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HomeMy Public PortalAbout1998 - Report to the Council Committee on the Convention Center (Revised) REPORT TO THE COUNCIL ON THE CONVENTION CENTER r (REVISED) NOVEMBER 16., 1998 Te 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 decade or so and summarize how the project has evolved up through recent weeks. In 1988 the Jefferson City Area Chamber of Commerce commissioned a feasibility study by Laventhol 8t Horwath of Kansas City to determine if any kind of convention facility was needed in Jefferson City. The 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 to review and update the findings of Laventhol 8t 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. Afterwards, a grass-roots anti-gambling,movement surfaced in Jefferson City and succeeded in putting the riverboat issue before the voters once again in November 1995. The anti-gambling position prevailed by a 52-48 percent margin putting the riverboat permanently to rest and the convention center back to square one. Earlier in 1995,the Mayor appointed an ad hoc convention center committee and charged it with securing a convention facility for Jefferson City. In August of that year, Requests for Proposals were distributed to about forty different firms inviting them to submit ideas 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. Council Report Page 2 November 16, 1998 Proposals were due in December of 1995 and just two were received. One was from John Q. Hammons, owner of the Capitol Plaza Hotel, and the other 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 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, the only two proposals came 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 for a convention center, the present value of Ramada's contribution to the project exceeded that of Mr. Hammons. It was also felt that securing a downtown location would require substantial disruption and dislocation and be much more expensive for the City to acquire the needed properties and prepare the site for development of the center. 3 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 eight-year-old feasibility study in order to help the council make a decision on whether to proceed with the project. Price Waterhouse from Tampa, Florida was hired to conduct the update. Three of Price Waterhouse's conclusions deserve mention: 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 most other communities, would generate an operational deficit of between $288;000 and $483,000. The second issue 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 Council Report Page 3 November 16,, 1998 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 community focus groups which confirmed not only that.many citizens felt a downtown location for a convention center was far superior to the Southridge site but that the proposed location would cause the referendum to fail and fail badly. In October 1997, the City Council formally withdrew the referendum from the February ballot, severed ties with the Ramada Group and formed two ad hoc committees to decide: 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. The first committee 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 brainstormed for ideas on what features the new convention `! } center should contain. 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 two blocks east of his hotel. Because parking for approximately 150 State employees would be uprooted, discussions ensued with not only Mr. Hammons but State officials to ascertain their interest in contributing toward a parking structure that the 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. 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. Hammons. Different options and 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; O covering the operating deficit of the facility; 0 covering cost overruns related to construction; _ Council Report 'Page 4 November 16, 1998 O number, location and assignment of parking spaces; U 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. With the help of Mr. Hammons and his staff and'State officials representing the Office of Administration, the following represents the 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 Jefferson 3,500,000 Property Acquisition, Other Items 17700,000 State of Missouri 2,000,000 Total $ 13,000,000 $ 13,000,000 Two issues for City Council consideration for Monday, November 16, are the proposed development agreement with John Q. Hammons and authority for a sales tax referendum on the February 1999 ballot. The sales tax can take one of two forms. One, 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. Two, combine the convention center and parks sales tax issues into one as we discussed at the October 22 Finance Committee and November 2 City Council meetings. Based on estimated percentages of disposable income that is typically spent on retail items within the City of Jefferson, it is estimated a 3/84 sales tax would add between $40 and $50 per citizen to their retail sales depending on spending habits. Elimination of the 164 property tax would decrease tax bills according to their assessed value of the residence or business property. For example: Property value $60,000 $80,000 $100,000 $150,000 Decrease in $18.24 $24.32 $30.40 $45.60 property taxes Advantages of combining the two issues on the February 1999 ballot include: i O City would eliminate at least 164 of property taxes which citizens have no control over in favor,of a sales tax which citizens do have control over. © An estimated 45% of sales tax revenue comes from outside.the City. Council Report Page 5 November 16, 1998 © By reducing Parks subsidy, City Council can free up additional monies for the General Fund or reduce property taxes further. O The City would be helping to consolidate ballot issues. © More funding for the Parks Commission. Disadvantages of combining the two issues on the-ballot include: O Possible effect on the City's 2001 half cent sales tax vote. © To the extent the subsidy is reduced, City Council has less "authority" over the Parks Commission. © More money is put into control of non-elected officials. O Voters may perceive the City is "trying to pull something." -© More complicated ballot issue. As far as the development agreement is concerned, the Memorandum of Understanding in the Council packet summarizes the essential framework. Basically the contract calls 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 is complete upon which the ownership of the convention center building (not the parking garage) would be transferred to Hammons. As long as the City owns the building, no property taxes will be paid. Once the building is transferred to private ownership, Hammons would pay 100%of all property taxes due. While Hammons is not paying property taxes as long as the City retains ownership,it is noteworthy that he is contributing $7.5 million towards a $6 million facility. The City would agree to acquire the necessary property, prepare the site for development and contribute a total of$3.5 million towards the project subject to a successful referendum and secure necessary funding from the State for their share of the project. (See table on page 4 for funding breakdown). The State has agreed to pay the City the equivalent of$50 per month rent for approximately 235 spaces or about $141,000 per year. The State's contribution (or rent, if you will), would be capitalized over 25 to 30 years which should, at today's interest rates, generate approximately$2 million. Assuming interest rates are maintained at their current levels, the City would sell municipal revenue bonds for $2 million and pay the debt service with the $141,000 annual lease payment from the State. In conclusion, the biggest remaining question for the City Council,is to determine the funding source for-the City's $3.5 portion of the convention center project. There are two options under consideration and both have their advantages and disadvantages. Please contact Allen Garner, Bill Lockwood or myself if you have any further questions regarding the convention center project. a council\convcvlslte\council report nov