Dallas voters to decide on bond-financed convention center revamp

BY SourceMedia | MUNICIPAL | 08/10/22 03:03 PM EDT By Karen Pierog

The Dallas City Council on Wednesday put a measure on the Nov. 8 ballot that would allow for the planning, financing, and construction of a replacement of its convention center, partly financed by an increase in the hotel occupancy tax.

The measure, which passed the council unanimously, will let voters decide on raising the city's hotel tax to 9% from 7%. Hotel guests in Dallas currently pay a 13% tax of which 6% goes to the state.

Over 30 years, Dallas would raise about $1.5 billion from the tax hike and about $2.2 billion under a project financing zone (PFZ), which will redirect incremental hotel-associated state tax revenue to the city.

The ballot measure would also authorize the city to finance improvements at Fair Park, the site of the Texas State Fair, the Cotton Bowl Stadium, museums, and entertainment venues.

"Not one penny will come out of your general fund, our general fund," Omar Narvaez, the city's deputy mayor pro tem, said ahead of the council's vote. "It will get paid for 100% from folks who are visiting the city of Dallas."

The PFZ funds and hotel tax revenue would back about $1.8 billion of revenue bonds, with issuance beginning in 2023 and construction on a replacement for the Kay Bailey Hutchison Convention Center starting in 2024, Rosa Fleming, the city's director of convention and event services, told The Bond Buyer last month.

She said the current facility, which has $500 million to $700 million in deferred maintenance, is inefficient. A bigger facility would be built with the expectation it will nearly double attendance and more than double annual hotel room nights.

In October, S&P Global Ratings revised the outlook on A-rated Dallas convention center debt to stable ahead of a nearly $233 million bond refunding. The outlook for dozens of bond issues backed by hospitality-related revenue, including Dallas', had been changed to negative in 2020 amid a barrage of event cancellations due to the COVID-19 pandemic.

Fitch Ratings rates the Dallas bonds at A-plus with a stable outlook.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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