Will new convention center take other groups' funding?

Thursday, December 10, 2009 at 5:22am

In a meeting billed as the first official question-and-answer session devoted entirely to the finance plan of the proposed Music City Center, Metro Council members Wednesday night pressed Finance Director Richard Riebeling and project leaders on what some believe are unanswered concerns attached to the $585 million project.

A finance package unveiled a week ago by Mayor Karl Dean and his administration would use a combination of six hotel taxes and fees that target tourists to pay off the estimated $40 million per year debt service for the new convention center.

Though the method intends to spare Nashvillians from footing the bill, several public organizations that rely on a portion of the city’s hotel tax — including the Adventure Science Center and Country Music Hall of Fame — could lose a total of nearly $14 million in funding.

“I guess the $64,000 question — and in this case it’s the $13.77 million question — is, do you folks have a plan to replace this money to these entities?” asked Councilman Michael Craddock.

Riebeling said the portion of the hotel tax currently designated for those public programs had been used to pay off debt on the existing Nashville Convention Center until three or four years ago. Once the city finally paid off all the center’s bonds, those funds were channeled to their current utility.

“Items that need to be funded, that we’re going to continue to fund, will be funded in next year’s budget from revenues that we have available,” Riebeling said. “When we present the budget, we will present that like we do for every other department.”

Asked by Councilman Jim Gotto if making up that $14 million means additional taxes, Riebeling said, “There’s also the concept of reducing expenditures.”

While consultant feasibility studies show revenues collected by the tourist-targeted taxes should relieve debt sufficiently, a portion of that debt would be backed by so-called “non-tax revenue,” which includes licenses, permit franchise fees, fines and penalties, among other things.

Harassed by Council members on the possibility of tapping into those revenue sources, Riebeling stressed there’s no intention ever to use them.

“They’re a back-up pledge,” Riebeling said. “We don’t anticipate any of these revenues being used to pay for the debt service. It’s there to market the bonds … and really to lower interest rates.”

Perhaps the most significant unknown of the proposal involves an adjacent convention center hotel, which Dean and his administration left out of the finance package after failing to attract a private investor.

The plan is to continue negotiations with veteran hotel development venture Phelps Portman, though the administration hasn’t ruled out asking for public financing or a public-private partnership.

After recognizing the administration’s desire to have the center and hotel open together in 2013, Councilman Jason Holleman asked project leaders to clarify the anticipated revenue streams for the public portion of a public-private hotel.

Jeff Scruggs of Goldman Sachs, the bank holding company that would underwrite the city’s bonds, said the most likely form would be for a developer to request the city to finance a portion of the hotel’s construction, a model known as “gap financing.”

“The whole idea would be, in the best of all scenarios, that revenues that you’re currently not collecting would be earmarked and dedicated to potentially pay those bonds, but of course there can’t be a guarantee,” Scruggs said.

31 Comments on this post:

By: producer2 on 12/10/09 at 7:00

This story has run at least a half dozen times. Find something new to discuss.

By: govskeptic on 12/10/09 at 7:43

Details such as these are so irritating to those who
love the MCC. Actually this 14M that's been available
for the last few yrs has been a slush fund for the
administration to hand out to selected entities. It
should have been put in the General Fund for
services expected from a metro gov. and not used
in the way it has been allotted.

By: idgaf on 12/10/09 at 8:03

Asked by Councilman Jim Gotto if making up that $14 million means additional taxes, Riebeling said, “There’s also the concept of reducing expenditures.”


So he knows about the CONCEPT of reducing spending.


What they are talking about is spending roughly $1200 for every man , woman and child in Davidson County. (without cost over runs)

By: willt on 12/10/09 at 8:08

Goldman Sachs is involved? In today's US News and World Report, denoting the top high schools in the US, Hume Fog was one of those nationally recognized as a leading school of learning and how it's graduates have found their way into top US colleges and universities while experiencing rats, mold, sinking floors and walls in one of Nashville's oldest school buildings....We are considering nearly $600 million dollars for a convention center while school facilities budgets have been cut???? Are convention center projects more important than our schools? Makes absolutely no sense with a fine convention facility at Opryland Hotel to even be considering, in this economic climate, to put further questionable debt onto this city whole literally ignoring school facilities ? Maybe Goldman could go to their "buds" in Washington and get further handouts to help this "white elephant" Karl Dean-O-bama is promoting. Sick....

By: JeffF on 12/10/09 at 8:37

Dean really needs to find someone more personable and less abrasive to speak to the council. Riebling is going to smarta%% one time too many and turn a Yes into a No.

Yes some of the council are hostile toward your pet cause, but they still get to vote.

Hey proponents: Is the new convention center the number one need of Nashville? Yes or No answer please.

By: Walter Sobchak on 12/10/09 at 9:17

You don't fund improvements to school facilities, public works etc. with TOURISM GENERATED DOLLARS. This money has to be INVESTED. It has to be put right back into the tourism sector of our economy. schools, infrastructure, etc. do not provide ROI. JeffF also keeps asking the same OUT of CONTEXT question.

The MCC money will come from a newly generated stream of funds that's been created for the sole purpose of REINVESTMENT. Why can't people understand this?

By: Walter Sobchak on 12/10/09 at 9:28

You don't fund improvements to school facilities, public works etc. with TOURISM GENERATED DOLLARS?

Let me be specific: Not initially, anyway.....

By: taxed2much on 12/10/09 at 9:52

The proponents of the Metro convention center try to sell the notion that using the city's general revenue funds to pay for it is a last resort. If this against all economic odds project is carried out, however, they can be counted on to check into that resort.


By: Magnum on 12/10/09 at 9:54

Walter, most of these posters don't believe the MCC will provide a POSITIVE ROI. That's the real issue. It's not an issue of understanding as you put it...more of an issue of believing.

Having said that, maybe they believe that having a more educated populus is less of a drain on tax-funded resources. And that having up-to-date, efficient public works systems actually save money vs. old systems.

By: JeffF on 12/10/09 at 10:07

From the diseased line of thinking that believes that revenue generated by tourism should only be spent on tourism, here is the continuation of the thought:

Revenue generated by shopping malls should only be used by shopping malls.

Revenue generated by car sales should only be used in car dealerships

Revenue generated by court fines should only be used by the court

Revenue generated by property tax should only be used on buildings and land.

Tell you what, if you want to sty loyal to this philosophy, fund the convention center with actual revenues it creates for itself. This would mean no rental car taxes to anyone not going to the place, not hotel taxes for anyone not attending a meeting, no sales tax money on restaurant meals in the zone unless you are in town for a MCC event.

I ask a legitimate question that no one on the pro side wants to be on record answering: Is the convention center the real number one need in Nashville? The avoidance of answering Yes or No is mind boggling. Say 'Yes' or say 'No' no essays about reinvestment of who owns the money, just tell us Yes or No.

By: producer2 on 12/10/09 at 10:12

half of the funding issues....HALF.... are going to the Sommet Center/Nashville Arena, whatever you want to call it. I really don't think that is a tourism issue. Not many folks fly into the city each week to go to a preds game or a concert. I am a big fan of the facility but I think there may be other ways to fund this budget line item.

By: producer2 on 12/10/09 at 10:14

Not to mention the only reason these funds were available in the first place is the current facility was paid off IN ADVANCE using the same (it will never work) funding mechanisms. Since that money stream was no longer needed for the repayment of bonds,

By: JeffF on 12/10/09 at 10:18

God forbid if this funding were to go toward something Nashville actually uses or even needs. Send it to the out-of-towners and the few poverty-wage industry people who love them.

By: Walter Sobchak on 12/10/09 at 10:22

JeffF - What a waste your last post was. You obviously didn't read my followup post.

Cities typically grow their general fund with this new tax stream once intial expenditures have been re-couped.

If you look at projects in similar markets, as recent as 2008, you'll note local economic impacts in the high millions to billions per year. I can't think of a better investment in our local economy.

I wonder how many downtown business owners are opposed to this project.

By: DustyU on 12/10/09 at 10:25

Another politician generated boondogle. Dean will get his fancy new building and the taxpayers will get the financial mess that will hit home well after he is safely out of office. Then everybody will blame the council for causing the catastrophy.


By: nashtnman on 12/10/09 at 10:29

“six hotel taxes and fees that target tourists”
“$40 million per year debt”
“funded in next year’s budget from revenues that we have available”
“There’s also the concept of reducing expenditures.”
“a portion of that debt would be backed by so-called “non-tax revenue,” which includes licenses, permit franchise fees, fines and penalties, among other things.”
“Riebeling stressed there’s no intention ever to use them.”
“We don’t anticipate any of these revenues being used to pay for the debt service.”
“administration’s desire to have the center and hotel open together”

Are you people listening to this? What a crock of shit!!! We are getting a white elephant shoved down our throats and we are going to have to pay for it. 6 new taxes and fees - 40M a year debt and backed by non-tax revenues that they have "no intention" of using, BULLSHIT!! "Don't anticipate" this is bullshit, when did a new government construction project ever come in on budget? "Administration's desire" the damn administration does not pay for this waste the citizens of Nashville are the ones saddled with this debt. I cannot even get sidewalk on a busy street that middle school students walk every day TO AND FROM SCHOOL and this a__hole mayor wants to spend 585 million ADDITIONAL committed tax dollars. You know he will then come back at us for the hotel portion. He will not stop with just the convention center. This is just a stepping stone for his career. He will be moving on and saddling Nashville with this huge albatross of a debt. We will not even be able to count of what little taxes he does pay. PLEASE CONTACT YOUR COUNCIL MEMBER AND VOICE YOUR OPINION.

These people committing our tax dollars are ELECTED people. GET INVOLVED, CONTACT YOUR COUNCIL MEMBER. WE HAVE TO STOP THIS PROJECT OR AT LEAST PUT IT ON THE NEXT BALLOT. The public is going to have to pay for this so why should we not have the right to vote on it??????

By: producer2 on 12/10/09 at 10:35

thank you for your clear and concise knowledge of this issue. JeffF is already getting paid by the opposition so giving him actual facts will only get you a string of unrelated and meaningless links to more of the Albany NY, and Cedar Rapids Iowa facilities that did not reach 100% of their potential in this economic downturn. Not that there have ever been any reports of actual cities going bankrupt by investing in tourism, JeffF likes to dwell on the "underperforming" Convention Centers like they were designed to bring in millions of dollars all by themselves. Good luck and keep it up!

By: Walter Sobchak on 12/10/09 at 10:49


You mean Jeff is actually getting paid for his bloviation?

Albany and Cedar Rapids? oooh I wonder why I've never booked a show in those places?They sound like GREAT convention towns, with national appeal and recognizable brands.

I heard all of these same arguments when I lived in San Diego 89-91. People were freaking out. 20 billion dollars into the local economy and a thriving, revitalized downtown later, NOBODY is complaining.

By: JeffF on 12/10/09 at 10:50

Ignoring the information again there Produce? I ca repost the dire straits from Indy, Louisville, St Louis and only big cities AGAIN but youseem to remember the little one. It is easy to focus on the underperformes because that is all there is. There are zero instances of centers which have not been underperforming since their inception. ZERO. Zilch.

For a change Producer feel free to dwell on the centers that have met expectations and promises. Also answer the question, "Is the convention center the number 1 need in Nashville. Get yourself on the record. I answer. Make your stance public, let everyone know what you think the number 1 need is. Be the one that says the schools, police, and transporations are not more important then the convention center.

Indy is till laying off convention center staff and Portland, Las Vegas, Ft Lauderdale have killed their expansion plans. Of course those are all non-cities without the Nashville "brand". Don't make fun of the little cities problems until you are sure that the big boys' problem aren't any worse. Eventually you will have to stop relying on ignorance of news from other cities and admit that your industry is feverishly flopping like a fish on the docks. Judging by the news blasts this morning it appears that the media may be jumping on board with the truth a little more than before. of course they aren't saying anything that I have not already brought up in the last couple of years.

Which city is it again that has conventioned itself into prosperity? There isn't one.

By: JeffF on 12/10/09 at 10:54

Actually San Diego is losing money and convention proponents there once again say the only thing that will fix it is even more expansion. They haven't even paid off the last two expansions. Wonder if that would happen here?

By: JeffF on 12/10/09 at 10:58

I will add that no one credits the convention center for revitalizing San Diego except the convention industry itself. That is taken from arguments for another expansion since only it will revitalize a downtown. Curriously downtown SD seems vital already but expansion may lead to residents receiving superpowers and capes.

no one in Nashville would be silly enough to say that meetings has turned downtown around would they? Metro tax money went into at least 20 different projects and it would be a shame to believe that what really did it was the convention center facing away from everything.

By: JeffF on 12/10/09 at 10:59

don't forget to answer the question "Is the convention center the most important item facing Nashville"?

By: Walter Sobchak on 12/10/09 at 11:05

Sand Diego isn't losing Money Jeff. The center is losing money, like most all Convention centers do. Sand Diego has rebuilt it's entire downtown around the convention center. Believe me, I was and have been there. You keep spouting off on issues like, roads, schools and sidewalks. Take a look at the long-term, local economic impacts which come about as tourism increases, and guess what? New roads, new sidewalks, new schools!! You think officials want to expand the sand diego center because the CITY is losing money? Wrong. Look at San Diego's general fund now vs 5, 10, 15 years ago. The center was a catalyst for this.

By: idgaf on 12/10/09 at 11:23

The people are the ones that should be voting on this.

By: brphillips on 12/10/09 at 11:36

When the city tapped into the hotel tax to fund non-profits and other entities several years ago it was clearly stated this was a stop gap measure and the funding would either be moved back to general fund, or in some cases, go away after a perioo of time. The city's need to call for the hotel tax for support of a new and improved convention center is not a surprise, just forgotten conveniently by some.

By: JeffF on 12/10/09 at 2:01

Pardon me but San Diego and San Diego County are the poster children for insolvency. I have been there, I have read the journals regarding the money problems of the state of California and the even more dire problems of SD. Conventionites want to expand and are saying they need to expand because they are losing meetings and the money that comes with it (sounds vaguely familiar). The we must spend money to keep what we want economic argument.

I would shy away from using local government in California as role models.

By: JeffF on 12/10/09 at 2:01

Is the convention center the number one priority of Nashville?

By: JeffF on 12/10/09 at 3:07

Beautiful news about the glory of tourism today:

I am going to risk bringing up bad news about another failing convention facility in a small, insignificant city, Chicago:

Mayor hints at aid for convention center
CHICAGO - Chicago Mayor Richard Daley says he may be open to the city subsidizing financially troubled McCormick Place convention center, but with conditions.

Government subsidy for McCormick Place?

Also in another small city, Pittsburgh, state and local officials pulling the plug on their convention center hotel project, joining the small insignificant cities of Portland and Ft Lauderdale.

Boston, another small city that is wanting to save it flopping business by increasing the size and costs:

San Jose (a Small city that is 6 times Nashville size):
San Jose council softens goals for maligned convention center operator
"Two years ago, a civil grand jury rapped San Jose officials for failing to hold the agency that runs the city's convention center responsible for missing its performance goals and costing taxpayers millions of dollars a year. On Tuesday, the City Council unanimously took action: It lowered those goals."

Make sure when you argue that you be prepared to rebut all of them, don't distract from the message by bringing up the dozens of small town failures like in Myrtle Beach, Knoxville, St Louis, and Atlanta.

By: Walter Sobchak on 12/10/09 at 5:34

Clocked back in, I see.

Chicago - Convention Attendees poured $10 billion dollars into the local economy in 2005

San Jose (not six times Nashville's size) Only has 300,000 more residents than Nashville. But of course, you're including San Francisco. $129 million into the local economy in 07. This city has no identity and isn't considered a good convention destination.

Pittsburgh - The convention center cost $300 million to build and saw $84 million pumped into the local economy in it's first year.

Boston - $494 million in convention dollars into the local economy in 2008.

Ft Lauderdale - They don't need a hotel for their center - Ft lauderdale saw $8.69 billion pumped into it's economy through conventions in 2008. In fact one single small opthalmology conference pumped over $20 million into the economy in three days.

Convention Centers lose money if you're looking at them as independent businesses, Everyone knows that,. BUT Convention centers are not independent businesses and are capable of pumping billion per year into a cities economy. This is why they exist.

I, for one, am sick and tired of seeing a corporation (Gaylord) suck the life out of our local economy. Convention attendees get off their planes, ride their cabs to Gaylord and spend all of their extra time eating and drinking ON PREMISES. They are sequestered. It's a brilliant model for business but hurts our city.

Screw em.

By: Walter Sobchak on 12/10/09 at 5:52

According to Forbes the city of San Diego ranks as the fifth wealthiest in the United States.[4] San Diego's biggest industries are manufacturing, the military, and TOURISM. A strong convention industry and the luxury yacht industry drive San Diego's economy.

By: producer2 on 12/10/09 at 6:15

JeffF , you have met your match!