St. Anthony: Stadium plan puts heat on convention center

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Roof of Minneapolis Convention Center

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The USA Volleyball Girls' Junior National Championships are coming to the Minneapolis Convention Center in 2014. That's nearly 30,000 players, parents and fans who local officials say will spend millions on hotels, meals and shopping.

Sounds like a solid booking. But we're going to need a lot more just like it if Minneapolis is going to pay off the convention center debt and its portion of the planned Vikings stadium.

The pressure is on the two executives who run the city-subsidized convention center and its partner, Meet Minneapolis, to work in concert to drive revenue higher and convention center expenses lower over the next several years. The convention center has failed to generate the revenue its boosters projected 20 years ago; thus an operating subsidy is required.

That's why the convention center, which cost $350 million, is undergoing $10 million in work this summer to seal the roof, refurbish bathrooms, overhaul the heating and cooling system and replace the lights in an upgrade designed to cut more than $500,000 a year in water, waste and energy costs.

The money is provided by a 0.5 percent Minneapolis sales tax, liquor, lodging and restaurant taxes of about 3 percent that pay the principal and interest on the $170 million in outstanding construction bonds and provide the convention center's annual operating subsidy plus the majority of funding for Meet Minneapolis.

The nonprofit visitors bureau says out-of-town visitors to convention center events last year spent about $275 million at downtown restaurants, hotels and retailers.

Meet Minneapolis CEO Melvin Tennant, whose overall job is to attract tourists to the Twin Cities, said he and Jeff Johnson, who has overseen the convention center for six years, are integrating their operations for mutual benefit.

"There can be animosity," Tennant said, "because convention centers need to make money ... to show a profit, while convention and visitors bureaus are in the business of generating overall economic impact in the area. But we're also responsible for revenue for the convention center. We're looking at things holistically."

For example, Meet Minneapolis has placed some sales staff inside the convention center.

Tennant, a several-city veteran of the tourism industry, was paid nearly $220,000 last year tied to a performance-based contract. It helped that convention center revenue was nearly $15 million last year, best since the $15.5 million in 2008, when the Republican convention came to town.

Johnson, a city employee who's paid about $150,000 to run the convention center, has a job that's fairly easy to measure by the numbers. His goal is contain the convention center's operating expenses as a percentage of operating revenue, including a fund provided by hospitality taxes. That percentage climbed to 35 percent during the 2009 recessionary year and dropped to 29 percent last year. Convention center revenue rose to $83 million in 2011 from $70 million in 2009.

However, rental income has been flat, as convention planners pit cities against each other in rent-cutting wars amid a national glut of convention space. Johnson points to rising revenue from food, technology services and ancillary income as part of the solution.

Meet Minneapolis, which gets about 80 percent of its revenue from the city hospitality taxes and the rest from member businesses, said its efforts to promote Minneapolis as a clean, safe, green and vibrant place were a big reason why visitor spending was up 10 percent last year to $6.5 billion in the Twin Cities metropolitan area.

About 26.8 million people visited the Twin Cities last year, according to an industry study by D.K. Shifflet & Associates, behind Chicago at 42.4 million, but ahead of cities such as St. Louis, Indianapolis, Kansas City and Denver, which Meet Minneapolis considers peer competitors for convention trade.

The city estimates there will be sufficient revenue to retire the convention center bonds in eight years and start funding the city's roughly one-quarter share of the Vikings stadium cost, as well as pick up the remaining Target Center debt. Johnson said the projections assume the hospitality taxes will grow 2 percent a year, less than they have on average since 1990.

After the controversial Vikings deal was sealed this spring, Mayor R.T. Rybak said: "We will accomplish all of this -- build a new $1 billion 'people's stadium,' renovate Target Center, secure a competitive convention center and above all, provide much-needed property tax relief -- with no new taxes ... by using only existing [taxes] that are currently collected in Minneapolis ... paid by the 18 million people who visit, work or spend in Minneapolis each year."

Maybe. But we're going to need a lot of big volleyball-sized tournaments to keep the momentum going.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com

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