Was Convention Center Expansion Preapproved?

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The seeds of a proposed City Council action Tuesday night to approve a major Anaheim Convention Center expansion were sowed in 2010 when a previous council, led by former Mayor Curt Pringle, cut a deal with the city’s hoteliers.

The agreement, cited in a city staff report attached to the agenda of the regular City Council meeting, called for a special 2-percent room tax on hotels, which allowed the city to eliminate a $6-million line item in the general fund dedicated to marketing and promotion of the local hospitality industry.

The millions from the marketing and promotion line item would then be dedicated to funding a convention center expansion and grand plaza, according to city officials.

The special tax district was approved at the Sept. 14, 2010, council meeting, with Pringle selling it to the public as a way to finance the convention center improvements free of taxpayer expense.

So tonight’s vote, according to city officials and industry representatives, is essentially a ratification of the next step in that earlier agreement.

Yet there is no specific contract binding the city to this commitment, nor is there a fixed dollar amount attached to it.

Jay Burress, president and CEO of the Anaheim/Orange County Visitor & Convention Bureau, couldn’t say whether there is a contract in effect or whether the deal was based merely on a handshake. He said he was new to the bureau so didn’t have the history.

An almost certain sticking point in Tuesday’s discussion of the proposal will be how much the city agreed to spend previously and the additional load the project’s cost and debt service will put on the general fund.

Mayor Tom Tait has said he hasn’t found any evidence that the city is bound to a specific figure. “I see no documentation to show a deal to build a $180-million project,” Tait said.

If the expansion is not approved, the city will be close to paying off its $84-million facilities debt. There could be a substantial drop in annual payments starting this year, and by 2023 the city would be free from more than $16.8 million in annual debt service.

But if the expansion and its financing plan is approved, it will add to and extend that debt for decades. Annual debt service payments totaling $409 million over 30 years could reach $17 million, according to a city staff report.

This means the annual cost to pay off the expansion project debt would assuredly be significantly more than the $6 million the city was paying annually to promote the industry prior to 2011, but as of now it is impossible to say exactly how much.

City officials didn’t provide other projections on whether revenue saved by the special tax district pay for the expansion’s total cost plus interest by the deadline for this article.

Nonetheless, they claim the expansion would pay for itself through increased hotel room stays and other economic impacts, and the staff report cites a study that shows hotel stays increasing after the expansion is built.

But experts who study the economics of convention center expansions said that the assumptions by Tampa-based Crossroads Consulting Services are flawed and that the added debt load represents a tremendous risk to the general fund.

In fact, entire sections of Crossroads Consulting Services study on Anaheim exactly match the consultant’s study for Baltimore, which experts point to as evidence that the study is little more than boilerplate.

City spokeswoman Ruth Ruiz wrote in an email that if the convention center expansion isn’t approved, the tax district could be dissolved. According to the district’s management plan, city officials and hoteliers would then have to find an alternative funding source for resort district promotions.

Please contact Adam Elmahrek directly at aelmahrek@voiceofoc.org and follow him on Twitter: twitter.com/adamelmahrek

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