Proposal made to convert convention center to a city hall

Owners of the Phoenix Expo Trade & Event Center have made a proposal to buy part of the Fort Smith Convention Center and convert 40,000-square feet of the exhibit area into a new city hall.

The letter from attorneys representing FSM Redevelopment Partners — owners of the Phoenix Expo center — was received at the city by fax Friday (Oct. 15). City directors were notified Tuesday of the proposal, according to Deputy Fort Smith City Administrator Ray Gosack. City Administrator Dennis Kelly is out of town this week.

In the letter from Jeb Joyce, an attorney with the Springdale-based law firm of Quattlebaum, Grooms, Tull & Burrow, FSM Redevelopment Partners proposes to buy the convention center — but not the 1,331-seat performing arts center — and adjacent city-owned parking lots and convert the operation to a city hall. No specific financial terms were made in the proposal.

“Thereafter, my client, at its sole cost and expense, would make improvements and alterations to the facility in accordance to plans and specifications to be mutually developed and agreed to by my client and the City of Fort Smith wherein the Convention Center facility would be converted to a ‘City Hall’ for use by city administrative, management and service personnel. The converted facility would then be leased back from my client by the City of Fort Smith under a long term lease arrangement,” noted the letter.

The letter suggested an Oct. 25 meeting is already set on the subject, with a Nov. 1 deadline for the city to sign a non-binding letter of intent to pursue the offer. Also, the contract offer stipulates a 9.98% return “based on the total investment by Buyer for the acquisition, construction and conversion of the property …”

Although the Joyce letter did not identify FSM Redevelopment as its client, Gosack said Lance Beaty is the only person who has approached the city with such an idea. Beaty, along with Dr. Stephen Nelson, is a partner in FSM Redevelopment.

“The proposal is a significant transformation of the region’s convention-hosting capabilities,” Gosack said in an Oct. 19 written response. “The proposal needs to be reviewed by several stakeholders before a meaningful response can be offered. Since we just became aware of the letter this morning, there’s not been adequate time to thoughtfully analyze the proposal.”

Considering that state funds were used to help build and operate the center, Gosack said, the city will first have to determine its legal limits with respect to converting the center to another use.

Beaty confirmed with The City Wire that FSM Redevelopment did submit the proposal, but he said it’s too early to comment on details.

“It is a skeletal proposal for discussion and development, and if there is mutual interest, we’ll need to put meat on the bones,” Beaty said, adding that he hoped both parties would “work within the limits of each organization to see if there is a practical, financial arrangement.”

Beaty said there are three goals behind the proposal. First, he thinks it may be important to “monetize the asset (convention center) at a fair market value” and send that money to the city. Second, he thinks the proposal would “address and eliminate the hotly-contested convention center funding issue.” And, thirdly, as a resident of the city, Beaty said he would feel good about helping to “provide a long-overdue municipal structure where people can conduct their business more conveniently.”

When asked the pointed question of the benefit to his expo center of putting the convention center space out of use, Beaty was quick with an answer.

“That’s a fair question, and at this point in time it’s what I would consider an intangible benefit to us. I can’t quantify it, but it makes sense to think that would happen,” Beaty said.

Claude Legris, executive director of the Fort Smith Convention & Visitors Bureau, praised FSM Redevelopment Partners for their vision with the Phoenix Expo center and “how interested they are in growing the (tourism) industry in the region.”

But he said converting the convention center to a city hall “would effectively eliminate the industry that has grown up in the downtown area over the last 10 years.” He also noted that the Holiday Inn City Center just spent $8 million dollars in renovations to maximize its connection to the convention center.

“The primary drawing card of the convention center is that it’s surrounded by the hotels, and vice versa,” Legris said. “And I haven’t even mentioned the downtown restaurants that are helped by it.”

Legris said losing the convention center would also kill a recent marketing effort designed to double the odds of recruiting conventions and events to the area.

“We just expanded it (sales pitch), and that’s why we are so pleased and excited about what is possible. We’ve got the convention center, the expo center and the exhibition hall (Kay Rodgers Park) and that gives us the ability to recruit so many different types of business for the city,” Legris explained. “We’ve got three good venues that all have what I call a differential advantage. … I’d like to see a nice city hall as much as the next guy, but I would hate to limit our ability to bring business into the city.”

The Fort Smith board of directors spent most of 2008 and 2009 trying to come up with a solution to plug the annual deficit with the Fort Smith Convention Center. A state turnback program ends in June 2010 from which the city has received about $1.8 million a year. In 2010 the city will receive only $888,723 in 2010. A fund balance will allow the city to cover the convention center shortfall in 2011.

The board recently instructed the staff to draw up three referendum questions for a special election ballot.
• A half-percent prepared food tax to cover convention center costs only, and estimated to raise $900,000 annually;
• A 1% percent prepared food tax to cover convention center costs that would raise an estimated $1.8 million annually. The annual allocation would be $1 million for the convention center, $240,000 for a convention center maintenance fund, $250,000 for Marshals Museum operating costs, $100,000 for the Fort Smith Classic (PGA professional golf tournament; although the Classic is not likely to return in 2011), $60,000 for various festivals, $50,000 for Bass Reeves monument (2012 and 2013 only), and $50,000 for arts community (beginning in 2014);
• Reallocation of 0.5% street tax funds to cover only the annual costs to operate the convention center. The reallocation is estimated to raise about $943,000 annually.

If two or more of the three options receive a majority of FOR votes, only one of the issues would be enacted. If the reallocation plan is approved by voters, the two prepared food tax options would not be enacted, even if they gain voter approval.

An ad hoc committee established by the board in early April reviewed several options, including a 1% hospitality tax, finding cuts in the city’s roughly $40 million operating budget, reallocating a portion of the city’s 1% street tax, re-instituting a business license fee and finding a 3rd party operator for the center. The ad hoc group eventually endorsed a 1% prepared food tax that would also support the U.S. Marshals Museum and other city art and entertainment facilities and event.