Flow of Funds: Convention Center Fund
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Transcript Flow of Funds: Convention Center Fund
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