The Indianapolis City-County Council on Monday night voted unanimously to issue up to $155 million in bonds to pay for an expansion of the Indiana Convention Center.
Kite Realty Group Trust plans to construct a publicly-funded, 300,000-square-foot addition to the convention center, plus two privately-funded hotels with 1,400 rooms on the site of Pan Am Plaza.
Kite acquired the 1,200-space parking garage beneath Pan Am Plaza for $30 million in March 2019 and plans to fully rebuild the structure while razing the remainder of the plaza for the convention and hotel project.
City leaders say in order to remain competitive with other convention cities, the city needs to expand its meeting space.
And while the proposal has gained bipartisan support from the City-County Council, some experts and hoteliers wonder if moving ahead with plans for more hotels is wise with so much economic uncertainty spurred by the ongoing pandemic.
To finance the convention center expansion, the city plans to issue up to $155 million in bonds that would be paid back through tax-increment financing over 25 years. TIF districts capture growth in assessed value, which generates increased property tax revenue to cover the cost of new public infrastructure.
The city expects debt service on the project to run about $10 million each year. It will use increased property tax revenue from the first hotel, estimated to be about $4 million to $5 million annually, coupled with funding from the existing downtown TIF district, to pay off the bonds.
Annually, the city provides the Capital Improvement Board with about $8 million from the downtown TIF district for operations. A portion of that funding—about $5 million to $6 million—would be redirected to bond payments.
The bonds would be used to pay only for the publicly-owned assets of the convention center expansion, including the 50,000-square-foot ballroom, the covered walkway connecting the addition to the existing building across Capitol Avenue and infrastructure improvements on Georgia and Illinois streets.
Combined, those aspects of the project are expected to cost $125 million. The other $30 million would go toward capitalized interest, which would cover early bond payments and financing costs associated with issuing the bonds.
Kite Realty is expected to finance construction of the hotels with no subsidies from the city.
Council Minority Leader Brian Mowery, a Republican, said the project ensures Indianapolis will continue to be a top convention city for years to come by enabling it to host larger conventions the city can’t accommodate right now and by keeping conventions that continue to grow.
“This is such a crucial proposal and a crucial development for our city,” he said while bringing up the former Hoosier Dome, which the city started building in 1982, nearly two years before luring the Colts away from Baltimore. “You look back years past when they said we were going to build a dome for a football team. They didn’t know we had a team, but look at us now.”
“This is our next level opportunity to get and continue to attract more and more convention business,” he added.
Councilors also lauded the commitment by Hilton, which will run the hotel, to pay its employees at least $14 an hour, saying that pledge would increase hotel wages across the city.
Councilor Jared Evans, a Democrat, called the vote Monday night a “shining moment” in the city’s history, saying that, as other cities have halted conventions, Indianapolis is doubling down on them.
Mayor Joe Hogsett, a Democrat, thanked the council for its bipartisan approval.
“Tonight’s passage of the Indiana Convention Center expansion marks a major milestone for the future of our downtown,” he said. “Through an innovative partnership between the Capital Improvement Board and Kite Realty Group, this sixth convention center expansion will create thousands of construction and hospitality jobs, while positioning Indianapolis for growth as we emerge from a global pandemic.”