CHICAGO - A long-delayed bond-financed plan to renovate Detroit's convention center may finally be a done deal after the City Council this week declined to block the project.
The council's implicit approval removes the last obstacle to breaking ground on the $300 million plan to renovate the aging Cobo Hall. Cobo is home to the North American International Auto Show, which is one of Detroit's top economic engines and estimated to bring in around $500 million annually to the cash-strapped city.
The council in February - under different leadership - had vetoed the state-sponsored plan to renovate Cobo, sending Michigan legislators and regional leaders back to the drawing board.
Under new legislation signed earlier this month by Gov. Jennifer Granholm, the city would retain ownership of the convention center while leasing it to a new bond-issuing authority for 30 years. The center would revert to the city's control after 30 years. Under the original plan, Detroit would sell the facility outright.
The new five-member authority would sell up to $299 million in bonds backed by hotel and liquor taxes from Wayne, Oakland, and Macomb counties, as well as state cigarette taxes. Under the new deal the authority would also take over debt issued by the Detroit Building Authority to build parking facilities at the center and give the city $20 million to compensate for lost parking revenue.
Tuesday's City Council decision to not cast a vote on the plan before the Aug. 1 deadline to reject it advances the project after years of regional squabbling. Proponents have said they would like to break ground on Sept. 1, though there is no clear timeline yet on when the authority would enter the market to sell bonds.
"One of first priorities of the authority will be to establish the construction schedule for the rehab of the facility, and once the construction schedule is set that will drive the financing schedule," said Michael McGee, attorney with Miller, Canfield, Paddock and Stone PLC, which is working on the transition. The authority will likely enter the market with the bonds in early 2010, he said.
The legislation also allows for the creation of a citizens advisory council to advise on a variety of issues, including ensuring that Detroit's residents are first in line for new jobs created by the project.
In related news, Detroit Mayor Dave Bing recently told local media that a trio of privatization plans that the city's 2010 budget is balanced on are "unrealistic" and that the government could run out of cash by Oct. 1 without dramatic cuts.
Bing said Detroit must eliminate city departments and cut services and jobs among other moves to eliminate a roughly $25 million deficit by Oct. 1. Among other options, Bing told the Detroit Free Press editorial board that the city would ask the state to help with its debt, perhaps by increasing its share of state revenue sharing.
The budget relies on three asset-privatization transactions estimated to raise $275 million. They include leasing the Detroit-Windsor Tunnel, the city's municipal parking system, and the Public Lighting Department.
Crafted before Bing took office, the budget was approved earlier this month by the City Council. While Bing has said he won't veto the plan, he said the privatization plans are not a realistic way to eliminate Detroit's financial problems.