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Wednesday, February 8, 2017 by Kara Nuzback
Council hears funding options for new convention center
Faced with concerns that the city is losing revenue because the Austin Convention Center is too small, City Council heard proposals for convention center expansions that ranged from $400 million to $600 million projects at its work session Tuesday.
Carla Steffen, deputy director and chief financial officer of the convention center, presented several proposals to Council, all of which stemmed from two basic financing options: maintain the existing 15 percent hotel occupancy tax and let voters decide whether to finance a new convention center proposal, or raise the HOT tax an additional 2 percent to 17 percent and create a financing proposal that Council could approve.
The first option replicates how the existing center was funded and qualifies the convention center as a community venue. Steffen said the project might need to omit certain components, such as improvements to the Waller Creek area, the Palm School and the historic homes on Red River. With this option, all of the pledged revenue could be spent only within the convention center venue.
The second option would allow Council to raise the HOT tax up to an additional 2 percent. That additional funding could only be used on an expansion to the existing convention center, but it allows for a higher debt capacity, Steffen said. The increase would allow planners to include more components in the proposal, including area improvements, she said. It would require Council, rather than voter, approval. The second option also has the potential to generate additional annual funding for arts, historic preservation or other uses.
“We ran scenarios under both options,” Steffen said.
Of the seven scenarios given in writing to Council members, Steffen highlighted Option 1, which would fund the expansion under the existing HOT tax rate, and Option 2B, which would implement a 2 percent increase in the rate.
Option 1 could be completed with about $400 million in project funds, but it would not allow for any area improvements or certain onsite components, such as underground parking.
Option 2B would raise the HOT tax rate to 17 percent with a plan of retiring the debt in 2021 and then bringing the rate back down to 15 percent. Option 2B would require about a $600 million project budget, and it would allow the design to include open, walkable space; underground parking; a rooftop park or venue; and improvements to the surrounding area.
Another “big box” convention center is not what the community wants, Steffen said.
Option 2B would also include more than $6 million in funding that could be used to fund tourism and promotion or cultural arts in the city, Steffen said.
“This is not a venue option,” she said. “This option allows for excess.”
She said the new convention center could also include a new fire station or a new Austin Energy chiller, both of which are needed in the downtown area. Street-level convention center space could house restaurants and retail, she said.
Austin Convention Center Director Mark Tester said the city frequently loses groups that show an interest in Austin because the convention center is too small.
“The demand is there,” he said.
Tester said that City Council districts 1 and 3 hosted town hall meetings to discuss the potential new convention center, and District 9 is planning one.
Mayor Pro Tem Kathie Tovo, who represents District 9, said the meeting is scheduled for Feb. 25, and she is working with Travis County Commissioner Margaret Gómez to finalize the details.
“This is very interesting, and it’s a lot to think about,” Tovo said of the proposals.
Council Member Ora Houston thanked convention center officials for involving the community in its proposals and giving Council options for how to potentially fund the project.
Mayor Steve Adler said the proposal could aid Council’s scheduled discussion Thursday on funding preservation projects downtown.
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Key Players & Topics In This Article
Austin City Council: The Austin City Council is the body with legislative purview over the City of Austin. It offers policy direction, while the office of the City Manager implements administrative actions based on those policies. Until 2012, the body contained seven members, including the city's Mayor, all elected at-large. In 2012, City of Austin residents voted to change that system and now 10 members of the Council are elected based on geographic districts. The Mayor continues to be elected at-large.
Austin Convention Center: This city department operates the downtown convention center and associated events.
Hotel Occupancy Tax: A tax on the rental of a room in a hotel or other rental properties (including apartments) that cost 6 percent of the cost of a room.