Indianapolis to consider bond for $150 million expansion of Indiana Convention Center
Mayor Joe Hogsett is asking the City-County Council to approve a 25-year bond for the long-anticipated $150 million expansion of the Indiana Convention Center.
The mayor's office plans to use tax revenue largely from two proposed Hilton-brand hotels to fund a 300,000-square-foot addition to the convention center onto Pan Am Plaza, featuring the state's largest ballroom at 50,000 square feet. A skywalk over Capitol Avenue would link the new space to the rest of the convention center.
Meanwhile, Kite Realty Group — which owns Pan Am Plaza — will pay for and build two hotels in between Capitol Avenue and Illinois Street, adding 1,400 hotel rooms to the downtown tourism scene.
The timing might seem odd given the economic downturn resulting from the COVID-19 pandemic, but Chief Deputy Mayor Thomas Cook argues the project essentially will be a stimulus package for Downtown Indianapolis hitting right when the outlook is less grim.
"We're in this scenario metaphorically right now where the big Downtown boat has taken on water and we’re aware of that and we’re bailing it out as fast as we can and were plugging the leaks," Cook said. "But this is building a really big sail, because when that wind comes back, we want to be able to capture that energy better than any other convention city in the country."
The move surprises some hoteliers who initially opposed the expansion, which they've said could hurt business due to market saturation. Now, they express caution about the uncertainty that the pandemic and recent protests bring to the convention industry.
"We're in the midst of the worst situation to ever hit hospitality — worse than the Great Depression," said Mike Wells, president of the REI Investments company that co-owns the downtown Marriott. "And you know, for us to have to spend time to talk about this while we're fighting for our lives, it just seems surreal."
Nonethesess, the city's tourism agency is betting that the upgrades will attract more conventions, propelling Indianapolis into a more competitive tier of the national convention market.
David Hoppe, president of the massive annual Gen Con convention, said downtown housing is one of the event's biggest pain points.
"We've always said to the hotel community: 'If you build it, we'll fill it,'" he said.
A new skyline
Construction would start in 2022 and last up to 5 years, when Cook predicts the convention business should be back in full swing.
The project could use an anticipated 2,500 construction workers. The Hilton hotels, meanwhile, could ultimately hire 600 full-time employees.
Kite Realty Group would build a 40-story, 800-room newly developed luxury Hilton brand known as Signia. Only Indianapolis, Atlanta and Orlando have Signia hotels in the pipeline. It would employ 400 people.
Under the terms of the deal, Kite has to wait at least 5 years after the first hotel opens to build the second hotel unless it hits a certain capacity mark. If capacity reaches 72% over two consecutive years, Kite must begin construction on a second, 600-room hotel within six months.
Tom McGowan, president and COO of Kite Realty Group, indicated Hilton is bullish on the project. Both he and Hilton, he indicated, hope to start the second hotel sooner rather than later.
Hilton also is pledging to hire the 600 full-time workers at an average minimum wage of $14 per hour, which McGowan said is unprecedented. It's also a nod to political realities in Indianapolis. The mayor's office said the City-County Council has made it clear hotels that come to the city for subsidies will need to commit to providing their workers with a living wage.
"There’s no question that Hilton hotels want to make a more significant impact in the city of Indianapolis," McGowan said. "It's a market they've had their eye on for a long period of time. It’s a key objective way up to the top of the executive ranks in Hilton."
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City would use property taxes for the project
Officials estimate construction to cost $125 million, higher than the previously announced $120 million price tag, with finance costs and interest bringing the total to $150 million.
Kite would bear the cost of construction for the two hotels. The city's portion of the funding would cover the convention center expansion, which it will own and lease to the Capital Improvement Board.
Kite, which would still own the land, would lease the land to the city at no cost.
The 25-year bond would be paid off through property tax revenues generated by the hotels through the city's Downtown tax increment financing district (TIF).The Marion County Capital Improvement Board would also contribute a sizable chunk of the $8 million it annually receives from the TIF for operations, perhaps as much as $6.7 million.
"What the convention center can do for the city of Indianapolis is obviously monstrous in terms of taking us out of the conditions that we're in today and push us forward," McGowan said. "But in addition to that, this northeast corner where the location of the 800-room Signia hotel will be will then take us to another level."
The Metropolitan Development Commission will examine the proposal Aug. 5 and the council will get its first look Aug. 10. The mayor's office hopes the project is approved by September.
Industry pushback
The expansion would be the sixth version of the convention center since it opened in 1972.
The project was announced in October 2018 but has been slow to gain the necessary approvals.
It's been met with sizeable backlash from other Indianapolis hoteliers who worry there's not enough business for the 1,400 new rooms Hilton proposes to build as part of the project.
Wells said he and other hotel owners were stunned that the mayor would take on such a project when so many downtown hotels are hurting from the coronavirus pandemic and the recent protests.
"This is a paradigm shift," he said. "It's a new world. We don't know what it's going to look like when we come out of this and I think we need to be very cautious, especially when we have real needs for that $8 million."
Wells also argued that property assessments of downtown hotels will drop significantly in the next year and a half, given the recent damage from the protests and extended closures from the pandemic.
Jim Dora, president and CEO of the General Hotels Corporation that owns the downtown Crowne Plaza and runs the Grand Hall and Conference Center, also expressed uncertainty about the future but noted the city's forward-thinking nature.
"With the current economy it will be a push to build it, but one of the things that’s always made Indianapolis so great is our forward thinking and the forward planning," he said. "I am sure that everyone's goal and expectation will be that we're able to build the convention industry back up to what it was before COVID."
Tourism officials say expansion is necessary
Chris Gahl of Visit Indy said the expansion will help keep Indianapolis among the top convention cities.
The Indiana Convention Center's last expansion, a $275 million overhaul in January 2011, doubled its size to 1.2 million square feet, which gives the city the 17th-largest convention center in the nation.
But since then, Gahl said, other cities are catching up.
He said the new expansion would allow the city to bid for 82% of the nation's top 250 trade shows, up from 75%.
He said the expansion will help Indianapolis retain conventions that have an annual economic impact of $287.7 million and put the city in play to land another 208 conventions with $1.1 billion in economic impact.
"We're going to go back to each one of those 208 conventions and were going to say, 'we have this in place, we're expanding, we have new hotels, we want to get your attention again,'" Gahl said.
Call IndyStar reporter Amelia Pak-Harvey at 317-444-6175 or email her at apakharvey@indystar.com. Follow her on Twitter @AmeliaPakHarvey. Call IndyStar reporter Chris Sikich at 317-444-6036. Follow him on Twitter: @ChrisSikich.