District of Columbia:
Status of the New Convention Center Project
T-AIMD/OCE-98-239: Published: Jul 15, 1998. Publicly Released: Jul 15, 1998.
- Full Report:
Pursuant to a congressional request, GAO discussed the results of its review of the Washington Convention Center Authority's (WCCA) efforts to arrange for financing and constructing of a new convention center in the District of Columbia, focusing on: (1) the 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; (2) the 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; and (3) information on the site selection process, including WCCA's analysis of alternative sites, particularly the Northeast No. 1 site.
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) GAO's latest review of the project identified an additional $58 million in project costs which--because WCCA expects these costs to be funded through federal grants or moved into operating costs--are not included in WCCA's total project costs; (3) these costs raise the project's cost estimate to $708 million, excluding reserve requirements and financing costs of $138 million; (4) while WCCA has maintained a $650-million budget, a number of changes have been made among the budget components, with some components increasing and some decreasing; (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; (7) areas of risk are not included in the $500.6-million price; (8) the total contingency for the project is down from $75.9 million to $40 million; (9) WCCA's financing plan to cover predevelopment, construction, reserves, and operation of the convention center calls for about $846 million; (10) 73 percent of the funds needed to finance the project are expected to be derived from revenue bonds supported by dedicated taxes; (11) WCCA received $44 million in dedicated taxes in 1997, and WCCA has projected collections to increase at 1 percent a year over the next several years; (12) the financing plan assumes a lower interest rate, an increase in the annual dedicated tax revenues to support the bond financing, and an increase in the terms of the bonds from 30 to 34 years; (13) these changes would allow WCCA to borrow more money to finance the project; (14) risks associated with the financing package could affect the rating of the bonds and accordingly, the interest rate; (15) the site selection process for the convention center has a long history and numerous studies over the years have consistently identified Mount Vernon Square as a preferred site; and (16) WCCA's most recent analysis of the Northeast No. 1 site indicates that costs would be higher and would likely result in opening the convention center at a much later date than estimated for the Mount Vernon Square site.