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Convention Center Convention Center AuthorityAuthority

Republican Policy Group Republican Policy Group PresentationPresentation

March 23March 23rdrd 2015 2015

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Meeting AgendaMeeting Agenda Approval of the Previous MinutesApproval of the Previous Minutes

Discussion of the Convention Center Lease Discussion of the Convention Center Lease & Agreement with the State& Agreement with the State

Implications for Future Lease Implications for Future Lease ArrangementsArrangements

Status of APRA RequestStatus of APRA Request

Discussion of Next Meeting Discussion of Next Meeting

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Lease and AgreementLease and Agreement

Lease & Agreement Lease & Agreement – Original signed November 19Original signed November 19thth 1991 1991– Second Amendment signed April 26, Second Amendment signed April 26,

20052005

““The State has agreed to lease the The State has agreed to lease the ‘Project’ from the Authority pursuant ‘Project’ from the Authority pursuant to the terms and conditions set forth to the terms and conditions set forth

in this Agreement”in this Agreement”

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Description of PropertyDescription of Property

Lease and Agreement includesLease and Agreement includes– 610,000 ft610,000 ft22 convention center facility convention center facility

including parking for 720 automobiles including parking for 720 automobiles – Garage facilities of additional 1,680 Garage facilities of additional 1,680

spacesspaces– 320,000 ft320,000 ft2 2 hotel/office building hotel/office building – 300 hotel rooms 300 hotel rooms – 50,000 ft50,000 ft2 2 commercial office space commercial office space

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Requirements of AgreementRequirements of Agreement

““The Authority agrees to lease to the The Authority agrees to lease to the State, and the State agrees to take and State, and the State agrees to take and hire from the Authority, the Project”hire from the Authority, the Project”

Lease begins on the date of bond Lease begins on the date of bond issuanceissuance

Lease “shall terminate on the date on Lease “shall terminate on the date on

which all . . . Bonds and Notes secured by which all . . . Bonds and Notes secured by this Agreement . . . have been paid in full”this Agreement . . . have been paid in full”

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Requirements of AgreementRequirements of Agreement

State Payment of Rentals State Payment of Rentals – ““An amount which shall equal Debt Service An amount which shall equal Debt Service

with respect to all Outstanding Bonds” with respect to all Outstanding Bonds” – ““An amount necessary to provide for An amount necessary to provide for

payment of the Operations & Maintenance payment of the Operations & Maintenance Expenses”Expenses”

– ““An amount necessary to restore Debt An amount necessary to restore Debt Service Reserve Fund” Service Reserve Fund”

– ““An amount necessary to restore the An amount necessary to restore the Operating Reserve Fund”Operating Reserve Fund”

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Requirements of AgreementRequirements of Agreement

State Additional RentState Additional Rent– ““Amounts sufficient to pay all other Amounts sufficient to pay all other

obligations, charges, expenses or liens obligations, charges, expenses or liens payable by the Authority” payable by the Authority”

Minimum Rentals Paid by the StateMinimum Rentals Paid by the State– ““Payment of the principal & premium and Payment of the principal & premium and

interest payable on all Outstanding interest payable on all Outstanding bonds”bonds”

– ““All other obligations, charges, expenses All other obligations, charges, expenses by the Authority” by the Authority”

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Cost of the ProjectCost of the Project

Best Available Estimate in 1991Best Available Estimate in 1991– $255,000,000 cost $255,000,000 cost – 1987 original cost estimate of $100 million 1987 original cost estimate of $100 million

Additional CostsAdditional Costs– ““In the event the Cost of the Project shall In the event the Cost of the Project shall

exceed amount available, the State shall exceed amount available, the State shall pay ‘Additional Rent’ required”pay ‘Additional Rent’ required”

– Alterations to the Project are at the Alterations to the Project are at the discretion of the Authority and shall be discretion of the Authority and shall be “promptly paid by the State as Additional “promptly paid by the State as Additional Rent” Rent”

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Lease Agreement Legality Lease Agreement Legality

Constitutionally Legal Constitutionally Legal – A General Assembly cannot encumber a A General Assembly cannot encumber a

future General Assembly future General Assembly – The Lease Agreement Stipulates The Lease Agreement Stipulates

““Payment shall be subject to and dependent Payment shall be subject to and dependent upon appropriation by the General Assembly”upon appropriation by the General Assembly”

Debt Issued Debt Issued – Revenue bonds by the Authority Revenue bonds by the Authority – No need for voter approval No need for voter approval

Not General Obligation Bond Not General Obligation Bond

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Default & TerminationDefault & Termination

Default Default – Failure by the State to pay according to Failure by the State to pay according to

the Lease & Agreement the Lease & Agreement

Termination Termination – Lease & Agreement is terminated upon Lease & Agreement is terminated upon

the failure of the State to appropriate the failure of the State to appropriate funds to the Convention Center funds to the Convention Center Authority Authority

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Remedies of the AuthorityRemedies of the Authority

Re-enter and take possession of the Re-enter and take possession of the ProjectProject– Holding the State liable for all Rentals & Holding the State liable for all Rentals &

other amounts dueother amounts due

Exclude the State from possession of Exclude the State from possession of the project and sell or lease to the project and sell or lease to another party another party – Holding the State liable for all Rentals & Holding the State liable for all Rentals &

other amounts due other amounts due

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Additional ProvisionsAdditional Provisions

State Purchase Provision State Purchase Provision

– All Outstanding bonds, notes, and All Outstanding bonds, notes, and obligations must be fully paidobligations must be fully paid

– The State may purchase the Project The State may purchase the Project from the Convention Center Authority from the Convention Center Authority for $1 for $1

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Providence DevelopmentProvidence Development

Construction Construction – Funded solely by the Authority through debtFunded solely by the Authority through debt

DebtDebt– Paid by every tax payer for last 2 decades Paid by every tax payer for last 2 decades – No vote, still have hundreds of millions to pay No vote, still have hundreds of millions to pay

Legality Legality – Completely legalCompletely legal– Few need to sign the deal for implementation Few need to sign the deal for implementation

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Leasing Arrangements Leasing Arrangements

Entities Can Issue the Debt Entities Can Issue the Debt – Issued Debt and thereby claim fully funding the Issued Debt and thereby claim fully funding the

construction of the Project with private capital construction of the Project with private capital Rhode Island Residents Rhode Island Residents

– Paid for the construction of the CCA Project Paid for the construction of the CCA Project – Annual appropriations for debt service are in Annual appropriations for debt service are in

excess of $20 million excess of $20 million Only two individuals signed the document Only two individuals signed the document

forcing $454 million of state spending forcing $454 million of state spending – From 1994-2015From 1994-2015

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Leasing ArrangementsLeasing Arrangements

Rhode Islanders Should be Wary of Rhode Islanders Should be Wary of Lease Arrangements Lease Arrangements – Seek stronger protections in the law Seek stronger protections in the law

against creative financing schemesagainst creative financing schemes– Hold those accountable for entering into Hold those accountable for entering into

such arrangements such arrangements

Potential legislative opportunitiesPotential legislative opportunities– Taxpayer protections Taxpayer protections

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APRAAPRA

Informational RequestInformational Request– Copies of the request are available Copies of the request are available

Expectation of Receipt Expectation of Receipt

Comparison to other Convention Comparison to other Convention Centers in our geographic areaCenters in our geographic area

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Committee Member Committee Member ConcernsConcerns

Provided Documentation Provided Documentation

Questions of the CommitteeQuestions of the Committee

Areas of Further Inquiry Areas of Further Inquiry

Additional Concerns Additional Concerns

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Upcoming MeetingUpcoming Meeting

Additional week off Additional week off

– Need additional time to obtain and read Need additional time to obtain and read APRA documentationAPRA documentation

– Next meeting April 13Next meeting April 13thth at 3:00 in the at 3:00 in the House Minority Office House Minority Office