Dominick Calsolaro

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Cost of Convention Center

Published on 6/29/2007

June 29, 2007

Re.: Updated cost of the Convention Center and the reliance on convention center hotel profits to cover the cost of debt service.

To: Albany Convention Center Authority Board Members

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On June 25, 2007, the Times Union reported in an article entitled, “Center now a $300M project”, that the proposed Albany Convention Center is now projected to cost $300 million rather than its original cost estimate of $185 million! George Leveille, director of the Albany Convention Center Authority (ACCA), said the cost of the project is $100 million more than originally expected. Mayor Jennings is quoted, “…the cost increases should not be a surprise.” And he goes on further to say, “…I don’t think anyone should be alarmed by the price.”

WRONG! Everyone should be alarmed by the new price tag. The state has committed only $75 million or 25% of the cost. Some of the other funding is coming from the increase in Albany County’s “bed” tax. Where is the rest of the money going to come from? Let me guess - the selling of bonds, another increase in the county sales tax like they are proposing in Cleveland, OH (The Plain Dealer, “Convention center plan gains suburban backing”, June 21, 2007), or a possible “food” tax, in addition to the sales tax, and other surcharges like those being considered in Nashville, TN for their new $455 million convention center – a fee on rental cars and taxi service from the airport (The City Paper, “Music City Center, Gaylord legislation likely to be filed today”, June 22, 2007).

Now, back to the bonds. Under state law, the bonds for the convention center/hotel are to be secured with the backing of the section 19-A (Public Lands Law Art. 2) monies from the State. In fact, in subdivision 2 of section 19-A it states: “...that any such payment shall be reduced by any amount necessary to meet eligible obligations of the Albany convention center authority…”. So, if the amount of bonds that must be sold in order to finance the convention center/hotel project is increased to cover the additional cost of the project, and the hotel doesn’t make enough profit to cover the yearly debt service, I guess the city of Albany can kiss that 19-A money goodbye. An example of a convention center hotel not making a profit is right here in New York State. Paul Snyder, majority owner of the Hyatt Regency Buffalo is quoted in the May 31, 2007 Buffalo News, “…he hasn’t made a profit since it opened in 1984.” (“Hyatt hotel to undergo $11 million renovation”). In fact, the state is kicking in $5.1 million for the project.

Simply put, the City of Albany can not afford to back bonds that may total more than $100 million in principal alone, against future state aid payments to the City. The City of Albany, according to the most recent census data, has experienced an increase in the number of residents living at or below the poverty level, while at the same time, suffering from a loss of population of people defined as “middle class”. If Albany is going to have to use state aid monies to pay the convention center/hotel debt service, then there will have to be an increase in the local real property tax rate to make up the difference. The backs of the taxpayers in Albany should not have to carry the load for a State authority’s (Public Authority Law Art. 8 Title 28-B entitled, “Albany convention center authority”) debt service.

How can the citizens/taxpayers in Albany be protected from having to use future state aid payments to pay a State authority’s debt? I have a few suggestions:

1.
The State of New York fund the full cost of the Albany convention center/hotel project, after all, the ACCA is a State authority.
2.
Place a limit on the cost of the project, keeping to the original price tag of $185 million, and scale back the proposed project so as not to exceed the original cost estimate (with the State agreeing to fund the full cost of the project if this proposal is agreed to).
3.
The ACCA should take a step back and investigate alternatives to building the convention center/hotel as presently formulated so as to find a less expensive alternative. One possible alternative would be updating the 1997 study that proposed expanding the Empire State Plaza Convention Center. The original study for this expansion projected a cost of around $20 million. Even with inflation and the ever-increasing costs for construction materials, the cost of this expansion will probably not exceed the original targeted amount of $185 million.



I recommend that the ACCA adopt two resolutions:

1. That the ACCA take no further action on the proposed convention center/hotel as presently proposed until all funding sources have been identified and the affect on the city’s taxpayers is known.
2. That the ACCA keep the project’s cost at the originally proposed amount of $185 million unless the State of New York or a private developer agrees to make up the difference between the original estimated cost and the final cost. That the ACCA will not place any additional monetary burden on the citizens of the City of Albany beyond the originally agreed to funding formula for a $185 million convention center.




What I am asking the ACCA to do is to review the whole convention center/hotel project, especially its funding formula, and find a way to protect the taxpayers of Albany from having the added burden of the convention center/hotel debt service payments placed squarely on their backs. The citizens of Albany should not have to pay for any part of this State project.

Thank you for this opportunity to address the Board this morning.



Sincerely,
Dominick Calsolaro
Common Council Member – First Ward
(518) 859-5219