Wednesday, December 2, 2009
Barry / Politics Music City Center Financing to Be Unveiled Thursday; Will the Numbers Add Up?
Posted by Bruce Barry on Wed, Dec 2, 2009 at 12:45 PM
First and foremost, what's the plan for a convention headquarters hotel? Although Mayor Dean insisted just two weeks ago that "there will certainly be a hotel," it seems doubtful that hotel financing will be part of the package unveiled tomorrow, especially since no concrete hotel feasibility study has yet been made public. An absent or deferred hotel project creates a bit of a conundrum because, according to consultants' analyses (see chart after the jump), the revenue stream for financing the convention center relies significantly on sales tax revenue thrown off by a new hotel.
The most recent analysis of revenue is by a consulting firm called HVS, which presented a summary of its findings in a slide presentation last month. City finance director Rich Riebeling promised that Metro Council and the public would get their hands on the full HVS report before Thanksgiving, but that still hasn't happened.
The chart below shows revenue projections during the sixth year of MCC operation as conjured up in each of the three consultants' analyses that the city has commissioned. Although a new convention headquarters hotel would yield room tax just like every other hotel in the county, the more significant hotel-generated dollars take the form of sales tax contained within the "sales tax redirect" category. This "redirect" captures sales tax generated by the MCC campus as a whole, which includes the center itself (operations and retail), parking and a new hotel. We asked Riebeling last month why that redirect number jumped so dramatically (doubling!) in the interval from the 2007 analysis to the first 2009 analysis. What had changed other than, oh, say, the largest economic downturn in half a century? Riebeling said he didn't know but offered to look into it. We're still waiting for an answer.
An explanation for the drop in that category of anticipated revenue from the first 2009 analysis to the most recent one is a bit easier to fathom: The C.H. Johnson study assumed a 1,000-room hotel, while the HVS study assumed a smaller 750-room hotel. HVS estimates that the hotel will account for a bit over two-thirds ($6.3 million) of the $9 million in revenue from sales tax redirect in 2018.
If $6 million is the revenue hit to a hotel-free financing stream, can the numbers work without a hotel? Astute viewers will notice in the chart the marked escalation since 2007 in estimates of tourist development zone (TDZ) revenue. In the absence of a hotel, will the mayor's office ask us to buy into the recently redrawn TDZ boundaries as a basis for such a vast expansion of this form of revenue? (The C.H. Johnson TDZ number is low, by the way, because it accounts for TDZ dollars that get sucked off by Gaylord; it isn't clear if the newer HVS study does likewise since we don't yet have the actual full report.)
As a more general matter, the newest (HVS) analysis in the top row of the chart shows that a very large portion of the money ($19 million out of $51 million total) comes from the revenue categories that are the most difficult to predict. Estimates of sales tax redirect are highly speculative since they are based on unspecified occupancy assumptions and subject to discounts and deals that the city might cut with trade associations to attract their convention business. As for TDZ revenue estimates, the consultants at HVS in their recent slide show called the tax growth rate differential that forms the basis for TDZ revenue "nearly impossible to predict in any given year."
The mayor and his finance chief, no doubt, will tell us tomorrow that the project is highly feasible on the revenue side and affordable on the cost and financing side. It's time to take a close look and ask some hard questions.
Comments (11)
Showing 1-11 of 11
Another pressing question: what will Emily Evans and Mike Jameson find to criticize? Their masters at Gaylord must be appeased.
like
dislike
If the Mayors office cannot control MDHA with something as simple as a $75000 public relations contract with McNeely Pigott & Fox...
'The agency's records showed it had been billed for more than $458,000 by public relations firm McNeely Pigott & Fox, which had an initial contract capped at $75,000'. Tennessean Nov 26th
... How on earth can we expect them control, building contractors, unions, bulldozers and men with jackhammers, lawyers and contracts? Nothing about this kid-glove administration inspires iron-fist confidence. Nothing.
Similarly, it is beyond belief that a proposed Medical Mart Center and The Music City Center are not mutually exclusive events. The timing of that announcement and the method (bring the Governor) is all sizzle and no steak. This 'Do or Die' proposition was been made by the developer and not the city.
I am not worried about medical device companies making there way through this world. But I am worried about the fortitude of the council and the mayor for not knowing that the strongest negotiation tactic is the ability to walk away from the table.
This is why I believe that a public 'up or down' vote is the only fair and democratic answer for all parties. Besides, it would cost less than another 'Public Relations' campaign from MDHA and it would settle the score forever.
MDHA does not control the Music City Center project any longer. The Music City Center Authority does.
Gaylord's trolls should research the issues before posting ill-informed comments.
kevin
this is as bad as when you could not remember Bud Wendell's name. There is no such thing as the Music City Center Authority. But to your point the project is not being run out of MDHA or your mythical Music City Authority. The project is being managed solely and completely out of the finance dept.
How is the weather in Denver?
Pardon me, I'm too busy trying to make sure I have enough hair gel in my do to pay attention to details. You know, the Sharpmeister has to look good on camera.
It's called the Convention Center Authority. You knew what I meant, stupafuck. But you Gaylord trolls aren't interested in facts. You just want to obfuscate and kill jobs for Nashvillians.
Tsk, tsk, Kevie. How is that going to help you win an election some day?
Apparently, I have better command of the facts than you. How is the weather in Denver. Heard from your comrades that it was pretty warm over Thanksgiving. Has it cooled down now?
"You just want to obfuscate and kill jobs for Nashvillians."
Yes we know it's vitally important to provide construction and service jobs for illegal aliens.
Make that sarcastic xenophobia please.
It will make finanacial sense. Havn't you seen all the smoke machines and mirrors being erected at City Hall?
