Convention Centers Get Expensive Surprises

By Rachelle Crum -- Tradeshow Week, 6/12/2006

Convention center operators currently expanding or renovating their centers, or even building a venue from scratch, are facing some expensive choices these days. Blame Hurricane Katrina, the high cost of petroleum and the booming U.S. construction industry — all have led to higher than anticipated materials costs, particularly for projects that were planned several years ago.

Dozens of convention center construction projects are underway across the country. At least one is running $9 million over budget, while in another case, the shortfall could be as much as $53 million.

Kevin Molloy, general manager of the Bayfront Convention Center, a new venue under construction in Erie, Pa., said that, because of the extra $9 million that must be tacked onto his previous $94 million budget, he is now "finding better ways to build a mouse trap" by considering alternative materials for the center and more potential future revenue sources.

"We are looking to both revenues and expenses to answer the $9 million question," he said.

The shortfall became apparent to Molloy after he received higher than expected bids for general construction, plumbing, steel and electrical work as the project moved into its second phase. The authority is currently re-evaluating the bids and may have to put the project out to bid anew if other ways to save some money don't surface.

Across the country in Phoenix, Scott Sumners has similar concerns.

Sumners, deputy director of the Phoenix Convention Center, said an unanticipated increase of $53 million in construction costs may place the city-owned venue over its $600 million budget. Again, the problem is that construction costs have escalated since preliminary estimates were made before the project started.

"This has to do with taking the subcontractor bids on Phase II of our project," he said. "We didn't get a lot of competitive bids. One bid for drywall that we estimated would be $14 million came in at $28 million."

"Joe Contractor," Sumners added, "he can basically name his price."

To ease some of the pain of that unexpected $53 million price boost, the center will rebid the drywall and exterior skin packages to see if it can do better. The aggregated Phase II bids are 15 percent over what was estimated, Sumners said.

He said the center would approach the Phoenix City Council about additional funding.

The $103 million Bayfront Convention Center budget includes the construction of the center, a 200-room hotel and a 130-car parking garage.

The 142,500 square foot center, to be owned and operated by the Erie County Convention Center Authority, will feature a 28,800 sq. ft. exhibit hall, a 13,500 sq. ft. ballroom and seven breakout rooms.

Molloy expects the Erie venue to open late next summer, as scheduled.

"I have no doubt that the convention center would get there, I have no doubt that the hotel will get there, if the $9 million question gets answered," he said.

The Bayfront project is funded by state and county bonds and a state grant of $44 million. The center's operations budget will come from Erie hotel taxes. The increased funding, Molloy said, would have to come from either the state, the county or both.

The Phoenix Convention Center is partly funded by the city and state. Its operating budget comes from taxes on hotel occupancy, restaurants, bars and construction contracts.

"We are proceeding with all of the bids we have to proceed with," he said, which include demolition, steel and concrete foundations.

The Phoenix venue was earlier this year renamed Phoenix Convention Center from Phoenix Civic Plaza. The city began demolishing the north half of the facility earlier this month.

When Phase I of the Phoenix center expansion, the West Building, opens next month, the venue will have a 65,000 sq. ft. exhibit hall, 27,000 sq. ft. of meeting room space, a 21,000 sq. ft. conference center and a 45,000 sq. ft. ballroom. When Phase II is completed in January 2009, the venue will offer 659,000 sq. ft. of exhibit space, 172,000 sq. ft. of meeting space and 46,000 sq. ft. of ballroom space. The total usable space of the center will expand from 302,000 sq. ft. to 922,000 sq. ft.

Molloy said he is relieved to know that his problems are minor compared to, say, the Miami Intl. Airport expansion which, according to reports, is $1 billion over budget.

The U.S. Census Bureau estimated that construction spending during April surged to a $1.2 billion annual rate, 8.5 percent higher than in April 2005.