Orange County, Florida, suspends convention center expansion

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Orange County, Florida, officials pulled the plug on a major bond-financed expansion of the second-largest convention center in the country amid a five-month-long, double-digit plunge in tourist tax collections, which support the plan.

Since the pandemic-induced downturn, the county had used tourist development tax revenues to continue designing the $605 million capital improvement plan at the Orange County Convention Center. County commissioners had already voted to postpone construction.

Declining tourist tax revenues led to the suspension of the convention center expansion project, said Orange County, Florida, Mayor Jerry Demings.

Mayor Jerry Demings said the expense of finishing the design work and funding other projects, which required dipping into reserves, was too great against the backdrop of economic uncertainty.

Demings said he directed staff to reduce immediate and future TDT-funded expenses, including the convention center expansion, until finances and tax collections stabilize.

"Initially, we intended to complete the design to have a 100% set of drawings," Demings said in a memo to commissioners. "However, I have looked at the additional cost required to reach that milestone against a backdrop of significant uncertainty of when to proceed with the project."

“Additionally, we are unaware of the design changes that may be needed to successfully compete and operate in the post-pandemic environment,” he added.

The county had 60% of the design done in August, according to the convention center's website. The convention center is 7 million square feet. The expansion will include adding 60,000 square feet of meeting rooms, an 80,000-square-foot ballroom, and 200,000 square feet of flooring to seat up to 20,000 guests.

Demings suspended the architecture and design contract with the joint venture Populous and C.T. Hsu, saving $18.5 million in design fees.

On Thursday, Orange County Comptroller Phil Diamond said TDT revenues continued their double-digit nose dive in July, for the fifth straight month of historic declines.

Collections were $5.16 million, a 77.2% decrease compared to July 2019.

"The worldwide pandemic continues to weigh heavily on the tourism industry," Diamond said.

In Central Florida, the unemployment rates are among the highest in the state with thousands of tourism related workers laid off or placed on extended furloughs, he said.

As of July, Orange County had 123,183 unemployed workers, for a jobless rate 16.1%, according to the U.S. Department of Labor.

The unemployment rate in adjacent Osceola County, many of whose workers are employed by Orange County theme parks, was 20.2% in July. Florida’s statewide unemployment rate was 11.3%.

Diamond said July's TDT collections were influenced by actions taken by the area's mega-theme parks and the lack of tourists.

Disney World, which reopened in mid-July after a lockdown to reduce the spread of COVID-19, reduced park hours and delayed the opening of several hotels and resorts. Universal Orlando closed some of its hotels and delayed the construction of the planned Epic Universe theme park.

On the expenditure side of TDT revenues, Diamond said the county continues to use reserves over the short-term to offset the collections shortfall and to meet funding obligations.

The July report shows the county drew down $21.76 million from cash reserves for the TDT renewal and replacement reserve, other authorized uses.

Last month, Chief Deputy Comptroller Eric Gassman told The Bond Buyer, since April about $5 million of reserve funds from the other authorized uses category have gone to the debt service sinking fund to bridge the downturn in TDT collections and to avoid using bond reserves.

Gassman said Friday that July’s reserve draw included $5.1 million for the sinking fund. Other components of the draw were for the operations and maintenance reserve, capital expenditures, and various expenses for local entities, such as the visitors bureau.

The bond reserve account remained fully funded at $80.24 million, according to the July TDT report.

Orange County has issued about $890 million of bonds secured by TDT revenues for the convention center's expansion and improvements. The bonds are rated AA by Fitch Ratings, Aa2 by Moody's Investors Service, and AA-minus by S&P Global Ratings.

The spread of COVID-19 in the Sunshine State may be a deterrent for some tourists. As of Friday, there were 640,211 confirmed cases of the virus and 11,903 deaths, according to the State Department of Health.

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