CHICAGO — Michigan would create a new authority to take ownership of Detroit’s Cobo Hall Convention Center under a long-awaited expansion plan unveiled yesterday by state and local officials that relies on $600 million of borrowing to help attract more business to the home of the annual North American International Auto Show.

The plan includes refunding the center’s existing debt, expanding its exhibit space, creating a regional authority to take over operations, and making the center a sales-tax free zone — the first for a U.S. convention center.

Wayne County Executive Robert Ficano, Gov. Jennifer Granholm, and Detroit Mayor Kwame Kilpatrick announced the plan yesterday. Under discussion for several years, the current plan is both smaller and less expensive than previous proposals.

“We can expand our regional convention center without raising new taxes and give consumers a tax break at the same time,” Ficano, the plan’s chief supporter, said during the press conference.

The $595 million of planned borrowing would be secured by state hotel and liquor taxes. About $110 million would go to refund Cobo’s outstanding debt while another $323 million of new-money debt would finance construction. An additional $20 million would finance the purchase of Cobo from Detroit.

The overall financing includes the issuance of $142 million of taxable bonds that would be invested in an endowment fund with earnings expected to generate $9 million annually to cover the center’s operations. By forgoing the tax-exemption, the authority would not be restricted as to its investment earnings.

Cobo currently loses between $15 million and $20 million a year, a deficit covered by Detroit’s general fund. Detroit would continue to pay any remaining deficit from its general fund.

A new regional convention authority, with the ability to issue bonds, will own and operate the center under the proposal. The authority’s board would consist of representatives from Wayne, Oakland, and Macomb counties, Michigan, and Detroit.

Granholm yesterday announced the state would contribute an additional $150 million during the next 10 years for the center’s general operations. That money will come from restructuring a portion of the county’s current debt obligations to the state.

State legislators will introduce a trio of bills next week to enact the plan. One bill would create the authority to run the center, another would extend the hotel and liquor tax for seven years, and a third would establish a sales-tax free zone at Cobo, and perhaps other state convention centers. Rep. Morris Hood 3d is the principal sponsor of the bills.

“It’s a good concept, and we’ve certainly made more progress than we’ve made in the past,” said Michael McGee, a senior principal at Miller, Canfield, Paddock and Stone PLC, which is bond counsel on the deal. “Now we wait for the political process.”

If legislators pass the bills before the end of its spring session, the authority might go to market before the end of the year, McGee said. “It’s all driven by the legislative schedule.”

Creating a sales-tax free zone for Cobo would set a precedent for U.S. convention centers, said officials. A final bill could extend the benefit to other convention centers in the state.

The state is not expected to lose significant revenue by exempting Cobo from the 6% sales tax, primarily because conventions currently don’t sell a lot of goods, said Turkia Mullin, assistant chief executive officer for Wayne County. “It’s not like we’re foregoing [revenue],” she said. “The hope is to have the plan remain revenue-neutral for the state.”

State, local, and county officials have been debating proposals to expand the Cobo center for several years. A recent study estimates that the Cobo center’s events bring in about $600 million in annual revenue, with more than 80% of that coming from the auto show.


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