- change ups
Grand Center Cost Up But Revenue Gap Down
GRAND RAPIDS — The budget gap for the Grand Center expansion project narrowed by nearly $8 million last week, even though the estimated cost of the work rose by almost $20 million.
The new estimate pegs the construction cost for the convention center work at $219.5 million, up nearly 10 percent from the four-year-old estimate of $200 million. The increase is largely due to inflation in the construction industry, as the cost of labor and materials have risen since the initial cost-estimate was made.
But the deficit between the project’s cost and revenue has been reduced by 57 percent, falling from $13.5 million to $5.8 million. The drop is largely due to stronger financial commitments from Kent County, the Grand Action Committee and, possibly, the Downtown Development Authority.
Kent County Commission Chairman Steve Heacock said the county would increase its pledge to the project by 19 percent from $73 million to $87 million. The money will come from the county’s lodging excise tax, more commonly known as the hotel/motel tax, and will be funneled to the project over the next 25 years.
“That’s not because the county decided to release any general funds. It’s because we’ve secured more of the hotel/motel tax stream that already existed,” said Heacock, who also chairs the Convention and Arena Authority, the board that owns the Grand Center and Van Andel Arena.
“The reason there was more is that the county was characteristically conservative in its original estimate. Secondly, we are now working with Paine Webber and through them we were able to eke out some more money out of the already existing revenue stream,” added Heacock. “So we are very confident that we can produce the $87 million from the county’s hotel/motel taxes.”
Paine Webber is handling the project’s bond offering.
Grand Action pledged to increase its private-sector fundraising effort by 10 percent, raising its goal from $30 million to $33 million.
“Grand Action has already started on increasing our goal to $33 million and we’re absolutely confident that we’ll achieve that goal,” said David Frey, Grand Action co-chair and CAA board member who chairs the building committee. “We’re looking forward to being a part of this coalition, this partnership that is going to get this project done.”
The hope is that the DDA will double its commitment of $5 million. The board initially proposed to pay for the Monroe Avenue street work associated with the project, which was originally targeted at $5 million. But the work ended up costing just under $10 million and DDA member Verne Barry has urged the panel to make a stronger financial pledge to fill the street-work gap.
“I’m cautiously optimistic. But, of course, it depends entirely on that board’s deliberations and ability to cover that shortfall,” said Heacock.
The state has given $65 million to the project, while the federal government is on board for $8.7 million. The city has also pledged $10 million from arena receipts over a 10-year period.
The next step is to find the $5.8 million still needed. Heacock pointed out that there are several funding possibilities available, including more federal money. The chairman added that both of the state’s senators, Democrats Carl Levin and Debbie Stabenow, will be asked to find $5 million for the project.
In addition, some engineering changes could be made to the project or a few items could be shelved until the money is found. “There does exist a significant list of items that can be revisited,” said Dale Sommers, CAA project manager.
Of the $219.5 million cost, $169.5 million is the construction estimate and $50 million belongs to the CAA estimate. Another estimate will come about halfway through the process of drawing up the construction documents, expected to occur sometime next year. The CAA approved the new budget and gave the green light to start on those documents last week.
Heacock noted that the $5.8 million gap was less than 3 percent of the project’s total budget, and he expressed confidence that the shortfall would be met before the new building officially opens in December 2004.
“We also look at this as somewhat conservative,” said Heacock. “While we think we’ve squeezed all there is to squeeze out of the county funds, there may be more there as the project continues and the bonds actually are put out, depending on interest rates and the economy.”