CHICAGO - In a move with possible long-term revenue implications for Detroit, the City Council on Tuesday voted to reject a bond-financed expansion of the Cobo Hall convention center.
Without the expansion, the city risks losing one of its chief economic engines, the annual North American International Auto Show. The auto show is currently committed to the city through 2010, though a number of automakers have pulled out in recent years, citing space constraints.
It's unclear whether state and regional officials, including Michigan Gov. Jennifer Granholm, will renegotiate the proposal, which was years in the making.
Meanwhile, in a special election Tuesday, former Detroit Pistons star Dave Bing emerged as the winner in Detroit's mayoral primary and will now face off with current interim Mayor Ken Cockrel Jr. in a May 5 election.
The winner - who will wade into a host of fiscal woes, including the city's $300 million deficit and newly downgraded junk-bond ratings - will serve out the remainder of former Mayor Kwame Kilpatrick's term through the end of the year.
Voters also approved five of six bond proposals, supporting a total of roughly $200 million of new-money borrowing despite the city's financial problems.
With a turnout of under 15%, Detroit voters approved measures that included a $97 million unlimited-tax general obligation bond issue that would finance improvements to the Detroit Public Library, city museums, and parks and cultural facilities.
Also approved was a $72 million issue for public safety projects, a $25 million economic development bond issue, and a $22 million issue to finance various street and light improvements. Voters rejected by 62% a $35 million borrowing to finance the improvements of various city buildings.
In voting 5 to 3 to reject the $300 million Cobo Hall expansion, opposing council members said the deal would mean essentially giving away an important city asset and nearly all control over the center's future.
Cockrel after the vote held a press conference vowing that the deal would go forward one way or another. "I am not prepared to give up on this. I am in it to win it," he said.
The deal - which Granholm signed into law in January subject to Detroit City Council approval - would create a new bond-issuing authority to oversee Cobo Hall. The expansion would be financed through the sale of bonds backed by hotel and liquor taxes. The five-member authority would be made up of representatives from Detroit and Wayne, Oakland, and Macomb counties, with one member appointed by the governor.
Under the deal, the authority would pay Detroit $20 million for the center, which the city would use to pay off outstanding bonds that financed parking facilities at Cobo. Detroit would save an additional $15 million that is used to cover annual deficits at the center.
The council's rejection follows a recent report by its own fiscal analyst urging members to approve the plan. According to fiscal analyst Irvin Corley Jr., Cobo Hall has a negative value of $284 million, based on operational deficits through 2023 coupled with repair and expansion costs.
If the city sold it, Corley estimated it would save about $500 million through 2015, in part by saving $100 million in debt service on current outstanding bonds issued in 1989 - the authority would take over those payments under the current plan - and other savings.
New bonds financing an expansion would be paid off with liquor and hotel taxes that would be extended through 2039. Those taxes are currently scheduled to end in 2015, when the current outstanding Cobo bonds will mature.
