City Beat

Costs soar to upgrade Sacramento's convention district. Here's why city says it's worth it

The city of Sacramento is poised to spend up to $240 million renovating the Sacramento Convention Center.
The city of Sacramento is poised to spend up to $240 million renovating the Sacramento Convention Center.

The city of Sacramento and local hotel operators are poised to spend up to $340 million transforming the convention and theater district downtown.

The new budget for renovations to the Sacramento Convention Center, Community Center Theater and Memorial Auditorium has grown by tens of millions of dollars as the plans became more ambitious in recent months, according to a city staff report posted this week.

The Convention Center budget alone has doubled – to roughly $240 million – as a second large ballroom was added to the plans and necessary upgrades to the facility were discovered.

City and tourism officials said the bigger plans for the convention complex will help Sacramento attract larger and more frequent events, generating more revenue for hotels, restaurants and other downtown businesses.

"Sacramento is on the map in a way that we haven't been before," said Councilman Steve Hansen, who represents the central city. "I believe this project, as it's been refined and improved, is not only responsible, but a smart investment in continuing to support our tourism economy."

Hotel operators are in the process of voting to assess themselves a fee that will generate $40 million toward the construction of a second 40,000-square-foot ballroom at the Convention Center. Mike Testa, head of the Visit Sacramento tourism agency, said he is "very confident" the hotels will agree to the assessment and that operators in downtown, Elk Grove, Natomas and Arden have all expressed support for the fee.

Testa said the second ballroom will be larger than those at convention centers in competing markets like San Jose and Long Beach. Adding the space, along with other upgrades, will allow Visit Sacramento to book two large conventions at the same time.

The facility hosted 36 major conventions last year, a figure that is expected to double by 2025 after the expansion, Testa said. Just over 383,000 people attended conventions at the center in 2017, according to Visit Sacramento.

"In some ways this levels the playing field and in some ways it puts us ahead of our competitors," he said.

The cost of the Convention Center renovation was originally estimated at $120 million. But tourism officials lobbied for the second ballroom, an addition that tacked roughly $50 million onto the cost.

The city's contractors then discovered a long list of building issues, including updating the fire alarm system, Wi-Fi, cell service and carpeting. That, combined with the potential for steep increases in the price of steel due to the tariffs proposed by President Donald Trump, caused the budget to hit $240 million, said Desmond Parrington, the city's project manager for the renovation.

The Community Center Theater will see $83.4 million in renovations and up to $16.8 million will be spent upgrading Memorial Auditorium so it can host events normally held at the Community Center Theater while that facility is closed.

The Convention Center will close in July 2019 for construction and is scheduled to re-open in November 2020. The Community Center Theater renovation starts in February, with interior work beginning next summer that will shut the theater down until late 2020.

City officials said $248 million of the total budget will be funded by bonds paid back by the hotel tax. Under city code, the city charges a 12 percent tax on hotel rates, most of which must go to support tourism-related projects. Two percent goes to the general fund budget that supports core city services.

The city is also applying for a $55 million loan from the state-operated California Infrastructure and Economic Development Bank (I-Bank), according to the staff report. That would also be repaid through hotel taxes.

The investment is worth it, city officials said.

"This project is very, very important for the city," Mayor Darrell Steinberg said. "I am very happy with the outcome."