Now that the Washington Legislature has provided a financing package for a proposed expansion of the city of Spokanes convention facilities, proponents of the project are working feverishly to organize a campaign to win voter approval of the project.


A committee chaired by David Hook, of the Spokane Area Restaurant Association, is close to hiring a political strategist or a polling firm for the campaign, says Mike Kobluk, director of the citys Spokane Center, which includes the Opera House, Convention Center, International Ag Trade Center, and Albi Stadium.


That paid consultant will be part of an effort spearheaded by the city of Spokanes Sports, Entertainment, Arts, and Conventions Advisory Board (SEACAB), which within days will name a chairman, chairwoman, or perhaps co-chairs to head up the expansion drive, Kobluk says.


The campaign is going to start, City Councilman Jeff Colliton said after a meeting of the advisory panel last week. Kobluk said almost 40 people, mostly from business, attended that session.


Gaining voter approval of the $85 million project wont be easy. Spokane Valley leaders are evaluating whether the unincorporated areas of Spokane County would benefit from the project in proportion to the tax revenue those areas would provide to build it. Also, at least two board members of the Spokane Public Facilities District, which is being asked to take on the project, have concerns about it.


Convention-expansion advocates, in a recent meeting with the Journal of Business editors, said an analysis by a Wall Street financial services firm concludes that the expansions three proposed revenue sources would raise sufficient funds to pay for it, meet other expenses, and provide $20 million for county projects.


The firm, Lehman Brothers, has estimated those sources would raise $394 million over 30 years, which would cover the $85 million expansion, debt service on the project, debt service remaining from construction of the Spokane Veterans Memorial Arena, and the $20 million in county projects.


Lehman Brothers have looked at this and said, We can bond against this, says Spokane retailer Patrick Jones, a member of both SEACAB and its convention center expansion advisory committee.


Lehman Brothers conclusions are in contention, however. Jones says that Spokane Public Facilities District Board member Bill Williams, the chairman of Telect Inc., has questioned a key projection in Lehman Brothers figuresthat receipts from a countywide sales tax would grow at an average annual rate of 3 percent from the year 2000 through 2029. Williams couldnt be reached for comment, but Carl Lind, the public facilities districts board chairman, questions whether the 3 percent growth rate is conservative enough.


A county report says that even though the countys total sales-tax revenues grew by an average rate of 4.79 percent annually over the last 20 years, they rose at a slower 3.62 percent pace from 1994 through 1998. Spokane County Commissioner Kate McCaslin says she would have preferred it if the convention-expansion advocates projected a growth rate of 2 percent a year.


Yet, Jones says that Spokane bond attorney Roy Koegen has vetted Lehman Brothers estimates with his bond insurance companies. Theyre comfortable with that growth rate. We think were behaving conservatively. Jones own research says that taxable sales in the county grew by an average annual rate of 6.9 percent from 1987 through 1997.


The revenue issue is one of many swirling around the project. For example:


Construction of the expansion must be under way by Jan. 1, 2003, or a $65 million, 25-year sales-tax credit approved by the Washington Legislature could be lost.


The Legislature has specified that the project must be done under the auspices of a public facilities district. While the Spokane Public Facilities District, which built and maintains the arena, has been asked to take on the convention-facilities expansion, it hasnt agreed to do so yet. Nonetheless, Jones says that if the districts five-member board had to vote on the issue today, we think it would pass, by a 3-2 vote.


The concerns expressed regarding the projects fairness to the unincorporated parts of the countyand particularly the Valleywill have to be addressed.


When voters cast ballots on the project, they also will weigh the merits of the $20 million in county projects.


The city hasnt completely tied up the site yet.


The pro-convention forces have a tight time schedule in which to address concerns.


Tyrus Tenold, chairman of the convention center expansion advisory committee, is pushing to put the project on the September ballot. Interest rates in the municipal bond market are favorable now, and if bonds can be sold to finance the project before rates go back up, that would hold down financing costs, Tenold says.


Moreover, getting work started on the convention-facilities upgrade by Jan. 1, 2003, isnt a sure thing, says Kobluk. He says that even if voters approved the project in September, it could take 12 to 14 months to design it and additional time to call for bids and start construction.


The project would be funded by these sources:


The 0.033 percent, 25-year, state sales-tax credit, which would raise the projected $65 million from the year 2000 through the year 2024. That money otherwise would be used by the state in other ways.


Extension of a 0.1 percent countywide sales tax thats already being levied to help pay for the arena. A spreadsheet prepared by Lehman Brothers projects that tax would raise $254.7 million between 2000 and 2029, but the levy is scheduled to sunset after 2017, and Spokane County voters would have to approve its extension.


Extension of a 2 percent hotel-motel tax collected from Spokane County lodging establishments with 40 or more rooms, also to help pay for the arena. That tax would raise a projected $74.7 million between 2000 and 2029, but also is scheduled to sunset after 2017.


Convention-expansion advocates have believed that Spokane County voters would have to approve an extension of the hotel-motel tax, although the Spokane Hotel-Motel Association has told the public facilities district verbally that it supports extending the tax past 2017 to help pay for the convention expansion. Kobluk says research is being done to determine whether voters would have to approve an extension of the tax if the association commits formally that its members will continue paying it.


The public facilities district board said in a mission statement last spring that it wanted the district to remain a single-purpose entity dedicated to the arenas success, but the board has exhibited a willingness to at least talk about taking on the convention-facilities expansion. Its gathering information now to decide whether it will assume responsibility for the project.


On May 25, the board is to receive an updated life-cycle analysis of capital expenditures that the arena will need over time. Also, LeMaster & Daniels PLLC, a Spokane CPA firm, is doing a fresh analysis of the districts finances. Executive Director Kris Mote thinks it will be late June or early July before the board has all of the information it needs.


Says Lind, If LeMaster & Daniels tells us we can do this, then maybe its time to negotiate.


Lind, however, has deep concerns. He says the district originally sold about $45 million in bonds to build the arena, and it makes annual debt-service payments of $4.5 million on those bonds from a yearly revenue stream of about $6 million.


Now, Lind says, the convention-expansion advocates plan to sell $112 million worth of bondsor two and a half times as much as the district sold. They say debt-service payments can be made on those bonds from a revenue stream thats projected at just $8.7 million in its first year, Lind claims. He questions whether that can be done, but adds, Of course, I dont have Lehman Brothers at the other end of my phone line.


Jones says that $105 million to $106 million in bondsnot $112 millionwould be sold if the project were financed today. He adds that if those bonds could be sold now, they would carry an unusually low interest rate, which would hold down financing costs and debt-service payments. He says that while Lind has seen Lehman Brothers projections, I dont know how well he understands them.


The expansion proponents say that if they fail to get the district to embrace their project, they could ask city of Spokane voters to create a city-only public facilities district to handle the project, but they dont see that as a viable option. If the project were built by a city-only district, the hotel-motel tax wouldnt be available to help pay for the project, and city voters probably would be asked to approve an additional, city-only sales tax. Meanwhile, they also still would pay the sales-tax and hotel-motel levies to retire the arena bonds.


Getting the unincorporated parts of the county to support the convention-facilities expansion also has been a tough sell.


After meeting with Lind recently, the Valley Chamber of Commerces Legislative Committee seemed to advocate that SEACABs selection of a site and a financing package for the project be revisited. The committee also asked whether the public facilities district should do its own study on the convention center proposal to protect itself. Finally, the panel came out in favor of an independent feasibility study by a private auditor.


Valley Chamber President and CEO Loren Mitchell says the organization doesnt necessarily want SEACABs decisions to be revisited, but is urging the public facilities district to proceed cautiously as it makes decisions. He says he hasnt seen a step-by-step financial analysis of the project or an analysis of the effects on its market from other convention-facility expansions in the Northwest.


I think the convention expansion would be exceptionally good for the entire county, Mitchell says. We dont want to see it rejected. We just dont want the public facilities district to be talked into something that its not entirely comfortable with. If the district isnt 100 percent behind it, its going to have real problems when it goes to the voters.


Frank Tombari, chairman of the Valley chamber, says that as Valley and downtown business leaders worked to get the financing package for the project through the Legislature, the Spokane Area Chamber of Commerce reached out to Valley leaders. They have been inclusive almost to a fault to get the project where it is today.


Theres no schism between Valley and downtown interests now, but leaders from the Valley and other unincorporated parts of the county are trying to make sure the interests of their areas are represented, Tombari says. He adds, I dont think youll see anybody in the Valley say they dont want these projects to go forward.


The county has a draft list of the projects that it would like to build with its $20 million from the convention-expansion revenue sources, and McCaslin says that list would be refined before voters went to the polls.


The draft list includes $17.5 million in projects, mostly at the Fairgrounds and Expo Center, including a $4.75 million expansion of the main building, a $1.95 million floral building, $1.55 million in food-service buildings, and a $3 million covered arena with seating and cattle pens.


Dolly Hughes, business operations manager at the fairgrounds, says those four projects have been sought since at least 1990 or 1991. Other fairgrounds projects on the list include a $2.35 million, replacement grandstand area and $1.4 million for repairs and maintenance. The seventh project on the draft list is a $2.5 million senior citizens center at Mirabeau Point, which is being developed in the Spokane Valley.


The convention-expansion advocates concede that providing $20 million for county projects is a political strategy to gain support for the project in the unincorporated parts of the county, but Jones contends that it also is an equity strategy. He says that under the current scenario for funding the expansion, 42 percent to 46 percent of the needed revenue would come from the county, while much of the benefit from the expansion would accrue to the city. The county, he says, deserved to receive some additional benefits. McCaslin says the county had sought to have some appropriate return in the project.


The planned expansion of the convention complex would involve construction of a major new structure on the south side of Spokane Falls Boulevard, across the street from the citys current convention facilities. The new building would include a 100,000-square-foot exhibit hall; an executive conference room; smaller meeting rooms; three floors of parking with 800 vehicle stalls; and a big dock-service area.


A lobby-bridge would span Spokane Falls Boulevard to connect the new structure with the older facilities. The ballroom, or banquet-conference room, in the old Convention Center would be converted into new meeting rooms, and the exhibit hall there would be remodeled into new ballrooms.


With the new facilities, we could double, or triple, the amount of convention business that were doing today, claims Hartly Kruger, president and general manager of the Spokane Area Convention and Visitors Bureau.


The citys current convention facilities, with 38,000 square feet of exhibit space, are too small to host many of todays bigger conventions, even if organizations elect to use 22,000 square feet of banquet space and selected lobby spaces for exhibits and have their meetings and meals off premises, he contends.


In the spring of 1998, the CVB surveyed 393 associations across the U.S. that it believed might hold meetings in Spokane if the Spokane Center were expanded. Among the 114 responses, 56 of the associations said they would consider meeting in Spokane if the convention complex here were upgraded. Those 56 meetings would bring an estimated 140,000 additional delegates to town and have a potential economic impact here of $150 million, Kruger says.


A 1995 survey by the CVB produced similar results. On comment forms in the two surveys, many organizations that were interested in meeting here said they need between 50,000 and 120,000 square feet of exhibit space, or up to three times as much as the convention facilities here have now.


Theres even more of a concern, and that is losing the business we already have, Kruger says. He says the Northwest Mining Association, which has met in Spokane every year for the past 104 years, is running out of room here, and the annual Ag Expo, which was founded by the Spokane Area Chamber of Commerce, needs more space.


The expansion advocates project that if the facilities were expanded, the number of nights that convention delegates spend in hotel rooms here would go up by between 47,000 and 58,000 a year, and 800 to 1,000 new jobs would be created in the county. Some critics have said the project is too big, but Kobluk contends that if a smaller project were done, another expansion effort would have to be launched within a few years.


Says Kruger, We have 2,100 to 2,300 hotel rooms within walking distance of our convention facilitiesmore than Portland, Ore., which is attractive to meeting planners. If bigger meetings can be attracted to Spokane, large blocks of hotel rooms will be reserved downtown, and other hotel guests will rent rooms in the Valley and elsewhere outside of the city center, Kruger contends.


Kobluk says that the city owns only about 25 percent of the site of the proposed convention-facilities expansion. Probably 10 or 12 owners own the rest of the land, he says.


The city hopes that it can trade property of equal value to those landowners or reach some other arrangement with them to acquire their property, Kobluk says. If worst comes to worst, the city does have condemnation power, but nobody wants to do that (condemn the property).


He says SEACAB tried to get a hotel developer interested in doing a public-private project in conjunction with the convention-facilities expansion, but was unable to interest a hotel developer in such a project.