St. Louis County Council members signed off on $105 million of borrowing to cover the county’s share of a convention center expansion despite growing concerns about the project’s cost.
The city issued $105 million in late 2020 to cover its share of the public tab but the county’s financing had long been in a holding pattern. Council Chair Rita Heard Days held up a vote over funding for a recreational center in the northern part of the county that had been built into the county’s support for the St. Louis Convention & Visitors Commission’s convention expansion plans.
The council signed off on an additional $40 million of borrowing for the rec center at its meeting Tuesday.
The financing plans received approval only after several council members raised concerns about whether the county would be asked down the line put more in the financing pot after the sole bid for the first phase of the project came in more than $40 million over the estimated $80 million price tag.
“To approve this bonding now would relegate the county to being on the hook for additional taxpayer funding to cover the cost overruns or risk a half built project…this is the very definition of fiscal irresponsibility,” Councilman Ernie Trakas said, adding that he hoped County Executive Sam Page would press the CVC for more detail on how the project’s current estimates and the impact should it be scaled down before issuing the bonds.
Inflation, supply chain struggles, and the Russian invasion of Ukraine have driven up prices, officials said.
Trakas was the lone vote against the borrowing in a 6-to-1 vote but others also raised concerns. Days countered that county is not on the hook for any additional funding. “It is my understanding that is not negotiable,” she told members.
The borrowing would be structured as special obligation bonds subject to an annual appropriation. Although the county can tap any available funds to repay the debt, it intends to use funds in a special trust fund that includes collections of a 3.5% hotel tax.
Voters approved the sports and recreation tax on hotels in 1990. Collections were primarily going to repay debt issued for The Dome at America’s Center, the former home of the National Football League’s Rams that moved to Los Angeles in 2016. The dome’s debt is being retired this year.
Columbia Capital Management LLC is advising the county and Armstrong Teasdale LLP is bond counsel. A competitive sale is expected, according to the bond resolution.
The renovation and expansion of the Cervantes Convention Center that is part of America’s Center Convention Plaza Complex calls for new additions to space, expanding parking, ballroom improvements, and outdoor plaza renovations. The bond resolution prohibits use of bond proceeds or county funds to finance site acquisition or to pay for maintenance and operations.
The separate $40 million of borrowing for the recreation center permits the borrowing to finance the acquisition, construction, installation, and equipping of an indoor track and field complex that would have the capacity to host regional or national NCAA events and has the flexibility to convert for other recreational, athletic and other events. Some council members voiced worries over the lack of detail available on the project but still voted in favor of the borrowing.
Local officials agreed to the public financing for the downtown convention center in 2019 before the COVID-19 pandemic struck and put a deep dent in tourism related revenues. Officials have said with the Dome’s debt retired the funds are available to cover debt for the expansion project.
When originally completed four decades ago, the downtown convention center was the eighth largest facility of its kind in the United States. Local authorities completed an expansion in 1993 and in 1995 built the Dome. The Convention and Visitors Commission operates the campus. Officials are aiming to complete the new expansion by 2023.
The city’s $105 million sale of leasehold bonds were 3.5 times oversubscribed, according to Comptroller Darlene Green. The city will eventually rely on hotel and restaurant taxes to repay the bonds but is obligated to make rental payments that cover debt service on the bonds from any available revenues under the lease agreement subject to an annual appropriation.
The city structured the bonds with capitalized interest and back-loaded principal payments that don’t begin for nearly two decades, to allow the city to tap hotel and restaurant taxes once they are freed up and recovered from the pandemic’s toll. Ultimately, it’s the city’s ability to tap any available revenues that appealed to investors and would drive interest in the county’s transaction also, market participants said.