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Andrew F. Brimmer, Chair, DC Financial Responsibility and Management Assistance Authority
Testimony to the House of Representatives Committee on Government Reform and Oversight Subcommittee on the District of Columbia
July 15, 1998




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Mr. Chairman and Members of the Subcommittee:

Thank you for inviting me to testify today on the development of the new Washington Convention Center. I will describe briefly the role the District of Columbia Financial Responsibility and Management Assistance Authority (“Authority”) is playing with respect to the development of this vital economic development project This is one of the most important such projects ever to be undertaken by the government of the District of Columbia.

Earlier this week, the Authority approved the District Council's legislation (Act 12-402) regarding the Washington Convention Center. Our action allows plans for the new conference and meeting facility to advance to the next step, which is approval by Congress and the National Capital Planning Commission. In granting its approval the Authority first reviewed the process undertaken by the Convention (:enter Authority, considered comments and testimony presented to the District Council, and gave serious consideration to concerns expressed by venous groups, including the Committee of 100. In reaching its decision, the Authority weighed the economic benefits associated with the project, considered the impact of the new facility on the Shaw Community, evaluated estimates of the guaranteed maximum price (“GMP”), and the risk elements to the government. Finally, we considered the feasibility of carrying out the project as well as the soundness of the budget and plan of finance.

The Authority has been committed to this project from the very beginning. We have given it strong support — including assigning some of our Senior Staff to work closely with the Convention Center’s management. We have monitored this project very closely for the last two years, and have provided guidance and advice when necessary or appropriate. The Authority believes that the Convention Center Authority, under the leadership of Mr. Terry Golden, has acted responsibly and effectively with regard to design, location, and the contracting for the Center.

As the Committee may recall, the Authority concurred with — and supported — the Convention Center’s decision to reject the original design-build procurement approach in favor of the current construction manager at-risk method for the construction of the new facility. The Convention Center Authority made this decision after receiving one bid from the market in its initial solicitation and after it reviewed the recommendations of the General Services Administration. The shift to the construction manager at-risk procurement method produced healthy competition for this contact, and it resulted in the final GMP of $500.6 million. This figure of $500.6 million represents the direct hard cost of construction negotiated by the Convention Center Authority The total cost for the project is estimated to be $685 million, consisting of $650 million for hard and soft costs, plus equipment and contingencies; $25 million to improve the METRO Station; and $10 million for utility relocation. The total budget assumes that $25 million will be provided through a federal grant to fend the WMATA costs to expand the Metro Station, and $10 million will be available using Community Development Block Grants for utility relocation (subject to approval by the U.S. Department of Housing and Urban Development).

Most importantly, we have worked hand-in-hand with the Convention Center Authority to restructure the early financing plan We have considered comments from the Administration, Congressional staff members, the Council, representatives of the hotel and restaurant industry, and the financial marketplace. We are confident that the restructured dedicated tax revenue will be mote the sufficient to support the expected planned issuance of tax-exempt bonds in the range of $560 – $645 million without any undue risks to the District and its general fund.

The current financing plan includes adequate operating and marketing reserves, renewal and replacement reserve funds, and a rate stabilization account, all to assure that the new building can be maintained and will be able to compete effectively with other convention centers. Furthermore, the new structure contemplates a closed indenture and a change in the current lock- box facility of the District to insure that, once the dedicated revenues are collected, they will go first to pay the annual debt service on the bonds. Based on current cash flow analysis, it appears that, if administered properly, the debt on this project could be retired well in advance of the stated 30 - 34 year final maturity on the bonds and that there should be a positive net return to the general fund, once the debt is paid off.

The Authority weighed the concerns expressed by some citizens with respect to the impact that the proposed facility might have on the Shaw Community. We were pleased to learn of the efforts made by the Convention Center Authority to gain the support of Shaw, and other community and business groups. The Convention Center leaders assured US that they will establish an “affirmative action oversight committee” to monitor, on a monthly basis, all contracting and affirmative action goals relating to the Local, Small, and Disadvantaged Business Enterprise program. The affirmative action and employment goals set by the Convention Center Authority are aggressive but achievable. The Construction Manager has agreed to a vigorous outreach and advertising program that is designed to make opportunities known within the target communities. The Contractor and all of its subcontractors also are required to enter into First Source Employment Agreements. There are incentive and penalty clauses within the Construction Manager contact to help enforce these social and business agreements.

Concerning the possible adverse impact on the surrounding community, the Convention Center Authority has responded by developing sound mitigation responses. Pursuant to Section 106 of the National Historic Preservation Act, the Convention Center Authority, is a signatory to a Memorandum of Agreement with the National Capital Planning Commission, the District, the Advisory Council On Historic Preservation, and the D.C. State Historic Preservation Office, which outlines a number of measures to be taken to safeguard community and environmental interests.

Finally, the Authority believes that the new Washington Convention Center can serve as the cornerstone project for expanding the District's tax base, and in improving opportunities for economic development. The economic impact analysis prepared by the accounting firm of Coopers & Lybrand indicates that this project will have a significant, and much needed, positive “net” impact on the economy of the nation’s capitol. the net total economic impact resulting from this project by 2006 is estimated at $397.9 million ($776.7 million projected for the new facility versus $378.8 million projected for the existing facility). The total employment impact is estimated to be 9,750 jobs by 2006, for a net employment gain of 3,860 over the projected employment for the existing facility. As witnessed by the recent announcements of planned new hotel rooms to be built in the District, the Convention Center can leverage growth in both the tax and employment base of the District, without committing or jeopardizing the general fund of the government. Indeed, the key to this project is the ability to spur economic development across the District. The hotel and restaurant industries are very supportive of this project and, with their help, we look forward to a greater opportunity for economic development in the District.

I would like to make specific note of the efforts of several individuals who have been instrumental in the Center’s progress They include Mr. Terry Golden, Chairman of the Convention Center Authority and Council Member Charlene Drew Jarvis, Chair of the Committee on Economic Development. Mr. Edward Singletary, a former Member of the Authority, provided strong leadership to encourage the development of the new Convention Center. I also wish to express our appreciation to the members of the Committee of 100, which provided the Authority with considerable research and insight into the issues of location and management of a successful meeting and convention center.

Mr. Chairman, the Authority is dedicated to the mission of creating a stable, vital environment that will retain existing residents, businesses, and visitors, while attracting new ones. The Washington Convention Center will help greatly to fulfill that mission. The state-of-the-art facility will attract new business and tourists to the District, and it will be a catalyst for furthering downtown and nearby neighborhood development. The Convention Center will create jobs for District residents in the hospitality industry and in related meeting and exhibition service companies. Finally, this project will generate enormous benefits for the District, and it will strengthen the economy of the entire metropolitan region. Therefore, the Authority urges the Congress to approve the project and to take all necessary actions, before the scheduled August recess, in order to provide e District the opportunity to move forward with this vital economic development project in an expeditious manner.

Mr. Chairman, this concludes my statement. I would be pleased to respond to any questions that you or Members of the Subcommittee may have.

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