The Convention Center Chronicles: Wrap-Up
Expanding the Convention Center and adding a Headquarters hotel are going to be heavy financial lifts for this area.
We are talking about an initial cost of $212 million to $361 million (all estimates from here), even before new construction can begin. The Convention Center Authority believes it can ‘self-fund’ this, meaning their existing income streams (hotel taxes, sales taxes, Duck Tours and trolley tour surcharges, Boston-based car rental/Zipcar surcharges) have enough excess* to support bond funding of this amount.
Then, some public entity will need to come up with a minimum package of $200 million to support construction of a 1000-room hotel that will need $310 to $500 million in private funds (much of it debt, to be sure) to be feasible. It’s worth noting that there are roughly 1350 rooms worth of privately-funded hotel rooms in the immediate vicinity in the planning or permitting stages that can’t find financing right now. (Makes one wonder if we couldn’t provide some level of incentive far south of $200 million and get the same number of rooms.)
And that’s before we get started on expanding the Convention Center itself. The cost is projected in the neighborhood of $1 billion dollars. So, all told, this project is going to require a package of public support with a value around $1.5 billion, along with several hundred million dollars worth of private support.
Given the challenging economic times and the difficult fiscal climate, it’s hard to believe that a project of this magnitude will get approved based on a flawed process that is unwilling to grapple with the actual performance of the BCEC versus projections, and is based on an analysis that fails to acknowledge the marginal impact of expansion, the potential softening of demand, and the massive oversupply of capacity in the marketplace.
*On the topic of ‘excess’ income streams, I remain hopeful that someone will explain to me why the Authority has sent $65 million to the state general fund, is slated to send another $5 million this year, funded the Tall Ships at $1 million and provided an $18 million construction loan to a private tourist attraction. If the Authority has such excess reserves, it should use them on worthwhile internal projects or look at reducing its taxation levels.
Crossposted at Pioneer Institute’s blog.