Metro Finance Director Richard Riebeling remains steadfast in his assurance that the proposed new Convention Center will be financed with revenue bonds supported by the project, and not general obligation bonds.
If the impending financial feasibility study reveals that the project, estimated to come in over $600 million, needs general obligation bonds, then the prominent anti-tax group Tennessee Tax Revolt is poised to take action.
The Metro Charter contains a provision that could require voter approval before the bonds are issued, similar to the one Davidson County voters faced on the construction of what is now LP Field.
Currently, the proposed new Convention Center is in the predevelopment phase. Already, contracts for design, building and public relations have been handed out for the project.
Metro Council is expected to vote on financing for the Convention Center, to be located in SoBro, late this year or early next year.
“We have repeatedly told the Council that we do not intend to use [general obligation] bonds on the Convention Center,” Riebeling said. “That’s not something we have contemplated. It is extremely unlikely and it’s not what we’ve charged anybody with looking into. There’s no intention to use any [general obligation] bonds to support the center.”
According to Riebeling, a financial feasibility study will soon begin for the project. The study will include a maximum cost for Council to approve the issuance of the bonds. Already a feasibility study is being conducted for a hotel, which could be attached to the project as is often done with new Convention Center deals.
With the feasibility studies in their early stages, Ben Cunningham with Tennessee Tax Revolt is keeping tabs on the Convention Center project. Cunningham successfully advocated for a charter amendment giving voters the right to approve property tax increases in 2006.
The charter provides for a similar process on approving general obligation bonds. If six percent of the voters sign a petition calling for a referendum on issuing the bonds within 20 days of Council approval, then voter approval would be required.
“A shift to [general obligation] bonds will put it on our radar without question. It will bump it up our list,” Cunningham said.
The initial estimate for the Convention Center was $455 million, but already that number has risen to over $600 million. The attached hotel would be estimated at a minimum $200 million.
“[There is concern], especially on a project like this that is just apparently open-ended in terms of expense,” Cunningham said. “We have no idea what this monster is going to cost. The problem is of course no one knows.”
Riebeling maintained the project would be funded with revenue bonds, putting the burden of repaying debt on the revenue streams generated by the 1.2 million square foot facility. Riebeling said the choice to use revenue bonds was not related to the potential for voter-required approval on general obligation bonds.
“The voter approval, I haven’t even thought about it,” Riebeling said. “That’s not been close to my mind. Before I came along, and since I’ve been involved, it has been talked about that the flow of revenues that would pay for the project would be supported by users of the center. That’s still clearly what we’re focusing on.”
A memo uncovered by The City Paper earlier this year showed that previous Metro Finance Director David Manning had serious doubts about the city’s revenue bonding capacity for the project.
Based on the tourism taxes set aside for the project, Manning estimated Metro’s revenue bonding capacity to be in the neighborhood of $320 million.