Funding plan for convention center comes into focus

David Cameron: No general fund or Spring Forward SGF funds will go toward convention center debt service.

As the city of Springfield tries to garner public approval for a tax to fund a downtown convention and events center, officials have changed their financial projections and their approach.

It’s like a fiddling of an old-style radio knob to get a clearer fix on the desired station, with adjustments aimed at achieving a better result. The city is now proposing a 35-year sunset on a 3% lodging tax to fund the center, and its projections for paying off the debt reflect what City Manager David Cameron believes is a more accurate view of tax growth.

The city has also revealed the site location of the proposed center, to include the Springfield Expo Center and adjoining property, and design partners. One of those, architectural firm Populous Inc., hosted a visioning workshop for community members to learn about the center design on Jan. 28.

The proposed convention and events center is projected to cost $175 million, said Cora Scott, the city’s director of public information and civic engagement. About $145 of that would be financed through bonds.

A breakdown from the city shows debt service on a $145 million event center would cost $316.2 million by the time of its retirement in 2057.

The November 2025 iteration of a 3% lodging tax contained no sunset but instead was planned as a permanent measure to be paid for by guests to the city’s hotels, motels and short-term rentals. That tax failed at the polls in a light-turnout, single-question election, with 7% of city voters showing up to vote and 52% of those rejecting it.

Another 3% lodging tax will be put before voters on April 7, and city officials have already started trying to get the word out about how it will differ from the previous proposal.

In addition to the new sunset provision, discussion of funding the convention center emphasizes a cap on costs of $175 million, with additional land acquisition expenses bringing the total up to $205 million – but only if the city receives a $30 million allocation from the state. That allocation was approved by the Missouri legislature but withheld by Gov. Mike Kehoe, who has the sole authority to decide whether or not to release it before June 30.

If the state funds are not released, plans for the center will be adjusted, according to Scott.

“The state funds would help with the overall larger development, which could include land acquisition and adding to the convention/event center,” she said.

Cameron explained the notion of the hard cap to the Citizens’ Advisory Board, which recommends expenditures of Spring Forward SGF sales tax funds, in its Jan. 22 meeting.

“The hard-cost cap on the project is $175 million,” Cameron said. “If we do not get the state’s money, that’s what the hard-cap cost would be; with the state’s money, it will be $205 million.”

Cameron said the city is communicating a significant transition in its forecast for debt repayment, following work with the city’s underwriter, Stifel. The city now projects 4% growth per year in the city’s lodging tax revenue, compared to the 2% projection discussed in the run-up to the last election.

“The city’s hotel/motel taxes have grown about 5% a year over the last 20 years. That’s historical data that’s actually a trend,” he said.

There is a tendency to be conservative with projections in government budgeting, Cameron said.

“When we ran the pro forma on the first measure, it was based at 2% growth, just to be conservative, even though the data says it’s growing at 5%,” he said.

Data released by the city projects that during its 35-year term, the 3% sales tax will raise just over $407 million. In the first year, 2027, the projection is just shy of $4.9 million. That figure is expected to steadily rise at the 4% rate until it reaches $21 million in year 35, which is 2061.

Debt service on $145 million is expected to conclude in 2057, steadily climbing from a 2027 level of $3.7 million through to a 2057 level of $13.7 million.

A snapshot of historical lodging tax collections provided by the city shows a percentage change that averages 5.1% from fiscal 2005 to 2025. The average, however, is achieved with sizable variation from year to year. For instance, in fiscal 2020, when COVID-19 curtailed travel, collection fell 23% from the previous year. There was a 5.6% positive swing in fiscal 2021 and then a 40% increase in fiscal 2022, when travel was presumably back at prepandemic levels.

Buffer funds
Also in the convention center funding equation are funds being collected through the existing lodging tax to retire bond debt on the city’s Jordan Valley Park.

Cameron said the current Jordan Valley Park debt is due to expire by June 30, 2028 – earlier than its original due date of 2030. For this, Cameron credited the efforts of the city and Finance Director David Holtmann.

“Because the city has been so financially responsible … paying off that debt actually earlier than the 2030 date, we’ll actually have access to those funds,” he said.

For up to a decade of the revised pro forma, Cameron said, a portion of the Jordan Valley Park bond retirement funds will be available to supplement tax proceeds for debt service on the convention center.

Information provided by the city shows that debt service on the $145 million bond project would begin with $3.7 million due in 2027 before jumping to $7.9 million in each of the two years that follow, then going up steadily from there.

The proposed 3% tax would kick in at $4.9 million in 2027, exceeding that year’s $3.7 million in debt service, but annual tax revenue projections then come in behind each year’s debt service projection until 2043.Scott explained that this is just a potential use of the existing tax funds to stabilize debt coverage as the convention facility ramps up. After that, she said, the new tax would be expected to fully cover debt service.

“Remaining lodging tax revenues would continue to support operations, maintenance and tourism-related programming,” she said. “No general fund funding is anticipated or required for construction, debt service or ongoing operations.”

The city gets a 44% share of the existing 5% lodging tax funds, Scott said, and this is the funding that would be used for debt stabilization for a limited time. She said based on the current amortization schedule and conservative revenue assumptions, that would be no more than a decade.

Cameron’s explanation of the existing lodging tax funds showed them to be a sort of buffer.

“That’s how we underwrite and make sure it doesn’t come out of the city’s operating expenses,” Cameron said. “I think it generates about $21 million over that same time period; we’ll utilize about $6 million to offset any concerns with the debt service,” he said.

Cameron’s report to the CAB follows that body recommending $30 million of Spring Forward SGF sales tax funds be put toward the center in July 2025. That move was in keeping with the tax’s purpose of funding transformational projects that conform with the city’s Forward SGF comprehensive plan, according to Cameron, but it was at odds with many people’s understanding of what the funds could be used for, chiefly parks, trails and neighborhoods.

According to Cameron, as he spent time getting feedback from various city groups after the failure of the November measure, the concern was frequently expressed that the city would come back for more money to pay for the center – either through its general fund or the Spring Forward SGF sales tax.

“There was an understanding – ‘OK, you’re going to come back and ask for more to offset any losses to this thing … or you’re going to utilize the half-cent to issue debt off of it,’” Cameron said.

But CAB has stated that funding from the Spring Forward SGF cannot be applied to debt, Cameron said, calling it an educational piece that has to be explained.