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HomeMy Public PortalAbout2002 - Report to the Council on Convention Center Menlo To: Mayor Tom Rackers Members of the City Council From: Rich Mays, City Administra Date: December 10, 2002 Re: Convention Center Please find attached a report on the history of the convention center effort in ]efferson City. This may become useful. as we proceed with the latest inquiry. 1 will be meeting next week with seven individuals to receive input for what could be included in a Request for Proposal that would be sent to prospective developers, including Bruce Cohn. If you have any questions regarding this report, please don't hesitate to contact me. bks cc: Department Directors REPORT TO THE COUNCIL ON THE CONVENTION CENTER DECEMBER 16, 2002 The Jefferson City convention center project has been an on-going and elusive endeavor for many years. While citizens in this community have discussed the need for such a facility, little has been accomplished. This report will review the convention center effort over the past fifteen years or so and detail how the project has evolved up through recent weeks. In 1988 the Jefferson City Area Chamber of Commerce commissioned a feasibility study by Laventhol U Horwath of Kansas City to determine if any kind of convention facility was needed in Jefferson City. This study concluded that, "Given Jefferson City's high density of hotel rooms, central Missouri location, its position as the seat of state government and limited existing local facilities able to accommodate larger groups,potential support is evident for a convention facility." The study went on to recommend that"any development of a convention/civic center facility in Jefferson City be oriented primarily toward the convention center. Such an orientation would take advantage of Jefferson City's attributes and, while likely requiring subsidy, would generate potentially significant economic impact." In 1992 the Chamber of Commerce enlisted the services of the locally-based Pathway Group (David Harrison and Dave Donnelly, Principals) to review and update the findings of Laventhol at Horwath. Pathway concluded that a convention center was in fact feasible and also recommended a location for their suggested 30,000 square .foot .facility"- the square block bordered by McCarty on the north, Broadway on the west, Washington on the east and Highway 50 on the south. Pathway stated that this particular location "best-conforms to proven criteria" that they established in their study. In 1992, the advent of riverboat gambling came to Jefferson City. The City's designated developer, Becker Gaming Group, promised to build a convention center near the Ramada Inn ' if the voters approved a referendum authorizing the presence of a riverboat. After a successful referendum in late 1992, Mr. Becker ran into difficulties with the Missouri Gaming Commission which, in effect, stalled the riverboat/convention center proposal. Afterwards, a grass-roots anti- gambling movement surfaced in Jefferson City and this group succeeded in once again, putting the riverboat issue before the voters through a Charter amendment in November 1995. The anti- gambling position prevailed by a 52-48 percent margin putting the riverboat permanently to rest and the convention center effort back to square one. Council Report Page 2 December 16, 2002 Earlier in 1995, Mayor Duane Schreimann appointed an ad hoc convention center committee and charged it with securing a convention facility for Jefferson City. In August of that year, RFPs were distributed to about forty different firms inviting them to submit proposals on how a convention center should be built, how it should be financed and where it should be located. The RFPs were intentionally left open-ended to encourage maximum creativity and flexibility for prospective developers. Proposals were due in December of 1995 and just two were received. One was from John Q. Hammons,the Springfield developer and owner of the Capitol Plaza Hotel. The other proposal came from the Ramada Inn/Propst Group. Mr. Hammons' "proposal" was a two-page letter basically expressing his interest in constructing a convention center within the vicinity of his hotel. The Ramada proposal was much more substantive and better met the expectations of the convention center committee. Ramada proposed that the convention center be built on twelve Ramada-donated acres immediately west across Southridge. Drive from the hotel and that the project be financed with a combination of a hotel/motel tax, restaurant tax (both of which were dependent on a successful public referendum) and State convention center funding (which would have to be authorized by the Missouri General Assembly). In April 1996 the City Council directed Mr. Hammons, the Ramada/Propst Group and any other interested developers to submit one last offer to the City on what they could financially contribute to-the convention center cause. Once again, only two proposals were submitted from John Q. Hammons and the Ramada Group. Later that month, the City Council voted to accept Ramada's proposal because, while most of the council members preferred a downtown location fora convention center, the present value of Ramada's financial contribution to the project exceeded that of Mr. Hammons. It was also felt that securing a downtown location would require substantial disruption and dislocation to that area and be much more expensive for the City to acquire the needed properties and prepare the site for development of the center. Meanwhile, there were two other issues that had to be addressed before the project could proceed with the Ramada Group. The first was to update the aforementioned Pathway feasibility study in order to help the council determine if a convention center was still viable. Price Waterhouse from Tampa, Florida was hired to conduct the update which they concluded late in 1996. Three of Price Waterhouse's conclusions deserve mention: Council Report Page 3 December 1,6, 2002 o The presence of a convention center would derive significant direct benefits (such as increased restaurant, hotel, and entertainment business) as well as indirect benefits (spinoff and "multiplier effects" from the above) within the Cole County area. © A new convention center should include a 20,000 to 25,000 square foot ballroom in order to offer a facility that could not be matched elsewhere in the community. ® A convention center in Jefferson City, like in most other communities, would generate an operational deficit of between $288,000 and $483,000. The second remaining issue the Council was concerned with was how to finance the City's $6.5 million portion of the $13 million project. After considerable discussion involving the advantages and disadvantages of an economic development sales tax (which required legislative approval in the 1997 special session), a restaurant tax and a hotel/motel tax, the City Council voted to authorize a 3/8 of one percent economic development sales tax for a February 1998 public.referendum. It was estimated that this level of sales tax would pay off the City's portion of the convention center within approximately three years. After the City Council authorized the February 1998 referendum, negative feedback regarding the location of the proposed convention center began to surface. The Chamber of Commerce presided over several communityfocus groups which confirmed that many citizens felt a downtown location for a convention center was far superior to the Southridge site and that the proposed location would cause the referendum to fail and fall badly. In October 1997, the City Council formally withdrew the referendum from the February 1998 ballot, severed ties with the Ramada Group and formed two ad hoc committees to recommend: o The exact downtown location that was best for the convention center. © What sort of amenities and facilities should be included within the proposed convention center. Council Report Page 4 December 16, 2002 The first committee chaired by Seth Evans of Architects Alliance, investigated several geographic alternatives for locating a convention center in the downtown area. They established about twenty criteria and rated each of the sites accordingly. The second committee, chaired by Councilman Charles Jackson, brainstormed for ideas on what features the new convention center should contain. (Details on the two committees' findings are available in the City's archives.) By February 1998 both committees' work 'was coming to a conclusion when John Q. Hammons,through the two-former'representatives of the Pathway Group,communicated a desire to put a substantial amount of his own funding into a convention center located in the square block just east of his hotel. Because parking for approximately 150 State employees would be uprooted if such a facility was constructed, discussions ensued with not only Mr. Hammons but State officials to ascertain their interest in contributing funds toward a parking structure that the three parties knew would eventually be necessary—not only to accommodate convention center patrons and State employees but to physically support the convention center structure as well. Initial meetings with John Q. Hammons proved to be productive as the participants discussed ways to meet the objectives of the City, the State and Mr. Hammon. Over a period of several months, different options pertaining to various convention center issues were explored including: o determining,the total cost of the project; © ownership and property tax abatements; © financing options for Mr. Hammons' contribution; o the size of the facility and its ballroom; ® covering the operating deficit of the facility; O covering cost overruns related to construction; o number, location and assignment of parking spaces; o acquisition of thirteen parcels of property; © issuance of taxable versus non-taxable municipal bonds; m how the City would fund its share of the project. r Council Report Page 5 December 16, 2002 Negotiations with Mr. Hammons and his staff and State officials representing.the Office of Administration resulted in the following agreed upon financial arrangement. , CITY OF JEFFERSON CONVENTION CENTER FINANCING Parks/Stormwater Sales Tax Alternative USES OF FUNDS SOURCES,OF 'FUNDS Convention Center Construction $ 6,000,000 John Q. Hammons $ 7,500,000 Parking Structure 5,300,000 City of]efferson 3,500,000 { Property Acquisition, Other Items 1,.700,000 State of Missouri 2,000,000 Total $ 13,000,000 $ 13,000,000 The proposed City sales tax could have taken one of two forms. The first option was a separate economic development sales tax for 3/8 of one percent which would pay off the City's share of the parking garage in fifteen to eighteen months. The second option was a combination of the convention center and a parks sales tax into one ballot issue. A public referendum in February 1999 was proposed. As far as the development agreement between the City and ]ohn Q. Hammons was concerned, a Memorandum of Understanding summarized the essential framework. Basically the agreement called for Mr. Hammons to contribute $7.5 million of the $13 million project,secure his own financing, absorb any operational deficits and construction cost overruns and operate a 32,000 to 36,000.square foot convention center that would include a 20,000 square foot ballroom. The City would own the convention center facility until the term of Hammons' loan was complete upon which the ownership of the convention center building (not the parking garage) would be transferred to Hammons. As long as the City owned the building, no property taxes would be paid. Once the building was transferred to private ownership, Hammons would pay 100% of all property taxes due. While Hammons was not paying property taxes as long as the City retained ownership, it is noteworthy that he would be contributing $7.5 million towards a $6 million facility. For its part, the City would agree to acquire the necessary property, prepare the site for development, contribute a total of$3.5 million towards the project (subject to a successful sales tax referendum) and secure necessary funding from the State for their share of the.project. The Council Report Page 6 December 16, 2002 State agreed to pay the City the equivalent of $50 per month rent for each of approximately 235 spaces or about $141,000 per year. The State's contribution (or rent, if you will), would have been capitalized over 25 to 30 years which should have, at the prevalent interest rates at that time, generated approximately $2 million. Assuming interest rates were maintained at their current levels, the City would have sold municipal revenue bonds for $2 million and paid off the debt service with the $141,000 annual lease payment from the State. In November of 1998, two local private groups,approached the City Council basically offering to put together a convention center project in competition with the one Mr. Hammons was proposing to the City—that is, construction of a convention center, restaurant and hotel and with them,,the responsibility for paying-their fair share of property taxes. The.two groups were: 1) Capital Convention Center Group, LLC (CCCG) Darrell Dunafon, Prost Builders and Ramada Inn and 2) Dan Gordon and Richard Groner of Gordon and Groner and Associates. The City Council, knowing the difficulties in communicating with John Q.'Hammon and appreciating the local interest, voted to require Request for Proposals from any parties interested in building a convention center in November of 1998. RFPs were due in mid-December and just before the deadline, the City received correspondence from John Q. Hammons officially withdrawing his interest in the project. The City Council then formed a sub-committee to evaluate the two remaining proposals that they received from CCCG and Gordon and Groner. In April of 1999, the City Council passed a resolution designating CCCG as the developer of first choice and directed the City staff to begin negotiating a development agreement with them. Negotiations between the City and CCCG ensued for several months with the $31 million project involving a City contribution of $4.1 million through'an.eighteen-month 3/8 of one cent sales tax which would require a public referendum. Negotiations between the City and CCCG went on for months. As the-end of 1999 came to a close, it became apparent that the development agreement and project was not going to happen. In a nutshell, CCCG required additional funding which the City was unable and unwilling to provide. Looking at it another way, further analysis by the City and the developer indicated that, for a variety of reasons, the risk of the project to the developer and to the City and its taxpayers had increased beyond acceptable levels. In February of 2000, the City Council passed a resolution effectively putting the latest chapter in the Jefferson City convention center saga to rest for the foreseeable future. A Council Report Page 7 December 16, 2002 Two years and four months later, Mr. Bruce Cohn, the St. Louis based developer of the Hotel Governor Office Building, approached the City regarding his interest in developing a small convention center and restoring some of the older properties on West McCarty Street. update report council dec 2002 r