If you believe cities need convention centers, then Nashville needs a new one. Even the most outspoken skeptics of the combined $1 billion Music City Center project will admit to that.
Inadequate space at the current Nashville Convention Center has led to untold millions of dollars worth of lost revenues from the 297 conventions that took their business elsewhere, according to figures from the Nashville Convention & Visitors Bureau.
Now, no one questions Nashville’s status as a destination city or the value of the reported $4 billion tourists bring to the local economy each year. But when it comes to the $635 million Music City Center and its attached public-private hotel of unknown cost, there are plenty of questions coming from a vocal minority of Council members who feel tugged along by Mayor Karl Dean and his administration’s new step-by-step approach.
As recently as two months ago, one of Dean’s top aides said the expectation was that a financing deal for the convention center would be presented to Council this spring.
In place of a comprehensive package that includes details of how the project will be financed, Council instead will vote in the coming weeks on legislation to provide the Metro Development and Housing Agency with $75 million worth of tourism taxes, along with condemnation powers, to start buying property south of Broadway where the center would be built.
The administration now claims the ‘step-by-step’ approach is the best way to go. It also contends the vote on land acquisition is not the definitive vote on approving the center.
On that point, some Metro Council members disagree.
“If we’re going to spend $75 million of taxpayer money, we aren’t doing it to speculate on land,” District 23 Councilwoman Emily Evans said. “We’re doing it to build a convention center.”
To be sure, the legislation approving the land acquisition includes a preamble stating Council will approve building a new convention center. That leads Metro Council attorney Jon Cooper to provide the following analysis on the resolution:
“Although this resolution and the companion ordinance authorizing the acquisition of the property are not the final authorization for the construction of a convention center, the council office would point out that acquiring the property and then deciding not to approve the eventual financing for the construction of the convention center would raise several procedural and legal issues.”
The analysis goes on to point out the state enabling legislation, which allowed Metro Council to create a series of tourism taxes last year, says those revenues may only be used for a convention center.
“Thus, once the property is acquired, it is doubtful that the property could be used for another purpose while the debt is outstanding, and that any sale of the property would have to be applied towards the debt service,” the analysis states.
Down with TDZ?
Consider for a moment city businesses The Mellow Mushroom on 21st Avenue, the Farmer’s Market off Jefferson Street, the East Nashville U-Haul, the Krystal on Charlotte Avenue. They are but a few of the properties Metro believes will benefit from Music City Center.
How would that happen?
Well, earlier this year, Metro Council approved the creation of a massive Tourism Development Zone (TDZ), basically a circle with a 3-mile radius around the proposed convention center site. The TDZ works a lot like a tax increment financing area. It sets a baseline year, in this case 2008, and then allows Metro to collect all the incremental sales tax increases and put those revenues into paying back the debt on the Music City Center.
MDHA Director Phil Ryan calls the TDZ “a rough circle,” but District 22 Councilman Eric Crafton isn’t buying it.
“There’s no way anything on Jefferson Street benefits from a new Convention Center,” Crafton said.
He believes the TDZ is so huge — it encompasses all of downtown, goes across the river into East Nashville, heads west across Interstate 40/65 to include bars and restaurants on South Street, then works its way in northeasterly chunks all the way up to Jefferson Street — that Metro will never see the benefit of increased sales tax revenues over the next 30 years.
To Crafton, Metro will need those incremental sales tax increases, but he says the TDZ should be shrunk to include only the businesses in close proximity to Music City Center.
“It can’t support itself and it's destined to benefit a few wealthy people in town to help them get wealthier while the taxpayer foots the bill once again,” he said. “I’m sick of it, and I’m going to point out where things are correct and I’m going to point out where things are bad.
“In a year when we’re considering laying off cops and teachers and fire[fighters], we don’t need to be giving away millions in sales tax revenues for the next 30 years.”
Land acquisition time frame questioned
Exactly how much Metro will be “giving away” is unclear, because MDHA and Metro Finance have still not released sales tax projections. The state Office of Finance and Administration must certify the TDZ and it has not yet received the final application from Metro.
On top of that, there is a two- to three-month approval process once the state receives the application. Furthermore, the state has discretion to remove properties it does not feel will benefit from convention center-driven business.
“This whole thing seems hair-brained,” Crafton said. “And people need to know about it.”
Even if the Council approves the land acquisition phase — and the mood among members is there are more than 21 of them lined up to vote with the administration — questions remain surrounding the land acquisition process.
Ryan said last week MDHA would have the necessary 17 acres of downtown property purchased by the end of the summer. That seems ambitious to Council members who believe it will take more like nine months to a year to buy the property.
“Having gone through condemnation proceedings before, three months seems pretty fast,” said District 24 Councilman Jason Holleman, who is the city attorney for Mt. Juliet.
The Greyhound bus station and Rocketown, a youth ministries facility, are among the properties in the center’s imprint.
Then there’s the issue of operating costs.
The current Nashville Convention Center receives about $1 million annually from Metro for operations. The Music City Center would be more than three times its size, yet it was stated at last week’s meeting it would not operate with a loss. An attached parking garage was referred to as a magic bullet that will essentially lead to an operating profit, according to projections provided by Johnson Consulting.
“Most of these convention centers receive an operating loss, yet we’re projecting to make money because of the parking garage,” At-large Councilman Jerry Maynard said.
Convention Center advocates, including the Dean administration, are asking for patience and insist the tourism taxes and the TDZ revenues will be sufficient to pay for the center. The CVB has already sold 100,000 room nights and is confident it can sell 1 million before the new center’s proposed 2013 opening.
But the risk still remains that Metro Council could approve land acquisition and then be presented with a financing deal it can’t stomach. What happens then, if the land is already bought, if the SoBro buildings are demolished, and there's no palatable financing deal from Dean’s administration?
“If they come back and say, ‘You have to do this, you’ve already bought the land,’ then people are going to be angry,” Evans said. “To say the least.”