Thursday, August 15, 2002

Mayor 'mothballs' convention expansion

Delta backs out of pledge to buy naming rights

By Gregory Korte,
and Dan Klepal,
The Cincinnati Enquirer

        Delta Air Lines' decision to pull its name off of an expanded Cincinnati convention center Wednesday shattered an already fragile consensus over where to expand, how to expand and who will pay for it.

        After meeting with downtown hotel managers, Cincinnati Mayor Charlie Luken immediately declared that the $198 million expansion plan would be “mothballed” and replaced with a plan to renovate the existing, city-owned facility. Those plans are sketchy, but could cost $20 million to $80 million, the mayor said.

        That seemed to be just fine with the hoteliers, who confessed to feeling just a little relieved at the Delta announcement that it would not pay for naming rights. Without an expansion, they say, there's no need for a room tax increase that would have ranked Cincinnati third in the country.

        That tax was palatable in January, but not any more, said Wayne Bodington, general manager of the Westin Hotel.

        “There was a sense of optimism that the meetings and convention market was going to improve, and now it's clear that the improvement we were looking for was not around the corner,” he said. “Given the way the economy is today, we're not overly concerned about the expansion.”

        Others, including the Greater Cincinnati Convention and Visitors Bureau, are unwilling to retreat.

        “First of all, we need to remain calm. From our perspective, the focus needs to be on finding another corporate sponsor and keep moving forward,” said Julie Harrison Calvert, a spokeswoman for the bureau. “We have more corporations and corporate headquarters than any other city in the region. We have a lot of companies with a national or international reach, and we think one of them would step forward.”

        Hamilton County Commissioner Todd Portune, whose financing agreement with the mayor represented a big step forward in the expansion plan in January, was more blunt.

        He said Mr. Luken's abandonment of the expansion plan represents a unilateral decision.

        “The Delta announcement is disappointing on a number of fronts, but it shouldn't be cause to panic and scrap the whole plan until you see if others are willing to step into the breech. To pull out without consultation with anybody is a shock. We can't, as a region, afford to keep taking two steps backward for every step forward,” Mr. Portune said.

        A downturn in the economy — and especially the airline industry — prompted Delta's decision. The city and county had hoped Delta would contribute about $15 million for the expansion of the Albert B. Sabin Cincinnati Convention Center.

        Political, business and civic leaders have debated those expansion plans for 12 years, with the city's tourism industry arguing that Cincinnati needs a bigger convention center to stay competitive with other cities in the region.

        If political leaders are going to build a consensus around a new plan, their time is running out. Under a state law passed specifically for Hamilton County, county commissioners would have to approve an increase to its bed tax between Sept. 4 and Sept. 30, or lose the opportunity to do so.

        County Commissioner Tom Neyer said he's in no hurry to make a snap decision.

        “It took two years to come up with a financing plan, and I'm reluctant to come up with a new one in two hours,” he said.

        County Commissioner John Dowlin said he thinks the financing plan was unworkable to begin with.

        “Even if Delta did contribute, the financing plan didn't work,” he said.

        Before this year, the hotel/motel tax in the city was 10.5 percent, with these components: a 6 percent sales tax, a 3 percent county bed tax and a 1.5 percent city bed tax.

        The city increased its bed tax to 3 percent in March. The expansion plan would have increased it again to 4 percent, and raised the county's tax to 6.5 percent.

        The plan already had a difficult political journey from the city to the county to the state. When it came back from Columbus, there was an $8 million funding gap. That was manageable, Mr. Luken said. Losing Delta's contribution was not.

        “First, we've been dinged a little by the county, we've been dinged a little by the state, and now we've been dinged a lot by Delta,” Mr. Luken said. “The options for the city are limited.”

        But Mr. Luken emphasized he wasn't disparaging Delta. He said he understood the airline industry has seen some tough times since last September.

        Atlanta-based Delta, which operates its second-largest hub locally, had originally pledged in 1999 to commit $30 million for naming rights, an amount scaled back with a smaller expansion plan.

        But the airline lost $583 million in the first half of the year alone, while others are doing worse. US Airways asked for bankruptcy protection Sunday; American Airlines announced it would cut 7,000 jobs Tuesday.

        A Delta spokesman said the airline still wanted to be involved with the project, and left open the possibility that it would revisit the possibility after a year.

        “It's just not feasible to make a rational business decision in this current climate; and in the long run it's better for us to defer it, hoping Delta returns to consistent profitability and then we can review it again,” said Eric Summe, the airline's regional director of government affairs.

        The news was devastating for downtown businesses that rely on convention-goers.

        Lane Simon, assistant general manager at the Rock Bottom Brewing Co. on Fountain Square, said his business depends on downtown events such as conventions and baseball games.

        “For whatever reason, Cincinnati isn't able to embrace the kind of development that Northern Kentucky does. They're leaving us in the dust. The expansion would have made downtown a more attractive destination for people out of town,” he said.

        Neetoy Chin, owner of Wah Mee restaurant on Elm Street, said he was counting on the expansion to increase his business by 20 to 25 percent.

        “Now, it'll probably take 25 years for it to happen,” Mr. Chin said. “This isn't good for anyone.”

        James Pilcher contributed to this report.



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