Memorandum

City of Lawrence

City Manager’s Office

TO:	Thomas M. Markus, City Manager
FROM:	Diane Stoddard, Assistant City Manager Danielle Buschkoetter, Management Assistant
Date: CC:	December 5, 2017 Casey Toomay, Assistant City Manager
RE:	Public Sector participation in area conference center development

This memorandum will summarize the public sector participation in conference centers in Manhattan, Olathe, Overland Park and Lenexa, Kansas. In the case of these four communities, the development of a conference center was a stated goal of the City.

Manhattan, Kansas

The Manhattan Conference Center was opened in late 2011 and is a 30,000 square foot facility, yielding 15,500 square feet of usable conference space. The conference facility can host events for up to 1,500 people and the space is flexible with one large room that can be segmented into eight separate rooms. The conference center is adjacent to a parking garage and also adjacent/connected to a 135 room hotel, the Manhattan Hilton Garden Inn. The development of a conference center had been discussed in the community for a number of years and was a specific goal identified by the City Commission.

The City of Manhattan has a development agreement with the developer regarding the hotel, conference center and parking garage. The developer constructed all three of the facilities, with the developer financing the $14-15 million hotel, the City financing the $6.3 million parking garage utilizing half STAR bonds and half general obligation bonds, and the City financing the conference center construction with the issuance of $9.5 million in economic development bonds. The City’s agreement with the developer outlines developer ownership and operation of the hotel and conference with City ownership of the parking garage. The agreement also calls for the developer to repay $5 million of the $9.5 million construction cost of the conference center over a 30-year period. The developers pay $100,000 annually for 29 years toward the repayment with a balloon payment in year 30 of $2.1 million. The repayments are current. A more detailed memo on the Manhattan Conference Center project is available here.

Olathe, Kansas

The City of Olathe directly pursued opportunities for a conference center. It was identified as a need in the community and a priority of the City Council. The Embassy Suites Hotel and Conference Center opened in late 2015 and has approximately 200 rooms and 25,000 square feet of conference space. The conference center can accommodate approximately 750-1,000 people. Thus far it has been successful and has not encountered any major issues.

There were a number of incentives used to make the project financially feasible. First, an Industrial Revenue Bond (IRB) was used for a sales tax exemption on construction materials. Second, Tax Increment Financing (TIF) was used to capture property tax increases, 100 percent of the City’s sales tax and 100 percent of the transient guest tax for a 20-year term. Third, a Community Improvement District (CID) was created which captured an additional 2 percent sales tax to pay off general obligation bonds for a 20-year term. Finally, the City waved some fees associated with the project. It should be noted that the City does retain an administrative fee and has discounted use of the hotel and conference center for City events.

Overland Park, Kansas

The Overland Park Convention Center and Sheraton Hotel was opened in 2002. The project includes a 240,400 square foot convention center consisting of 60,000 square feet of exhibit space, 14,000 square feet of meeting rooms and a 30,000 square foot ballroom. The facility also includes an outdoor terrace, full-service kitchen, covered and surface parking, enclosed and open-air walkways between the convention center and the adjacent Sheraton Hotel, as well as a football field sized courtyard between the facilities. The adjacent Sheraton Hotel has 412 rooms and is directly connected to the Overland Park Convention Center. The development of the convention center and hotel was a specific priority of the City Council.

Overland Park Development Corporation was created as an instrumentality of the City of Overland Park to oversee the design, construction, operating and financing of the City’s Convention Center hotel. The Development Corporation issued bonds, backed by pledge of operating revenue with a backstop of transient guest tax funds to fund the hotel. The convention center was constructed using General Obligation bonds. The City has a strong management agreement in place for the operation of the hotel and convention center.

Lenexa, Kansas

In 1997 the City of Lenexa began pursing plans for City Center, which is a large mixed-use development that houses Lenexa’s new downtown. The need for a conference center was identified in the original City Center plan. The Hyatt Place Hotel and Lenexa Conference Center opened in 2016 and has approximately 125 rooms and 14,000 square feet of conference space. The conference center can accommodate approximately 500 people. Thus far it has been successful and has not encountered any major issues.

There were a number of incentives used to make the project financially feasible. First, an Industrial Revenue Bond (IRB) was used for a sales tax exemption on construction materials. Second, Tax Increment Financing (TIF) was used to capture property tax increases to help pay for the land and public infrastructure improvements for a term of 20-years. Third, the City provided a $4 million economic development grant financed through general obligation bonds and paid back with transient guest tax collections from the hotel. Fourth, the City established a Project Stabilization Fund. This fund received annual payments from the City over 5 years on a sliding scale based on the occupancy and daily rates of the hotel. Finally, a Community Development District (CID) was created to capture an additional 1 percent sales tax for a term of 22-years.