Friday, October 21, 2011

The Truth About the Convention Center

There was a candidates' forum last night and like it occassionally does the convention center came up.  And like so typically happens, someone said little bit about how well it's doing, and how nothing comes out of the general fund to fund it, and then there was basically no further discussion.

I want to take a second to give you the truth about the convention center.

As you can see here on pg. 9, the operating fund for the convention center is $7.6M.  About $2.5M of that is interest on the convention center debt.  About $2M of the $7.6M is debt payment on the principle.  About $3M is operating costs.

Now, pg. 9 in that document says that $5.4M comes from the room occupancy tax.  This is misleading.  In reality, that money comes from the room occupancy tax fund.  These are two very different things.  Room occupancy tax implies that all of that $5.4M is being generated by the room occupancy tax every year.  Room occupancy tax fund implies the reality of the situation: the city has to dip into a savings account every year to make the convention stadium solvent.

As you can see on pg. 208, the room occupancy tax only generates $2.1M in revenue every year.  Clearly, this is not enough to cover the operating costs of the convention center.  Parking deck net revenues and user fees are not enough to cover it either.  The parking fund has an $800k shortfall for this year, and there are only five events booked at the convention center for the next four months starting in November.

As city finance director Debra Mack makes clear in an email the city is dipping into a fund to keep the convention center from operating in the red:

As we have discussed previously, the ROT Fund has $13,951,562 of accumulated ROT receipts and investment earnings at June 30, 2010. The ROT Fund transfers funds to the Convention Center Operations Fund annually that is used, along with parking deck net revenues, to fund the operations of the Convention Center. [Emphasis mine]
Ms. Mack clearly says ROT "fund." Yet in public, city officials present it as the room occupancy tax, as if that revenue is being generated every year.  This is clearly misleading.  The reality is that the city goes into a $14M fund that is filled with accumulated room occupancy tax receipts, receipts from the ROT before the convention center was ever built.

As you can see, there's a very good chance that this fund will be completely depleted within three years or so.  What happens then?  Well, I can't see that $5M coming from anywhere but the general fund.

So, when incumbents and others say that the convention center doesn't dip into the general fund, technically they're right, but give it a few years and they'll probably be telling a different story.

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