Milwaukee Journal Sentinel
The downtown Milwaukee Wisconsin Center convention center expansion is proceeding with a $420 million taxpayer-financed project even as the COVID-19 pandemic has devastated the travel industry.
The Wisconsin Center District, the state-founded agency which operates the convention center and other downtown venues, will borrow money by selling bonds to investors this fall.
Work is expected to begin immediately after the bond sale is completed by mid-December, and the expanded convention center is to open by March 2024. The project will double the building’s space.
Even though the pandemic has canceled conventions nationwide, as airlines, hotels and restaurants are faced with huge losses and layoffs, the timing is right for this project to proceed, said Marty Brooks, district president and chief executive officer.
“We cannot wait,” Brooks said Thursday in comments to the board’s Governance Committee, which unanimously granted final approval for the expansion.
The district, which also operates UW-Milwaukee Panther Arena and Miller High Life Theatre, is expected to end 2020 with a loss of $2.7 million.
It had expected to post about $21 million in net income this year before the pandemic canceled the Democratic National Convention and dozens of other Wisconsin Center events. The convention business is projected to fully recover by 2023, Brooks told committee members.
A bigger Wisconsin Center opening in early 2024 would be positioned to “ride the wave,” he said. A larger center is needed to compete with new and expanded convention centers in St. Louis, Indianapolis and other cities, Brooks said.
Also, interest rates for borrowing are at historic lows, Brooks said. Finally, there are looming deadlines prompting the vote to move forward.
The State of Wisconsin agreed in 2019 to provide taxpayer backing for up to $300 million in district debt tied to the project.
That “moral obligation pledge” means state taxpayers would cover the debt if the district was unable to do so. That pledge expires at the end of 2021 if the district hasn’t sold bonds by then.
Also, the bonds that are sold to investors in 2020 will have credit-worthiness ratings that are set in part according to the district’s revenues from 2017 through 2019, Brooks said. Delaying the bond sale would require looking at district revenues from 2020 — when they have dropped sharply.
As a result, the bond sales would most likely have to be delayed until at least 2024 to obtain improved revenue results required by investors, Brooks said. There is strong interest from investors in buying the bonds in 2020, said John Mehan, a managing director at Baird & Co., financial adviser for the district.
A June bond sale that refinanced district debt also saw strong demand, Mehan told committee members.
That debt restructuring is expected to reduce the district’s 2020 debt payments by $18.3 million. That restructuring is projected to save an additional $14 million in 2021. It also greatly helped increase the district’s cash reserves, increasing them to $17 million by the start of 2021 and $23 million by the start of 2022, said Steve Marsh, district senior vice president and chief financial officer.
The project bonds are to be paid off over 40 years by countywide hotel, restaurant and car rental taxes levied by the center district. The first debt payments aren’t due until 2027.
The project was approved by the district board on April 2, but the expansion was delayed until the Governance Committee provided final approval.
The expansion, budgeted at $419.9 million, will add 112,000 square feet to the center’s main exhibition hall, providing a total of 300,000 square feet.
The development also will provide a second ballroom with an outdoor terrace and add meeting rooms, indoor parking spaces and loading docks. Adding onto the Wisconsin Center will allow it to attract more conventions and trade shows, bringing more spending by visitors, according to a December study by HVS Global Hospitality Services, a consulting firm based in Westbury, New York.
Annual direct spending of visitors to the Wisconsin Center, now estimated at $105 million, is expected to increase to $154 million by the time the project is complete.
The Wisconsin Center opened in two phases, in 1998 and 2000. The third phase will be on what are now convention-center parking lots between West Wells Street and West Kilbourn Avenue.
Tom Daykin can be emailed at [email protected] and followed on Instagram, Twitter and Facebook.