Convention Center Expansion Is Solid, Sensible Public Policy

Ribbon cutting for Convention Center grand Plaza - funded in the same way as the proposed ACC expansion.

Ribbon cutting for Convention Center Grand Plaza – funded in the same way as the proposed ACC expansion.

The proposed 200,000 square foot expansion of the Anaheim Convention Center is good, solid, sensible public policy. It recommends itself for a number of reasons, but primarily so for two reasons: it maintains the Convention Center’s competitive edge, and it establishes a mechanism wherein the Resort District businesses fund this expansion as well as future modernization needs.

Anaheim has been in the convention business since 1967. It has been a source of economic vitality, jobs and opportunity for the city. The Anaheim Convention Center is presently the largest convention facility on the West Coast and in the top-tier nationally. Staying on top requires any enterprise to periodically invest in its competitiveness. For the Anaheim Convention Center, that means expanding its size and nature of its facilities.  Standing pat is a recipe for stagnation and decline.

Anaheim wants to keep shows like NAMM, and be in a position to attract bigger and better shows – the kind that bring with them more affluent attendees who stay longer and spend more money. That requires having convention facilities that meet the needs of those kinds of shows – such as more “flex” space – and this expansion will give ACC that ability. It also adds the ability for the Convention Center to “stack” shows – to have two large shows simultaneously, which in turn generates more room nights for Anaheim hotels.

And that’s really the bottom line here. The Anaheim Convention Center doesn’t exist in a vacuum. It’s a part of the economic ecosystem of the Resort area. The Convention Center’s success translates into success for Resort district businesses, which generates employment and TOT and sales tax revenue for the city.

The Anaheim Tourism Improvement District (ATID) was formed in 2010 formed by Resort district hotels, which are essentially taxing themselves to fund marketing of the Convention Center and local tourism, as well as transportation improvements in the ATID boundaries. They understand that it is good for business to do so. Since they are actually on the ground and in the business, I would tend to favor their judgment over that of Prof. Heywood Sanders way out in Texas.

Formation of the ATID freed up the TOT revenues previously dedicated to those activities to be re-programmed for the Convention Center expansion.

The debt-financing of the ACC expansion will cost $409.2 million. That covers not only the actual expansion, but the city’s $35 million liability for the structurally unsound Carpark 1 – which the city would have to replace if it were not the site of the expansion. It also includes $20 million for neighborhood improvement tacked on by the city, and it pays for the Convention Center Grand Plaza.

The revenue freed by the formation of the ATID – $6 million in 2010 – is projected to generate $450 million by 2046.  For the mathematically-challenged, that is more than $409.6 million. Furthermore, that $450 million projection is, to reiterate, based on a 3% annual growth in TOT revenue. Since that is only half of its historic growth rate, it is more likely that more than $450 million will be generated.

What the city ought to do is obligate excess revenues – which there will be even under the ultra-conservative projects, to retiring the debt sooner – which would have the added advantage of preventing the city from using that revenue for other purposes. It would then be available to fund future Convention Center betterments. Also, any such obligation should be contingent on the maintenance of the ATID.

As perceptive readers have by now discerned, what the City Council has the opportunity to do is establish a mechanism to fund not only the proposed Convention Center betterment, but future ones, as well, using a portion of TOT revenues freed up by the decision of Resort area businesses (including some in Garden Grove) to tax themselves to fund marketing and transportation improvement in the Resort area.

Yep – obviously, the Convention Center expansion is obviously a reckless “gamble” that is “guaranteed to fail.”

Anaheim can heed the counsel of doubt and act from dread and trepidation, or it can continue a successful tradition of boldness and vision. The latter has unquestionably worked for Anaheim, and there’s no percentage in switching to the former.

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  1. I love this site. Just the gift that keeps on giving.

    “The ATID is projected to generate $450 million by 2046. For the mathematically-challenged, that is more than $409.6 million.”

    Well, no. That is, in fact, a lie. A big one. It’s projected to generated $410 million. Rosier assumptions push it north, but the projection is PROPERLY labeled $410m for the purposes of an economic evaluation.

    The $409.6m in debt service is based on what? 100% use of the $300m max issue?

    So, based on the math in front of us, this isn’t exactly a no brainer. It’s well within the norm for this project to have a zero payout (for the geniuses our there, $410m and $409.6 are about the same), assuming all the rosy projections that support the $410m.

    Given that engineering hasn’t been done on the project, there’s a good chance the city will LOSE MONEY on this deal as well. The total installed cost of the expansion may be off my $30,000,000 using standard risk tolerances for work at this stage gate. Tack on interest and now you’re in the position of approving a project that loses north of $50,000,000 if the economy performs as expected.

    If the economy isn’t as rosy as the projections show, well, then you’re into a nine-figure loss. Simple math indeed. Perhaps ya’ll could use some lessons.

    Also, “This expansion is not being funded from the city’s general fund”

    According to the city, this will be funded through the general fund. Might want to address that piece of “misinformation” as well. You meant something else. Here’s the quote: “To ensure that the new revenues would be available for General Fund programs, City Staff has put together a financing plan that keeps the General Fund’s annual debt service burden where it is today”

    There is a huge upside to this project and maybe this is the right project for Anaheim, but tossing it around as a no-brainer when you’re risking half a billion dollars of taxpayer money is asine.

    Stop treating people like they’re stupid and lead.

    • Is it wrong to say that you support the concept of the convention center expansion but question financing assumptions?

      Because the way you go about addressing the matter makes you look supportive of VOC. You cant help but expect people to be upset with you when you show allegiance to a group like that, driven to undermine any attempt at civic improvement in Anaheim… unless the point of the posts is exactly that

      • I think an investment of half a billion dollars of taxpayer money ought to be either supported by a mandate from the people (i.e. a vote) AND/OR be pretty darn bullet proof. This investment has some rather substansive holes, mostly because of its magnitude. There are no half billion dollar no-brainers in life. Sorry.

        I get the substantial tie to prior investments by the city. What I don’t get is the argument that the city must double down that investment in order for the original one to pay out. That isn’t substantiated by the study. I do empathize with the tone set in the VOC that this may very well be a race to the bottom, due in large part how many other cities are looking an expansion. Someone has to lose . . . after all, if Anaheim is going to poach an event from New Orleans, don’t we expect the Big Easy to fight back? Should we be investing that $400,000,000 somewhere else to give Anaheim a competitive advantage? At what point do the amenity requirements of residents supersede the subsidies local businesses require?

        The council seems to be in a reflexive crisis handling mode. If we don’t do this, the Angels will leave. If we don’t give way that, we won’t ever get a four star hotel. If we don’t spend taxpayer dollars, the Convention Center will fail. As a result, that balance between the needs of residents and the support businesses require is getting unjustly tilted.

        Civic improvement serves the sole purpose of benefiting the residents of the community. What you’re seeing is a struggle to define when and how much of a return the community should get.

        I agree with Matt that the studies cited by the VOC are less than conclusive. I don’t agree they’re opposed to civic investment.

        They (and I) are opposed to a civic ripoff. But, that’s why we’re all here to discuss, right?

    • Matthew Cunningham

      Also, the RFP stipulates a fixed construction price.

      • I’ve been looking for that. Link? I saw $155m, but I didn’t see a list of what change orders applied to.

        If the city is issuing a fix bid to remove some risk, that’s a good thing– particularly given where the project is currently at.

  2. Matthew Cunningham

    Ryan: I got my wires crossed while describing the role of the ATID and corrected my original post. However, the ATID was formed in 2010 – and revenues generated from 2010 come to $450 million by 2046.

    And again, that is based on a projected growth rate that is half of the actual, historic rate.

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