Supporters of a bigger, better convention center point to a study that says without one, Sacramento can’t compete with other West Coast destinations for visitors and their cash.
They paint an alluring vision to marry the expansion with a planned renovation of the nearby Community Center Theater, revitalizing one end of K Street while the planned arena enhances the other.
They show off conceptual drawings of a spruced-up convention center connected by an elevated pedestrian walkway to a theater topped by a new ballroom with views of Capitol Park.
It is a great concept. But what is lacking is a clear way to pay for it all. Until they find that, the plan will have to sit on the city’s wish list for a while.
Leaders of the Sacramento Convention & Visitors Bureau realize that. They told The Bee’s editorial board they won’t go to the City Council until they have a rock-solid financing plan. “I don’t want them approving a pretty picture,” said Tony Giannoni, co-chairman of the committee shepherding the proposal.
He and others at the convention bureau have started talking to city officials about a plan to nearly double rentable space at the 158,000-square-foot convention center by adding exhibit space and more meeting rooms – the most glaring shortcoming identified.
While officials aren’t prepared to publicly give any cost estimates, the price tag is nearly $50 million just for the theater renovation, required to comply with the Americans with Disabilities Act. City officials are still $8 million to $10 million short on that piece.
The “backbone” of any financing plan for the entire project would be the city’s 12 percent hotel tax, which is still paying for the center’s last expansion – an $80 million project in 1995. Once that $8 million a year in debt service comes off the books in 2021, boosters want to use it again. They’re also looking into federal tax credits, plus possible private money.
There’s some time to sort all this out since the project would be constructed in phases, over seven to 10 years. The theater renovation probably wouldn’t start until spring 2015.
Still, supporters need to address several issues to prove that this is a project that makes sense and that the city can afford:
• The hotel tax can’t be counted on until at least 2021 because it is the backup if not enough parking revenues come in to finance most of the city’s share of the arena. Increasing the hotel tax would be opposed by hotel operators and could drive away convention business. For now, any borrowing would have to be backed by the city’s general fund, which is risky and unlikely to win council approval.
• The convention center complex – which also includes the theater and Memorial Auditorium – requires a subsidy from the hotel tax of about $800,000 a year to bridge the gap between operating revenues and expenses, according to city figures. That figure doesn’t include the $1.6 million a year the convention bureau gets for marketing and promotion.
• While cities have engaged in an “arms race” by building bigger convention centers, experts say that economic development strategy has failed in most cities and point out that demand for convention and trade show space has dropped since the late 1990s peak.
Many of these issues were raised in a recent report by Eye on Sacramento, a local watchdog group, which derides the expansion plan as “doubling down on failure.” In April 2010, a consultant hired by the city to do a comprehensive financial review sounded some of the same alarm bells. Management Partners said that other major California cities use far more of their hotel tax revenues for general government purposes. Of the $19.7 million generated in 2012-13, about $4.8 million went into Sacramento’s general fund for citywide services.
City Manager John Shirey is among those who need convincing that the convention center project is feasible, saying he has yet to see a workable financing plan.
His skepticism is warranted. While expansion supporters deserve credit for thinking big, they have much more work to do to demonstrate that Sacramento can pay for it.