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Back to Washington Convention Center Authority resources on-line

Terence C. Golden, President and CEO of Host Marriott Corporation and Chairman of the Board of Directors of the Washington Convention Center 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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Chairman Davis, Delegate Norton, Members of the Subcommittee, my name is Terry Golden and I am appearing before you today in my capacity as Chairman of the Board of Directors of the Washington Convention Center Authority. I would like to thank you for giving me the opportunity to appear before the Subcommittee to discuss a project of enormous importance to the District of Columbia — the development of the new Washington Convention Center.

We all know that Washington is one of the nation’s leading destinations for both tourists and conventioneers. Last year, the Nation’s Capital played host to more than 22 million tourists and another 6 million business and convention visitors. Collectively, visitor spending totaled nearly $10 billion in 1997. Impressive as those numbers are, if they are to increase in the coming years, the District's convention facilities must be able to accommodate the technological and functional requirements of today’s meeting and exhibition industry.

Our current convention center can no longer meet the needs of our target market. Once the fourth largest convention center in the country, today it ranks number thirty. Our present facility has only 12 loading docks and, more importantly, it can host only a single show at a time. The upshot is that the District is losing valuable market share to the likes of Philadelphia, Atlanta, and Orlando.

The new Washington Convention Center at Mount Vernon Square has been designed to meet the needs of our target market, which consists of professional associations, corporate conventions, and international meetings.

Together, these groups account for 85 percent of the total convention and meetings industry, and our new facility will accommodate 100 percent of that market for the foreseeable future.

The new convention center will total 2.3 million square feet, with 725,000 square feet of prime exhibit space, l 50,000 square feet of dedicated meeting space, 66 loading docks, and a 60,000 square foot ballroom, which will be the largest in the Northeast. The ballroom space is flexible space, so it will be possible to configure it as additional meeting space, thereby providing a total of 210,000 sq. ft. of meeting space. The new Center also will have state-of-the-art technology.

The building has been designed by an award-winning team of architects and engineers who have worked on convention facilities throughout the country including Philadelphia, Atlanta and Chicago. The design has been approved by both the Commission of Fine Arts and the National Capitol Planning Commission.

While the new Washington Convention Center will be a handsome addition to the District architecturally, the real reason for building this facility is the enormous economic contribution it will make to the City and to the region.

According to Coopers and Lybrand, the new Washington Convention Center will produce in the District $776.7 million in total economic output in its fifth year of operation. By the fifth year, the region as a whole will realize $1.4 billion in total output.

Just as significant are the jobs that will be created in the District. By the fifth year of operation, the project will support 9,750 full and part time jobs in the District, while in the region 17,580 full and part time jobs will be produced.

We are well aware that this project has its detractors. But it is terribly important that you know how much support there is throughout the city and in the Shaw neighborhood for the new Convention Center at Mount Vernon Square. Over 20 Shaw area civic organizations — including three surrounding Advisory Neighborhood Commissions — have endorsed the project.

We have undertaken a number of steps to mitigate any adverse community impacts. The entire building has been lowered one whole level to reduce the apparent massing, and L and M Streets both will remain open to pedestrian and vehicular traffic. To better serve the Shaw community, the new Center will include approximately 44,000 square feet of street-level retail space fronting on 7th and 9th Streets. Our goal is to be as friendly to the surrounding community as we will be to visitors in the building.

With respect to the construction cost, our Construction Manager (CM), the joint venture of Clark/Smoot, has agreed to a $500.6 million Guaranteed Maximum Price (GMP) for the project. If there are construction cost overruns, they will be borne by the Construction Manager.

The construction management contract that we entered into has been structured in such a way as to encourage costs savings, with 75 percent of any savings going to the Authority and 25 percent to the CM. Further, the contract outlines aggressive local, small and disadvantaged business enterprise subcontracting goals.

In order to reach the GMP, the Authority worked with the Construction Manager to clarify construction details, received independent cost estimates, and engaged in a value engineering process that found less costly ways to undertake the project. Neither the design nor the function of the building were compromised during the value engineering process. In the end, the Authority was able to negotiate a GMP that is consistent with the project budget.

Total cost for the entire project is $650 million, inclusive of the GMP.

Additional costs include: $97 million for soft costs such as legal and other professional services; $22.3 million for equipment and fixtures; and $30 million for construction-related contingencies. The budget anticipates that improvements to the Mount Vernon Square Metrorail Station and some off-site utility relocation costs will be funded through grants from the federal government. Specifically, the President’s FY 1999 budget includes $25 million for the Metrorail station and $10 million for the utility work.

The City Council of the District of Columbia has approved the financing plan and the GMP for the project. These items also have been approved by the Financial Responsibility and Management Assistance Authority.

The financing plan anticipates issuing approximately $645 million in par amount bonds with net bond proceeds equaling $616 million with a 34-year senior and junior lien structure. Bond proceeds will finance $45 million in Debt Service Reserve Funds; a contribution of $9 million to the Capital Renewal and Replacement Reserve Fund; and $12 million for financing costs. Finally, the Authority will utilize the more than $100 million in cash and investment earnings on hand to fund the remainder of the $650 million budget.

This is a very conservative model that the Authority will continuing to refine, and we may present to rating agencies a more aggressive financing structure to achieve a transaction which could have a 30-year term of senior lien debt only.

Again, I believe that you will conclude, as others have, that our plan is extremely conservative.

A recent analysis of potential future revenue generated by the dedicated taxes indicates that more than enough money will be available to support repayment of the bonds. While the Authority based it financial model on base year revenues totaling $44 million, the report indicates that in 1999, dedicated tax revenues will be $52.6 million and in 2007 revenues will be approximately $71.4 million.

Development of the new Washington Convention Center is essential if the District of Columbia is to continue to grow and prosper. The Convention Center Authority has worked diligently to bring us to this point.

The New Washington Convention Center enjoys broad support in both the public and private sector. The new Center has been enthusiastically received by our customers. With your support, we can begin this critical economic development project this year.

Therefore, I respectfully urge the Subcommittee to authorize the Washington Convention Center Authority to issue bonds and to spend funds for construction of a new convention center at the Mount Vernon Square location. We also request that the Subcommittee waive the 30-day Congressional review period for the “Washington Convention Center Authority Amendment Act of 1998,” which was recently passed by the Council of the District of Columbia, signed by the Mayor and approved by the DC Financial Control Board.

Waiver of the 30-day review period will allow WCCA to complete the bond transaction in August and take advantage of the currently favorable interest rates in the municipal bond market.

Mr. Chairman, that concludes my formal statement, and I would be delighted to answer any questions that you might have at this time.

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