That enormous gnashing-of-teeth sound from the Puget Sound area? Those wails of frustration and upset from downtown Seattle? No, it’s not a response to the pandemic and its human toll, or even to the economic dislocation that has followed. It’s the pain of downtown boosters, Chamber of Commerce leaders, and local officials faced with the pressing need to find an extra $300 million to finish the $1.8 billion (yes, billion) expansion of the Washington State Convention Center.
The expansion, termed by the Seattle Times “one of the city’s largest-ever construction projects,” has been underway since 2018, with the goal of adding 440,000 square feet of new convention space, effectively doubling its current size. In the last week, the need for an immediate federal government bailout was promoted in the media by an array of dignitaries, with King County executive Dow Constantine arguing there would be “statewide” ripple effects if the expansion isn’t completed: “The visitor industry is the core of our regional economy, with the Convention Center at its heart.”
So how did a $1.8 billion convention center expansion end up needing federal dollars? In fact, how did an expansion of a modest convention center end up costing $1.8 billion? For that, you have to go back to 2008. An expansion in 2001 had utterly failed to produce the promised new business. But by late 2008 the center’s leadership had begun to promote another expansion, with board chair Frank Finneran claiming, “We are losing more business than we are booking.” At that point, the expansion cost was pegged at a mere $766 million. But the governor and state legislature were thoroughly uninterested, and actually raided the center’s surplus hotel tax revenues to make up a state budget shortfall in the wake of the recession.
Finneran, along with the business and labor interests that backed a larger center, approached the state government again in 2010 with a plan to shift from state control to ownership by an independent King County public facilities district, with funding from the area hotel tax. The state legislature blessed that plan, and the new district sold bonds to pay off the center’s debt, preparing the way for pursuing the expansion. And the new entity turned in 2014 to outside consulting firm Conventions, Sports and Leisure International (CSL) for a feasibility study and a forecast of the new business a bigger venue would attract.
CSL — those would be the same folks who forecast that Philadelphia’s big 2011 expansion of its convention center would bring 786,000 annual hotel room nights, a number that by 2018 remained at only about 370,000 — endorsed an even larger expansion than the one proposed in 2009, forecasting that it would bring an additional 22 annual international and national events, boosting attendance by about 79,000 to just over 220,000. With a bigger expansion came a larger pricetag: By late 2015 the projected cost was up to $1.4 billion. Still, an outside financial feasibility analysis concluded that growing local hotel tax revenues would be more than enough to cover the required annual debt service.
By 2018, with a better estimate of site acquisition costs, and a series of deals with neighborhood and community groups that added over $90 million, the cost estimate was now $1.73 billion and climbing. The district still planned to sell bonds, a total of $1.08 billion in July 2018. But it now didn’t have enough projected revenue to cover the full expansion cost. The district staff and board pressed ahead anyway, anticipating that it could sell a second bond issue, for about $168 million, in 2020. The district was warned in a May 2018 analysis that the “WSCC could be vulnerable to a potential economic downturn in the 2019-25 time frame,” but still went ahead without the money to finish the project. Simply put, convention center officials bet that hotel revenues — and hotel taxes — would keep going up, year after year, which was a little like promising the bank you’ll be able pay for that big, new house with the huge raise you’re sure to get next year. They lost.
Costs have kept growing, and with the convention center expansion now 30% complete, it needs $300 million more — money that the district doesn’t have and that it likely can’t sell bonds for. With Wall Street apparently not particularly interested right now in long-term debt backed by hotel tax revenues, for some reason, officials have turned to federal stimulus dollars on offer in the wake of the coronavirus pandemic; Washington state Sen. Patty Murray told KING5 that she is “working now to explore what can be done at the federal level to help support the project’s timely completion.”
The convention business has been on the decline for years, even as convention centers continue to expand to compete for a dwindling number of events — and it’s expected to take years to recover from the current bans on large in-person public gatherings, especially if organizers start experimenting with online meetings in the interim. Nonetheless, Visit Seattle president Tom Norwalk told the Seattle Times that his organization is “very confident” that demand for conventions will continue to be strong. Just what the federal government should bet on.