Council members waiting for final conference center designs

"Ball is in the developers’ court"

The Jefferson City Council is awaiting final proposals on a conference center, but findings in a recent market study have both encouraged and discouraged council members.

Charles Johnson, of Johnson Consulting, recently revealed the results of a $17,000 market study the City Council requested in July. The market study detailed the area and made recommendations for a conference center and hotel facility, three months after two developers revealed proposals of their own for the project.

The two developers, Jefferson City-based Farmer Development and Hannibal-based Ehrhardt Hospitality Group, are now in the process of tweaking and changing their proposals based on the findings of the market study.

Members of the City Council saw the results of the market study in different ways, with some referring to it as an affirmation of the council’s request for a conference center last fall and others seeing the results as a bit discouraging. But all agreed on the need to wait and see what the developers bring in their final proposals.

“It was encouraging, but at the same time somewhat discouraging,” said 3rd Ward Councilman Ken Hussey.

Hussey said the study showed a conference center could be viable in Jefferson City, an encouraging finding. Hussey also said the market study provides greater confidence for the council members in making a final decision.

First Ward Councilman Rick Prather said the study confirmed what the council’s request for proposals contained last fall.

“It confirmed what we had thought,” Prather said. “It shows that there is a need.”

Fourth Ward Councilwoman Carrie Carroll said she was pleased with the market study and how it was done, noting nothing in the study really came as a surprise.

“What really validated what I thought in the beginning ... was overall the downtown site was more favorable in the long term,” Carroll said. “I felt like the decision I made initially is something I would still stand by.”

FIfth Ward Councilman Ralph Bray said he is glad to have some updated information on the current market, as the last study was done in early 2008. Bray said he also was pleased to see some value placed on location within the study, which noted long-term economic benefits would come from the downtown location but conference centers at malls do work as well.

“I’m keeping an open mind. The proposal for the mall, the whole process, has reflected very favorably on the Farmers,” Bray said.

Second Ward Councilman J. Rick Mihalevich said the study was money well spent, especially considering the different location being considered now. The 2008 market study only looked at a downtown location, he said, but the council now also is considering the Capital Mall site.

First Ward Councilman James Branch said the study was both enlightening and concerning.

“I’m not seeing a lot of positive things here,” Branch said. “I can’t advocate spending money if it’s not going to add any money, if there’s no benefit.”

Branch said though he wants to see a conference center in Jefferson City, he wants to make sure it doesn’t take business away from other facilities in town in what is already a thin market. If that’s the case, he said, it may not be the right time.

“I don’t hold out a lot of hope right now,” Branch said.

Bray said the city will need to expect a good return on its $9 million investment and he wants to see how the developers will overcome any financial difficulties with each proposal.

“We need to have a good comfort level that wherever this money goes we will get a good return on it,” Bray said.

One issue, Hussey said, is the current proposals are a bit smaller than what the city needs, though he hopes the revised proposals will remedy that problem.

Hussey said he had always been more supportive of a downtown location for the conference center, but the market study noted several immediate challenges to that location despite its popularity.

“There are certainly some challenges to be overcome downtown, in terms of parking structure needs, land acquisition,” Hussey said.

Those issues of parking and land are not immediate problems for the Capital Mall location, which the study noted would be an easier site at the start of the project, though downtown may be more economically viable over the long term. But Hussey said the council isn’t locked in to choosing either site.

“We may reach the conclusion that neither one of these options is really viable, or what we consider to be a smart, long-term investment for the community,” Hussey said. “It could be that we decide to not accept either proposal. That needs to be on the table.”

If that becomes the case, Hussey said he does not see the conference center idea as going away.

“There is a need,” Hussey said. “There could be a different opportunity to do it.”

Possibility of operating subsidy

Hussey said the operating deficit outlined in the study’s projections of the first 10 years of operations were discouraging for the council and the city, especially in terms of a potential need for a subsidy.

“I get the sense that the general consensus on the council is to not provide a subsidy,” Hussey said.

Hussey noted that if the city were to spend only $6 million of the lodging tax funds on construction and use the rest of the collections for a subsidy, he would be more agreeable to it.

“I’m certainly not going to be supportive of a subsidy that comes out of general revenue,” Hussey said.

Carroll said the revenue expectations from the market study, that the conference center would operate at a deficit through the first 10 years, are fairly common in the world of conference centers.

“It is still doable,” Carroll said. “It’s very common ... it takes time to show a profit or break even.”

She said it would create jobs and attract more visitors to the community, bringing a more positive economic impact to the region that often gets lost when seeing the operating deficit.

Carroll has been one of few council members who have not voiced total opposition to any operating subsidy for the conference center and though she noted she will continue to keep an open mind, she said the city is not interested in picking up the tab on operations.

“I don’t think the city is interested in taking that on,” Carroll said. “I just happen to be open to looking at all possibilities.”

Fourth Ward Councilman Carlos Graham said he is completely against any city subsidy for conference center operations, but he wasn’t surprised by the expectation of a loss for the first 10 years.

“I wasn’t too, too shocked,” Graham said. “You’re going to lose in the first few years ... a subsidy is not going to be very favorable or accepted.”

Branch agreed, saying he couldn’t vote for anything that required an operating subsidy.

“We don’t have the money,” Branch said.

Mihalevich said the operating subsidy is a sticky issue and noted he does not believe the council, or the community, has “stomach for that.”

Bray said he believes the developers understand that the council, in general, would like to avoid any subsidies. He also noted losses from conference centers are common and the study states profits from the hotel would help to offset any losses.

“I think it’s too soon to draw any conclusions,” Bray said.

Several other council members also noted that profits from a hotel attached to a conference center often get lost in the discussion.

“(Conference centers) operate at a deficit, but the hotel operates at a profit,” Scrivner said. “Just because there’s a deficit doesn’t necessarily mean there’s an expectation that the city has to cover those deficits.”

Prather said the conference center was never expected to make money, but the hotel would be the profitable portion of the project.

“Of course they’re going to show a loss,” Prather said.

Graham said he hopes to get more public input as the process continues. The council will hear from the public twice in the next week on the conference center issue.

“I know that people are anxious either to move forward or to say no to the conference center,” Graham said. “I’m ready to see if the developers come back with something different.”

Scrivner agreed, saying the process has been prolonged enough as it is and he would like to move forward.

“The ball is in the developer’s court now,” Scrivner said. “It’s going to be interesting to see what happens.”

Second Ward Councilman Shawn Schulte and 5th Ward Councilman Larry Henry did return calls for comment.

Background

PKF marketing study – 2008

• Study pricetag: The study was commissioned by Garfield Traub, and other members of a consortium of developers called JFCHC, LLC, as part of a pre-development agreement that had a total price tag of $200,000. As of Friday, a specific price for the study itself was unavailable.

• Preferred hotel brand: Marriott, Sheraton or Crown Plaza

• Advises a full-service, 250-room hotel with 40,000 square feet of meeting space and full-service restaurant plus lounge/bar. The facility should include 16,000- to 20,000-square-foot ballroom and a 8,000- to 10,000-square-foot ballroom.

• Notes a perception that Jefferson City lacks leisure and entertainment activities, which is a competitive disadvantage.

• Jefferson City is presented with a competitive disadvantage due to its lack of proximity to a major interstate highway.

• Projected being open in January 2011 — the facility would host 342 events with annual attendance at 64,000

• Expected to generate $3,835,000 in revenues in a stabilized year of operation.

Johnson marketing study – 2013

• Study price tag: $17,000

• Preferred hotel brand — Marriott, Sheraton or Crown Plaza

• Advises a 150-room hotel, incorporating one or more restaurants, with 15,000 square feet of flexible space for a ballroom/exhibit hall, an additional junior ballroom of 5,000 square feet, and 10,000 square feet of meeting and breakout space. (Along with a long-term expansion plan of up to 40,000 square feet.)

• Notes there is a lack of entertainment offerings necessary to make Jefferson City an attractive destination for certain events.

• “Jefferson City has excellent highway access being located on U.S. 50 … and U.S. 54.”

• Projecting being open in 2016 — hosting 240 events with 98,400 attendees.

• Expects continual net losses over the first 10 years of operations, starting at $500,000 deficit in 2015 and $55,369 in 2025.

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