The planned $1 billion expansion of the Boston Convention and Exhibition Center has been frozen indefinitely by Gov. Charlie Baker, whose administration on Wednesday expressed deep misgivings about the center's ability to pay off the anticipated debt without impacting the state budget.
Baker announced he is pausing the potentially job-rich project, which was intended to add 1.3 million square feet to the South Boston convention center, until a new Massachusetts Convention Center Authority board can take another look at expansion and potentially address concerns over financing.
The governor on Wednesday also replaced seven of the 13 members on the board under his direct control, and reappointed two others.
"We are pausing the expansion of the Boston Convention and Exhibition Center in order for the new members of the Massachusetts Convention Center Authority to conduct a thoughtful analysis and determine how these resources can best benefit our economy, job creation, and the development of Boston's Seaport District," Baker said in a statement. "The environment has changed greatly in the five years since this proposal was first introduced, and the Seaport district has experienced an economic boom. Plunging ahead now, when the data on the expansion's feasibility is mixed, combined with the change of leadership at the MCCA would be irresponsible given the vast amounts of taxpayer dollars necessary to not only build but operate the expanded facility in the face of pressing financial needs outside of the booming Seaport District."
Convention Center Executive Director James Rooney's impending departure in July to lead the Greater Boston Chamber of Commerce emerged as a "major concern," denting the administration's confidence in the project due to the leadership gap it will create, according to officials.
The Legislature in 2014 approved legislation signed by Gov. Deval Patrick authorizing the Convention Center Authority to borrow up to $1 billion to finance the BCEC expansion. The debt was to be paid through the existing convention center fund, which receives a mix of tourism and hospitality fees and taxes.
Supporters of the project, including Rooney, argued that expansion would allow Boston to lock in bigger conventions by allowing it to compete for larger shows that require greater exhibition space. The project called for the 516,000 square-foot convention floor to be expanded by 335,000 square feet, the addition of a second ballroom and additional meeting space. The authority has also been pursuing separate deals to add two new mid-priced hotels and a 1,000-room headquarters hotel on Summer Street to the waterfront district to accommodate an increase in convention-goers.
Others, however, questioned the revenue projections used to sell the expansion to lawmakers. The Pioneer Institute, through former Inspector General Greg Sullivan, asked Patrick at the time to veto the bill, saying the revenue projections were "unrealistic" and could lead to statewide taxes being used to cover the shortfall.
Baker's move to block the project puts him at odds with Boston Mayor Marty Walsh and many Democratic lawmakers who approved the expansion, touting its benefits for job creation and economic growth.
Rep. Nick Collins, a South Boston Democrat, and other supporters in the Legislature argued last year that the expansion project, along with the development of new hotels, would create as many as 4,700 construction jobs and 2,100 permanent jobs, and generate $716 million in new annual economic impact and $41 million in new state revenues. The Boston Convention Center Authority projected that with expansion the BCEC would host 15 to 20 more major events per year and generate an additional $184 million in economic impact annually.
After coming into office, Baker said he would pause the project until he could do his own review. Administration and Finance Secretary Kristen Lepore on Wednesday said that even with the expansion the BCEC would only be the 15th largest convention center in the country, based on exhibition space, and could still struggle to compete for larger shows.
She said the valuable property in Boston's growing Seaport District would likely be developed regardless of what happens with the BCEC, generating new jobs and revenue for the city.
After looking at the market, Lepore said hotel room occupancy nights have never lived up to the initial projections for the South Boston convention center of 670,000 nights a year. In 2014, the BCEC and the Hynes Convention Center generated a combined total of only 472,000 hotel-night stays, Baker administration officials said.
The Legislature last year included a provision in the borrowing bill that calls for statewide hotel taxes, which are currently split between a tourism fund and the state's general fund, to be used as a backstop in case the convention center is not able to cover its increased annual debt load.
Since the signing of the bill, Lepore said the convention center authority has revised downward its annual revenue projections over the 30-year span of the expansion bond period by $640 million, raising serious doubt about the likelihood that general fund revenues will not be needed to pay the debt.
The bill does contain a provision that calls for the city of Boston to repay the state general fund any money needed to finance the BCEC expansion, but even that was not sufficient to satisfy the administration at this point.
Baker reappointed Barbara Capuano, tax manager at Raphael and Raphael, LLP and the wife of Congressman Michael Capuano, and Paul Sacco, CEO of the Massachusetts Lodging Association, to the board. He also newly appointed Duck Tours CEO Cindy Brown; Chicopee construction company owner Andrew Crane; Karen Johnson, of The Debt Exchange; TD Garden President Amy Latimer; Leominster real estate developer Gregg Lisciotti; John McDonnell, managing director of the company that makes Tito's Handmade Vodka, and Frederic Wittman, from the commercial real estate firm HFF.
With Wednesday's appointments, Baker controls a majority of the board. The remaining board members include former South Boston Sen. Jack Hart and Michelle Consalvo, both appointees of the Boston mayor, and ex officio members Lepore and Ronald Rakow, the city of Boston's assessing commissioner.
Lepore did not rule out signing off on the expansion project in the future if the new board, after its review, can prove its feasibility. She said it would also be up to the board whether to continue down the road of developing new hotels in the area without a guarantee of BCEC expansion.
The new board will also have the responsibility of hiring a new executive director to succeed Rooney, who has led the authority for more than a decade.