Downtown Milwaukee’s Wisconsin Center convention center expansion is proceeding — a $420 million taxpayer-financed investment — even as the COVID-19 pandemic has devastated the travel industry.
The Wisconsin Center District, the state-created agency that operates the convention center and other downtown venues, will borrow funds by selling bonds to investors this fall.
The bond sale is to be completed by mid-December, followed by more design work and a late 2021 groundbreaking. The expanded convention center, which will double the facility’s space, will open by March 2024.
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Even though the pandemic has canceled conventions nationwide, with airlines, hotels and restaurants facing huge losses and layoffs, the timing is right for the expansion to proceed, said Marty Brooks, district president and chief executive officer.
“We cannot wait,” Brooks said Thursday in comments to the board’s Governance Committee, which unanimously granted final approval for the expansion.
The district, which also operates UW-Milwaukee Panther Arena and Miller High Life Theatre, is expected to end 2020 with a loss of $2.7 million.
It had expected to post around $21 million in net income this year before the pandemic canceled the Democratic National Convention and dozens of other Wisconsin Center events.
The convention business is projected to fully recover by 2023, Brooks told committee members.
An expanded Wisconsin Center opening in early 2024 would be positioned to “ride the wave,” he said.
The larger facility is needed to compete with new and expanding convention centers in St. Louis, Indianapolis and other cities, Brooks said.
Also, interest rates for borrowing the cash are at historic lows, Brooks said.
Finally, there are looming deadlines prompting the vote to move forward.
Wisconsin taxpayers would cover debt
The State of Wisconsin in 2019 agreed to provide taxpayer backing for up to $300 million in district debt tied to the expansion project.
That “moral obligation pledge” means state taxpayers would cover the debt if the district was unable to do so. That pledge expires at the end of 2021 if the district hasn’t sold bonds by then.
Also, bonds sold to investors in 2020 will have their credit worthiness based in part on the district’s revenue from 2017 through 2019, Brooks said.
Pushing the bond sale into the future would require including district revenue from 2020 — which is down sharply.
As a result, the bond sales would likely have to be delayed until at least 2024 to obtain improved revenue results required by investors, Brooks said.
There is strong interest from investors in buying the bonds in 2020, said John Mehan, a managing director at Baird & Co., the district’s financial adviser.
Compared with stock prices, which have been volatile as the pandemic has continued, bond prices have been largely stable. Bonds are generally considered less risky than stocks because they make scheduled interest payments to investors over several years.
Plan would add second ballroom
A June bond sale that refinanced district debt also saw strong demand, Mehan told committee members.
That debt restructuring is expected to reduce the district’s 2020 debt payments by $18.3 million. That restructuring is projected to save an additional $14 million in 2021.
Also, it greatly helped increase its cash reserves, to $17 million by the start of 2021 and $23 million by the start of 2022, said Steve Marsh, district senior vice president and chief financial officer.
The expansion project’s bonds are to be paid off over 40 years by countywide hotel, restaurant and car rental taxes levied by the center district. The first debt payments aren’t due until 2027.
The project was approved by the district board on April 2, with the expansion delayed until the Governance Committee provided final approval.
The expansion, budgeted at $419.9 million, will add 112,000 square feet to the facility’s main exhibition hall for a total of 300,000 square feet.
The development also will create a second ballroom with an outdoor terrace and add meeting rooms, indoor parking spaces and loading docks.
Expanding the Wisconsin Center will allow it to attract more conventions and trade shows, bringing more spending by visitors, according to a December study by HVS Global Hospitality Services, a consulting firm based in Westbury, New York.
Annual direct spending of visitors to the Wisconsin Center, now estimated at $105 million, is expected to increase to $154 million by the expansion’s completion.
Full-time jobs at hotels, restaurants and other businesses tied to that spending, now estimated at 800, will increase to 1,200 in 2024.
Much of the projected increase in convention bookings is tied to the expansion’s second ballroom. That will allow Wisconsin Center to book more than one major meeting at the same time.
The Wisconsin Center opened in two phases, in 1998 and 2000. The third phase will be on what are now convention center parking lots between West Wells Street and West Kilbourn Avenue.
This article originally appeared on Milwaukee Journal Sentinel: Downtown’s $420 million convention center expansion, backed by Wisconsin taxpayers, is proceeding despite travel industry depression