Frequently Asked Questions

FEASIBILITY

1. Why was the 2005 Johnson Study Report on the Convention Center not recently updated? If excessive cost by the original consultant was the reason, why was another group not chosen to update and verify the results of the 2008 study?
As per the Owner/Architect Agreement with the City of South Padre Island, Texas dated February 21, 2013, the official notice to proceed for the Schematic Design and Master Planning phase of the South Padre Island Convention Center Expansion and Renovations project has been issued. This notice to proceed includes the updating of the Feasibility Study performed by Johnson Consulting. - Posted 3/5/13

2. Why have we not seen a report on the results of the recent Convention Center expansions in Texas as a basis for support of the expansion of the SPI Convention Center?
There is ample public information available on Convention Center expansions in Texas but because of the uniqueness of our destination, much of the comparable data is not relevant to the City of South Padre Island, which is why the City Council funded the update to the Feasibility Study by Johnson Consulting. - Posted 3/5/13

3. What are the anticipated difficulties, if any, that may be expected in renegotiations with the County for this ground lease?
We do not anticipate any difficulties in working with the elected officials of Cameron County regarding this project. - Posted 3/5/13

4. What are the minimum terms for a renegotiated lease that the City is willing to accept?
The terms of the lease are already in place and the City will be requesting an extension of the lease for an additional 25 years. - Posted 3/5/13

5. How long will the City allocate as an acceptable time for renegotiation?
The City Council has not discussed a timeframe for renegotiation. - Posted 3/5/13

6. The City does not have a particularly successful record of dealing with the County on a number of issues. What other issues are expected to be involved in these negotiations on a new ground lease?
The City is unaware of any issues regarding the extension of the lease. - Posted 3/5/13

7. Has the City considered asking the County to participate or facilitate in the City's ability to revitalize the Convention Center? A rebate or lowering of ground lease rates for the early years would seem to be reasonable.
At this point in time, the City has not made any request to Cameron County regarding the terms of the lease. The only direction at this point is to extend the terms of the lease for an additional 25 years. - Posted 3/5/13

8. What does the comparative performance look like for operating results of the convention center - without expansion, during expansion and after expansion?
The City has operational costs for the current facility but until the schematic design work is complete, it would be difficult to determine what the operational impact would be since City Council has not yet made a decision regarding the various components of the project which consist of 1) priority repairs; 2) renovation; 3) site work; and 4) expansion. - Posted 3/5/13

9. What was Broaddus role with the McAllen Convention Center? I would like to see a projected with actual comparison?
Broaddus & Associates was not involved in the pre-project planning for the McAllen Convention Center and has no feasibility projections that would include projected/actual number of conventions, operating costs, etc. For a summary of the role Broaddus & Associates played in the new McAllen Convention Center project, please click here. - Posted 2/5/13

10. What has been addressed to the Brookings Institute 2005 Convention Center report, finding that many cities have been constructing larger convention centers only to see attendance drop considerably? Has this been reviewed?
It is unclear who has received or reviewed this report and although it was a 2005 study, it was nice to see the upward trend on prime visitor destination being successful when other convention destinations experienced a downward trend. The following is a quote from the Bookings Institute 2005 Convention Center report:

"Some cities have long managed a successful role as visitor destinations as a result of their history, amenities, and distinctiveness. Both Boston and San Francisco are such locales, where a convention center can build on a large base of hotel rooms, restaurants, shopping, arts, and cultural facilities.

Boston's relatively small existing convention center, the Hynes, provides 193,000 square feet of exhibit space in a prime Back Bay location surrounded by some 5,000 hotel rooms.

Writing in 2001, consultant David Petersen described the center as having "achieved maximum occupancy in the first year after expansion" [1988] and thus a "phenomenal success."
- Posted 2/5/13

11. What is the current state of the convention center industry in Texas and the nation?
This question is too broad to be able to answer in a simple Q and A format and there is a vast array of opinions, studies and information available to the public. We can speak on behalf of some Texas associations that have a practice of selecting "destination cities" to hold their annual meetings and often experience higher attendance when their annual meeting is held on South Padre Island. - Posted 2/4/13

12. Why spend this amount on a 20-year building instead of tearing it down and rebuilding? Wouldn't new construction be more prudent/beneficial?
Renovation costs are typically 75% of new construction and although the building may need some repairs, other projects have shown that there is still value in retaining functional areas.Renovation budget is currently $130/sq ft and the new construction budget is $250/sq ft. - Posted 2/4/13

13. Does Broaddus & Associates have information on whether the McAllen Convention Center met its projections?
This information is not available. - Posted 2/4/13

15. The survey showed lack of space was only part of the reason SPI lost conventions or large events. Is it the best use of funds to attract a sector of the market?
Attracting more visitors especially visitors that stay an average of three nights, such as is true for conventions and association meetings, helps all business on the Island not just hotels, but also restaurants, convenience stores recreation, etc. - Posted 2/4/13

16. The Johnson Report was conducted in 2005; why isn't there an updated study?
The cost of a new report would be an estimated $50-60 thousand using Johnson and TVS Design together. We are getting good information from TxMET (see Question 1 in this section) that deals with groups,- who they are, size, where they go and why. - Posted 2/4/13

17. What are the terms of the Convention Centre lease with Cameron County to make sure the lease continues past the life of this project?
The lease term began on November 1, 1988 and expires on October 31, 2037. The City has the right to extend the lease for an additional 25 years. - Posted 2/4/13

18. Has the City considered other sites on which to build a new Convention Centre with better access to restaurants and entertainment?
Yes, the City has considered other sites, but the cost of land acquisition makes a new location prohibitive. The Convention Centre currently sits on a 30-acre site. - Posted 2/4/13

19. Have the Texas General Land Office and the US Corp of Engineers clarified the exact build area as limited by the wetlands that surround the existing site?
HDR Engineers has completed their report and it is available on the website. - Posted 2/4/13

20. Do you have a copy available of the Corpus Christi development plan mentioned by Broaddus & Associates at the January 28, 2013 Town Hall Meeting?

FINANCE

1. The HOT (Hotel Occupancy Tax) is the recommended method of financing for the refurbishment and expansion of the existing Convention Center. However, the HOT itself is complicated and the method that the City uses and cannot use the HOT revenue is not well understood.
Yes, the City is evaluating the use of hotel occupancy tax to fund the project but the City Council has not made a decision regarding the project or its funding source. The City's elected officials and staff, together with its consultants (city attorney, financial advisor, project manager, etc.), are well versed in the nuances regarding the use of hotel occupancy tax. For more information on the use of HOT funds, please see Question 1 under Finance and the Scott Joslove Report on HOT Tax under Associated Documents. - Posted 3/5/13

2. Would you please furnish the schedule of uses for the HOT during 2011 and 2012? Please indicate how much was used for advertisements and promotion; how much for maintenance; how much for beach cleaning assistance and re-nourishment, etc.?
The City posts its financial statements every month to ensure governmental transparency. To view the complete reports, visit www.myspi.org, Government, Department Reports. Financial Statements for the Convention and Visitors Bureau are available along with other department reports. - Posted 3/5/13

3. Would you please furnish a pro forma projection of the anticipated use of the HOT for the next 5 years, assuming that the debt service schedule (3% growth rate) provided by Estrada and Hinojosa is the basis?
The Current Market Conditions, Hotel Occupancy Tax Revenue History and Hotel Occupancy Tax Revenue Bond Scenarios which was produced by Financial Advisor Dave Gordon of Estrada Hinojosa is posted on the Convention Centre Project under Associated Documents. - Posted 3/5/13

4. As you can see from the questions above, we are interested in understanding how much HOT is available for expenditures, other than debt service on the Convention Center debt. Any assurances or explanations that could be included in this answer would be helpful.
This number cannot be determined until we have direction regarding the cost of the project. Currently, there is no debt obligation on the Convention Centre. - Posted 3/5/13

5. Would you please consider obtaining an updated feasibility study conducted by an outside, qualified consulting firm? We would hope that the conclusion of the study would be that the best reasonable path of the City is to spend $30 million obtained from HOT on refurbishment and expansion of the Convention Center and to do at its current location.
At the February 20, 2013 City Council meeting, the City Council approved $315,000 for the Schematic Design phase fees, which includes $25,000 to update the 2005 C. H. Johnson report. The Johnson Report is available under Associated Documents. - Posted 3/5/13

6. The term of the revenue bond debt is proposed to be 30 years. However, the expected `life" of the building is somewhat less than 30 years. How do you reconcile this seeming inconsistency?
The decisions regarding financing have not yet been made by the City Council. - Posted 3/5/13

7. If $30 million of the hotel occupancy tax is dedicated to fund an expansion of the convention center which benefits the hotels, what equal amount of funding and effort is going to be dedicated to increasing the business for the thousands of condominiums and real estate companies and rental property managers on the island that typically do not benefit from convention business yet whose rentals contribute almost ONE HALF of the Occupancy Tax? It is time to focus on more than the hotel business when we discuss the tourism industry and use of Occupancy tax on this island.
Increasing convention business is viewed as an economic generator benefiting the entire business community, and not hotels exclusively. - Posted 3/5/13

8. We understand that the City has applied for an increase or change in the HOT? Please explain what has been requested and why. If the city were not trying to fund this expansion of the convention center, would it ask to increase the overall rate? Has the city looked at the impact of raising the occupancy tax on families coming to the island to rent condominiums? If the city is not successful in getting these requests through at the state level, how does this impact the funding of the beaches vs. the convention center?
The request for an additional 1% "rebate" from the State hotel occupancy tax would generate additional funding for the beach. The City is working with its State Advocacy Representative Clint Smith of Hillco to assist with the requested legislation. The City's elected officials are working with local hoteliers to garner support for an additional ½% increase in the local hotel occupancy tax rate to fund beach renourishment. While these legislative initiatives do not have a direct impact on the Convention Centre project, ensuring that our beach is well-maintained helps us remain competitive in the convention market. - Posted 3/5/13

9. What type of projects can be funded with HOT funds?
Every expenditure of local hotel occupancy tax must meet a two-part test to be valid. The first element of the two-part test is the expenditures must put "heads in beds," which means every funded project must attract overnight tourists to the City's hotels and motels, thus promoting the City's hotel industry. The second part is that every expenditure of the local hotel occupancy tax must also fit into one of the statutorily-authorized categories which were narrowed by HB 1324. The statute on the use of hotel occupancy tax for the City of South Padre Island is further restricted where 7% of the funds generated must be used towards category 1 and category 3 (see below) and 0.5 % of the funds is limited to beach uses. The remaining 1% may be used for any authorized category:

1. Convention and visitor centers
2. Convention registration
3. Advertising the city'
4. Promotion of the arts
5. Historical restoration and preservation
6. Sporting events in a county under 290,000 in population

For more detail on the authorized use of hotel occupancy tax, please see the posted report authorized by Scott Joslove, available by clicking here. - Posted 2/5/13

10. Since there are projections regarding HOT growth over the next 30 years, is there a HOT tax budget that coincides with the projections of growth?
This projection should include employee cost, maintenance, advertising, etc. There should be a least one projection based on the current Convention Center Budget with no growth, since there is no guarantee with the "build it and they will come".

There are three models that were presented by the City's Financial Advisor Dave Gordon from Estrada Hinojosa & Company, Inc. that projected no growth, moderate growth and high growth together with showing a ten year annual revenue growth. Gordon's presentation is available on the City's website. Broaddus and Associates have calculated a preliminary estimate of cost increases for the expansion based on some projected breakdowns of costs. With an assumption that the City would hire maybe one or two more maintenances positions to assist with the logistics involving conventions and an assumption of a reduction of electricity costs of 25% because of the newer more efficient systems that would produce some savings, the estimated increase in operating costs for the newly renovated and expanded Convention Centre would be between $639-$756 thousand per year. - Posted 2/5/13

11. Why would the City use this type of financing instead of a certificate of obligation?
The advantages of certificates of obligation are that interest rates would most likely be lower and there wouldn't be a need for a dedicated debt service reserve fund. The disadvantage of certificates of obligation is that the City would be pledging property taxes in addition to the HOT funds. - Posted 2/5/13

12. Is a debt service reserve fund common for a project like this?
It is common because the City would only be pledging the hotel occupancy tax (HOT) revenue only and not property taxes, so it is structured with safeguards in place to protect bond purchasers and make the bonds more marketable. There would be approximately $2 million in reserve funds available only to pay debt service and the funds would earn interest income. The monies would be owned by the City and would be used to pay the last year's debt service. - Posted 2/5/13

13. Why does residual reserve include beach erosion?
It was for illustration purposes only. The total HOT rate is 8.5% of which at least 0.5% must be used for beach erosion. The 8.0% would be pledged to the bonds. Whatever is left after the payment of debt service would be used for other allowable City expenditures including beach erosion. - Posted 2/5/13

14. How will the cost be covered by HOT funds if current HOT funds are spent every year? Will budgets, such as the advertising & marketing budget be cut?
The Convention & Visitors Bureau is under new leadership that has already made significant improvements with fewer marketing dollars. The City would not be moving forward if the budget did not allow for this project. Debt service on the bonds will have first priority, however. We also expect HOT revenue to continue to grow over time, particularly if this project is undertaken. - Posted 2/5/13

15. What accounts for the $15 million per year increase in revenue from this project?


Currently, you have 63,000 attendees that when calculated results in an estimated revenue of $30 million. The table below shows the 97,000 attendees you are projected to achieve by 2020 that equates to estimated revenue of $45 million. The difference is $15 million. Note: C. H. Johnson/TVS Report in 2005 used average spending per day of $80 and an average hotel cost of $90 per night. We have updated the number for 2013 to $100 average per day spending and $150 per night including tax. - Posted 2/5/13

16. Has a detailed cost analysis of the projected running costs of the revised building been produced?
The evaluation of operational cost as it relates to the renovation and expansion is not yet complete. This will partly be based on the final improvements to be made which has yet to be determined. - Posted 2/5/13

17. Will there be a city accountant on hand to answer questions about the spending of the project that potentially affects the running of the Convention and Visitors Bureau overall?
The City will have several departments responsible for project oversight and will also have its consultants Broaddus & Associates which has been contracted to assist the City in managing the project. Financial reports are generated each month by the Finance Department and posted to the City's website. The City Council has on its agenda for February 6, 2013 a Responsibility Matrix that clarifies project/construction approval process and provides area of responsibilities based on activity. Once this is approved by City Council, it will be posted on the website. - Posted 2/5/13

18. Assuming today's rates, what is the difference over 30 years in the proposed payments between a revenue bond and a GO bond?
The City's current general obligation bonds are rated Aa2 by Moody's and AA- by S&P. The rating on HOT revenue bonds will probably be around A2 and A although this will be a new rating so there is some uncertainty. Additionally, the City may be able to save some money by using bond insurance with the HOT revenue bonds which is again unknown at this time. Based on current estimates, the difference in debt service over the proposed 30 year term will probably be about $8-9 million. This is net of the approximately $2 million debt service reserve fund deposit which will be required for the HOT revenue bonds and used to pay the last year's debt service for the bonds. The advantage of using HOT revenue bonds as previously noted however is that property taxes will not be pledged to the bonds. - Posted 2/5/13

19. Do we have a marketing budget with line items and media placement for 2013? If so, I would like to review it, along with the entire budget condensed for the convention center.
For the complete budget with line items for Fund 02- Hotel/Motel Tax Fund and the Fund 06- Convention Center Fund, please click here. - Posted 2/5/13

20. What other projects were considered for the City, since money is very "cheap" at this time?
The City Council is not currently evaluating the issuance of debt for any other capital projects but that is not to say that the City Council would not consider debt issuance in the future for a project that is deemed a priority. - Posted 2/5/13



ACCOMMODATIONS

1. Have there been any ongoing discussions or negotiations about building a new hotel near the existing Convention Center site? Either with the County or any private group? Are any anticipated?
Yes, there have been discussions regarding a hotel near the Convention Centre site. - Posted 3/5/13

2. What plans have been put in place to secure an adjoining Full Service Hotel once this expansion begins? Waiting until completion is valuable time lost in securing such a critical element.
There are no plans in place, but now that the City Council has an approved a contract with the Architect/Engineering Consultant, work can begin regarding a master plan for the entire site. - Posted 3/5/13

3. Are there conversations with the County to dedicate land for a convention center hotel on the beach front?
There have been preliminary conversations with Cameron County elected officials regarding the project; however at this stage, it is only discussion. - Posted 2/5/13

4. How many hotel rooms are currently available on SPI?
Currently, there are 2,165 hotel rooms, with 696 of those in full-service hotels. For condo room rentals, the number fluctuates from 2,100 to 2,200 rooms depending on private owners. - Posted 2/4/13

5. Why expand the Convention Centre if SPI does not have the hotel space to accommodate the extra people?
The occupancy rate fluctuates based on the time of year and with each property. The City is relying on feedback from our local experts in the hotel industry regarding their capacity to provide the necessary hotel rooms to an expanded market. The City also receives data regarding weekly average daily room rates and weekly occupancy rates contained in Destination Reports which are publications of Smith Travel Research, Inc. - Posted 2/4/13

6. Would there be flights to support the additional people?
Representatives from the Brownsville South Padre Island International Airport and the Valley International Airport in Harlingen currently sit on the Convention Centre Transition Board to assist the City in working with the necessary entities to provide the necessary airline flights and services needed to accommodate greater attendance. - Posted 2/4/13

7. What kind of feasibility study can be conducted to determine whether SPI will have rooms and flights available if this project is completed?
While there is no feasibility study that will guarantee private investment from the airline and hotel industries, by creating additional demand for these services through the renovation and expansion of the Convention Centre, it is much more likely that these private enterprises will either expand their services or invest which will stimulate the local economy. - Posted 2/4/13

8. Is there ANY proposal submitted to partner with a hotel group to produce the rooms necessary to support such an expansion? If so, who will represent the Council and the City?
We are currently exploring these options. - Posted 2/4/13

9. Who will be able to talk about the permitting issues with regard to the wetlands?
HDR Engineering is contracted with the city to handle these issues. - Posted 2/4/13


CONSTRUCTION

1. I've attended some meetings about the convention center. Will you be renting kiosk space for small businesses? For instance, could a photographer have a desk and a backdrop to take photos? Will there be a "Gazebo" like setting with the bay view and sunsets? Wedding ceremony location? I'm a photographer and would be interested in renting a small space.
Currently, there are no plans to rent space in the Convention Centre. We are in the process of negotiating a contract with the selected architect and engineering firm. That contract is scheduled to be placed on the City Council agenda for February 20, 2013. Once the contract has been approved by City Council, the design team together with Broaddus & Associates, who represents the City, will begin to work with the CVA Transition Board to develop a schematic design. We certainly anticipate that the design will complement the natural beauty of the island. The CVA staff has been actively promoting the Island as a great wedding destination and we would encourage you to contact the CVA staff regarding their marketing efforts that will help you be successful. - Posted 2/14/13


6. Has the City considered adding something different to the Convention Centre that would make it stand out?
These issues will be addressed at the schematic design phase. - Posted 2/4/13

7. What is the difference between a banquet hall and exhibit hall? How does this differ from the space available now?
The SPI Convention Center does not have a banquet hall in the current facility. An exhibit hall is an open space sold to vendors that is then partitioned into booths or spaces. A banquet hall is a finished room, typically with high ceilings, chandeliers used for assemblies, including food and beverage (catering services). - Posted 2/4/13

8. At the January 28, 2013 Town Hall Meeting, a problem was mentioned with a parking garage? What is the problem? Could this problem be avoided if the parking garage was placed under the new building?
You can build on top of a parking garage, but you cannot build underground because the water table is too high. There is no problem with building a parking garage; however, they are expensive, with a typical cost per space of $15,000. To avoid that expense, we recommend fitting additional spaces on surface parking, which would be less expensive. - Posted 2/4/13


DECISION-MAKING

1. Could you please furnish a timeline for the decision process that the City intends to follow to reach a final decision on this project? Are there any deadlines or other points by which the decision must be determined?
The Architect/Engineering Consultant "Gignac" will be meeting with the Convention and Visitors Transition Team on March 27, 2013. It is anticipated that in May 2013, the City Council will have enough information to be able to make some decisions regarding the Convention Centre Renovation and Expansion Project. - Posted 3/5/13

2. Has a decision already been made on this project? If not, how will the decision be made, administratively or by a vote?
A decision has not been made. The City Council has not voted on the scope of the project nor has a vote been taken on the financing alternatives. If the City Council makes a decision to utilize revenue bonds, an election will not be held. - Posted 2/4/13

3. When you get ready to make a decision, will the City consider taking it to voters, whether in an election or petition form?
If the City were funding this project with property taxes, then the City would put it to a vote; however, the funding method that is being proposed is revenue bonds that would pledge the use of hotel occupancy taxes. The Secretary of State does not allow a municipality to hold non-binding elections, which is what was requested at the town hall meeting. - Posted 2/4/13