San Jose
San Jose
Convention Center
Convention Center
RENOVATION AND EXPANSION
ECONOMIC FEASIBILITY ANALYSIS
August 6, 2002
S TRATEGIC A DVISORY G ROUP LLC
Discussion Topics
Market Demand Assessment
Market Requirements
Program Budget
Funding Plan
Economic Benefits Summary
Next Steps
S TRATEGIC A DVISORY G ROUP LLC
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Industry Trends
Supply and Demand Growth Index
325
Exhibit Supply
300
Growth Rates:
275 Last Last
Growth Index (1985=100)
2001 5 Yrs 10 Yrs
SUPPLY: Exhibit SF 3.0% 1.4% 2.2%
250
DEMAND:
225 NSF - All TS -1.3% 3.5% 3.9%
Net Sq Ft NSF - TS 200 -1.5% 3.3% 3.9%
200
Attendance - All TS -5.8% 2.0% 3.7%
175 Attendance - TS 200 -4.5% 1.2% 3.4%
Attendance
150 Projections: Supply growth based on known
projects under development. Demand growth
assumes 2003 recovery to 2000 levels, 3%
125 thereafter.
100
'85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05
Source: Tradeshow Week; Major Exhibit Hall Directory. Projected
S TRATEGIC A DVISORY G ROUP LLC
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Target Market Survey
# of # of Avg. Event
Companies Meetings Attendance Attendance
Local Corporations 28 604 169k 280
Tradeshows 16 88 162k 1,800
Associations 34 431 58k 135
TOTAL 78 1,123 389k
S TRATEGIC A DVISORY G ROUP LLC
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Level of Interest
60%
Market
Corporations
50%
Potential
Local
40%
30%
20%
75%
10%
0%
Definitely No Highly Unlikely Might Highly Likely Definitely Yes
60%
Tradeshows
50%
40%
30% 87%
20%
10%
0%
Definitely No Highly Unlikely Might Highly Likely Definitely Yes
60%
Associations
50%
75%
40%
30%
20%
10%
0%
Definitely No Highly Unlikely Might Highly Likely Definitely Yes
S TRATEGIC A DVISORY G ROUP LLC
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Market Requirements
Facility
– 300k exhibit SF to accommodate simultaneous events
– 60/30k Sr./Jr. ballroom SF to accommodate general
sessions and banquet requirements
– 70k breakout meeting SF to accommodate
simultaneous events
Hotel
– Room rate expectations are consistent with hotels
– There is sufficient existing hotel room supply to meet
room block requirements
S TRATEGIC A DVISORY G ROUP LLC
-6-
Exhibit Square Feet
Existing
Expansion
0
1,000,000
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
W Ma
es dis
t
P a Mo on
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* Facilities have greater
Ch ndo
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go
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than 1 million square feet.
Las Vegas
-7-
Facility Program Assumptions
Existing
Square Feet Facility Renovated Expanded Total
Function Space:
Exhibition Halls 143,000 165,000 135,000 300,000
Ballroom 22,000 0 60,000 60,000
Jr. Ballroom 0 0 30,000 30,000
Meeting Breakouts 27,500 22,000 48,000 70,000
Subtotal 192,500 187,000 273,000 460,000
Support Space 572,400 522,100 472,000 994,100
Parking 426,100 426,100 757,000 1,183,100
Total 1,191,000 1,135,200 1,502,000 2,637,200
Parking Spaces 1,200 2,900
S TRATEGIC A DVISORY G ROUP LLC
-8-
Program Budget
$370 million
– Expansion & renovation program
– Public circulation and support
– Parking
– Hard & soft costs
– Public art
– City’s “green building” guidelines
– Escalation & contingency
– Estimated by HDC Associates; Reviewed by Devcon
Construction
S TRATEGIC A DVISORY G ROUP LLC
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Funding Plan
4% Increase of Transient Occupancy Tax
– Based on conservative projections
• 1992 – 2000 +11.6% (compound average growth rate)
• 2000 – 2001 +29.8%
• 2001 – 2002 -37.0%
• 2002 – 2031 +4.1% (compound average growth rate)
– Accommodates bond reserves, construction
period interest, and issuance costs
– Today’s interest rates plus 100 basis points
– Implement tax January 2003
S TRATEGIC A DVISORY G ROUP LLC
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Total Tax on Room
La
s
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
Sa Veg
W n J as
es o
t se
Las Vegas
Ph Palm
Sa o e
Ft n Di ni x
. L D eg
a ay o
In ud e to n
d r a
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w po e
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no ide
San Diego Oakland
No lu lu
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Sacramento
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Top 50 U.S. Cities
as la u s i
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h i d e tin
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Kno n Dia
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Me xvi
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Ne mp le
w hi s
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ah o
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Da im
Comparable TOT Rates
De l las
t
C S r oi
Anaheim
Sa o lu eatt t
n mb le
An u
Ho ton s
Seattle
us io
to
n
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Impact of TOT Increases
City-Wide Hotel Room Revenues (in millions)
$1,200
Anaheim
Increased
TOT 3.5%
$1,000
$800
$600
Increased
TOT 3%
Charlotte
$400
Meals Tax 1%
$200
San Jose
$0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
S TRATEGIC A DVISORY G ROUP LLC
-12-
Expansion Economic Benefits
Delegate
$261/day • Supports Merchants
/day
• Creates Jobs
• Generates Personal Income
Event Organizer
Event Organizer
$25/day
$25/day $ • Generates Fiscal Resources
• City
• County
Exhibitor
• State
$94/day
/day
S TRATEGIC A DVISORY G ROUP LLC
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Expansion Economic Benefits
Over 30 Years Existing Increase Expanded
Direct Spending (IACVB) $4.6b $3.4b $8.0b
Indirect & Induced (IMPLAN) 2.3b 1.7b 4.0b
Total $6.9b $5.1b $12.0b
Annual Jobs 2,230 1,670 3,900
Salaries and Wages $2.4b $1.8b $4.2b
Fiscal Benefits
City of San Jose $304m $228m $532m
Santa Clara County 35m 27m 62m
State of California 433m 324m 757m
Other 91m 68m 159m
$863m $647m $1,510m
S TRATEGIC A DVISORY G ROUP LLC
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Costs versus Benefits
Costs Benefits
Development Cost: Fiscal Benefits (30 years)
Existing Facility $131m City of San Jose $532m
- TOT $427m
Program Expansion 370m
- Sales Tax 83m
$501m - Airport PFC 22m
Other 978m
Excludes financing costs. $1,510m
Spending $12b
Jobs 3,900
Personal Income $4.1b
Construction Jobs 2,400
Construction Pers. Income $96m
S TRATEGIC A DVISORY G ROUP LLC
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Next Steps
Ballot Measure
Community Input
Assess Operations and Maintenance Costs
Implement Tax
Select Design Team
Environmental Review Process
– Including Formal Public Comments
S TRATEGIC A DVISORY G ROUP LLC
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