Flow of Funds: Convention Center Fund

Report
BCEC Context, Convention
Center Financing and
BCEC Westin Hotel
Presentation to
The Convention Partnership
Presented by Kairos Shen, BRA
Frederick Peterson, MCCA
Johanna Storella, MCCA
James Sult, Piper Jaffray & Co.
Howard Davis, MCCA
May 24, 2010
Agenda
 Community Context




BRA’s Vision for the South Boston Seaport District,
Existing/Proposed Development Plans and Land Ownership
Transportation Plans/Future Considerations
South Boston and Fort Point Neighborhoods
 BCEC Financing: Case Study
 Overview: Financing for Other Convention
Center Expansions
 BCEC Westin Hotel: Case Study
2
Community Context
Kairos Shen, Chief Planner, BRA
Fred Peterson, Director of Facilities Operations, MCCA
3
MCCA and Community Dialogue
 Objectives
 Begin the process of jointly identifying neighborhood &
community concerns
 Work together to explore potential solutions
 Respect existing uses in the area and how any expansion
weaves into the fabric of the community
 Planning Documents





Seaport Public Realm Plan
BRA 100 Acre Plan
City of Boston/ BRA Crossroads Initiative
Current zoning in and around BCEC
BRA East/West First Street planning – rezoning efforts
4
Community Concerns – What We’ve Heard
Design
 Campus-style
 Appropriate aesthetic
 Height; scale; massing & finishes
 Open Space
 Types of uses
 Onsite location(s)
 Connectivity to surrounding areas (e.g. 100 acres)
Pedestrian Impact




Access
Connections to neighborhoods and waterfront
Streetscape improvements
Traffic calming elements
5
Community Concerns – What We’ve Heard
Transportation
 MBTA
 D Street/Summer Street or on-site service
 Silver Line
 CSX Track 61 uses
 Cypher St connection from A St to Pappas Way
 Pedestrian connections & vehicular uses
 “Blue Highway” – water ferries & shuttles
 Parking & Marshalling
 Locations, structures and loading docks
 Shuttles & trucks servicing each building
 South Boston Bypass Road
 Spanning over the roadway
 Current & future uses (Hazmat truck route)
6
BCEC Financing: Case Study
Johanna Storella
Chief Financial Officer, MCCA
7
BCEC Construction and Financing
 Project Funded at State and Local Level:
 Commonwealth Responsibilities
 Chapter 152 authorized the Commonwealth to issue $694.4
million in special obligation bonds to cover Boston,
Springfield and Worcester projects
 Convention Center Fund established to secure and provide
payment of State bonds
 City of Boston Responsibilities
 Under Chapter 152, City required to provide not less than
$157.8 million for BCEC site acquisition and preparation
 Chapter 152 also authorized the City to issue bonds to fund
this obligation, and to increase the room occupancy tax to
pay bond debt service
 Funding plan designed to place the tax burden on the
visitors rather than the citizens of the Commonwealth
8
Site Acquisition & Site Preparation
Funding
Year
Legislation
1997
1997
Chapter 152
Chapter 152
1997
1997
Chapter 152
Chapter 152
Source
City of Boston
City of Boston*
Subtotal - City of Boston
Commonwealth
Commonwealth**
Subtotal - Commonwealth
TOTAL Site Acquisition & Site Prep
Funding Expended on
Available
BCEC
$ 157,800
$ 25,000
$ 182,800
$ 157,800
$ 19,000
$
176,800
47,200
25,000
72,200
$
$
47,200
19,000
$
66,200
$ 255,000
$
243,000
$
$
$
* Split 50/50 with Commonwealth if costs exceeded $205 million.
** Split 50/50 with City if costs exceeded $205 million.
9
BCEC Project Funding
Original Legislation
Year
Legislation
1997
1999
2001
2004
Chapter 152
Chapter 68
BRA
Ch.26 Sec.439
Uses
Funding
BCEC Construction
BCEC Construction*
Environmental Remediation**
HVAC Funding from Conv.Ctr. Fund
Subtotal
$ 537,200
$ 18,000
$
1,900
$ 50,000
$ 607,100
Additional Legislation/Funding
2001
2002
2003
Chapter 88
Chapter 246
BANs Interest Income
Transportation Improvements
Energy Rebates
TOTAL CONSTRUCTION FUNDS
* Supplemental Budget Appropriation
** Cash Contribution from BRA
$
$
$
14,454
30,000
414
$ 651,968
10
Chapter 152 – Convention Center Fund
Revenue Sources
 Convention Center Fund
 Convention Center Financing Fee, 2.75% of the total room rent
 Commonwealth’s existing 5.7% hotel room occupancy tax
 Current hotel rooms located in BCCFD
 New hotel rooms located in Boston or Cambridge
 New hotel rooms located in the SCCFD
 Springfield’s 4% local hotel room occupancy tax for new rooms in the
SCCFD
 Commonwealth’s existing 5% tax upon sales at new retail shops in
BCCFD and SCCFD
 5% surcharge on the ticket price for any land or water based tour in
Boston
 State’s share of the vehicular rental surcharge, $9
 $2 per day surcharge on parking at any facility constructed as part of
the Boston, Springfield or Worcester projects
11
Chapter 152 – City of Boston New
Revenue Sources
 Anticipated 4% local option room occupancy
excise tax on new hotel rooms
 Sale of 260 hackney licenses
 City’s share of the vehicular rental surcharge, $1
12
Flow of Funds:
Convention Center Fund – FY 2009
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$0
FY09 BY Balance
FY09 Revenues
FY09 Expenses
MADS Coverage
Receipts
Released
FY09 EY Balance
13
Distribution of Funds:
Convention Center Fund – FY 2009
160,000,000
90,000,000
80,000,000
70,000,000
8.9%
16.3%
60,000,000
12.3%
50,000,000
40,000,000
140,000,000
120,000,000
100,000,000
80,000,000
62.5%
30,000,000
60,000,000
40,000,000
20,000,000
43.7%
20,000,000
11.3%
5.2%
16.6%
23.2%
10,000,000
0
Expenses
0
Revenues
Debt Service
MCCA Operating Exp
Occupancy Tax
Vehicle Surcharge
MCCA Capital Exp
Other
Use Tax/ Sightseeing
Interest/ Other
Transfer to Comm
Example: Fiscal Year 2009
14
Overview: Financing for Other
Convention Center Expansions
James Sult, Piper Jaffray & Company
15
CAPITAL FUNDING SOURCES
Hotel and F&B Related
Taxes
 Broad Base Occupancy
Tax
Other Tourism Related
Taxes
 Rental Car Surcharge
 Taxicab Fees
 Occupancy Tax on New
Hotels
 Tourist Activity
Surcharge
Direct Government Support
 Broad Base Sales Tax
Pledge
 State Debt Obligation (GO)
 City Debt Obligation
 Flat Fee per Occupied
Room
 Broad Base F&B Tax
 Target District F&B Tax
16
PHOENIX CONVENTION CENTER
Ownership / Operations
 Owned and operated by City
Operating Funding Sources
 Operating revenues
 Operating deficit funded from City Excise Tax
Fund
Facility (expanded)
•
•
•
•
•
Original facility opened in 1969
Expansion completed in December 2008
502,500 SF of exhibition space
150,000 SF of flexible meeting space
Three ballrooms totaling 119,000 SF
Capital Financing Structure
(Expansion)
 $300,000,000 State contribution
• Issuance of State backed bonds
 $300,000,000 City issued bonds
• Backed by pledge of Citywide excise
taxes
17
SAN DIEGO CONVENTION CENTER
Ownership / Operations
 Owned by City
 Operated by San Diego Convention
Center Corporation (City controlled)
 Land owned by San Diego Unified
Port Authority (ground lease to City)
Operating Funding Sources
Facility (expanded)
•
•
•
•
•
Original facility opened in 1989
Expansion completed in 1998
615,701 SF of exhibition space
204,114 SF of flexible meeting space
Further expansion and new hotel under
consideration
 Operating revenues
 Operating deficit funded from City
General Fund
Capital Financing Structure
(Expansion)
 $205,000,000 Lease Revenue
Bonds issued by Convention Center
Expansion Authority
• Backed by annual City lease
payments
 $4,500,000 annual debt service
support payment from Port to City for
20 years
18
PENNSYLVANIA CONVENTION CENTER
Ownership / Operations
 Owned and operated by the Pennsylvania
Convention Center Authority
 Authority is a component unit of the City of
Philadelphia
 Land owned by City (ground lease to
Authority)
Operating Funding Sources
 Operating revenues
 Authority receives approximately 70% of a
6% City-wide hotel occupancy tax
Capital Financing Structure (Original)
Facility (expanded)
•
•
•
•
•
Original facility broke ground in 1993
Expansion expected completion
• March 2011
700,001 SF of exhibition space
246,000 SF of meeting space
60,000 SF ballroom (92,000 SF total)
 $277,195,000 Lease Revenue Bonds
issued by the Authority
• Backed by annual City lease payments
equal to debt service
 City and State grants
• State - $185 million
• City - $42 million
 Expansion primarily funded by the State
19
WASHINGTON DC CONVENTION CENTER
Ownership / Operations
 Owned and operated by the
Washington Convention Center
Authority
 Independent authority of the District
government
Operating Funding Sources
 Operating revenues
 4.45% district-wide hotel occupancy
tax
 1% district-wide F&B tax
 1% tax on vehicle rentals
Facility
•
•
•
•
Opened March 2003
725,000 SF of exhibition space
250,000 SF of meeting space
52,000 SF ballroom
Capital Financing Structure
 $524,460,000 Dedicated Tax
Revenue Bonds issued by the
Authority in 1998
• Backed by revenues described
above
20
Capital Funding Sources by City
Broad Base
Occ. Tax
Limited
Occ. Tax
Broad Base
F&B tax
Limited
F&B Tax
Rental Car
Surcharge
Taxicab
Fees
Tourist
Activity Tax
Broad Base
Sales Tax
Atlanta
State Debt
Obligation
City Debt
Obligation
X
Boston
X
Chicago
X
Dallas
X
Denver
X
Las Vegas
X
New Orleans
X
Orlando
X
Philadelphia
X
X
X
X
X
X
X
X
X
X
X
Phoenix
X
X
San Diego
X
San Francisco
X
Washington DC
X
X
X
21
OWNERSHIP AND OPERATIONS
Ownership
Independent Authority (State)
 Boston
 Atlanta
 Chicago
 New Orleans
Independent Authority (City)
 Philadelphia
 Washington DC
 Las Vegas (Clark County)
City Controlled
 San Diego
 San Francisco
 Phoenix
 Dallas
 Denver
 Orlando (Orange County)
Operations Funding
Dedicated Tax Revenues
(operations)
 Boston
 Philadelphia
 Washington DC
 New Orleans
 Dallas
Direct City Funding (operations)
 Phoenix
 San Diego
 San Francisco
 Dallas (shortfalls)
 Las Vegas (room tax revenues)
 Denver
22
BCEC Westin Hotel: Case Study
Howard Davis
Director of Capital Projects, MCCA
23
RFP to Groundbreaking – 5 years
 1999:
 RFP Issued
 2000 – 2002:
 Development Agreement and Lease Signed
 Starwood/Carpenter & Company
 Design and Permitting
 2003:
 New Developers
 New Design – Two Phases
 2004:
 Groundbreaking
24
Since 2004 Groundbreaking
 2006:
 Westin Opens for Business
 2007:
 Hotel Sold - $302 Million
 Present
 Operations Successful
 No Firm Expansion Plans
25
Hotel Rent
 Base Rent
 Fixed Schedule
 Commences 2013
 Percentage Rent
 % of Gross Revenue
 Transaction Rent
 % of Sales/Refinancing Proceeds
 Approximately $1 Million to MCCA from 2007 Sale
26
Room Block Agreement
 Blocks of Rooms Available to MCCA
 At Not-to-Exceed Rates
 # of Available Rooms
 Function of How Far in Advance Rooms are Booked
 48 Months and Beyond: 75% Rooms
 Less than 12 Months: 0% Rooms
27
MCCA/Westin Relationship
28
Original Capital Structure
$121,000,000
$ 49,000,000
$170,000,000
Private -1st Mortgage Debt
$ 18,000,000
$ 15,000,000
$ 33,000,000
MCCA – Infrastructure, Etc.
$ 203,000,000
Total – All Sources
Private - Developer/Tenant Equity
Total – Private Sources
Public HUD Loan – City of Boston
Total – Public Sources
29
Enhanced Investor Returns
 Favorable Ground Lease from MCCA
 No Annual Rent Payments for 7 years
 Structured Property Taxes – City of Boston
30
Conclusions: BCEC Westin Hotel
 Hotel Was Needed and Successfully Developed
 7 Year Process
 Not Feasible Without Public Contributions
 Approximately $33 million – 16% of Total
 Today, Required Public Contribution Much
Higher
 In Washington, D.C., Approximately 50%
 Hotel Sold Within Year of Opening
 Very Significant Profit for Developer
31

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