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

February 06, 1986|DAVID HALDANE | Times Staff Writer

LONG BEACH — 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."

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