Report Claims Huge Financial Losses at Sacramento Convention Center
A report issued by city watchdog Eye on Sacramento (EOS) reveals that the Sacramento Convention Center has been racking up major losses of $16 million annually for over a decade and shows no signs of improving its abysmal performance. "Convention Center losses over the past 14 years stack up to an eye-popping $218 million - greater than the city council's proposed $211 million cash subsidy of a proposed sports arena," according to the EOS report.
"The $16 million annual loss is consuming 4/5ths of the city's 12% hotel tax," the report notes. "Eliminating the $16M annual subsidy of Center losses would allow the city to hire 160 new police officers. The annual loss equates to 59% of the new taxes the city is collecting from passage last year of a 1/2 percent sales tax hike," said Dennis Neufeld, EOS's Director of Research.
"The city council plans to use the hotel tax as additional collateral to secure repayment of hundreds of millions of dollars of new arena bonds, tapping a revenue source that is already largely consumed by Convention Center losses, leaving the hotel tax a weak bulwark against possible claims by arena bondholders against the city's general fund (the ultimate guarantor of the arena bonds) should future city parking revenues (the primary source for repayment of the proposed bonds) fall short of city projections," the report stated.
The report also notes, "The Sacramento Convention & Visitors Bureau is expected to propose this month that the city spend from $50 million to $200 million - to be funded out of the hotel tax - to further expand the Convention Center, even though a major Center expansion in 1996 failed to meet overly optimistic revenue projections and greatly increased annual center losses."
"Expanding the Center again would be doubling down on failure. We have to stop the losses with better management or pursue a smart adaptive re-use of the facility," Neufeld added. The EOS report recommends that the city drop its plan to use the hotel tax as arena bond collateral, while outsourcing convention booking and facility management to experienced private firms to reduce losses.