BCEC Context, Convention
Center Financing and
BCEC Westin Hotel
Presentation to
The Convention Partnership
Presented by Kairos Shen, BRA
Frederick Peterson, MCCA
Johanna Storella, MCCA
James Sult, Piper Jaffray & Co.
Howard Davis, MCCA
May 24, 2010
Agenda
 Community Context




BRA’s Vision for the South Boston Seaport District,
Existing/Proposed Development Plans and Land Ownership
Transportation Plans/Future Considerations
South Boston and Fort Point Neighborhoods
 BCEC Financing: Case Study
 Overview: Financing for Other Convention
Center Expansions
 BCEC Westin Hotel: Case Study
2
Community Context
Kairos Shen, Chief Planner, BRA
Fred Peterson, Director of Facilities Operations, MCCA
3
MCCA and Community Dialogue
 Objectives
 Begin the process of jointly identifying neighborhood &
community concerns
 Work together to explore potential solutions
 Respect existing uses in the area and how any expansion
weaves into the fabric of the community
 Planning Documents





Seaport Public Realm Plan
BRA 100 Acre Plan
City of Boston/ BRA Crossroads Initiative
Current zoning in and around BCEC
BRA East/West First Street planning – rezoning efforts
4
Community Concerns – What We’ve Heard
Design
 Campus-style
 Appropriate aesthetic
 Height; scale; massing & finishes
 Open Space
 Types of uses
 Onsite location(s)
 Connectivity to surrounding areas (e.g. 100 acres)
Pedestrian Impact




Access
Connections to neighborhoods and waterfront
Streetscape improvements
Traffic calming elements
5
Community Concerns – What We’ve Heard
Transportation
 MBTA
 D Street/Summer Street or on-site service
 Silver Line
 CSX Track 61 uses
 Cypher St connection from A St to Pappas Way
 Pedestrian connections & vehicular uses
 “Blue Highway” – water ferries & shuttles
 Parking & Marshalling
 Locations, structures and loading docks
 Shuttles & trucks servicing each building
 South Boston Bypass Road
 Spanning over the roadway
 Current & future uses (Hazmat truck route)
6
BCEC Financing: Case Study
Johanna Storella
Chief Financial Officer, MCCA
7
BCEC Construction and Financing
 Project Funded at State and Local Level:
 Commonwealth Responsibilities
 Chapter 152 authorized the Commonwealth to issue $694.4
million in special obligation bonds to cover Boston,
Springfield and Worcester projects
 Convention Center Fund established to secure and provide
payment of State bonds
 City of Boston Responsibilities
 Under Chapter 152, City required to provide not less than
$157.8 million for BCEC site acquisition and preparation
 Chapter 152 also authorized the City to issue bonds to fund
this obligation, and to increase the room occupancy tax to
pay bond debt service
 Funding plan designed to place the tax burden on the
visitors rather than the citizens of the Commonwealth
8
Site Acquisition & Site Preparation
Funding
Year
Legislation
1997
1997
Chapter 152
Chapter 152
1997
1997
Chapter 152
Chapter 152
Source
City of Boston
City of Boston*
Subtotal - City of Boston
Commonwealth
Commonwealth**
Subtotal - Commonwealth
TOTAL Site Acquisition & Site Prep
Funding Expended on
Available
BCEC
$ 157,800
$ 25,000
$ 182,800
$ 157,800
$ 19,000
$
176,800
47,200
25,000
72,200
$
$
47,200
19,000
$
66,200
$ 255,000
$
243,000
$
$
$
* Split 50/50 with Commonwealth if costs exceeded $205 million.
** Split 50/50 with City if costs exceeded $205 million.
9
BCEC Project Funding
Original Legislation
Year
Legislation
1997
1999
2001
2004
Chapter 152
Chapter 68
BRA
Ch.26 Sec.439
Uses
Funding
BCEC Construction
BCEC Construction*
Environmental Remediation**
HVAC Funding from Conv.Ctr. Fund
Subtotal
$ 537,200
$ 18,000
$
1,900
$ 50,000
$ 607,100
Additional Legislation/Funding
2001
2002
2003
Chapter 88
Chapter 246
BANs Interest Income
Transportation Improvements
Energy Rebates
TOTAL CONSTRUCTION FUNDS
* Supplemental Budget Appropriation
** Cash Contribution from BRA
$
$
$
14,454
30,000
414
$ 651,968
10
Chapter 152 – Convention Center Fund
Revenue Sources
 Convention Center Fund
 Convention Center Financing Fee, 2.75% of the total room rent
 Commonwealth’s existing 5.7% hotel room occupancy tax
 Current hotel rooms located in BCCFD
 New hotel rooms located in Boston or Cambridge
 New hotel rooms located in the SCCFD
 Springfield’s 4% local hotel room occupancy tax for new rooms in the
SCCFD
 Commonwealth’s existing 5% tax upon sales at new retail shops in
BCCFD and SCCFD
 5% surcharge on the ticket price for any land or water based tour in
Boston
 State’s share of the vehicular rental surcharge, $9
 $2 per day surcharge on parking at any facility constructed as part of
the Boston, Springfield or Worcester projects
11
Chapter 152 – City of Boston New
Revenue Sources
 Anticipated 4% local option room occupancy
excise tax on new hotel rooms
 Sale of 260 hackney licenses
 City’s share of the vehicular rental surcharge, $1
12
Flow of Funds:
Convention Center Fund – FY 2009
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$0
FY09 BY Balance
FY09 Revenues
FY09 Expenses
MADS Coverage
Receipts
Released
FY09 EY Balance
13
Distribution of Funds:
Convention Center Fund – FY 2009
160,000,000
90,000,000
80,000,000
70,000,000
8.9%
16.3%
60,000,000
12.3%
50,000,000
40,000,000
140,000,000
120,000,000
100,000,000
80,000,000
62.5%
30,000,000
60,000,000
40,000,000
20,000,000
43.7%
20,000,000
11.3%
5.2%
16.6%
23.2%
10,000,000
0
Expenses
0
Revenues
Debt Service
MCCA Operating Exp
Occupancy Tax
Vehicle Surcharge
MCCA Capital Exp
Other
Use Tax/ Sightseeing
Interest/ Other
Transfer to Comm
Example: Fiscal Year 2009
14
Overview: Financing for Other
Convention Center Expansions
James Sult, Piper Jaffray & Company
15
CAPITAL FUNDING SOURCES
Hotel and F&B Related
Taxes
 Broad Base Occupancy
Tax
Other Tourism Related
Taxes
 Rental Car Surcharge
 Taxicab Fees
 Occupancy Tax on New
Hotels
 Tourist Activity
Surcharge
Direct Government Support
 Broad Base Sales Tax
Pledge
 State Debt Obligation (GO)
 City Debt Obligation
 Flat Fee per Occupied
Room
 Broad Base F&B Tax
 Target District F&B Tax
16
PHOENIX CONVENTION CENTER
Ownership / Operations
 Owned and operated by City
Operating Funding Sources
 Operating revenues
 Operating deficit funded from City Excise Tax
Fund
Facility (expanded)
•
•
•
•
•
Original facility opened in 1969
Expansion completed in December 2008
502,500 SF of exhibition space
150,000 SF of flexible meeting space
Three ballrooms totaling 119,000 SF
Capital Financing Structure
(Expansion)
 $300,000,000 State contribution
• Issuance of State backed bonds
 $300,000,000 City issued bonds
• Backed by pledge of Citywide excise
taxes
17
SAN DIEGO CONVENTION CENTER
Ownership / Operations
 Owned by City
 Operated by San Diego Convention
Center Corporation (City controlled)
 Land owned by San Diego Unified
Port Authority (ground lease to City)
Operating Funding Sources
Facility (expanded)
•
•
•
•
•
Original facility opened in 1989
Expansion completed in 1998
615,701 SF of exhibition space
204,114 SF of flexible meeting space
Further expansion and new hotel under
consideration
 Operating revenues
 Operating deficit funded from City
General Fund
Capital Financing Structure
(Expansion)
 $205,000,000 Lease Revenue
Bonds issued by Convention Center
Expansion Authority
• Backed by annual City lease
payments
 $4,500,000 annual debt service
support payment from Port to City for
20 years
18
PENNSYLVANIA CONVENTION CENTER
Ownership / Operations
 Owned and operated by the Pennsylvania
Convention Center Authority
 Authority is a component unit of the City of
Philadelphia
 Land owned by City (ground lease to
Authority)
Operating Funding Sources
 Operating revenues
 Authority receives approximately 70% of a
6% City-wide hotel occupancy tax
Capital Financing Structure (Original)
Facility (expanded)
•
•
•
•
•
Original facility broke ground in 1993
Expansion expected completion
• March 2011
700,001 SF of exhibition space
246,000 SF of meeting space
60,000 SF ballroom (92,000 SF total)
 $277,195,000 Lease Revenue Bonds
issued by the Authority
• Backed by annual City lease payments
equal to debt service
 City and State grants
• State - $185 million
• City - $42 million
 Expansion primarily funded by the State
19
WASHINGTON DC CONVENTION CENTER
Ownership / Operations
 Owned and operated by the
Washington Convention Center
Authority
 Independent authority of the District
government
Operating Funding Sources
 Operating revenues
 4.45% district-wide hotel occupancy
tax
 1% district-wide F&B tax
 1% tax on vehicle rentals
Facility
•
•
•
•
Opened March 2003
725,000 SF of exhibition space
250,000 SF of meeting space
52,000 SF ballroom
Capital Financing Structure
 $524,460,000 Dedicated Tax
Revenue Bonds issued by the
Authority in 1998
• Backed by revenues described
above
20
Capital Funding Sources by City
Broad Base
Occ. Tax
Limited
Occ. Tax
Broad Base
F&B tax
Limited
F&B Tax
Rental Car
Surcharge
Taxicab
Fees
Tourist
Activity Tax
Broad Base
Sales Tax
Atlanta
State Debt
Obligation
City Debt
Obligation
X
Boston
X
Chicago
X
Dallas
X
Denver
X
Las Vegas
X
New Orleans
X
Orlando
X
Philadelphia
X
X
X
X
X
X
X
X
X
X
X
Phoenix
X
X
San Diego
X
San Francisco
X
Washington DC
X
X
X
21
OWNERSHIP AND OPERATIONS
Ownership
Independent Authority (State)
 Boston
 Atlanta
 Chicago
 New Orleans
Independent Authority (City)
 Philadelphia
 Washington DC
 Las Vegas (Clark County)
City Controlled
 San Diego
 San Francisco
 Phoenix
 Dallas
 Denver
 Orlando (Orange County)
Operations Funding
Dedicated Tax Revenues
(operations)
 Boston
 Philadelphia
 Washington DC
 New Orleans
 Dallas
Direct City Funding (operations)
 Phoenix
 San Diego
 San Francisco
 Dallas (shortfalls)
 Las Vegas (room tax revenues)
 Denver
22
BCEC Westin Hotel: Case Study
Howard Davis
Director of Capital Projects, MCCA
23
RFP to Groundbreaking – 5 years
 1999:
 RFP Issued
 2000 – 2002:
 Development Agreement and Lease Signed
 Starwood/Carpenter & Company
 Design and Permitting
 2003:
 New Developers
 New Design – Two Phases
 2004:
 Groundbreaking
24
Since 2004 Groundbreaking
 2006:
 Westin Opens for Business
 2007:
 Hotel Sold - $302 Million
 Present
 Operations Successful
 No Firm Expansion Plans
25
Hotel Rent
 Base Rent
 Fixed Schedule
 Commences 2013
 Percentage Rent
 % of Gross Revenue
 Transaction Rent
 % of Sales/Refinancing Proceeds
 Approximately $1 Million to MCCA from 2007 Sale
26
Room Block Agreement
 Blocks of Rooms Available to MCCA
 At Not-to-Exceed Rates
 # of Available Rooms
 Function of How Far in Advance Rooms are Booked
 48 Months and Beyond: 75% Rooms
 Less than 12 Months: 0% Rooms
27
MCCA/Westin Relationship
28
Original Capital Structure
$121,000,000
$ 49,000,000
$170,000,000
Private -1st Mortgage Debt
$ 18,000,000
$ 15,000,000
$ 33,000,000
MCCA – Infrastructure, Etc.
$ 203,000,000
Total – All Sources
Private - Developer/Tenant Equity
Total – Private Sources
Public HUD Loan – City of Boston
Total – Public Sources
29
Enhanced Investor Returns
 Favorable Ground Lease from MCCA
 No Annual Rent Payments for 7 years
 Structured Property Taxes – City of Boston
30
Conclusions: BCEC Westin Hotel
 Hotel Was Needed and Successfully Developed
 7 Year Process
 Not Feasible Without Public Contributions
 Approximately $33 million – 16% of Total
 Today, Required Public Contribution Much
Higher
 In Washington, D.C., Approximately 50%
 Hotel Sold Within Year of Opening
 Very Significant Profit for Developer
31