March 23, 2012 in City

$65 million tax issue called economy booster

Extension of taxes would fund expansion of Convention Center, add seats to arena
By The Spokesman-Review
 
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Cathy Jones and Joe Estinson, of the Spokane Model Boat Club, show off some of their handmade creations to Cathy and Buck Baker, of Spokane, at the Spokane Home and Garden Show in the Spokane Convention Center.
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Ten years after Spokane voters approved a major expansion of convention facilities, they are being asked to approve another one.

The Spokane Public Facilities District is proposing a 10-year extension of a pair of sales and use taxes to pay for 91,000 square feet of new space in the boat-shaped Convention Center and two other smaller projects. The total cost is $65 million.

Mail-in ballots will be sent next week for the April 17 vote.

A 0.10 percent sales tax and a 2 percent room tax are set to expire in 2033 under current law.

The taxes are repaying money borrowed for construction of the Convention Center and Spokane Veterans Memorial Arena.

The new ballot measure would extend those taxes to 2043 to be used to sell new construction bonds.

In addition to the Convention Center expansion, which would cost $60 million, the proposal would add 750 seats to the Arena, bringing it up to a minimum seating capacity for landing another tournament round in the NCAA men’s basketball championship.

The NCAA requires 12,000 seats for basketball. The additional proposed seats would go in the open end of the upper level, near the scoreboard, and raise basketball capacity to 12,500 seats.

The Spokane River shoreline and Centennial Trail would also see improvements.

PFD officials and supporters are promoting the ballot measure as a completion of the existing convention facility to keep Spokane competitive in the convention and meeting market.

“We can create a lot of jobs doing this,” said Kevin Twohig, chief executive officer of the PFD.

The facilities are seen as an economic engine for the region – especially for the hospitality industry – and the source of some 2,300 full- and part-time jobs.

An economic analysis shows that the impact of the facilities is $173 million a year, including cash flowing into restaurants, shops, bars and hotels.

Construction could add another 800 jobs to the area.

When the newest portion of the Convention Center was completed in 2006, officials said they already knew they wanted to continue building in future years.

Convention centers around the country typically increase their size by doubling existing space until the facility matures after about three major expansions, said Cheryl Kilday, president and CEO of the Spokane Regional Convention and Visitors Bureau.

The existing facility has major deficiencies.

That was apparent a couple of years ago when a national convention of rural mail carriers came to town. A staff organizer complained about having to walk the long corridor between the newer exhibit hall and the older Ag Trade and convention space to the west, where convention headquarters were located.

Consultants hired to look at the expansion proposal also pointed to that issue.

Food service facilities in the newer convention hall are inadequate for serving large banquets, and the banquet facilities need enhancements such as a pre-function gathering area.

High-tech connections and work spaces are lacking as well, the consultants said.

The proposed expansion would solve those problems by creating more break-out meeting space in addition to an expansion of the Group Health Exhibit Hall.

Expansion would occur both at ground level and at the second level, on the north and northeast sides of the existing facility.

C.I. Shenanigan’s Restaurant, which operates on a lease from the PFD that expires next year, would be demolished to make room.

The consultant report and other studies undertaken to develop the proposal can be reviewed at www.spokanepfd.org.

Kilday and other experts said that the convention and meeting industry is maturing over time to serve a more discerning consumer – people who want a richer, more authentic experience.

Spokane’s fabric of locally owned restaurants, historic buildings, shopping, Riverfront Park and Spokane Falls offers that.

But Spokane’s facilities are mainly a draw for statewide and regional events, including consumer trade shows. The national market has not been well developed, consultants said, and increasing the size of the venue would make it more competitive.

Beyond the current bond issue, the PFD’s strategic vision report outlines the possibility of building a wider Convention Center district between Main Avenue and Spokane Falls Boulevard immediately to the south.

Taxes currently take in over $12 million a year for PFD facilities and are primarily used to repay construction.

The district’s finances are sufficient to make additional bond payments with the 10-year, voter-approved extension, CEO Twohig said.

Along with voter-approved taxes, the state has granted the Convention Center a sales tax rebate of 0.033 percent, which brings in about $2 million of that $12 million, and is used for bond payments.

Officials said the tax rebate is justified because the facilities generate enough additional sales taxes to offset the cost of the rebate, according to an economic analysis.

The history of the PFD goes back to the 1980s and a campaign to build the Arena. Local officials at the time won legislation creating the PFD as an arm of local government, plus new tax authority. Voters approved the PFD room tax in 1990 and added the sales tax in 1991. The Arena opened in 1995.

In 1999, the PFD won authority to operate convention facilities, leading to a move by the city of Spokane to turn over ownership of the INB Performing Arts Center and the older convention areas to the PFD. Voters approved the expansion along with tax extensions in 2002.

Over time, the PFD has proven to be financially healthy. Its operations net about $1 million a year.

In addition, tax collections have surpassed what is needed for bond payments. The additional tax revenue is held for major maintenance and expansion projects, Twohig said.

The Convention Center alone has an operating loss, which is offset by the strong performance of the Arena and INB.

Twohig said that having a convention center operate at a loss is “a common occurrence” in the industry.

The tradeoff, he said, is the fact that the Convention Center “is an economic engine for the Spokane community which primarily benefits the lodging, restaurant, retail and real estate industries.”


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