Committee accepts update on convention center expansion but flags signage, tariff and timeline risks

The Budget and Innovation Committee on July 1 accepted and filed an administrative report updating the proposed expansion and modernization of the city's convention center, voting 5-0 to record the report while continuing to press staff for clearer cost and revenue certainty.

The report, presented to the committee as an update rather than a final project approval, summarized value-engineering work, revenue assumptions tied to digital signage and remaining schedule and tariff risks that staff said must be resolved before the council decides whether to proceed.

City staff said the update grew out of direction given in April to return with a focused assessment of revenue options, operating-cost reductions, value-engineering opportunities and outstanding project risks. “We were instructed in April to return with ... options for increasing revenue, reducing annual operating costs, financial mechanisms and substantial known risks,” said Ben Cejas, an assistant who introduced the report.

Staff said the value-engineering review began with more than 300 ideas, winnowed to roughly 57 items that staff estimated would affect about $129 million in project scope; the team has identified about $27 million in savings or adjustments under active consideration and continues to negotiate additional items. Gary Le Moore, described in the presentation as the project engineer and executive, said some large elements — including work at the plaza — were being recommended to be handled separately from the expansion plan.

A central revenue assumption in the report is a program of digital signs. Staff said the current package includes six signs that together generate an estimated $60 million a year under the existing program design; removing or reducing highway-facing signs would cut projected annual signage revenue to roughly $29–31 million. Staff warned the change would raise the city's borrowing requirement and that, under the example used in the report, removing the highway-facing signs could increase the city's repayment obligation by roughly $930 million over 30 years if alternative revenues are not secured.

Committee members focused questions on three topics: whether the federal-state highway agreement dating to 1968 can be amended to clear the federal aesthetic/permit risk tied to highway-facing signs; the risk of commodity-price tariffs and their potential impact on construction cost; and whether the Department of Water and Power can deliver required utility work in the project schedule tied to major events.

On the federal-state agreement, staff said the city cannot eliminate risk without an amendment to the long-standing 1968 agreement between California and the federal government governing highway aesthetics and signage. “That agreement would need to be amended,” a staff member said, adding that federal coordination would be required and that staff expected to have more certainty before any final vote. Regarding tariffs, staff estimated that tariff- and commodity-price increases could add tens of millions of dollars to construction costs and said they were seeking final pricing in June exercises.

Staff emphasized the update was informational and that the project team would return with a final price and a refined risk profile before the committee or council votes on a project agreement. “We will know those details before we vote,” Cejas said.

After roughly three hours of presentation and questions, the committee voted to accept and file the administrative update. The vote does not approve construction or commit the city to a final project agreement; it records the report and directs staff to continue work on outstanding issues.

Committee members said they want more detail on parking-rate assumptions, the final contingency and the city’s contractual exposure should commodity or schedule risks materialize. Staff said it would return with updated pricing, contingency amounts and coordination outcomes with the Department of Water and Power and federal authorities before a final project agreement is submitted to the council.

Sources and attribution: presentation and discussion by Ben Cejas and Gary Le Moore; committee vote recorded by the committee clerk.