Are We Robbing Our Hoteliers to Pay Shad Khan?
Let users pay for the sports and entertainment venues so visitors can pay for a convention center to draw more traffic
The announcement that the bed tax would be used to pay for the city of Jacksonville's $43 million share of the $63 million scoreboards and end zone swimming pool at EverBank Field brings up the issue of how we fund our venues. Using the current method, we are moving 4 cents out of every 6 cents in bed tax collected to pay for improvements to the sports and entertainment venues.
Based on 2012 revenues, the 4 cents is worth $9.4 million. Is it the best use of funding to pay for local venues using money collected from outsiders? We first have to ask: How local are these venues?
It was pointed out in The Florida Times-Union that a large portion of the tax goes to paying off the stadium bonds on EverBank Field. The remainder goes to maintenance of the stadium and other city-owned venues. With the exception of the Florida-Georgia Game and the Gator Bowl Game, the majority of patrons are local. The number of patrons in 2012 was estimated by SMG's website at 2.3 million.
The patronage was shared among five venues: EverBank Field, the Baseball Grounds of Jacksonville, Veterans Memorial Arena, the Times-Union Center for the Performing Arts and Jacksonville Equestrian Center. All of these facilities benefit from the room tax but, according to the Times-Union, about 70 percent of the tax goes to EverBank Field.
If we really want to look at the local sports and entertainment venues as self-supporting, then they should be covered by funds from the people who use them and not just outside visitors. If we wanted to generate $9.2 million in revenue from a user fee, we could charge $4 per person. To create $11 million, we would impose a fee of $5. Is this draconian?
The answer is no. The public expects to have nice facilities and to have them kept clean. Jacksonville wants to keep a state-of-the-art image as shown through the $63 million in proposed stadium improvements. Shad Khan is paying $20 million of this amount to show his commitment to the city. Local sports fans and others who attend concerts and shows should be willing to help pay for the improvements and maintenance of their facilities to enjoy their events.
For the record: Khan has nothing to do with the misdirected bed tax; that's the fault of decades of mayors and City Councils. I support the improvements at the stadium and commend Khan on his becoming a vital asset to our community.
The costs of the facilities should be borne by those of us who use the facilities and not be taken from funds designated to bring people to Jacksonville. What is gained by having those of us who live here pay more to use the venues?
According to a Downtown Vision Inc. (DVI) 2012 report, the hotel occupancy rate in Downtown was 61.1 percent. Something needs to be done to improve this rate. To reach a resolution, we must determine why the rate is low and what can be done to improve it. Perhaps we can start with a Convention Center that has only 78,000 square feet of exhibition space. What problems does that create?
I had a recent conversation with a friend who is the marketing director for a major hotel. She explained that a group would call her and say they wanted to book an event that would use multiple room-nights across more than one hotel. After the call, she would pick up the phone and call SMG. The result would be the same: We have a local event booked for that time period and cannot accommodate the out-of-town group (and create business for our Downtown hotels).
The best option available is to build a convention center with about 250,000 square feet of exhibition space and 700,000 square feet of total space, as explained by Paul Astleford, CEO of Visit Jacksonville. He also admitted that there were three places that could hold such a facility in our Downtown: the Shipyards, the current Prime Osborn Convention Center and the property running along the Southbank from Wyndham Riverwalk through the Duval County School Board Building and into the JEA property.
Moving the $9.4 million to Visit Jacksonville would allow a bond issue of about $160 million at a rate of 4.7 percent after the discount and closing costs. Would this be enough to expand the Convention Center and include the Hyatt through a Skyway expansion? We have to look at the costs of the three options individually and see what is best.
Let's look at each location and the possible costs; this is a very rough estimate made without a consultant's report and using BuildingJournal.com as the cost calculator.
The current Prime F. Osborn III Convention Center has 278,000 square feet of meeting space and 78,000 in exhibition space; after the loss of some space to an Amtrak station, there's a need to add 462,000 square feet in total space. The construction cost for adding the exhibition space to the center is $19.5 million; the needed meeting space would cost $35.561 million. After adding allowances for site preparations and renovations to the current center, the cost of the project reaches a total of $79.288 million. This leaves $80 million to extend the Skyway to the Hyatt, the area of Berkman II and the Maxwell House plant.
The site at the Shipyards would have a convention center built from scratch. The portion of the Shipyards property that could hold a center this size is on the east side of Hogan's Creek. The total cost for the exhibition space is $27.132 million; for the meeting space, the total is $50.017 million. After allowing for site preparation, the total is $92.747 million. This leaves $68 million for Skyway extensions to the Hyatt and the new convention center.
The Wyndham site would cost $27.132 million for the auditorium; the meeting area would cost an additional $50.017 million; allow another $20 million to move the school board into the empty COJ office spaces on the Northbank and tear down the building; after adding site preparation and the cost to attach the center to the Wyndham and to tie in the Kings Road Skyway station, the total cost for this convention center reaches $139.89 million. This leaves $20 million to connect the center to the Hyatt with the Skyway.
What would we gain by having an improved convention center? The current Downtown hotel occupancy is 61 percent at 528,768 room-nights at an average cost of $98; this generates $3.11 million of the local bed tax. If we were not turning away convention business due to a lack of space, we could easily increase to 828,768 room-nights based on double occupancy. This means $4.873 million in bed tax generated Downtown and an occupancy of almost 96 percent. If we added another 100 smaller conventions and meetings, we would have to add hotels to meet the demand.
We need to let users pay for sports and entertainment venues with a user fee — then let out-of-town guests pay for a convention center, which will then bring in even more out-of-town visitors. The Prime Osborn Center became outdated more than 25 years ago; we need to act on what's been long neglected and build a new one.
Fouraker, in the banking field for the past 20 years, previously worked as paralegal at a law firm specializing in municipal finance.