Financing Looms as Key Issue for L.B. Convention Center Plan

A long-awaited study recommending a $59.5-million expansion of the Long Beach Convention and Entertainment Center has received the enthusiastic endorsement of local hoteliers and the mayor, despite serious reservations by top city administrators about the projected costs.

“Personally . . . I think it’s necessary,” Mayor Ernie Kell said in an interview Monday.

But City Manager John Dever, speaking at a council meeting the next day, expressed serious doubts--echoed by some council members--regarding the city’s ability to pay for the proposed expansion. “For all intents and purposes,” Dever said, “this is a project that cannot be financed by the general fund.”

The study--commissioned by the city Tidelands Agency last May from a San Francisco consulting firm--recommends almost doubling the amount of exhibition space at the convention center to make it competitive with other area centers. In addition, the report recommends adding 25,000 square feet of meeting rooms and a new parking structure.

The report says that a “dramatic” increase in the planned and existing hotel rooms in Long Beach makes the expansion necessary and feasible. Hotel industry officials have long lobbied for an expanded convention center to help generate business.

The report, prepared by Economics Research Associates, suggests financing the expansion through the sale of a $77.4-million bond issued by the city redevelopment agency and paid back over a 25-year period.

The amount is higher than the $59.5 million in projected construction costs, according to John Dykstra, who helped prepare the report, to provide a cushion against non-payment by the city and to provide interest during construction.

In addition, the report recommends an increase in the city’s bed tax from 7% to 10% and the imposition of a tax ranging from 50 cents to $1 per ticket on convention center events.

The report projects that the annual cost to the city for an expanded center would be between $11.4 million and $13.4 million. The report says that $2.2 million of the annual cost would be covered by the increased bed and ticket tax, with the city still needing between $9.2 million and $11.2 million to cover the annual debt service on the bond and the expanded center’s projected annual operating deficit of $3.3 million.

projected annual operating deficit of $3.3 million. Currently the convention center, with a budget of $6.6 million, operates at a deficit of $1.5 million a year. The suggested expansion would boost the center’s operating revenues from $5.1 million last year to an estimated $8.5 million during the first year of expanded operations, according to the study. The city foots the bill as a means of drawing tourists, concert and convention business to the city.

“I think it’s been very well thought out,” Kell said of the proposal, which the City Council this week referred to its Transportation and Infrastructure Committee with a suggestion that the committee form an ad hoc group of about a dozen citizens to study the expansion proposal. Kell said Monday that he expected the ad hoc group to be formed within two weeks and to return with a formal recommendation for action within 90 days.

“If the financing is structured properly, I don’t see it running into a lot of opposition,” the mayor said of the plan.

Other council members, however, were less optimistic in their assessments of the plan’s chances.

“While this may be a needed addition, we’re going to have to look at it seriously if we’re talking about that kind of money,” Councilman Thomas Clark said at Tuesday’s meeting, adding that the proposed cost to the city’s general fund constituted “a very serious obstacle” to enactment of the proposal.

Expansion a Hot Topic

Said Councilwoman Eunice Sato: “This is just the beginning of the process . . . and it shouldn’t stop here.”

Convention center expansion has been a hot topic of conversation in Long Beach since November when Facility Management Inc.--the company that manages the city-owned Convention and Entertainment Center--announced a 50% hike in fees for use of the facility, effective in July. George Matson, vice president and general manager of the management company, said that the increase is necessary because conventions are gradually replacing the more lucrative concerts and sporting events from which the center traditionally receives 12% of the ticket sales.

But Bill Miller, president of the Long Beach Area Convention and Visitors Council, predicted a 20% loss in convention bookings due to the fee increase. He recommended expanding the convention center, which he said would allow the conventions to continue at the lower rates without squeezing out the ticketed events. “If the city drags its feet (on convention center expansion),” he said in a recent interview, “we’re going to be way behind.”

Without expansion, he said, the convention center would not be able to attract enough people to fill the growing number of hotel rooms in the city. Currently, he said, there are about 2,200 rooms within walking distance of the convention center, a number that is likely to double in the next three years.

Two recent developments seemed to add credence to his argument.

Hotel Plans Canceled

Late last month, Jay Feinberg, executive vice president of the Feinberg Group Inc., which operates the Queensway Bay Hilton, announced cancellation of a 350-room addition to that hotel, citing, among other things, “the continued reluctance of the city to make a firm commitment to a convention center expansion.”

And the same week, the construction of a 21-story luxury hotel at the site of the Jergins Trust Building on Ocean Boulevard was postponed for at least six months due to what a spokesman for the development company called a “glut” in the number of hotel rooms downtown. Hospitality industry spokesmen have predicted just such a glut should the convention center expansion not be approved.

The $30,000 report estimates that an expanded convention center would generate nearly $76 million annually in direct expenditures to local businesses, including about $610,000 in sales tax revenues to city coffers. The projected $2.2 million from bed and ticket taxes would be in addition to that.

There would also, according to the report, be considerable “qualitative” benefits such as increased visibility as a potential vacation/convention site and a new “vitality” in the downtown area resulting from its increased number of visitors.

Recommended Changes

The recommended changes consist of 75,000 square feet of additional exhibition space on land contiguous to the center’s existing 88,000 square feet. Specifically, the report urges utilization of 24,000 square feet at the northwest end of the existing exhibit hall, and 51,000 square feet at its southwest end. Both sides now contain parking lots and access roads that, according to the proposed plan, would have to be rerouted. In addition, the plan calls for the construction of 25,000 square feet of new meeting rooms just east of the existing theater complex, and a large parking structure to be built in what is now the east parking lot.

Local hoteliers have been quick to endorse the proposed changes, although they are still considering the implications of the increased bed tax.

“It’s urgent that the expansion take place,” said Joseph Prevratil, chairman of the Long Beach Area Convention and Visitors Council, which represents local members of the hospitality industry. Prevratil is also president of Wrather Port Properties Ltd., which operates the Queen Mary.

According to Miller, the council went on record a year ago as being opposed to any increase in a bed tax. In light of the recent report, however, “we’re not sure how we feel now,” he said.

If the city acts by July, according to the report, construction of the new facilities could begin by January, 1988. Given that sequence of events, the study projects, the new expanded convention center would be open in 3 1/2 years.