Convention center expansion moves forward

After a long day considering various different topics, City Council voted 10-0-1, with Council Member Leslie Pool abstaining, to authorize staff to move forward with negotiations to purchase two expensive blocks to the west of the Austin Convention Center for the purpose of starting expansion. Pool said she was abstaining because she was concerned about financing for the expansion.

There were no details about the eventual cost since that will be part of the negotiations, but Council approved an exclusive negotiating agreement for blocks 16 and 32. The city will pay $6.3 million in earnest money to begin the process of acquiring the properties between East Second Street on the south and East Fourth Street on the north, between Trinity and San Jacinto Boulevard.

According to documentation provided by staff, “This action is the first of a two-step approval process. The exclusive negotiating agreement (ENA) will allow the city, the landowners and developers to establish more detailed specifications, including guaranteed maximum pricing for the acquisition and development of westward expansion of the convention center space. The transaction will include an estimated 750,000 square feet of convention space and related amenities.”

The second step of the process outlined by staff “is anticipated for the summer of 2021, with a real estate purchase and sale agreement with accompanying documents. Once the expansion space is completed to the west, the convention center plans to work towards potential redevelopment of the current convention center space.”

Earlier in the day, two citizens told Council they were not happy about the vote.

Samuel Franco complained about the process as opposed to the outcome. He later posted his comments to Facebook, writing, “I understand the real estate exception allows Council to negotiate behind closed doors; however, a procurement such as this should make the project scope, minimum specifications and contractual terms public before you execute an agreement of this magnitude.

“Furthermore, there has been no competition to ensure that the fees and other payments by the city are competitive and being performed by qualified parties, which is sacred in any public project. The Council instead is trying to sole-source what eventually will be a multibillion-dollar project to a group of developers who happen to own land but have not had to meet any sort of minimum prequalification requirements.”

Franco added, “This lack of transparency and total disregard for standard procurement processes for projects of this magnitude is just plain wrong and irresponsible at best.”

Environmental activist Bill Bunch, speaking for himself and not for his organization, urged Council to spend city money on helping the musicians and other artists who bring tourists to the city, not to move forward with the convention center expansion. He told them via email that convention center visitors account for just 2 percent of Austin’s tourists and 3 percent of annual hotel room nights.

“The $230 million or thereabouts convention center reserve fund is the only source of significant city funds that could and should be allocated, immediately, to save the Austin we all know and love,” he wrote.

Bunch has been fighting expansion of the convention center for several years. Attached to his email was a presentation from Heywood Sanders, a UT San Antonio professor and an expert on the convention industry. Sanders’ presentation, called “Future of the Convention Industry,” paints a gloomy picture. He notes that “by 2018 convention attendance at the nation’s four largest centers (Chicago, Orlando, Las Vegas, and Atlanta) still had not returned to pre-2008 levels. Despite an expansion that doubled its exhibit space, convention attendance at the Las Vegas Convention Center remains at the level of the late-1990s. Bond rating agencies are forecasting a very slow return of group meeting business.”

When the Austin Monitor spoke with Sanders Thursday, he said, “It is very clear right now in mid-September of 2020 that the future of the meetings and convention business is enormously uncertain. It is equally clear in the judgment of the bond rating agencies, including Moody’s and Standard and Poor’s, including the recent assessment of the city-owned Austin Hilton,” which was downgraded. “The consensus is as travel and hotel activity make a gradual return to levels that existed prior to March of this year that the last piece of that return is the meetings and convention piece.”

He concluded, “So at the very least, the future of convention business and the prospects for any one city in expanding their convention venues are at this point remarkably uncertain.”

The city’s adviser, Tom Hazinski of HVS Convention, Sports & Entertainment, was enthusiastic about expansion when he spoke to Council at Tuesday’s work session.

Sanders said Hazinski consistently produces convention center studies that favor expansion. He provided several of them to the Monitor, including Hazinski’s studies urging the expansion of convention centers in Buffalo, New York; Milwaukee, Wisconsin; and Grand Rapids, Michigan.

The Austin Business Journal has reported on plans for Block 16 on several occasions. As the journal noted in August, the design company Gensler has planned a 47-story tower with about 741,319 square feet of development, mostly office space, making it the city’s largest downtown tower if it were to be built according to plan. However, under the agreement between the city and the property owner, work on the tower would be delayed while the parties are negotiating. Not surprisingly, perhaps, architects from Gensler already have shown the city ideas for how they might design an expanded convention center.

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