It Ain't What You Don't Know....It's What You Know That Ain't So

There is no one better than Will Rogers to help one stick their feet firmly in the ground and gain a bit of perspective on pretty much any issue. Never mind that he kinda stole most of his witty remarks from Mark Twain (Randy, are you reading this?) because I consider Rogers and Twain to be some of the best assessors of what is the American political psyche.

It was Twain and Rogers I recalled as I listened yesterday to Dr. Heywood Sanders of the University of Texas at San Antonio and our own Butch Spyridon of the Convention and Visitors Bureau. Professor Sanders remarks were fact based, data specific. Mr. Spyridon did what he does best and what he has been doing for many years which is selling an image and a vision that relies on civic pride with a little bit of municipal exceptionalism.

The convention center proposal was "sold" to the public (if you can say it was sold. The popular support for the project seems a little thin) as a project that would not cost them any money. Indeed, the original convention center was built with general obligation bonds but the hotel and tourism taxes along with a substantial federal UDAG grant were used to pay debt service for about 20 years. So, the pitch was that these taxes that paid for the old center plus some new taxes would be sufficient to finance the new center. For free, the story went, we would get 1,000,000 new visitors who would spend $700 million in Nashville.

If we finance the Convention Center with general obligation bonds whereby we pledge the full faith and credit and a promise to raise property taxes to the extent necessary, annual debt service will be about $39,000,000 a year. ($635 million project, 30 years payment schedule, 4.5% interest rate, level debt service). If we finance the Convention Center with revenue only and explictly exclude any general fund pledges of any kind the annual debt service will be at least $50,000,000 ($635 million, 30 years, 6.5% interest rate, level debt)

According to a KPMG report (dated March 2007) forcasted revenues using a low growth scenario will not reach $39,000,000 until year 9 and won't reach $50,000,000 until about year 30. If we use GO bonds, in addition to a pledge of our city's full faith and credit we will need to subsidize debt service from sources other than hotel and tourism taxes with about $15,000,000 in the first couple of years and declining to zero by year 9. If we use a revenue only scenario (and I would probably argue that approach will find no investors, but I digress), then we will likely have to raise other revenue or just write a check out of the general fund because we don't care to see a bond default blemish our good name. The cost for that could be $25,000,000 in year 1 declining to zero in year 30.

According to an RFP that went out in December to potential hotel developers, Metro expects the new convention center to generate 200,000 to 300,000 new room nights. If you believe Mr. Spyridon that people stay 3 nights in Nashville, that translates into about 100,000 convention visitors. If Dr. Sanders is right and folks stay just 2nights, it translates into 150,000 new convention visitors. So, if we do GO bonds each of those visitors costs us between $100 and $150 bucks. If we do revenue bonds they cost us between $160 and $250 bucks.

What a deal.