the Cultural Affairs department and the $970,000 the city could keep for taxes, the total cost to put on 2023’s Something in the Water was about $1.8 million, a $700,000 increase from four years prior.

However, despite the weather issues and increased costs, Dr. Vincent Magnini said the festival returned a positive economic impact and return on investment for the city.

Magnini, the executive director of the Institute for Service Research, was hired by the city not only to analyze the performance of Something in the Water but seven other events held at the beach.

He found that the festival had an overall economic impact of at least $26 million, prompted at least 12,600 hotel stays with the city seeing between $1.04 and $1.18 spent for every dollar they invested.

Live Nation also debuted a new on-the-beach country music festival this year called “Beach It!”

The festival that took place June 23-25 on two Oceanfront stages was given the opportunity to keep all the admissions taxes, such as taxes on ticket purchases both on-premises and online.

The city believed that will equate to roughly $1.5 million, the actual amount was less than a quarter of that.

When you throw in the city services, that were also a part of this sponsorship agreement, the total investment by the city comes to nearly $473,000.

City Auditor Lyndon Remias requested that the Convention and Visitors Bureau ensure the nearly $2.2 million allocated for the festivals, but not earned, be returned to the city’s Tourism Investment Fund.

He also recommended the bureau “establish detailed, written guidelines related to authorizing, approving, and capturing/allocating costs associated with large special events. The guidelines should include examples of what to include as well as what not to include and be distributed to the departments along with the analysis code for the event.”

An economic analysis in 2019 found Something in the Water spurred an estimated $1.1 million in direct revenue to the city, with $285,000 being profit.

“As part of our review, we met with the author of the study, reviewed the methodology for
determining the fiscal and economic impacts, and reviewed the related spreadsheets that
supported the figures,” Remias said. “Based on our review, we determined that the methodology utilize for estimating the economic and fiscal impacts of the festivals was reasonable.”