District of Columbia:
Status of the New Convention Center Project
AIMD/OCE-98-238: Published: Jul 15, 1998. Publicly Released: Jul 15, 1998.
Pursuant to a congressional request, GAO reviewed the Washington Convention Center Authority's (WCCA) efforts to arrange for financing and constructing a new convention center in the District of Columbia, focusing on the: (1) estimated cost of this project, including the guaranteed maximum price (GMP) for constructing the new convention center, and the risk exposure for both the contractor and the District; and (2) financing plan, including proposed changes to the revenue base, history of dedicated tax collections, projections for future revenues, and sufficiency to cover the GMP and other project costs.
GAO noted that: (1) WCCA is proceeding with efforts to build a new convention center at Mount Vernon Square at a cost WCCA officials estimate to be $650 million; (2) this estimate has not changed since GAO reported on this project in September 1997; (3) however, GAO's latest review of the project identified an additional $58 million in project costs which--because WCCA expects them to be funded through federal grants or moved into future operating costs--are not included in WCCA's total project costs; (4) these costs raise the project's cost estimate to $708 million, excluding reserve requirements and financing costs of $138 million; (5) the majority of the estimated project costs are covered in a $500.6-million GMP for construction; (6) the GMP lays out 22 different cost components and sets limits on financial risks to the construction manager, Clark/Smoot; (7) areas of risk are not included in the $500.6-million price; (8) an estimated $207 million in other project-related activities will be or have been contracted for separately; (9) WCCA's current financing plan to cover predevelopment, construction, reserves and operation of the convention center calls for about $846 million; (10) seventy-three percent of the funds needed to finance the project are expected to be derived from revenue bonds supported by dedicated taxes; (11) changes from the previous financing plan include increasing the term of the bonds as well as the dedicated taxes to allow WCCA to borrow more money for the project; (12) WCCA received $44 million in dedicated taxes in 1997, and WCCA has projected collections to increase at 1 percent per year over the next several years; (13) these and other factors will be looked at by WCCA's consultants, rating agencies, and bond insurers who will evaluate the financing package and determine its ability to cover the GMP and other project costs; (14) risks associated with the financing package could affect the rating of the bonds and accordingly, the interest rate; (15) although WCCA plans to address an $18-million reduction in its construction budget by negotiating arrangements with vendors to provide equipment and services, to date there are no executed contracts to cover these arrangements; and (16) the site selection process for the convention center has a long history and numerous studies have consistently identified Mount Vernon Square a preferred site.