Convention Center overrun may be solved

The Spokane Public Facilities District may have found a way out of a $3 million shortfall in its budget for the Convention Center expansion.

In its last session, the state Legislature gave public facilities districts the right to sell their ability to refinance bonds. After voters approved additional taxes in May 2002 to pay for the expansion of the Convention Center, the district sold $77 million worth of revenue bonds to finance the project.

PFD Executive Director Kevin Twohig said selling the option to refinance those bonds – a transaction that likely would take place years in the future – could deliver a $3.5 million to $4 million infusion of cash within months. That’s almost exactly the amount needed to cover the district’s share of cost overruns in the construction budget for the 100,000-square-foot exhibit hall.

“We hope this would finish the job,” Twohig said.

Lehman Brothers of Seattle has already made clear to the district that it would be interested in purchasing that option, Twohig said. State law requires the district solicit at least two proposals, but the matter does not have to be put out to bid, he said. The downside to selling the bonds, he said, would be the district’s loss of flexibility to refinance the bonds itself in the coming years.

“It’s what are we going to get now versus what are we going to get in the future,” he said. “It could be anything from zero to the sky’s the limit.”

The district’s board of directors will meet at 3 p.m. on July 19 to consider the matter.

The cash payment would allow the district to spend more money renovating the existing Convention Center into smaller meeting rooms and ballrooms. The district had the money for, and had budgeted, $5 million for that work, but estimates place the cost closer to $6 million or $7 million, Twohig said. In addition, the money would pay for a warming kitchen, concession stands and other food service facilities in the new exhibit hall.

The cost overruns became apparent almost from the beginning of the construction project, when a larger volume of contaminated dirt than expected was discovered on the site, running up clean-up costs. The skyrocketing costs of materials, including steel and cement, made the problem worse.

The district went through a months-long negotiation process with its contractor to determine who should cover the budget overruns, which had surpassed $8 million. The matter was resolved by some expenses being cut from the budget, some being shouldered by the contractor and the district agreeing to a construction budget $3 million higher than originally anticipated.