Committee delays vote on convention center expansion after staff warn of financing and delivery risks

The City Council budget committee heard extended testimony and staff analysis about the proposed expansion and modernization of the downtown convention center and postponed a final vote on the project’s financing and contract delivery plan to allow more time for analysis and answers to outstanding questions. The committee also approved a set of unrelated consent items by roll call.

Committee members and city staff told the panel that the project’s estimated costs have grown since the last review, that potential revenue from freeway-facing advertising is now uncertain because of recent state legislative changes, and that the city could be contractually responsible for a wide range of delay-related costs if the chosen delivery method encounters the kinds of schedule or scope problems that commonly affect large construction programs.

Why it matters: the expansion is intended to increase downtown tourism and jobs ahead of large regional events, but staff said the city’s general fund would likely be asked to close a multi‑million dollar financing gap unless additional revenue or cost reductions are identified. Committee members pressed staff for clearer numbers and delivery alternatives before making a final commitment.

Most important facts first: city staff told the committee that a financing plan under consideration would seek authorization to issue up to $990,000,000 in lease revenue bonds (identified in staff materials as 2025 Series A and Series B bonds) but that the project’s overall estimated cost has increased, creating a larger annual debt service burden and a larger gap the general fund might have to cover. The Chief Administrative Office reported an increase in annual borrowing cost from about $158,000,000 to $242,000,000 and said the net general‑fund gap rose from roughly $42–$43 million to about $111,000,000 in the office’s updated projections.

Those updated projections reflect a roughly $500,000,000 increase in the project cost that staff attributed to higher material and labor prices and to the compressed delivery schedule the city is considering. The CAO further told the committee that revenue the city had expected from freeway‑facing signs and billboards — previously projected in staff materials as contributing tens of millions of dollars per year toward the project — is now uncertain after changes to the state bill referenced to the committee as AB 770. The CAO said, in Spanish, “Todavía existe ese riesgo. No se ha quitado esta este riesgo. Es verdad.”

Department of Water and Power officials told the committee the project schedule and contract structure create specific operational and cost risks for the utility. DWP general manager Dave Hansen said there are more than two dozen contract “relief” events identified in the draft project agreements that, if triggered, could create city financial exposure and scheduling delays. Hansen said, in Spanish, “Hay 27 eventos de alivios que asocian con el contratos ... y eso está afectando varios hitos ... Hay un costo financiero que la ciudad tiene que cubrir. No sabemos la cifra.” He also described ongoing work to size the temporary and permanent electrical service needed for the facility and for planned regional events on the site.

Members pressed staff on schedule and procurement choices. The committee was told the project is currently about 40–50 percent complete in design development; staff estimated final design completion would occur in spring 2026 and that initial site work and preparation could begin as early as October (staff described the October work as site preparation). The Board of Public Works (engineers) representative said the board has a dedicated team ready to manage the project, and that if the city provides the staff and resources “no vamos a ver ninguna demora” in their oversight (quote in Spanish provided by the Board representative).

Committee members also asked whether the city’s current negative credit supervision and other fiscal pressures make a large bond issuance riskier. Staff replied that additional indebtedness could increase borrowing costs and that rating agencies have placed city credit on negative watch because of structural budget issues and litigation risks; staff said that higher interest costs or a downgrade would raise the project’s long‑term cost to the general fund.

Decisions and next steps: becausemembers raised questions and because some committee members said they had received late information the morning of the meeting, the committee postponed action on agenda items 1 and 2 to allow staff to provide clearer responses about revenue assumptions, the specific contract relief events and the estimated financial exposure. The committee did approve consent items 3–14 on a 5–0 vote.

What to watch: staff said they will return with more detailed answers on billboard advertising assumptions, the estimated dollar exposure tied to the contract relief events, refined debt‑service projections, and the timeline for completing design. The committee’s final recommendation will determine whether the matter moves to the full council for a final bond authorization and approval of a project delivery method.