Med Mart failure brings worry from Music City Center critics

Sunday, October 21, 2012 at 10:05pm

When plans to locate a medical trade center in a retrofitted Nashville Convention Center were revealed in late 2009, Mayor Karl Dean insisted the timing of the announcement was “not directly related” to a key Metro Council vote that week on financing for the Music City Center.

At the same time, he said the plan for a Nashville Medical Trade Center — otherwise known as the Med Mart — “would not be where it is if we were not going to move forward” with the Music City Center. Whether the timing of the announcement was meant to leverage support for the new convention center, or to allay concerns about what would become of the old one, the two pitches did appear linked.

Three years later, the news that the Med Mart project had fallen through was not particularly surprising. Dallas-based developers Market Center Management Co. had been struggling to find tenants for the space for some time, and Dean seemed to be cooling on the project in a May interview with The City Paper. But its failure has brought questions about to what degree it was linked to the ultimate success of the Music City Center, not to mention support for its financing.

There are only three remaining council members who voted against the green-roofed behemoth that has grown into the Nashville skyline over the past year. While all three — Jason Holleman, Emily Evans, and Robert Duvall — acknowledged the overlap between key votes on the Music City Center and the Med Mart announcement, they declined for the most part to speculate retrospectively on the motives behind it. In any event, they said, now that the new convention center is a reality, they’re committed to seeing it succeed.

“We’re city officials, we’re leaders of our community — our job is to find a way for the Music City Center to be successful,” said Evans. “Find a way to make sure our revenue streams, our hotel occupancy taxes, are as diverse as possible. That they’re paid for by business travelers, by leisure travelers, by convention and trade show visitors, all of that. That is our mandate, that’s what we have to do.”

But on that point, there are still concerns.

Holleman, who survived a Dean-backed challenge to his council seat, which was widely seen as the political cost of his vote against the mayor’s signature project, worries about how the two projects were linked in the city’s planning. He told The City Paper last week that he’s concerned about the city’s ability to handle the debt on the new convention center.

“I think the ability of the city to cover the debt service on the convention center was marginal,” he said. “And to me, if the Med Mart project was made possible as a result of vacating the convention center space, then I thought the project could work. But without that, I had and continue to have concerns about our ability to cover the debt service without relying on the fallback funding sources, such as non-tax revenues.”

Duvall, who is currently running as a Republican for the state House District 59 seat, said he never perceived the Med Mart project as the “tipping point” for getting the Music City Center approved, but rather “some more meringue for the pie.” Now that it’s gone, he said it’s just another problem on top of others, such as the nearly $700,000 Metro will have to pay out to two groups forced to relocate their conventions due to delays with construction on the Music City Center.

“It was kind of a side note. ‘Oh by the way, we’ve got a tenant for the old convention center, it’s not going to be a problem getting rid of.’ Now we don’t have a tenant for it, so now we do have the problem again,” he said. “It’s more piling on.”

As recently as July, the Nashville Convention and Visitors Bureau was announcing advanced bookings at the Music City Center of more than 730,000 room nights for 86 meetings. They have set a goal booking 1 million room nights before the center opens in 2013. But for Duvall, general uneasiness about the viability of a convention center lingers.

“At this point, I’m more than a little bit concerned about where we’re headed,” he said. “I hope that we can fill that thing up and we can make it very successful. But it was built in an overbuilt category that is declining. And, you know, I guess people are going to come to Nashville, but are they really going to come to Nashville to go to the convention center, or are they going to come to Nashville to do something else?”

While noting that Market Center CEO Bill Winsor was “nothing but straight with everyone from the very beginning” about the fact that he couldn’t guarantee the Med Mart project would ultimately come to fruition, Holleman said he still believes, as he did three years ago, that making sure the old convention center houses an “economic driver” is a key component of the viability of the Music City Center.

“And so, now that we know it’s not Med Mart,” he said. “I think that at the top of our list of what we do is to find a reuse of that building, and find it quickly, and make sure that it is a building that adds jobs and economic vitality to the downtown core.”

In light of the Med Mart’s demise, Dean remained optimistic. After the announcement, he said the old convention space “remains a desirable piece of property” that is “generating a lot of interest.”

14 Comments on this post:

By: Ask01 on 10/22/12 at 3:28

On one hand, I would love to see the house of cards Mayor Dean constructed to force the MCC fall apart like a cheap childs toy.

If he and the Metro Council who supported the project were the only ones who suffered, I would sit back and enjoy the spectacle, revelling in their shame.

However, considering the possible negatives lurking in the shadows, waiting to empty the city's coffers and taxpayer's wallets should the entire fiasco blow up, I can only hope the MCC does well, particularly after all the city has endured during construction, and that the old convention center continues to be a productive revenue source.

I wonder just how fragile and doomed to failure the entire Med Mart concept was from it's inception, holding together just long enough to dupe enough council members into supporting the MCC.

By: JeffF on 10/22/12 at 6:11

Well said.

I am stunned how news outlets in one city will pick and choose the news they get from other cities in similar situations. http://www.charlotteobserver.com/2012/08/20/3464298/cost-of-convention.html#disqus_thread

By: producer2 on 10/22/12 at 7:41

except for a glaring difference.... The MCC construction notes are not attached to a public tax hike and there are already 750,000+ room nights booked 6 months before the doors open. The fundning mechanism is already at a surplus and the goal of 1 million room nights booked by the fall of 2013 will probably be shattered. Oh, and the private investments taking place that also extend into the billions of dollars are a nice addition. We know you hate downtown but facts are facts.....

By: JeffF on 10/22/12 at 7:59

Private investment? You mean all that stuff being built without increasing the tax base? Or do you mean the hotel tax that has been promised twice to pay for the MCC and the Omni. Or the zone where sales tax increases are promised to somewhere other than the general tax base.

If growth only pays into itself, does it really count? The job growth has already been deemed meaningless due to the industry's history (promising 30,000 new jobs made the prospects laughable). Where is that benefit again? If a tree falls in the woods, did anywhere ever hear it grow and then fall?

1 million room nights divided by how many years divided by two facilities divided by how many free rentals divided by how many free hotel rooms.

Read the Charlotte article. They have already lived this war and like here no body in the press bothered to check the other cities before hand.

By: bfra on 10/22/12 at 8:04

JeffF - P2 is a Karl suck up. Nothing he says has in relevance to what is good for the community. If Karl says it's so, P2 just echos "Yes Sir".

By: producer2 on 10/22/12 at 11:43

I read the article. It's not apples to apples. Here is a quiz for you.
A. What is being built besides the MCC which is a government building that will pay no taxes?
B. out of the taxes collected per room night, how much goes to fund tourism and how much goes into the general fund?
C. Regarding the tourism zone. How is the new % of tax calculated and what is the potential increase of business that is derived from additional tourist visiting the City?
D. Who deemed the job growth meaningless? Do you think all those folks who have opened and work at new entities think it is meaningless? Are you aware of how many new entities are set to begin construction including hotels, renter aunts, retail, and housing?

Now for some facts:
The million room nights are for the MCC only. They do not include any other meeting space OR hotel space that have also continued to rise. It is room night specific to groups that have booked space at the MCC.
I can say with certainty that there are NO free hotel rooms and NO free rental space in this package. If you have evidence otherwise please give it.

In fact if you have any evidence that is verifiable that anything I have posted above is untrue bring it. My guess is you will either no respond or have 20 links to other cities or articles that have no relevance to this discussion. Bring the facts or move on...

By: JeffF on 10/22/12 at 1:33

A. The Omni will not pay taxes on the improvement to the land, in fact it will receive those funds back as well as the room taxes. The "improvements" to the Hall of Fame tying it to the Omni will not be taxed. The parking structures for the two will not be taxed. The potential retail spots will not be taxed in the MCC. Preferred vendors of the MCC keeping inventory on site will not be taxed for the inventory space. Connection between the "private" hotel and the MCC will not be taxed. The businesses who formerly operated on the spaces are no longer on the tax rolls and act as a negative on tax revenues.

B. 70%

C. ?

D. Dr. Matt Murray of the University of Tennessee Department of Economics has labeled tourism growth as false growth many times. I have sat through his annual report to the TGFOA and have heard his warnings to governments on promoting tourism over real economic growth. Tourism growth is as deceptive a concept as small business being important to the overall economy. Neither employ people in appreciable numbers and are even less likely to provide livable wages and benefits to their primarily part-time workk force. Tourism/hospitality ranks only at #13 in Metro for employment and dead last for wages.

IBMA is a fine example of an organization getting extremely reduced and even zero rent for hosting events in Nashville's public facilities (they are leaving anyway because Raleigh offered rebates). The NCAA is paying nothing (zero) for the space for the Women's Final Four (oddly they count in the room nights even though technically it is an arena event (http://nashvillecitypaper.com/content/city-news/five-conventions-booked-music-city-center-remain-confidential). Although it did not happen the World Cup bid offered the space gratis at the behest of the Sports Authority. I do not know, but I seriously doubt that the NRA with its history of jumping from one brand new venue to another does so because it is more expensive. It is a buyers market and there are too many convention centers (many, many new or expanded) offering free space and rebates. Is it likely Nashville is the only convention center charging for its operating expenses? Really? The GWCC head and the Charlotte and San Diego admins are on record as saying they have to no-charge in this environment.

Things were bad for the convention industry 5 years ago when this all started. Since then Nashville has joined a dozen other cities in protecting their brands and bloating the bottoms of their balance sheets. A million room nights over 6-7 years is not that much when you look at the true numbers.

From the Dean:
“The demand study says we are going to essentially double the number of convention visitors. The medical mart will bring 100,000 to 150,000 new room nights. We are going to be one of the strongest cities for the hotel industry,”
(http://nashvillecitypaper.com/content/city-news/study-convention-center-would-add-135m-local-economy)
Does it sound like he was using the medical mart to push the convention center to council?

By: producer2 on 10/22/12 at 2:47

The dissenting members in the council didn't think so and you failed the quiz.

The Omni got a 62% tax break for a finite amount of time so they still pay 38%
http://blogs.tennessean.com/politics/2010/how-the-omni-hotel-tif-deal-would-work/

The CMOF will get TIF for the expansion and THE CCA will actually still own the land and lease it back to THE CMHOF. http://nashvillecitypaper.com/content/city-news/omni-hall-fame-connector-approved-rely-34m-tax-increment-financing

The tourism zone tax is calculated on sales over and above the previous 5 year avg. for a business. It is paid solely by the establishment and not by the consumer and it is only a portion of the additional tax revenue. If you can find any business owners complaining about this please post. They are THRILLED to have the additional business.
http://nashvillecitypaper.com/content/city-news/metro-revises-tourism-zone-around-new-convention-center

You have one guy who is obviously anti-tourism giving you his opinion. The better gauge would be to actually open your eyes and look at the amount of money being spent currently in a stale economy by PRIVATE entities to establish new businesses in the area specifically because of the investment made by the City. This statement "Tourism growth is as deceptive a concept as small business being important to the overall economy." is the most ridiculous thing I have ever heard unless of course you own Bain Capital.

Your first statement on IBMA is more accurate. They were given a reduced rate and even some funding by the CVB to try and prop them up since it is a "music based" organization. In the end they were told they would have to increase their money spent or move on. They moved on. For everything else you don't know the whole story. Any group where rent has been reduced for the MCC is paying slightly more for their hotel rooms and the hotels are paying a per room fee back to the facility for the rent. You see a rising tide lifts all boats and it just pains you that this is actually working out.. Sorry we are not Knoxville buddy.

By: producer2 on 10/22/12 at 2:52

By the way here is a link to the current tax collections used to pay for building the facility. They are annually running at a surplus and the building is not even open yet. I doubt that business will decrease from its current and previous state.
http://www.nashvillemusiccitycenter.com/reports.asp

By: Ask01 on 10/22/12 at 4:42

In the end, even my failed ex councilmember admitted, if revenue from MCC did not cover expenses the taxpayer would be on the hook for those expenses.

Simple, to the point, with no hype attached anywhere.

This was even brought up in an article in the Tennessean covering council meetings on the subject. Of course Mayor Dean and the sock puppet city council glossed over the point as, did my ex council representative who was voted out for his support of the issue, but the fact is indisputable.

The taxpayers are not out of the woods yet as far as having to pay for this boondoggle of corporate and business welfare.

If the MCC was such a good deal, why didn't the businesses standing to make the most profit build the facility themselves?

Perhaps because the deal is not that good?

By: producer2 on 10/22/12 at 4:52

The key word there is IF. That's all you need to know.

By: Ask01 on 10/23/12 at 12:43

How Romneyish, "That's all you need to know?"

Unbelievably arrogant, even considering the source.

"If" implies definite potential outcomes, totally negating any possible argument stating without reservation MCC will never cost the taxpayer money.

Once again, an unspinnable truth.

Truth is, the business community siezed an opportunity to manipulate others into building a venue from which they can profit while assuming none of the risks involved in construction. All with the dubious blessings of, in my opinion, spineless incompetent civic leadership.

I wonder what aims the business community harbors regarding their stance and interference concerning the school board debacle? Perhaps, suspicious as I am, ensuring an avenue to produce minimum wage employees for their business ventures at the MCC?

By: producer2 on 10/23/12 at 5:06

you can't use the words definite AND potential in the same sentence when discussing something that is possible. It's possible that a lot of things could happen in the world but not probable. That is a better use of language. And I am not a Romney supporter by any means. He makes stuff up like you and JeffF.
The difference between now and 3.5 years ago is that it was all speculation then. There are hard core facts now in terms of development, new business and jobs and growth in an otherwise stagnant area of the City. In case you missed it on the news and in dozens of publications Nashville is a boom town. That is not spineless leadership.

By: Vuenbelvue on 10/23/12 at 10:43

Share your opinion the comment says. That is what the above comenters have done. However, the Charlotte Observer article describes how staff and the expert consultanting firms air brush the results to suit the person signing the checks. What a mess Charlotte is in? The numbers given in this follow-up article, August 20, 2012 http://www.charlotteobserver.com/2012/08/20/3464298/cost-of-convention.html
plainly show that the entire process gives the service away to professionals running the conventions with no bang for the buck invested. I will hope that employees of our government and the Chamber of Commerce are honest with the numbers they have published. I also wish they would have lobbied the State Legislators starting 3 years ago for a local casino manangement contract to run a casino operation with proceeds paying for the expenses.