City staffers are engaged in talks with the owners of two and a half blocks of property located west of the Austin Convention Center in an attempt to learn what kinds of sales, leases or other property agreements can be executed to move forward with an ambitious expansion of the facility.
The Tourism Commission received an update at its meeting last week from Carla Steffen, chief financial officer for the city’s Convention Center Department, about the moves being undertaken since the defeat of Proposition B in November cleared the way for planning, design and assembling financing strategies for the expansion. Steffen said the city hasn’t started any formal negotiations with the property owners, but the current talks will determine what deals the city can pursue to begin the design and financing process for the two-phase project that is expected to cost more than $1 billion.
“Site assembly is the key next step to moving forward with the proposed expansion, simply because until we know the amount of land we can acquire or get access to in whatever form of real estate transaction that becomes, we don’t know what we can build,” she said. “Therefore we don’t know what it will cost, and therefore we don’t know what financing we will need.”
Steffen told commission members that the city will have 4.5 percent of the total 17 percent Hotel Occupancy Tax levied on hotel stays to use for debt service and operations related to the expansion. She said conservative estimates of future hotel tax revenues show the city would be able to bond about $750 million with that portion of the tax, which would be used to pay for the western expansion outlined in Scenario 5.2 of the University of Texas study of possible configurations for an improved convention center.
The second phase – mostly a reconstruction of the current convention center with an emphasis on mixed-use development – would be paid for largely through co-development deals the city could strike with partners interested in creating commercial or residential space in the towers projected to sit on portions of the current six-block site.
In May, City Council voted unanimously to move forward with the long-discussed plan to expand the convention center, as well as remake the Palm District located immediately to its south. That action caused opponents of the expansion to put forward the November ballot measure, which was defeated, that would have required voter approval for capital expenditures of more than $20 million on the center.
Steffen said the city has hired the Chicago-based consultant HVS to perform a market and economic analysis of the Austin area to make sure the data that provided the basis for the UT study are still relevant and accurate. The site assembly and forecasting of co-development opportunities is expected to last into late 2020, followed by a design phase in 2021 and start of construction in mid-2021.
The commission also heard about progress on the creation of a tourism public improvement district, or TPID, which is a 1 percent additional tax hoteliers had agreed to impose on themselves if the convention center was expanded, with some of those funds being used to provide services to address homelessness.
Owners of hotels in the proposed district downtown are reviewing the terms of the agreement, which will need to be approved by 60 percent of those hotels. From there Council would be asked to approve the agreement and formally create the district, which is expected to happen by late summer 2020.
Commissioner Brian Rodgers made a point of breaking down the discrete steps involved in how the TPID money will be used for homelessness since a recent state law limits TPID spending to promotional and sales efforts to build new business for hotels.
Commissioner Scott Joslove, who leads a state-level hotel trade group, said the TPID money is used to replenish discounts and incentives provided by the convention center to attract large events. Once those “buydown” promotions are paid back with money that sits in a general fund account, the funds can be used for any purpose including homelessness relief.
“It sounds like we’re doing an end run to call this general revenue so therefore we can use it without any discrimination,” Rodgers said. “When I first read about it, it seemed like it was circumventing the purpose of the law and it seemed like we were washing the money through our system.”
Photo by Joey Parsons made available through a Creative Commons license.
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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.
