Dominick Calsolaro

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Albany Convention Center - Questions/Concerns

Published on 2/27/2006 by the Times Union

The Albany Convention Center Authority (ACCA) has finally met. Governor Pataki has promised some state funding. Mayor Jennings says that the convention center is a “no brainer”. And it looks like the long-awaited construction of the convention center and hotel complex (the “project”) is within sight.

It all seems too good to be true, and it is! There are three areas of concern that the members of the ACCA must take a hard and realistic look at: the cost of constructing the project; the financing scheme proposed for the project; and the siting of the project.

First, the projected cost of the project. The total cost of the project is estimated to be $200 million. This figure is outdated. Construction materials have skyrocketed over the past two years due to weather-related catastrophes such as Hurricanes Katrina and Rita. Take for instance the case of Raleigh, North Carolina. Raleigh has approved the building of a convention center very similar in size and cost to that of Albany’s proposal. The original projected cost of Raleigh’s convention center (scheduled to open in 2008) was $180 million. As of February 2006, the cost has risen to $215 million! The citizens of Albany need to be protected from the inevitable cost-projection overruns of the project. The ACCA must establish a contingency plan for cost overruns that will safeguard city taxpayers from having to assume debt to cover increased costs.

Second, the financing scheme proposed for the project. The Governor has committed $75 million in state funds for the project. Another $40 million is estimated to come from the county’s hotel occupancy tax. The remaining $85 million is to come from the private sector – most likely hotel revenue bonds. The state commitment is good, but not enough. The county bed tax is good, but many other municipalities have found that this tax does not meet projections and have been forced to impose a restaurant meal tax in addition to the bed tax. However, the most alarming aspect of the project’s financing scheme is the proposed hotel revenue-based bonding. It simply does not work.

Mayor Jennings has pointed out that convention centers do not make money. The same can be said for convention center hotels. A recent study by the Baltimore Development Corporation, M. J. Brodie and Irene E. Van Sant, May 5, 2005 done for the city of Baltimore, Maryland (“Baltimore needs a convention center headquarters hotel”) found that private developers required “a City pledge or guaranty of debt service”. The study goes on to state, “It was clear ….the City [had] to take the key risk if the hotel did not do as well as projected…” (p.2). Knowing this is the reality, and knowing that there are numerous examples of hotel revenue bond failures (e.i. Myrtle Beach, S.C., where in 2004, only one year after its convention center hotel opened, the city was forced to float $48 million in bonds to refinance the hotel revenue bonds), Governor Pataki proposed in his 2006-07 budget, additional state aid (Article 19-a Public Lands Law) for the city of Albany.

This annual aid of $22.85 million through 2010, decreasing to $15 million thereafter, is to run until fiscal year 2038-2039. This state aid sure looks good on paper but, the Governor included a caveat that could prove devastating for Albany taxpayers. The Governor’s proposal requires that this money be given, not to the city, but to the State Comptroller in two equal installments (March and September). The State Comptroller is directed to transfer to the ACCA “any amounts required…to make up any deficiency…for which such hotel revenue bonds were issued…” (Public Protection and General Government Budget proposal, pp. 338 – 340). In other words, before the city of Albany sees one red cent of this state aid, any deficiency in the hotel revenue bonds debt service reserve fund must be paid first. This requirement is a backhanded way of forcing the taxpayers of Albany to pay for a state authority’s project. We can not let this happen.

Third, siting the project. The members of the ACCA need to look beyond the three sites previously proposed in the convention center study as the only sites for the convention center. A couple of possibilities: Expand the Empire State Plaza convention center (a 1997 report suggested just that). Or, if this proposal is not “sexy” enough, why not offer to buy the Washington Avenue Armory from Mr. Coyne and turn it into the convention center. The Armory’s main floor space is similar in area to the proposed convention center exhibit space (approximately 100,000 sq, ft.), there are sub-floors for meeting rooms, and it is a wonderful unique building that will attract visitors just on looks alone. It is also located within blocks of the Capitol (with no hill to climb!) and it is near numerous and varied restaurants and bars along Lark Street, Central and Washington Avenues. It is also located within a stone’s throw of the Arbor Hill revitalization project, and will only help to bring economic stability to that area. Additionally, the ACCA could offer to buy the Main Branch of the Albany Public Library (thus helping to fund APL’s own rebuilding project) and use this site which is adjacent to the Armory, to build the hotel with underground parking.

In conclusion, the ACCA has a lot of issues to deal with that are going to require in-depth study and analysis. Despite calls for quick action, the ACCA must proceed with caution and with an open mind to new ideas, Albany’s financial future is at stake.