Dallas is moving ahead with plans to finance the replacement of its convention center and improvements to Fair Park starting with the private placement in August of short-term debt, which would be refunded as part of a sale of at least $1.4 billion of long-term bonds in 2024.
The city council June 14 authorized work to proceed on up to $223 million of special tax bonds, according to Rosa Fleming, the city’s director of convention and event services. Proceeds will pay for project design and other initial contracts.
Dallas aims to replace its Kay Bailey Hutchison Convention Center with a 2.5 million-square-foot facility that will have 800,000 square feet of exhibit space, 260,000 square feet of breakout space, and 170,000 square feet of ballroom space at an estimated cost of $1.9 billion.
Money to pay off debt will come from a hike in the city’s hotel occupancy tax, which was approved by voters in November for the convention center project and improvements to Fair Park, the site of the Texas State Fair, the Cotton Bowl Stadium and other venues. Dallas is also authorized to tap incremental growth in certain hotel-related state taxes collected within a project financing zone.
Over 30 years, the PFZ revenue is estimated at about $2.2 billion, while the two percentage point increase in the hotel tax would bring in about $1.5 billion for the convention center and about $350 million for Fair Park, according to a May financial plan update.
Fleming said a financial analysis done for a $233 million, 2021 hotel occupancy tax revenue bond refunding will be updated and will likely increase the bonding capacity for senior and subordinate-lien, long-term debt the city could issue in the fall of 2024.
“That study obviously has less revenue because we were in the middle of a pandemic and our forecasts were lower and it showed we didn’t recover from the pandemic until 2025,” she said. “We actually recovered as a city in 2022 and so this updated financial analysis will take that into account.”
The 2021 bonds were rated A by S&P Global Ratings and A-plus by Fitch Ratings.
The city council is scheduled to take up final approval of the private placement’s terms in August. Bracewell is the bond counsel and HilltopSecurities and Estrada Hinojosa & Company are co-financial advisors.
Dallas opted to replace its convention center, which was facing as much as $700 million in deferred maintenance, with a larger facility that would attract more business.