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Cobo Hall -- Funding Update
JUST ADDED:
 March 27, 2008 Letter
From Gerald D. Poisson, Deputy County Executive, Oakland County, to Mr. Dan Krichbaum, Chief Operating Officer, Office of the Governor (includes related Status Report and Issue Summary - Cobo Hall Project dated March 27, 2008).
Addendum to the Speech: Unanswered Questions: Cobo Hall Project (file size 42k)
This addendum was presented with the 2008 State of the County Address delivered by L. Brooks Patterson, Oakland County Executive, on February 7.
January 15, 2008 Letter
From Robert Daddow, Deputy County Executive, Oakland County, to Azzam Elder, Deputy County Executive, Wayne County (includes related e-mail dated January 3, 2008, from Mr. Elder to Mr. Daddow).
January 15, 2008 Letter
From Gerald D. Poisson, Deputy County Executive, Oakland County, to Azzam Elder, Deputy County Executive, Wayne County.
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In a September 14, 2007 Detroit News guest editorial, Wayne County Executive Robert Ficano indicated he wanted to "move forward with accuracy" in addressing the Cobo Hall expansion issue. Oakland County couldn't agree more. And in addition we believe that "openness" should be pursued. This section of the Web site has been established to achieve the desired goals of openness and accuracy.
In his September 14, 2007 Detroit News letter, Mr. Ficano made these three erroneous claims:
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"Oakland County Executive L. Brooks Patterson continues to misrepresent the cost structure of the proposed Cobo plan as $968 million."
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"The financing for Cobo is a fiscally responsible strategy. Once again, the plan is not $968 million and never has been."
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"The proposed plan is less than $600 million, which is one year's economic impact and significantly less than any previous plan submitted for consideration."
To be accurate, the attached documents demonstrate that it is Mr. Ficano who is misrepresenting the content of his Cobo Hall Expansion Plan when he claims his plan "is a fiscally responsible strategy" that "is not $968 million and never has been."
COST OF WAYNE COUNTY'S PROPOSED COBO HALL EXPANSION PROJECT
In late October 2006, a contingent from the Wayne County Executive's office approached Oakland County with a proposed Cobo Hall expansion plan. The summary of the plan, on page 5, plainly states that the plan's "total project cost" is $968 million. Simply put, Wayne County's plan calls for the issuance of $968 million in bonds, with the bonds to be paid off by extending the hotel and liquor taxes currently set to expire in 2015 for an additional 22 years, that is, from 2016 to 2037.
Components of Wayne County's $968 million Plan included:
Cobo Renovation/Expansion - $425 million
The renovation cost has been segregated into that which is needed for the expansion of the exhibit hall space and the costs of upgrading the facility for building code violations and other deferred maintenance, which is $209 million of the above amount. Several smaller expansions have recently been proposed as noted in the September 4, 2007 agenda and related minutes.
Purchase of Cobo Convention Facility - $20 million
The Wayne County Plan calls for the creation of a Regional Authority that will purchase the Cobo Convention Center from the City of Detroit for $20 million, even as the region is now expected to fund the $209 million in maintenance costs incurred over the past dozen years.
Payoff of the current debt - $110 million
In order to clear the title to the convention center and transfer ownership of it from the City to the Regional Authority the present debt must be repaid. Thus, $110 million of the $968 million bond proceeds are proposed to be used to pay-off the existing debt.
Cash Incentive Disbursements to 83 counties - $233 million
In order to immediately utilize all of the proceeds of the existing hotel and liquor taxes expected to be received from now until 2015 contemplates providing a discounted, lump-sum distribution to all counties based upon the amounts from the future collections. The discount rate is set at 10% - far in excess of the normal investment rates limited under State statutes. These current hotel and liquor tax proceeds are used by counties to support general fund operations and to fund local substance abuse programs. Apparently, the plan's proponents believe that in these troubled economic times, Michigan's county governments will be willing to accept a reduced, lump sum payment today in exchange for giving up larger cumulative payments between now and 2015 and forego any extension of the hotel and liquor taxes for their general fund operations and substance abuse programs.
Endowment Fund to Subsidize Operations - $180 million
The Wayne County Plan recognizes that even an updated and expanded convention facility cannot generate enough revenue to support itself. Thus, the plan calls for borrowing $180 million to subsidize convention center operations. This $180 million loan would be repaid out of the proceeds from the to-be-extended hotel and liquor taxes.
TOTAL PROJECT COST
Cobo Renovation/Expansion - $425 million
Purchase of Cobo Convention Facility - $20 million
Payoff of the current debt - $110 million
Cash Incentive Disbursements to 83 counties - $233 million
Endowment Fund to Subsidize Operations - $180 million
TOTAL $968 MILLION
RECENT COBO HALL MEETINGS
Since mid-August 2007, additional Cobo Hall meetings have been held with representatives from Wayne and Oakland County, Walbridge Aldinger, Barton Malow, Hines and other groups. The agendas and minutes taken by Oakland County are cited below:
August 17, 2007:
No agenda was prepared but the topic covered was generally funding models for the Cobo Hall project.
Minutes - Cobo Hall Renovation Project
Details of analysis in support of cash disbursements to counties of $233 million (and other funding level alternatives)
September 4, 2007:
Agenda
Minutes - Cobo Hall Renovation Project
October 10, 2007:
Agenda
Meeting with Mr. Sowerby to cover scope of work for an economic impact analysis for the Detroit Auto Show.
Minutes
Proposed next meeting -- November 16, 2007:
Agenda (file size 55k)
Handout. Proposal by Oakland County of using the cigarette tax revenues as a basis for supporting the revised construction cost.
Proposed meeting between construction companies proposing the alternative construction models and Oakland County facilities management personnel - no date established.
OAKLAND COUNTY COBO HALL REPORTS AND MATERIALS
Since Oakland County's involvement in the Cobo Hall project began, three separate reports on the progress of the negotiations and Oakland County's analysis of various proposals have been prepared by County personnel and presented to interested parties. Copies of these three reports are contained on this Web site below.
The three reports were issued with the following business issues and requests for additional information (most of which remains outstanding):
Cobo II: An Oakland County Perspective (June 1, 2004)
This first report provided a listing of business issues facing the Cobo Hall Tourism Action Group and identified information required by Oakland County to enable Oakland officials to make an informed decision on proposed Cobo Hall expansion. Few of these business issues were ever addressed by the TAG through the remaining calendar year.
An Update: Cobo II - An Oakland County Perspective (April 29, 2005)
After having spent the better part of another year attempting to discuss the business issues cited in the June 1, 2004 report, Oakland County codified the business issues at this latter time and provided recommendations as to how the project might proceed.
Cobo Hall: Patterson Plan to Fund Cobo Hall Expansion (February 7, 2007)
In response to the Wayne County Executive's $968 million plan for renovating Cobo Hall, County Executive Patterson prepared several alternative courses of action that could be considered for funding the Cobo Hall expansion.
To date, none of the business issues contained in this report have been discussed by regional leaders, although an anticipated third meeting of regional leaders may cover the issues for the first time since Oakland County's involvement was invited in 2004.
The following is the Wayne County plan for Cobo Hall.
October 30, 2006 Report
This document is the full power point presentation (plan) offered by Wayne County for the renovation of Cobo Hall.
OTHER PERTINENT QUESTIONS
Several key issues are yet to be addressed by the Wayne County Plan proponents.
For example, in early June 2007, Mayor Kilpatrick was quoted in a Detroit News article as stating that while the Cobo Hall project has merit, if the regional funding were made available he would suggest that the amounts be used for transportation needs of City residents. This article also notes that total cost of the proposed Wayne County Cobo Hall project is $968 million.
Another concern is that even as the deferred major maintenance needs of the facility, which today are the financial responsibility of the city of Detroit, have grown to $209 million, the Wayne County plan is still calling for the Wayne, Oakland and Macomb County residents to fund maintenance and pay Detroit $20 million to acquire the facility. Why pay $20 million for a property that needs $200 million in maintenance?
Another concern is the need for the on-going $180 million in operating subsidies. If we know the operation will continue to lose money every year, who will be responsible for operating shortfalls that go beyond the subsidy? While Wayne's representatives have agreed that any remaining operating shortfall would be the financial responsibility of the City of Detroit, Detroit officials are not involved in the current discussion and have made no such commitments.
There have been no financial commitments offered to date for the Cobo Hall renovations by the following entities:
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State of Michigan - despite assertions that the economic development and related job impacts exceed over $500 million for the Auto Show alone.
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Automobile companies.
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Casinos - added convention traffic in a successful convention center would ensure additional playing time in the casinos.
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Other counties in the SEMCOG region other than Wayne, Oakland and Macomb Counties and the City of Detroit.
The title transfer of Cobo Hall to the regional authority is objectionable to the Mayor and City Council. To date, the City of Detroit has not been represented in the most recent meetings despite Oakland County's concerns that the owners and operators are not at the table.
The Wayne County proposed governance structure would have a 5-member board, including the State of Michigan who has provided no financial commitment.
Oakland County has repeatedly requested information concerning the economic impact of the Auto Show to no avail specifically tailored to the Oakland County impacts. The economic benefits to Oakland County businesses and residents are suspect - particularly with the vendor preferences in place targeting City-located businesses and residents. It is possible that the upcoming meeting with Mr. Sowerby will resolve these concerns.
There are numerous data requests that remain outstanding and that are outlined in the three Cobo Hall reports.
Finally, the Conditions Precedent (see related exhibit in the latest Cobo Hall report) must be discussed and agreed upon before we proceed in closing any agreement involving the renovation of Cobo Hall.
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