from: http://www.arizonarepublic.com/news/articles/1124civicplaza24.html

Expansion plan for Civic Plaza: Is it worth it?

By Craig Harris

The Arizona Republic

Nov. 24, 2002

The planned $600 million expansion of Phoenix Civic Plaza, the most expensive public works project in city history, is being promoted as the next step in a downtown renaissance that has stalled since Bank One Ballpark opened in 1998.

Mayor Skip Rimsza and nearly every Valley business group support the project, which they say over time will lift Phoenix into the big leagues of convention business, with a 50 percent jump in delegate attendance and millions of dollars in out-of-town spending.

But, if we build it, will they come?

Related links $300 million question holds up expansion of plaza Phoenix remains 'behind the curve' in competitive world of conventions

From Baltimore to Los Angeles, no other city has enjoyed the kind of success in attendance that Phoenix is promising if it triples the size of Civic Plaza to 940,000 square feet. A dozen cities have expanded their convention centers in the past decade, only to fail to meet their attendance estimates. And if projections of increased business don't come true in Phoenix, tax dollars could be needed to pay off the construction debt.

Backers of the project acknowledge the financial risk but say it's vital to keep Phoenix competitive in the tourism business.

If the project is completed as proposed, Civic Plaza would become the ninth-largest convention hall in the country by today's standards. But cities such as New Orleans, Atlanta and Orlando, where convention center space is already greater than in Phoenix, also are expanding.

A decisive vote on Civic Plaza expansion could come early next year from the Arizona Legislature, when it considers funding $300 million, or half the project. Without the money, Phoenix says it's unlikely it could go forward with the expansion even though voters last year approved bonds to pay the city's half.

Rimsza has lobbied lawmakers and Gov.-elect Janet Napolitano, who say they are open to the expansion but want more details on how to pay for it. Legislative leaders, facing a $500 million deficit this year and a $1 billion hole next year, say they worry about leaving the state with a major financial commitment, although its payments would not begin until 2009. The city would cover all debt payments until then, when both government entities would make annual payments over 30 years.

"This project is all about giving us the opportunity to be a player in the (convention) market," Rimsza said. "This could be the next renaissance for central Phoenix."

Others aren't as sure.

"Every major convention venue in the country has either added recently or is planning to add new space. Phoenix, in the most simple possible terms, is competing in a race it can't possibly win," said Heywood T. Sanders, a University of Texas at San Antonio professor who studies convention center expansions.

David Johns, a Phoenix developer who has monitored the plan and offered alternatives, is worried about the cost.

"You could build this thing and not have enough business to service the debt. Then you have a drain on the budgets," Johns said. "This is not some little project that fell off the turnip truck."

Pros and cons

The $600 million Phoenix Civic Plaza expansion has widespread support among city leaders and the business community, although some observers question its viability. Here are pros and cons to tripling the size of the downtown convention center.

Supporters say:

Phoenix will be able to compete for more conventions.

The number of convention delegates will increase by 50 percent in 2009.

Tax revenues will increase by more than $20 million with expansion.

Tax revenues will decrease up to $13 million if the project is shelved and Phoenix loses its market share.

2,600 jobs created, with $100 million in annual wages, during construction.

Detractors say:

The state is in financial trouble and could be hard-pressed to contribute $300 million.

Future attendance projections are too optimistic.

A year after receiving voter approval for the expansion, details about the project remain sketchy.

Taxpayers could end up paying for expansion if attendance projections are not met.

National market is saturated with convention space.

Downtown Phoenix doesn't have enough hotel space unless new sites are built.

Data file:

Plan: Increase total exhibition, meeting and ballroom space to 940,000 square feet by building a new facility on the plaza terrace and tearing down and replacing the northern building at Third and Monroe streets.

Estimated cost: $600 million.

Estimated completion: 2009.

Yet the mayor and other supporters are certain that Phoenix will fall behind the curve in business tourism without the project. An expansion would allow the city to host one large or two major conventions at the same time, and a remodeled facility could attract high-end professional conventions for doctors, lawyers and bankers.

Do nothing, they say, and the state loses up to $13 million in tax revenues from Civic Plaza business that will go elsewhere. Already, the city has lost at least six major conventions because Civic Plaza is too small, although plaza records show that business actually has increased steadily three of the past four years.

Steve Moore, president of the Greater Phoenix Convention & Visitors Bureau, said that even if other cities have not met their projections he's confident that Phoenix will.

Civic Plaza is different because it's near an airport that has low fares and numerous direct flights, a major benefit for convention planners, he said. And, he added, the Valley is blessed with sunshine.

"We need the expansion of Civic Plaza for all the positive things it brings. It will provide an increased tax base, and we need hotels," said Jerry Colangelo, an outspoken supporter who runs the Phoenix Suns and Arizona Diamondbacks.

Mixed returns

But when a city expands its convention center, there's no guarantee of increased convention business, Sanders said.

Attendance has not met projections in at least a dozen cities, including Boston, New York, Philadelphia, St. Louis, Chicago, Detroit, Minneapolis, Los Angeles, Honolulu, Tampa and Baltimore, he said.

Baltimore, for example, tripled its center to 300,000 square feet five years ago, saying it would attract 50 conventions by 2000. It drew 26.

Sanders said there is roughly 72.4 million square feet of exhibit space across North America and an additional 12.2 million, a 17 percent increase, expected to be added within the next five years, according to industry estimates.

Sanders said one industry source shows convention attendance dropped roughly 34 percent last year, to 56 million, and he said growth was largely flat from 1995 to 1999, a period that marked one of the largest economic booms in U.S. history.

Phoenix also has to compete with neighboring Las Vegas, which has three facilities larger than Civic Plaza's planned expansion.

Scott Sumners, expansion project manager for the city, said Sanders has taken it upon himself to "throw rocks" at convention projects around the country. Sumners added he's confident the city would meet its increased attendance projections from the current 133,217 delegates to 200,000 delegates in 2009.

And there have been signs of success with expansions. San Diego, for example, last year booked 250 events, up from a projected 194, in its newly expanded convention center, which doubled in size to 525,000 square feet. But overall attendance dropped 4.5 percent.

In the minor leagues

Phoenix says Civic Plaza is the 60th-largest convention center. Tradeshow Week, an independent publication that tracks conventions, pegs Phoenix at No. 39, behind Tulsa; Harrisburg, Pa.; Reno; and Long Beach, Calif.

Sumners said the difference comes from calculations of how much space Phoenix actually can rent. Regardless of the ranking, he said, Phoenix should not be in the same league with those cities.

Michael Hughes, director of research services for Tradeshow Week, believes there still is a need for more space nationally. He said that markets such as New York and Las Vegas are tight on convention space and that large cities that expand will benefit.

Peggy Daidakis, Baltimore Convention Center executive director, said although her facility did not meet projections, it did generate enough new revenue to make the payments on the $151 million in bonds that tripled the size of its center.

Other challenges

Johns, a member of Civic Plaza Building Corp., the funding arm for capital expansions, agrees the facility is too small. But he opposes increasing the total exhibition, meeting and ballroom space to 940,000 square feet by building a new facility on the plaza terrace and destroying and replacing the northern building at Third and Monroe streets.

Johns said that, despite Phoenix voters approving the plan a year ago, the city has yet to provide a detailed budget or preliminary drawings to show whether the project could be done for $600 million and completed by 2009.

Don Keuth, chairman of the Civic Plaza expansion advisory committee, said that the city has been diligent in ensuring the project would come within budget and that there are only a few critics.

Beyond the Civic Plaza itself, downtown Phoenix has convention challenges.

With just two major downtown hotels, the Hyatt and Crowne Plaza, and a handful of smaller properties, Phoenix has 1,750 downtown beds. San Diego, by comparison, has 5,000 rooms within walking distance of its expanded convention center. By next year, an additional 3,100 rooms will be added in San Diego.

Rimsza said he's in negotiations with major hotel builders, but no one will commit himself to building downtown until there's more progress in expanding Civic Plaza. A lawsuit stopped the city from bringing a 700-room Marriott hotel to the Collier Center and an Embassy Suites property to the Arizona Center about two years ago.

Tracy Thomas of the Civic Plaza Building Corp. said it will be difficult to get any more hotels downtown with the recent openings of Sheraton Wild Horse Pass south of Phoenix and Kierland Resort in northeast Phoenix. The JW Marriott Desert Ridge in northeast Phoenix also will open next Saturday. Together, they add 2,200 more rooms to the market.

"Downtown has nothing to offer. There are no hotels, no golf, and minimal amount of things to do down there," said Thomas, who is chairman of the volunteer building corporation board. "Look at the Arizona Center and all the businesses that have failed and been in and out of there."