A panel weighing the expansion of the Boston Convention and Exhibition Center said on Tuesday that state lawmakers would have to identify between $78 million and $117 million annually in new revenues to support a planned $1 billion expansion of the South Boston facility. That sum could prove difficult to generate in a narrow, targeted fashion, raising the possibility of a legislative tug-of-war over how, or whether, to finance the ambitious project.
“It’s always difficult to raise new revenues,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, and a member of the group studying the expansion project. Widmer said revenues that targeted the tourist trade could prove more palatable to lawmakers, but noted that it would be difficult to service a $1 billion bond on narrowly tailored revenue streams.
“Whether we’re talking about existing revenues or new revenues, there is an intense competition for a limited amount of money,” Widmer added. “There are major fiscal needs across all of state government.”
State convention officials, along with members of the Patrick and Menino administrations, announced plans for a significant expansion of the South Boston facility well over a year ago. Since then, a group of business leaders, lawmakers, and outside consultants has been refining the expansion program. Current plans envision the construction of a 1,000-room hotel along Summer Street, more than 1 million square feet of new meeting, exhibit, and ballroom space, and a likely expansion of the existing Westin hotel.
The project’s $1 billion price tag, which would likely be financed through a bond offering, only covers the development of new convention space; it’s likely that the new $600 million hotel would require hundreds of millions of dollars in additional public subsidy.
Jim Rooney, executive director of the Massachusetts Convention Center Authority, said today that the $117 million annual revenue target remains a hypothetical figure, since the convention center expansion and finance plans have yet to be finalized and approved by the Legislature. But the hypothetical figures are important, Rooney said, because they help frame the discussion about how much financial support a convention center expansion would demand, and where such revenues would come from.
Rooney’s group is expected to issue its final report in April. It will then go to the Convention Center Authority board for approval, before being forwarded to the governor and the Legislature. It won’t prescribe specific new fees and taxes; instead, it will present its rationale for expanding, alongside a menu of possible new revenues for lawmakers to consider. Those options will likely include capturing new tax revenues that the expansion would generate; diverting existing occupancy tax revenues to convention center debt service; raising the occupancy tax rate; and widening the boundaries of the tourist district the convention center draws taxes from.
The more broadly based a new revenue stream is, the more bitterly it’s likely to be contested in the Legislature. The problem for Rooney is that it will be difficult to generate the magnitude of revenue needed – upwards of $100 million per year – without tapping broad revenue streams. For instance, the convention center authority’s financial consultant said today that an expansion would potentially generate $32 million in new rooms, income, sales and property taxes; however, the convention center is only entitled to a small percentage of those funds. That puts the convention center expansion at the mercy of a Legislature that has been reticent to raise new funds as of late. House Speaker Robert DeLeo, for instance, has said the House’s next budget won’t tap any new revenue sources.
Boston Mayor Tom Menino has been a longtime advocate of the convention center project because he sees it as a way to spur construction along the South Boston waterfront. Gov. Deval Patrick lined up behind the expansion as a way to generate activity in the state’s growth sectors, like biotechnology; the BIO conference, which spurred the governor’s 2007 trade mission to China, recently said the South Boston convention hall is too small to host its growing annual event. Convention center officials say Boston lost out on 72 shows in 2009 because of concerns over the South Boston hall’s size, a lack of nearby hotel rooms, or an inability to host simultaneous events.
However, the proposed expansion has drawn scrutiny recently. On Tuesday, Globe business columnist Steven Syre rebuked the idea of building into a shrinking convention market. In CommonWealth’s recent Winter issue, Charles Chieppo, a former convention center board member, argued that the South Boston convention center’s inability to live up to its initial projections should serve as a warning sign of troubles to come.
Homepage photo courtesy of Denterlein Worldwide.
