Conventional Choices

by Dan Richardson


Expanding the Spokane Convention Center is an easy question for Shaun Cross: The state wants to give the community about $36 million for economic improvement. Do we take it, build a snazzy expanded convention center and shine up some county facilities, or walk away from a good investment and let Olympia keep the money?


For Cross, the answer is simple -- take the money, expand the convention center, create jobs -- but then, he's spent months of volunteer time sorting out the details, first on a citizens' committee and now as a member of the Public Facilities District Board. The facilities district (PFD) operates the Spokane Veterans Memorial Arena and would also run the convention center expansion, or CCX.


Look at the numbers, Cross told Spokane city council members at a special briefing session last Thursday. Cross made the argument for the CCX -- everything from job creation to relieving the city's general fund of certain debts -- and made the argument passionately.


CCX is smart, he said. "This can be done." But for others -- including at least a couple of city council members -- the CCX vision possesses a wavering, mirage-like quality. It looks good on paper, but then, maybe it's a lot of fancy talk that could evaporate, leaving the city stuck with... well, nobody knows, exactly. Some critics label it, perhaps unfairly, another River Park Square in the making. (See "CCX vx. RPS," p. 11.)


"I congratulate you on your administration of the Arena. But this is a different ballgame. It's much larger," said Councilman Steve Corker, who asked the most and sharpest questions of Cross, the PFD's financial point man. There are numerous unresolved aspects of CCX, everything from the building design to the price of the land, and those loose ends trouble some. Councilwoman Cherie Rodgers told Cross, "I can't imagine anyone in the city of Spokane voting for a project if they don't know how much it will cost or where it will be."


It's not that the PFD doesn't know where an expansion would go. They do, sort of. It will be, say district officials and PFD documents, attached to the existing convention center on Spokane Falls Boulevard. It could go south, east or a bit of both.


The basics of the expansion plan start with a transfer of existing buildings, staff, debt and tax income from the city to the Public Facilities District.


Until now, the PFD's five-member volunteer board has run only the Spokane Arena -- and, apparently, run it well, paying its bills and accumulating a $14 million reserve, says Cross. Under the transfer, the PFD would take over the city's Spokane Center (the convention center, opera house and agriculture trade center but not Joe Albi Stadium), and inherit some $3.6 million in Opera House debt, plus the responsibilities for improving the facility, which boasts 20-year-old "temporary" orange seats, among other amenities. The city would also turn over certain tax incomes, like the roughly $350,000 it makes every year charging a 5 percent ticket tax on the Arena. The Spokane Center, over the past 11 years, has usually lost money for the city (in seven of those years) and the annual subsidy has averaged around $400,000 over that time.


The plan needs some signatures on the dotted line. To get off the ground, voters must approve two measures on May 21 authorizing the PFD to expand its authority to include the convention facilities and to extend a current district sales tax (one-tenth of 1 percent) and hotel room tax. If those two measures pass, the city council and county commission must sign on; both appear to be leaning in favor of CCX.


Finally, the county would issue $96 million in bonds to finance the CCX and some county facilities (see "Follow the Money," p. 12).


The best part of the deal, say CCX supporters, is that more than a third of the construction costs would come from the state in the form of a sales tax rebate.


How often, Cross asked the city council, does that happen? "If we do nothing, the people in this county are still going to pay 8.1 percent sales tax," he said. "The difference is, $36 million more is going to go to Olympia."





The SPREADSHEET--"The chances that something like this will come along again in my lifetime, with these benefits, is less than zero," says Cross. "I don't think people understand that. And that scares me. That's why I'm spending so much time on this."


He's sitting in his office, 11 stories above Sprague Avenue, explaining the details of a spreadsheet prepared for the Public Facilities District earlier this year by accountants LeMaster & amp; Daniels. Across a hallway is the office where John Powers, now Spokane's mayor, worked elbow-to-elbow with Cross for 17 years. The former law partners negotiated the outlines of the city-PFD swap this winter, and the spreadsheet is the PFD's outline for making the convention center expansion work.


For Cross, the CCX isn't a spreadsheet of numbers so much as a vision, a possibility of great things for Spokane -- like another Arena, maybe, or even another Expo '74. It's a vision of jobs, full hotels and local governments that are actually able to maintain their budgets. It's Cross's mission to help make the numbers come alive.


The bottom-line philosophy, says Cross, is that the PFD and LeMaster & amp; Daniels used conservative numbers in the financial analysis of the convention center plan. The analysis assumes 3 percent annual growth in tax revenues and expenses when the average for the past 22 years has been 5.4 percent, says Cross. (Efficiency and belt-tightening, he says, would help get past slumps in sales taxes like the current one plaguing local governments.)


The result is that PFD officials project the Spokane Center facilities to operate at about a $600,000 loss starting in 2005. But, given the the business acumen of the PFD board members and the interest on an expected reserve fund (of anywhere from $2.5 to $10 million, depending on how thriftily they can construct the thing), board members believe they can break even and squeeze out a larger convention center without busting the bank.


"Even with conservative numbers, this thing works," says Kevin Twohig, executive director for the PFD.


Two sets of dollars comprise the CCX bottom line: the set to build an expansion and the set to operate it. Financing the building is relatively straightforward, and, say supporters, paid for by visitors and the state. The $96 million in bonds is backed by that $36 million state sales tax refund (a special program available only for economic development projects completed by the end of 2003), plus an existing 0.1 percent local sales tax and a local hotel/motel room tax, says Cross. The state program grew out of frustration that lawmakers outside the Seattle area had when the state granted King County special tax rebates to help it build stadiums for the Seattle Mariners and Seahawks.


The operating funds come from tickets and convention bookings, sometimes indirectly. Spokane would have to agree to an "incremental contribution," or annual payment of up to $250,000 in current dollars, under the PFD plan. That payment would kick in only when the city realized increased tax revenue from an expanded convention center, Cross explains.


In other words, the PFD will grow the convention center bigger, raising a lot more tax money for the city, if the city splits the new money with them.


If and when the city transfers the Spokane Center to the PFD, funding and operating the convention center would no longer be the city's concern, says Cross. It's a clean break, he says. "The city's not on the hook if this goes south. It's the PFD's responsibility. It's not the city's. It's not the county's."





WE NEED OUR SPACE--The transfer and expansion plan has won Mayor Powers' approval and, says City Administrator Jack Lynch, the city's financial staff are on board, too.


But, again, not everyone is sold on CCX. Councilman Corker said at the council briefing that the city could be obliged out of necessity to help if the convention center doesn't do as well as projected.


"It will be our inherent responsibility," he contended.


That's a remote possibility, concedes the PFD's Twohig -- though Cross and Powers both say it isn't -- but only in the event of an economic "catastrophe," like a major depression. Spokane's convention problem, says Twohig, isn't a lack of people -- it's a lack of space. Right now, the Spokane Convention Center's main exhibit hall is about 39,000 square feet in size. Under CCX, it would grow to about 110,000 square feet.


Consider last week's Amway sales conference that filled the Spokane Arena's 12,500 seats, says Twohig. That's 12,500 people who could have enjoyed a dinner or a breakfast, or both, in an enlarged convention hall, but can't now due to lack of elbow room.


"That would be great business for the convention center," pines Twohig.


And the benefits would likely spill over to local hotels, like the DoubleTree, the West Coast Hotels and even the soon-to-reopen Davenport Hotel.


But, of course, there are plenty of other cities that are licking their chops, too. The state sales tax rebate is an incentive for cities like Tacoma, Yakima, Everett and Kennewick, all of which are said to be considering building or expanding their own convention halls. Given the decline of natural resources and manufacturing sectors in the Northwest economy, going after those conventioneer dollars just makes sense, according to John Christison.


Christison is not entirely unbiased. He's general manager of the Washington State Convention & amp; Trade Center in Seattle, which is five times the size of Spokane's current building. And he also knows the convention business.


National associations -- medical groups are a particular favorite in the industry -- will always favor Seattle's facility, says Christison, but "there's a secondary market that is a very strong market, and that is the smaller state meetings."


Industry insiders call them "Smerfs," an acronym for "social, military, recreational, fraternal" groups. The Smerfs are who Twohig says Spokane wants to capture with CCX. In this market, Spokane would compete with cities like Boise, Portland and Salt Lake City, if the community were to build a larger convention center, says Christison.


"What I can tell you is, the convention center in Spokane is reasonably small," he says. "It probably would make sense to enlarge the size of that facility to capture the regional audience."


Okay, says Corker, who worked with Cross on the citizens' committee studying the matter a couple of years ago. Expansion makes sense -- but expansion to at least 120,000 square feet, maybe larger, as outlined in previous competitiveness studies, Corker said at the council briefing. "There's one thing worse than not doing this, and it's not doing this right."


Even done right -- however big that really means -- an expanded convention center wouldn't necessarily have a corner on the market. Besides other regional cities, there's also one other area facility that draws crowds: The Spokane County Fairgrounds. The $96 million in proposed bonds would also fund about $12 million to renovate the fairgrounds. Wouldn't that just be enabling another competitor for convention business? Those are different markets, responds Twohig. Fairgrounds tend to get consumer-driven events, like gun shows and auto shows. Convention centers, he says, attract gatherings of associations and trade groups.


Besides, he says he isn't scared of a little competition.


"Does it take a little extra marketing involved? Sure," says Twohig. "But what do we happen to be good at, with the Arena? We're always full."





HAVE NO FEAR--That's essentially the Public Facilities District's one-liner in response to every serious question about the plan. The answer to the various concerns and loose ends boils down to, 'We've done a good job on the Arena, we're using conservative numbers for CCX, we can make this work for Spokane. Trust us.'


But building a convention center is, in Corker's words, a "bigger ballgame" than the Arena. For one thing, there's more staff (the Arena's staff is about 25, according to Twohig; the convention center is currently about double that, and it would at least double again with expansion, he says). Then there are the lingering questions like:


* Location: The PFD says it would build an


expanded convention hall attached to the current one, but there's no definite floor plan. That's because they don't yet own the land.


* Land: The PFD, the city and the major landowners to both the south (Spokane architect Glen Cloninger) and the east (Hilton/Doubletree hotels) are working on appraisals and price negotiations, expected to be completed this summer.


* Price: Having budgeted $8 million for land acquisition, the PFD must bargain hard for CCX real estate. It could spend more without breaking its budget, but then the reserve fund dwindles.


* Agreements: Will the city council accept the plan to assume property, debt and tax streams worked out by Cross and Powers in its present form? And, will the county commissioners agree to finance CCX by issuing those $96 million in bonds, as previously suggested?


"There remain many, many questions to be answered, regardless of the vote," says County Commissioner Kate McCaslin.


Corker, in an e-mail to The Inlander, seems to agree: "I am concerned that major issues have not been decided prior to the public vote."


Of course, six months ago, public officials were saying it was a long shot for the Public Facilities board even to organize a spring vote on CCX.


Cross is unfazed by the unresolved fine points: "We know enough that people shouldn't be concerned."


If voters are concerned enough to reject the plan, there is still time to hold another vote on the matter -- or perhaps two more votes. After all, if the Arena is to be the model for the CCX, it's worth pointing out that it took four votes before Spokane County voters finally embraced that project.