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How much did it cost St. Louis County to delay convention center bonds? An extra $88 million

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AC Next Gen groundbreaking ceremony

Regional leaders gathered Tuesday, May 17, 2022, to celebrate the groundbreaking of the America's Center expansion project known as AC Next Gen. The group gathered on the now-green area at the corner of 9th and Cole streets which used to be the C-9 parking garage. Photo by Hillary Levin, hlevin@post-dispatch.com

CLAYTON — The decision by the St. Louis County Council to delay its approval of convention center bonds is proving to be costly.

Because of the delay, the county’s hotel tax fund will end up paying an extra $88 million over the 25-year life of the county bonds, which are being issued to cover the county’s share of the cost of expanding America’s Center.

The council delayed action on the bonds for about eight months while Council Chair Rita Days pushed for approval of a new recreational facility in her North County district.

It finally acted last month, after Days added another $40 million to pay for a new facility, which hasn’t been designed yet, but may end up on the campus of the University of Missouri-St. Louis.

The city of St. Louis, by contrast, issued its convention center bonds in late 2020 and has been waiting on the county to act.

While the council was delaying action, rising inflation prompted the Federal Reserve to begin raising rates, increasing borrowing costs.

On Wednesday, Wells Fargo was the winning underwriter in the county’s $105 million bond issue, set to close June 7. The county’s bond pricing drew a 4.56% interest cost — a jump from the 1.56% the county had expected when it was planning on issuing the bonds in August.

The rise in interest rates alone will cost the county hotel tax fund an extra $59.4 million over the life of the bonds, said Paul Kreidler, the county’s budget director.

The $88 million estimate represents only the extra financing costs from the delay.

Inflation and the construction market have also led to major construction cost overruns on the project, which drew only one bidder for the first half and none for the second phase.

Days was pushing for a plan to build a recreation center in north St. Louis County, promised as part of a 2019 deal negotiated by her predecessor, Hazel Erby, to secure the county council’s support. But Kitty Ratcliffe with the Convention and Visitors Commission, which operates America’s Center and has long pushed the expansion, said the deal was only for excess hotel taxes to help fund the center, not for the CVC to plan and build it.

Meanwhile, Clayco executive Bob Clark launched a campaign to kill the expansion, arguing it was ill-conceived and would run into rising construction costs — which it did. He has a financial interest in the adjacent Bottle District with NorthSide Regeneration, though he says that has nothing to do with his opposition.

Clayco officials and longtime Clark partner Larry Chapman were in contact with Days and ultimately helped her begin planning a North County track and field complex, which still has few details but could be built on the UMSL campus.

Days finally moved ahead last month by adding a provision for up to $40 million in bonds for the North County facility. The increased costs do not include the extra bonds for the rec center. Those bonds have not been issued and won’t be until the plan comes together, Kreidler said.

“There’s going to be a lot of work that has to happen before we’re ready to go there,” he said.

Originally, the county, like the city, planned to pay for the bonds with the $6 million or so in hotel taxes each was using to pay debt issued to build the Dome at America’s Center, which was paid off last year. But the bond deal had to be restructured so the county hotel tax fund could pay for additional bonds for the rec center, Kreidler said. Those changes include adding about $16.6 million in interest costs to the bond financing package and delaying principal payments.

“We won’t even start principal payments until 2034 under this arrangement,” Kreidler said. “That in addition to the interest rate changes are combining to give us that additional cost. ... If there is a track and field complex that comes forward, or a rec center, or whatever you want to call it, this will give us the capacity to issue those bonds.”

Kreidler has said the extra project against the county hotel tax fund, still recovering from the pandemic, would preclude financing other projects against the fund for the next 10 years.

Days, in a statement, said the North County complex will help an “underserved community” and “transform the recreational opportunities for youth, seniors and the district as a whole.”

“The proposed recreation center for North County is a three-year-old commitment that was made before I was elected to the council,” she wrote. “The fact that it took over two years to secure funding for this project in my community is unfortunate and did not have to happen.”

With the county finally approving its share of the project, officials on Tuesday broke ground on the long-delayed project.

Posted at 7:30 p.m. Wednesday, May 18.

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