Thursday, September 26, 2002

Convention center expansion has money issues

Plan clears 1 hurdle, faces more

        Talked about for more than a decade, the expansion and renovation of the Albert B. Sabin Cincinnati Convention Center is one step away after Hamilton County commissioners on Wednesday approved raising the countywide hotel-motel tax by 3.5 percentage points, effective Dec. 1.

        But the last step could be a big one.

   Highlights of where the city and county disagree over financing the expansion.
    City-proposed agreement:
    City and county jointly guarantee any shortfall in revenue for debt service payments from their respective general funds.
    County contributes $500,000 per year for 30 years.
    No provision for funding the Cincinnati North Convention and Visitors Bureau
    No provision for excess revenue from the countywide tax increase.
    Agreement approved by Hamilton County commissioners:
    City alone must guarantee shortfalls in the debt service payments.
    County contributes $250,000 per year for 30 years. It also gives $1.7 million in cash for the project up front.
    County will give $500,000 per year — half from the original 3 percent countywide bed tax and half from the county's general fund — to the Greater Cincinnati Convention and Visitors Bureau for marketing suburban hotels.
    Any countywide tax revenue generated in excess of the amount needed for debt payments would be split: half going to early retirement of the debt and half going to a future expansion of the Sharonville Convention Center.
        Before the expansion becomes reality, Cincinnati City Council must agree to changes commissioners made to a three-page memorandum of understanding that spells out the responsibilities of both governments in the $160 million project.

        Council has only until Monday to sign off on those changes and agree to raise the city's bed tax from 3 percent to 4 percent.

        County commissioners spent about six hours Wednesday working through key issues in the document, which was drafted by the city administration.

        Most of the changes deal with the project's financing plan:

        The county decided to contribute $250,000 a year instead of $500,000 annually for 30 years. The county will also make a one-time payment of $1.7 million.

        Another $500,000 per year from the county will be used to market suburban hotels; the city did not make such a proposal.

        The county will not guarantee any of the project's debt; the city proposed the two governments split the guarantee.

        Tax money raised in excess of that needed to pay off the debt will be split — half to pay off the debt early and half to fund an expansion of the Sharonville Convention Center.

        The county is contributing the $1.7 million after it was made available by Clerk of Courts Jim Cissell out of a special fund that he controls. Mr. Cissell actually offered $3.5 million, but commissioners decided to keep half of that in county coffers for other purposes.

        Commissioner Tom Neyer said combining the lower yearly payments and the upfront cash would be almost as much as contributing $500,000 a year.

        “This is an enormously complex matter,” Mr. Neyer said. “And I'm excited by the opportunity this provides. This is very good news for the city, the county and the hospitality industry in the entire region.”

        The countywide tax increase, from 3 percent to 6.5 percent, would take effect only if the city approves the plan by Monday and the other funds have been committed by Dec. 1.

        Cincinnati Mayor Charlie Luken said the city can come to terms with the financial aspects of the changes.

        The mayor said the most important issue is one that commissioners didn't change — control of the Convention Facilities Authority (CFA), an agency that will collect and spend the new hotel tax revenue.

        “The most disturbing thing is that the CFA could be controlled by people who oppose the expansion of the convention center,” Mr. Luken said. “If you have the ability to control the CFA, you have control of the project. And if (Sharonville Mayor) Virgil Lovitt, bless his heart, ends up as chairman of the CFA, we're dead in our tracks.”

        Mr. Lovitt has acted as spokesman for northern hotel interests for the past year, and fought the financing plan for a $198 million expansion unveiled in January.

        Commissioner Todd Portune said membership on the CFA is a non-issue. The city already has hired the architect and construction manager for the project. The memorandum dictates that the city will manage the design and construction of the expanded center. Also, the state law allowing the county to raise its bed tax forced the county to create the CFA, and prescribed who would appoint the CFA's membership. The city would appoint three of the CFA's 11 members.

        Expansion of the center has been touted by business leaders and some politicians as necessary to increase tourism and pump some $122 million into the local economy every year. Hoteliers say it's a gamble because they are being forced to raise their bed taxes to among the highest in the country. The higher bed tax, combined with the high cost of air travel to Cincinnati, may repel those conventioneers attracted to a shiny new center, they argue.

        Commissioner John Dowlin voted against raising the bed tax, mainly because of money dedicated to the project from the county's treasury. Mr. Dowlin said the economic times are too tough, and the county's budget too fragile, to commit millions to the project.

        Mr. Luken told council members to keep their calendars clear on Monday, in case he calls a special meeting on the expansion.

        The city has an additional hurdle to clear before Monday.

        It is still negotiating with business leaders over the terms of a $10 million loan. Acting Deputy City Manager Tim Riordan told commissioners the city was close to an agreement.

        Mr. Riordan said details of the loan and the memorandum must be finalized because the city would have to spend about $15 million immediately to buy the WCPO-TV property at Fifth and Central and keep its construction team together.

        “Without that, we'd be hanging out there with $15 million in bonds and no idea of how we'd pay it back,” Mr. Riordan said.

        The city's business leadership originally committed to $20 million for an expanded center. In January that promise slipped to $16 million. The new plan calls for a $10 million contribution and a $10 million loan.

        Additionally, the financing plan assumes $20 million from the state and $10 million from naming rights.

        Construction would start in 2004 and be completed by 2006.

        Greg Korte contributed to this report.


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