Dean administration defends step-by-step approach to Convention Center

Thursday, April 16, 2009 at 1:42am


There are differing points of view among Metro Council members whether a vote to approve land acquisition in SoBro is a definitive vote on the proposed $635 million Convention Center.

Mayor Karl Dean’s administration maintains Metro Council’s vote to approve the Metro Development and Housing Agency to begin land acquisition is simply the next step in the process and not a final decision on Music City Center.

“Clearly we’ve said there are going to be numerous opportunities to vote on this going forward,” said Richard Riebeling, Metro’s finance director, said. “It’s not the definitive vote, it’s another in the process.”

The state law creating the tourism accommodation taxes that will be used to finance the project are specifically for a Convention Center, but Metro Council’s legal counsel, Jon Cooper, said he was looking into the question of whether the land could be used for something besides a Convention Center.

Riebeling said Metro’s bond attorneys intend to draft a letter stating it was permissible to approve land acquisition before the final financing is approved.

Still, concerns do persist whether the tourism taxes that will provide the revenue to acquire the land can be used for anything other than a Convention Center. If the land can only be used for a Convention Center, then approving up to $75 million for land acquisition could be viewed as the critical vote, according to some Council members.

“If we’re going to spend $75 million of taxpayer money, we aren’t doing it to speculate on land,” District 23 Councilwoman Emily Evans said. “We’re doing it to build a Convention Center.”

But District 7 Councilman Erik Cole disagreed and said a step-by-step approach to the deal made the intricacies of the project easier to digest. Cole said he didn’t view a vote on land acquisition as sending Council down a path, where there was no going back.

Council unanimously approved the predevelopment phase of the project last year.

“I’m not naïve enough to think we’re not moving towards approval,” Cole said. “But it’s sort of nice to be able to decide at each point.”

District 35 Councilman Bo Mitchell said at some point Council members had to decide whether they are philosophically for a new Convention Center, or not. Mitchell said he was comfortable voting ‘yes’ on the land acquisition, even if it meant there was no going back.

“I really don’t have concerns,” Mitchell said. “We’ve got to go through this process, we’ve got to acquire the land. I think if someone has in their mind that they’re not going to be for a convention center, then they probably shouldn’t be for buying the land for the convention center.”

There are two pieces of legislation in front of Council at the April 21 meeting, one would approve contributing the funds for land acquisition and the other would authorize an inter-governmental agreement with MDHA to start the process.

 

16 Comments on this post:

By: idgaf on 4/16/09 at 5:05

Do these people claim to smarter then Gaylord who put their expansion on hold and use their own money rather then ours?

How much is in that "fund" , enough to service the debt and aquire the land? If not they have no business going forward while cutting city services and laying off people.

This is like a family that can't pay the electric bill yet goes out and buys a new bass boat saying they will be able to put food on the table with it.

By: JohnSevier on 4/16/09 at 8:14

I did not support Karl Dean in the election. I will be the first to say, however, that he is doing a splendid job. Although Bob Clement would have been a good mayor, Karl Dean has a chance to be great. The primary reason is that he approaches every issue in a rational manner, asking what we need and will it work.
We are not Gaylord, Iggy. We are a city and our sources of revenue are not based on the same elements.
Let's support and trust the mayor on this.

By: producer2 on 4/16/09 at 8:17

don't kid yourself idgaf, Gaylord has gotten millions of dollars in government aid for their facilities through a variety of tax breaks and infrastructure. The expansion will recieve $80 million out of the same fund that will build the MCC. It is not all private money but they do contribute quite a bit to the hotel/motel tax fund.
Part of the reason their expansion is on "hold" is so they can concentrate on their newest facility in Arizona. They will announce something locally in the 3rd or 4th quarter and I would bet the expansion will be online at the same time the MCC is.

By: forlinjd on 4/16/09 at 9:05

“If we’re going to spend $75 million of taxpayer money . . ."

We've been told time and time again taxpayer money wouldn't be used for this exhorbitant MCC.

Yet another money pit for Nashville.

By: pandabear on 4/16/09 at 9:08

Oh sure, let's buy the land back for millions that we use to own
for pennies, "...but that won't mean we're making a decision..."

What a manipulating liar and stupid man !

Here are the top 2 reasons not to do this:

1.Convention centers in the USA have been losing money
for the last 10 years.

2. Read number 1 again.

By: producer2 on 4/16/09 at 9:25

pandabear,
Convention Centers are not designed to make millions of dollars alone. It is the value of the dollars spent by the literally millions of people who will use this facility and would otherwise not come to our city. This is why although your statement about convention centers is correct, it does not have any bearing on the bigger issue of the 4 billion dollar a year industry that puts 100 million a year into the the tax coffers. Every City must create revenue streams in order to operate. If we do not continue to grow these avenues then you and I will just have to pay more taxes. Something has to help support government and government spending for the programs you and I want, education, services, etc. Our taxes alone will not support this. Using a system that funnels funds from the use of its facilities is a pretty good way to create revenue streams that you and I pay relatively very little for.

By: JeffF on 4/16/09 at 9:58

I just became familiar with a new term in meeting/convention sales, the rebate. Seems that a lot of convention cities (maybe even Nashville) give rebates back to the meeting organizers for the hotel rooms they book. A meeting in Memphis was getting a kick-back of 15% to 20% for all rooms booked by their attendees. This amount was after the huge discounting of rooms.

Now I bring this up because the same meetings are getting free rent in the convention centers. Produce and others have argued this is done in order to get all those huge room nights for the city since that is where the money is supposedly. Now the money for those room nights are apparently disappearing and reappearing into the pockets of the meeting organizers (those who oftentimes are comped their own rooms, further making the "room nights" benefit even less important). I am wondering, are the "rebates" and their room discounts and freebies netted out of those glorious economic benefit calculations that are fed to our leaders in the council and mayor's office? The more I look at this industry, the smaller the economic benefit actually becomes.

http://www.bizjournals.com/memphis/stories/2009/04/13/daily25.html

This is the story with the behind-the-scenes information about large conventions. Memphis just lost a 50,000 person meeting to St Louis because St Louis was willing to continue the large rebating of hotel nights along with bargain basement pricing and free convention center rent. The Memphis hotels had apparently had enough of the losses just to keep people coming to Memphis. The article refers to the practice as being common in the convention market place. Real economic impact trumps estimated economic impact in private industry, why not public?

By: toggy on 4/16/09 at 10:33

JeffF

Deals being made around the country are simply a reflection of the nature of the current business environment. Kudos to St Louis on their win, they clearly wanted the business more (or needed it more). You must understand it typically is not a city (Memphis in your example) decision to rebate room revenues, it is an individual hoteliers decision to do so as it would be for offsetting convention facility rental. For the most part there are no "free" conventions being had out there. Everyone involved in any deal is getting what they would deem acceptable. If a hotel is rebating a portion of the revenues collected from attendees and either giving it back to the planner (as a rebate) and/or giving a portion of those revenues to provide a "free" convention facility to the attendee, that is their business decision. bottom line is the hotel is netting what they have determined is an acceptable rate and the Convention facility is getting paid for the use of their building. From this booking spawns huge amounts of direct and indirect revenue for the city and the participating facilities through food and beverage, AV, support, dining, entertainment, tourism, etc, etc. In more prosperous times these "deals" may not be as frequent but they certainly still exist. Just as in real estate the current convention environment is a buyers market. Understand as well that the tax portion collected by each hotel on the gross rate paid by the convention attendee is still in place, so the city is getting paid as well.

By: producer2 on 4/16/09 at 11:10

JeffF,
You should really not discuss issues you don't have a total grasp on. "Rebates" as used in your reference above refer to the same thing as comissions to third party companies that represent a variety of clients and work as an outsourced service to find and secure hotels, etc. for their clients meetings. What generally happens is the hotel or entitiy will say we will negotiate a $150 per room per night fee for their group. The company (third party) will then turn around and "sell" the rooms to their client for $165 , etc. and the hotel will issue that company (third party) the "rebate" difference for the cost of the room. That is how the third parties get paid and how their clients actually save money by having them do all of the work they would otherwise have to staff for. Toggy also gave you a variety of other ways those revenues might be used in different ways.

By: JeffF on 4/16/09 at 11:30

Actually when you read the story this particular meeting itself was demanding the rock-bottom rate then they still required the individual hotels to handle the bookings and keep up with who was a meeting attendee. There was no resale.

Either way, the economic impact of the room night is being overblown. So if the meeting is not making the money, and now the hotel is not making the money, we are down to level three the restaurants and bars. I have been to a few conventions, all of them provided all breakfasts, lunches, and most dinners. Who is making the money?

Does this economic impact exceed the $1 billion dollars (plus interest) of investment AND the possible returns of investing that $1 billion dollars into actual government related venture? It has to be Yes to both before this thing is a good idea. The center itself is not paying the bill, it only appears to not be in the red when it in can include tax revenues from unrelated activities into it's Statement of Cash Flows. And even then it requires a person to estimate an economic impact number just to justify general taxpayer backing of debt and losses and labor expenses.

On the subject of the article, this is being broken into pieces in order to hopefully create a unstoppable freight train. The easiest piece to digest and most important is the financing information, but apparently that will be the last item the board will get to see. By then the land will be bought (at a premium thanks to promoters of the center and hotel) and it will be legally tied up to prevent use for even the most important of uses. The council people need to require the completed financing plan before anything else is presented. The mayor is not presenting in a logical, necessary order. He is presenting this in a politically expedient order that will best quell any possible public dissatisfaction with a huge amount of sunk costs. When the referendum on the G.O. debt occurs his people will be able to argue killing this will be foolish because we have come to far and spent too much to stop now. Just like the mayors of Dallas and Portland in the last few weeks when trying to get their pet projects going in the face of a bad economy for everyone.

By: JeffF on 4/16/09 at 11:31

They really need to get this software correct. I couldn't post at all then I see it posts twice.

By: idgaf on 4/16/09 at 11:32

A city using taxpayer money should not be engaged in shady pratices.

Just where are all those fiscal benifits that we were supposed to get from the Titians and the preds? Its costing us over 25 million a year that we know about.

No taxpayer funds should be committed to this folly. NONE. A BILLION dollars is real money and real debt.

By: producer2 on 4/16/09 at 11:49

The city has turned down a lot of business that was looking to come to Memphis during COGIC’s convocation, said Wayne Tabor, general manager of the Holiday Inn Select Downtown. With over a year to plan for 2010, filling those dates is a huge opportunity for the city.

“They bid this out every three years and I think they just wanted to leave,” Tabor said.

To me this is just a city who was unwilling to meet the demands of the potential piece of business. This s not uncommon in any business situation, someone will always take the business that others pass on. It is all supply and demand. As stated by Colin Reed, Gaylord annually turns down millions of dollars worth of business because they either don't want to accept the rate the group was willing to pay or they don't have space. Space is the problem for the City. Nashville's facility has lost almost 300 pieces of business over the past few years because the groups cannot fit into the currrent facility. Maybe COGIC would like to come here if we had the space.

By: TITAN1 on 4/16/09 at 12:17

id, show me where the Titans and Preds are costing us $25 million a year?

By: JeffF on 4/16/09 at 1:36

For the record, I am not against the step-by-step approach. I am against putting the most critical key step last in order to steamroll its passage. Financing should have been passed right after the initial cost elements were identified. Instead it will be done only after nearly $65 million dollars has been spent, thousands of man hours have been devoted by government employees and their lobbyist friends and a dozen or so rah-rah meetings are held talking about the greatness of the place instead of how it will be paid for. Yes we have been given groundless and nonbinding promises that the tax revenue will pay for it, but no one is talking about the structure and legalities of the debt because someone has decided to withhold that information.

We deserve to see what opportunities Nashville is giving up on by going this route. We have already pieced together that the Stormwater program will already approximate this same amount. We know of all the dire warning of layoffs and hiring freezes and public service cutbacks. Yes the state law says this is to go to tourism, but also true is that this same law can be changed upon request by local leader's request.

By: Time for Truth on 4/18/09 at 12:33

This should be voted on by the electorate. The fact that some of us are already chipping in if we rent a car or need a Nashville hotel room is justification for a referendum. The downtown chamber that sponsored and put Dean in office are trying to pull a fast one on the citizens of Nashville.

Where these geniuses have failed to see the forest through the trees is that the proposed MCC location may adversely affect the current tourist epicenter. I think all would agree that includes the areas of Second Avenue and Lower Broad, especially the area around the Hall of Fame. This area is an easy walk from the current center and most larger downtown hotels.

The MCC location is on the fringes of downtown. The three people who post here and support this center being built use this as one of their arguments- 'who will miss the bus station and surface lots'. The other two arguments being 'I know more than you do' and 'ignore the fact that centers every else that are losing a fortune'. The 8th South location will make it more plausible for cost-concious conventioneers to spend their entire time at the center and the 'public-private' adjacent hotel. The only businesses I see clearly benefitting are a couple of nearby nudie bars.

Producer and Nashbeck will come back and say that this will open up that area to development. I beg to differ, in fact it will do the opposite. The natural highest and best use of this area is what was envisioned by professional planners, a logical connection between the river and the gulch with offices, retail and residences. A huge building which will be obsolete the day it is finished will discourage development by virtue of its footprint alone.

The MCC is too much, too late and too obviously wrong for Nashville.