Tuesday, September 16, 2003

$12M naming deal at impasse


Convention center expansion again at risk

By Gregory Korte
The Cincinnati Enquirer

Talks between Cincinnati and the Cinergy Corp. over naming rights for the city's convention center have reached an "impasse," Mayor Charlie Luken said Monday.

The breakdown puts the on-again, off-again $160 million convention center expansion in doubt once again.

Luken accused the regional power giant of trying to pay for its $12 million naming rights commitment "on the backs of city residents" - through higher electric rates to the city government and city gas and electric customers.

"I'm not going to allow that," Luken said. "We're not going to agree to higher utility rates to pay for naming rights."

Cinergy and the city agreed to the outlines of a tentative deal to put Cinergy's name on the expanded convention center a year ago after previous sponsor, Delta Air Lines, withdrew its $30 million commitment because of decreased air travel after the 2001 terrorists attacks. The center is now known as the Albert B. Sabin Cincinnati Convention Center.

Since then, the two sides have been unable to come to specific terms, and Cinergy has not made the first of four $3 million payments due nine months ago.

The mayor's statements seemed to take Cinergy executives by surprise. Greg Ficke, the president of the Cinergy's Cincinnati Gas & Electric division, said he talked to city officials Monday and was prepared to hear back from them today.

"It's unfortunate that the city believes we're at impasse. We think it's a great deal for the company and a great deal for the city," he said. "We frankly wonder whether the city is interested in us contributing the $12 million for the convention center expansion."

Two issues now separate the city and the utility. The first is the rate paid by city government to heat and power city facilities - costs ultimately borne by taxpayers. The second is municipal aggregation - a system whereby city voters could decide to form a buying pool and have all city residents buy their electricity from the lowest bidder.

Luken proposed last month that the city look into aggregation under Ohio's 3-year-old Electric Choice Law, which deregulated energy companies. While Cinergy has historically had low costs, Luken said, residents of suburban Indian Hill expect to save 9 percent if their aggregation contract with Dominion Energy withstands a court challenge by Cinergy.

Cinergy executives said they agreed to the naming rights, in part, because Cincinnati and its residents have been good customers. About 80 percent of commercial users and 95 percent of residential customers in the city get their electricity from CG&E, the company said.

The agreement to lend Cinergy's name to the convention center was with the understanding that "the city would not slap us in the face and go to another supplier after we put $12 million in the facility," said Cinergy spokesman Steve Brash.

Cinergy executives say they've offered several solutions to the city - including fixed-rate plans and tariff plans, in which the rate would be set by the Public Utilities Commission of Ohio. And they said they were willing to reduce the length of the city's contracts from 30 years to seven, with Cinergy's right to match any competitor's price after that.

"All we asked was that the city and the city's residents would continue to be our customers," Ficke said. "We thought that was a win-win situation. We have some of the lowest rates in the country, and some of the highest customer satisfaction in the country. I don't think that was an unreasonable position to take."

Neither side would provide financial details of its position. Cinergy said the city was expecting the utility to sell gas and electricity at a discount; Luken said Cinergy wanted to increase its rates.

The mayor said he was disappointed that the negotiations had become more about rates than the naming rights, noting that there was no public discussion of the rate issue when Cinergy president and CEO James E. Rogers made the naming rights announcement last Sept. 30.

"When he came to City Hall last year, he talked about a lot of high-minded civic reasons why they wanted their name on such an important facility," Luken said. "I have come to the conclusion that it was really all about gas and electric rates. What they really wanted was a monopoly on the city's business."

Brash said Rogers would have no response, saying, "This issue is being handled below his level."

At the convention center Monday morning, Luken touted the expansion to an international conference of economic development professionals. Afterward, he said he didn't know how the impasse would affect that expansion.

"We're in a $12 million hole," Luken said. "I continue to believe there will be someone willing to pay for naming rights now or in the future."

If not, Luken said, the scale of the project might have to be reduced. The remainder of the project is being financed through city and county contributions and increased lodging taxes

The Urban Design Review Board is scheduled to look at revised plans this morning.

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E-mail gkorte@enquirer.com




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