Expect the Unexpected: Financing the Orange County Convention Center Expansion in the Wake of Recession and Terrorism

By Donoghue, Sharon; Gassman, Eric et al. | Government Finance Review, August 2004 | Go to article overview

Expect the Unexpected: Financing the Orange County Convention Center Expansion in the Wake of Recession and Terrorism


Donoghue, Sharon, Gassman, Eric, Taub, Stephanie, Winterkamp, Fred, Government Finance Review


More and more communities are using sector taxes to finance growing capital improvement programs. Sector taxes, such as those on tourism, investment income, tolls, and landing fees, among others, are less stable and predictable than sales and property taxes. In developing capital financing plans based on sector taxes, governments should always consider ways to predict and overcome unfavorable developments. Thanks to this kind of contingency planning, Orange County, Florida, was able to successfully complete a $748 million convention center expansion despite the severe financial strain on the tourism industry following the September 11 terrorist attacks.

This article begins with a brief overview of the convention center, the expansion project, and the associated funding plan. We then discuss the challenges that ensued and how the county met them by revising the original funding plan. Finally, we highlight the most significant lessons learned from this enormous undertaking--lessons in teamwork, capital planning, and project finance.

INDUSTRY LEADER

Orange County, Florida, is home to the City of Orlando and the Orange County Convention Center. The Orange County Convention Center is a world leader in the convention industry and a central element of the county's economic development effort. Convention center activities are responsible for more than $20 billion of past and future net economic benefit. With 2 million square feet of exhibit space, the convention center is the second largest in the United States. One million square feet of the exhibit space is the result of an expansion project begun in 1998 and completed in 2003.

Orange County's 5 percent lodging tax, called the Tourist Development Tax or TDT, funded both the original facility and the expansion project. A 1979 voter referendum levied the initial 2 percent TDT and prohibited other county revenues from funding convention center capital projects. As such, TDT funding was the only revenue source available for the expansion project.

Through the years, the TDT grew at a robust annual rate in excess of 10 percent, in spite of negative tourism impacts like recessions and the Gulf War. Annual TDT collections reached nearly $100 million for fiscal year 1999. As TDT collections increased, the county accumulated TDT cash reserves that would reach $140 million by 2001.

In 1998, the county approved a five-year, $748 million convention center expansion to promote the local economy. The project included a massive new building, as well as improvements to the surrounding roadways and the existing facility. Using the input of convention industry clients, the county designed the facility expansion to be an efficient venue that would attract even more leading shows.

THE BEST LAID PLANS

The plan of finance to fund the five-year expansion project relied on growing TDT revenues to support a series of debt issues (see Exhibit 1). A financial consultant's projections of future growth in TDT collections showed that these revenues would comfortably fund the plan of finance. Fitch Ratings, Moody's Investors Service, and Standard & Poor's assigned credit ratings of A+, A2, and A, respectively.

The county sold bonds and the project started. Series 1998B TDT revenue bonds provided $136 million to fund design work and land. Annual TDT collections increased to $108 million by fiscal 2000. Series 2000 TDT revenue bonds in the amount of $300 million funded the first portion of construction. Following this second offering, the maximum annual debt service for all outstanding TDT debt was $65 million.

The plan called for another TDT revenue bond issue of approximately $220 million in 2002 to provide the remaining construction funding. The plan anticipated final combined annual debt service of about $82 million for all outstanding TDT debt. With projected annual TDT revenues of well over $108 million, the county was confident it would have no problem servicing this debt. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Expect the Unexpected: Financing the Orange County Convention Center Expansion in the Wake of Recession and Terrorism
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.