Convention Center...the first of many

In the summer of 2007, I sent many of my constituents a survey about a new convention center. Over 65% of you responded that you would be supportive of a new convention center for Nashville provided there was NO RISK to Davidson County taxpayers. About 35% of you said you didn't want a new convention center under any circumstances. Not a single person responded that they thought we should build a convention center under ANY circumstances.

Keeping that measure of public opinion in mind, I have always sought to evaluate any proposal related to the convention center in terms of what it might ultimately mean to the Nashville taxpayer - if anything.

On Friday, the Mayor's office submitted legislation to approve a new convention center. On Monday, the Mayor came and talked about the need for this project and his staff did a presentation followed by a Q & A.

The legislation submitted includes a resolution to approve an Intergovernment Agreement between Metro and MDHA. MDHA is an animal of state law and never has a budget approved or is in anyway overseen by the Metro Council. This Intergovernment Agreement authorizes Metro to collect all taxes related to the Convention Center project and transfer them "upon reciept" to MDHA. MDHA will use this money to pay all pre-development costs.

The agreement also provides that MDHA can issue bonds (I think this is a first) for up to three years in duration and totaling no more than $75 million. These bonds can be refinanced for up to 20 years. The bonds will be paid for by the convention center taxes and these can be pledge to secure any MDHA bonds.

Also submitted by the Mayor is an ordinance authorizing property acquisition within the footprint of the proposed convention center. There is a long list of parcels that supposedly will be acquired through negotiation or condemnation by the end of the summer.

Questions we should be asking:
1. $75 million dollar note that pays off in 3 years will need about $26 million a year in debt service payments of principle and interest (using a 3% interest rate and uniform principle retirement). Given that the hotel and tourism taxes designated for this purpose only amount to about $16 million a year, how is this going to work? Will this note require some sort of additional pledge or security from Metro? Will it be designed as an interest only loan?

2. What is the budget for this $75 million financing? How much for land? How much for relocation? How much for demolition? How much for engineering, architecture, design, consultants, etc? How much for financing costs? Is $75 milliuon enough? Is $75 million too much?

3. How will they acquire 45 parcels of land by negotiation and condemnation in 5 months? Has any serious pre-negotiation work been done? How many property owners have been contacted? How many contracts have been drafted? Have appraisals been ordered for all properties?

4. Why the piecemeal approach to financing? Why can't we take the advice of our bankers and do what pretty much every other major leisure facility does and make sure we have the financing before getting started? Why buy land if you are not sure you can support and finance a project of this magnitude?

Also, at the Hill is a state bill creating a convention center authority. It is about 30 pages long and filled with all sorts of stuff about bond financing (swaps and derivatives may be bad for local Tennessee governments but I guess they are ok for Convention Centers.) It also contained a paragraph which allowed the Metro Government to levy any direct tax it wanted to pay for the convention center. The administration wisely removed that paragraph and instead pledged the 2 cents of Hotel and Tourism money now going to the Convention and Vistors Bureau. So, instead of 3 cents or $15 million a year in Hotel and Tourism taxes there will be 5 cents or $25 million a year available for debt service. This money would be in addition to other taxes which amount to about $11 million a year. Of course, we will need to figure out a way to pay for the CVB contract from other sources.

I think it is important to get these and other questions answered before proceeding so we can know if there is any risk to the taxpayer. While some have suggested that we can vote on land acquisition without committing ourselves to actually funding a new convention center, I tend to disagree. The land can only be used for a convention center and unless we are intentionally going to violate state law, we should probably be sure we can support - with all that entails - such a project. Doing otherwise is not good for our convention business, not good for our economy and not good for our taxpayers.