King County will look to bail out the Washington State Convention Center with a $100 million loan as private sources of funding for the $1.9 billion expansion project in downtown Seattle have dried up amid the coronavirus-fueled economic downturn.
The pandemic has crippled both the business and the budget of the convention center, as conventions have been scrapped and hotels have sat virtually empty.
But construction of an expanded convention center — one of the city’s largest-ever construction projects — is well underway, with a cement and steel armature looming above a full city block in the heart of downtown. Construction began in 2018 and the center was slated to open in 2022. Foundations have been built, walls have risen, buses have been booted from the downtown transit tunnel.
And this may not be the last bailout the struggling project requires.
Since the spring, county and project leaders have warned the expansion project was $300 million short and, without federal aid, could run out of money by the end of the year. That federal aid has not come and year-end is nigh.
Even with a $100 million loan, there still remains a $200 million gap to fill, said Matt Griffin, managing partner of Pine Street Group, the private developer leading construction.
“This is not enough, it is one piece,” Griffin said. He said he’s discussed financing options with both the city and the state and hopes the county’s potential loan “becomes a template.”
Overall costs on the project have increased by about $35 million since May, Griffin said, due to the coronavirus.
Details of the potential loan are still being worked out, King County Executive Dow Constantine said Thursday, but the money would come from the county’s $3.4 billion investment pool, which invests funds for county agencies and school, water, sewer and fire districts.
The loan would be at “about 1%” interest, Constantine’s office said, comparable to the 0.82% earnings rate the investment pool saw in November.
Constantine said he was working with the Metropolitan King County Council to come up with a package “at manageable risk” to county finances.
Since the pandemic began, 67 conventions have been canceled, according to the Downtown Seattle Association. Conventions around the country have flatlined, with no guarantees of a full bounce back after the pandemic, even as cities continue to upgrade convention centers in an arms race to woo spendy business travelers to their downtowns.
Constantine called the loan “good and compelling public policy.”
“We have an obligation to help our region compete for convention and visitor dollars,” he said. “Having gone four-fifths of the way here in financing and constructing this convention center, we need to see it through to completion.”
He said he was “absolutely confident” the loan would be repaid, noting the hotel taxes to finance the project are already in place, “unless you believe no one will ever travel to Seattle or King County again.”
He differentiated between investing in the convention center and aiding struggling private businesses or even county services, like public transit.
“By loaning this money to a county entity, the convention center, we are able to continue the security of those funds and have them available,” he said. “They’re not funds we’re going to be spending and not recovering.”
The convention center expansion project was to be funded by selling bonds, backed by hotel tax revenue — 9% in Seattle and 2.8% in the remainder of King County — to pay back the debt.
But, since the pandemic hit, downtown hotels have held only 10% to 20% of their normal guests, according to the Downtown Seattle Association, and revenues have been down more than 90% from last year.
So far, the project has been funded by two bonds, sold in 2018, that were to be paid back through 2058. When those bonds were issued, revenue from the hotel tax had risen by 8% every year since 2010.
Former Seattle Mayor Mike McGinn, a longtime critic of the expansion, earlier this year likened the project’s financing to jumping in a cab without a wallet, hoping a roommate will pay when you arrive at home.
The expansion project, McGinn wrote, escaped public scrutiny because the Public Facilities District that oversees it isn’t an elected body and because “it neatly decided to launch project construction before securing all the financing.”
But other officials have been steadfast in the importance of not letting the project, which employs 1,000 construction workers, lag.
“Perhaps at no other time in our region’s history has it been more critical to fight tooth and nail to save every existing family-wage job,” said King County Councilmember Jeanne Kohl-Welles, chair of the council’s Budget Committee.
The loan would ultimately need the approval of the county’s Executive Finance Committee, which is composed of Kohl-Welles and members of Constantine’s staff.
“We cannot stall now, we cannot stop, there are thousands of jobs on the line,” said Nicole Grant, executive secretary-treasurer of the MLK Labor Council and a board member of the convention center.
Griffin, the developer, reiterated his message from the spring: that they would begin shutting down the project in early 2021 if they didn’t have a plan to raise the last $300 million.
“This project has the potential to be a crucial community asset for our recovery,” Griffin said. “Delaying it would be a huge loss for the region.”
Griffin is a prodigious donor to state and local politicians, overwhelmingly, but not exclusively, Democrats. He’s given more than $400,000 to state and local campaigns since 2006, according to state Public Disclosure Commission filings.
Griffin has been a consistent contributor to Constantine’s campaigns, donating the maximum allowable $2,000 to both his 2017 and 2021 reelection efforts. He’s also donated in recent years to at least five members of the nine-member County Council.