Sacramento, California, plans to issue up to $350 million in bonds as part of a plan to expand its convention center and renovate two other venues in a downtown revitalization effort.
The City Council voted unanimously Tuesday to move forward with the bond plan.
The city of about 500,000 residents – California’s state capitol – hopes to attract move convention business with the upgrade to the aging building and spur more cultural activities with the renovations to its Community Center Theater.
“Our rebuilt Sacramento Convention Center and Community Center Theater will present a welcome, opening face to the street, replacing the concrete bunker feel the buildings have now,” Mayor Darrell Steinberg said in a statement. “We need more projects like this in the city – great cities have public venues that they can be proud of, that are genuine destinations.”
The bonds will be secured by a portion of the city’s 12% lodging tax; A new 1% levy on hotels and motels the city is in the process of creating will secure a future bond for a ballroom in the convention center. Hotel owners approached the city about creating the Sacramento Tourism Infrastructure District to support the addition of the ballroom, city officials said.
The city will sell $304.8 million this fall, pricing in October and closing in November. Two series will be tax-exempt and a third taxable, said Brian Wong, the city’s debt manager.
Jones Hall is the city’s bond counsel and Montague DeRose and Associates is the municipal advisor.
On Tuesday’s Moody’s Investors Service rated the senior lien bonds A1 and the subordinate series A2. The outlook is stable.
“The A1 rating on the city's senior lien TOT revenue bonds reflects the economic strength of the Sacramento area, which is the fastest growing large city in California with robust growth in travel and tourism, as well as the stabilizing influence of the state capital,” Moody’s analysts said. “Although the nature of the taxes pledged to repay the bonds is limited and economically sensitive, solid historical and projected demand for hotel rooms along with favorable debt structuring and strong legal provisions are key credit features.”
The convention center was built in 1974 and was partly expanded 20 years ago, according to a June city staff report. The 134,000-square-foot facility lacks the space and amenities to compete with centers in San Francisco, Los Angeles, Seattle and Portland, the report said. Meanwhile, cities with comparable centers like San Jose and Pasadena are moving forward with expansion plans.
“Status quo is not an option, and Sacramento is faced with a choice to expand the SCC or to continue to lose market position,” the report said.
The $196.4 million project will add exhibit halls, meeting rooms, more kitchen space. In addition to that, the 40,000-square-foot ballroom is expected to cost $48 million to $50 million. The city will sell bonds for the ballroom next year.
The expansion – which will also include a grander lobby – will bring the center to 255,000-square feet in programmable space.
The older parts of the facility and an adjacent office building will be demolished.
A study conducted by a city consultant said that the expanded space would allow the center to attract bigger conventions with more guests who stay for multiple days at hotels. Occupancy at the center is estimated to grow from 48% to 62% and the number of annual events to go up from 36 to 61 by 2025.
The study estimates an annual increase of 150,000 new hotel room night stays with $22 million in new revenue and $2.7 million in lodging taxes.
Construction on the convention center is expected to start in December with a partial opening in November 2020 so that it can accommodate two regular conferences held there, Wong said. The full project is expected to open in March 2021.
The two other projects are part of the same downtown complex as the convention center.
“It really strengthens the mayor and council’s long-term vision which is providing livability in the city and providing cultural amenities,” Wong said.
The Community Center Theater will be renovated to make it better accessible to disabled patrons. The $85.7 million renovation will include additional restrooms and concession areas, an expanded lobby and a larger loading dock that will allow the theater to host larger shows. The project will begin construction in February 2019 and should be open by May 2021.
The city already started construction in June of its $16.2 million renovation to the city’s Memorial Auditorium to add audience seating, acoustic enhancements, upgrades to audio/visual capabilities and an orchestra shell.
The auditorium will open in May 2019 and will serve as the temporary location for Community Theater events until that project is done.
