IBJ: The city is taking over operations of the Gateway Convention Center. How did that come about?
Bair: The city partnered with the center, and the city paid for a study by Johnson Consulting, which specializes in convention centers. We wanted to focus on the center because it is so limited in its revenue sources under the Convention Center Act in Illinois. With the new convention space opening in Belleville, the competition is ramping up.
The TIF that we’ve kind of supplemented Gateway with on capital improvements the last 10 years expires on Dec. 31, 2021. With all that, the idea was to have a game plan on how to set them up to succeed.
IBJ: Being proactive for what you expect to happen down the road?
Bair: Yeah. You eventually know the kid is going to move out of the house. Under the Convention Center Act, they have no taxing authority. The city appoints their board and backs their debt with the TIF, and we collected the food and beverage and hotel/motel tax for them. The logical conclusion was to consolidate the two entities and make them a part of the city.
Their board and our council voted in January.
IBJ: Does anybody else have to weigh in on this?
Bair: The Convention Center Act was very simple. It said the board votes to dissolve, and the governmental entity, the city, votes to accept. It was ridiculously simple. The board voted unanimously to dissolve and the city voted unanimously to accept the Gateway Center. There is no other legislative step.
IBJ: So, what does it mean for the city itself?
Bair: Well, we’ve got staffing (that can assume some duties). Like finance, we’ve got a finance department. And they were paying outside contractors, like a landscaping company. The city is going to take care of that for about 20 percent cheaper than they’d pay on the private market.
It was an instant savings of about $200,000 to $300,000 a year. There is so much duplication. They have such a small staff, and we have scale, so it’s much easier for us to absorb their operations.
Really what happens is we added about $26 million in assets — what the properties are valued at — with only about $4 million in debt. This also improves the financial position of the city.
IBJ: What else makes up that $200,000 in savings?
Bair: Fifteen percent is for contractual services. There were a couple of positions eliminated because the city is already doing it. We will no longer be charging an administrative fee to collect the taxes. We’re refinancing their bonds so we’ll save $52,000 a year on refinancing their bonds. We have a better credit rating and more access.
IBJ: Will taxpayers notice a difference in this? Will the city’s tax rate remain the same?
Bair: Property taxes will be completely unchanged.
The only difference: We had a 1 percent food and beverage tax that the entire amount went to the Gateway Center, and that was limited to the district right there at 157 and 255. We took that citywide. And the city also did that 10 years ago for a full year, when they were looking to attract the Grizzlies stadium. Makes it more fair.
We increased our hotel/motel tax from 7 percent to the level that O’Fallon’s at, which is 9 percent. Both of those were the same reason, partly the Gateway Center, partly parks and rec. When O’Fallon increased theirs that’s what they used to fund their capital improvement for parks and recreation. That’s one of the reasons we did that, to make sure – since it was focused on tourism and hospitality – that hotel and motel tax goes back into one of the prime drivers of the hospitality industry. We want residents to come in here and to have athletic tournaments use the Gateway Center.
If you’re John Citizen, you’ll notice 1 cent on a $10 extra value meal, but you’re not going to pay the hotel/motel tax at all. That’s completely driven by business.
IBJ: From a marketing standpoint, what does this mean?
Bair: We get to focus more on the sales pitch to get people to the convention center — ideally, to get the revenues up to where we can implement the plan. And the plan is to attract an adjoining, high-end hotel so you can walk out of the lobby of the Gateway Center and get into the hotel. Part of the plan is a 35,000-square-foot expansion of the Gateway Center so we can attract indoor athletic events and gaming events. It’s really space that’s needed based on where the market’s at. St. Louis regionally doesn’t have a space for indoor athletic events — like 30 courts for a volleyball tournament.
Eventually, in the next year or two, we’ll be pushing that expansion and looking to partner with the private market to really get them invested. So, the city or the public is not paying the whole bill.
IBJ: Is the city going to closely watch what’s going on the next year before launching into an expansion?
Bair: I would say yes. Because we’re actively managing the implementation. There is a lot of minutia as far as details. We intend to immediately get an upgrade to the Gateway Center, and a lot of that will be on the TIF money that we are not holding aside. It needs new carpet – it’s had the same carpet since 1996. There’s some very basic stuff that needs to be done to freshen it up. Then by 2019 we’re going to jump right into expansion, figuring out what the plan is and who our partners are going to be.
IBJ: Is there room to expand?
Bair: There is, but a lot of the space has to be rethought. One of the things we have to do for expansion is structure parking. Right now, there is a lot of land being wasted on surface parking. That’s very inefficient. Surface parking does give you the ability to use it as a revenue stream. The city can charge for that parking, or not, depending on what the event is.
IBJ: Has this been in the works for quite a while?
Bair: The discussion started in October 2017 as a result of the study. It was discussed with the City Council at the Jan. 8 meeting. It was voted on by the Gateway board at their Jan. 18 meeting and then the City Council voted on it at their Jan. 22 meeting. All were unanimous votes. The effective date is May 1.
IBJ: Has the convention industry been receptive to this?
Bair: Nobody said a word. The convention industry is a little odd, and I’m not going to pretend to understand it. This is a model like Rosemont and Schaumburg, the two municipalities we looked at that own their own convention centers. Our competition right now is really St. Charles, and it is owned by the county.
IBJ: You said the convention center is limited by its very nature. Has it lost any big opportunities because of that?
Bair: Sure, their business has been declining because they can’t update their facility. The consequence is you have to raise your prices. So, it’s kind of a vicious circle. Without the ability to do some basics, they have absolutely lost business.
The only reason they’ve stayed viable is they’ve purchased a couple of shows, which is an anomaly for the industry. The most notable one is the fishing show, which just happened in January. That show gives them a profit of about $70,000 when they do it.
It would have been a matter of time before they were in financial insolvency, about three or four years.
IBJ: It strikes me that this will be a new venture for the city…
Bair: It fits right in with what we’re doing in taking over management of our parks. And we’re switching our convention and visitors bureau affiliation from IllinoiSouth to the Alton Regional Convention and Visitors Bureau, which is changing to Great Rivers & Routes. We fit perfectly with them. We’re going to lead the whole region in tourism, commercial recreation and hospitality.