Costs rise for downtown C.R. projects

CEDAR RAPIDS - Easy to miss Wednesday in Mayor Ron Corbett's State of the City updates on $300 million in city flood-recovery building projects was a cost jump of more than $25 million in the city's hotel and Convention Complex projects.

Making the climbing costs tough to notice in the annual mayoral speech was Corbett's announcement of good news: that the city had secured a new naming rights deal with U.S. Cellular on the city's arena and new convention center that could bring the city $3.8 million over 10 years. U.S. Cellular Center had by paying the city $150,000 a year to put its name on the arena, now under renovation.

At the same time, though, the mayor made note to the 520 people who paid to eat lunch and hear his speech at the League of Women Voters' event that the cost of the $25 million-plus hotel renovation would now climb to more than $40 million and the cost of the $75.6 million Convention Complex project, which started out with an estimate of $67 million early on before design, would jump to $85 million.

The new numbers came in a flurry of numbers and project synopses at the luncheon event that covered the library, Paramount Theatre, central and west-side district fire stations, City Hall, public works building, bus depot, riverfront amphitheater and animal control facility.

Later Wednesday, John Frew, the city's project manager on both the hotel and Convention Complex projects, put the new projected cost of the hotel renovation at $44 million.

Frew said the new, higher number factors in the $2.1 million figure to service debt incurred on the project before the hotel is open and generating revenue and is able to cover debt costs. Another $3.2 million covers the funds the city used to purchase the hotel in March 2011 from the hotel's creditors. The city has decided that hotel project budget should cover those costs, Frew said. Another $750,000 added to the project goes to a required “rainy-day fund for operations.”

But much of the jump in the hotel budget numbers, he said, is coming for two reasons: to bring the hotel up to the standards that come with having secured the DoubleTree by Hilton brand; and to put the city in position to sell the hotel in the future.

Frew said the city likely could have done a much less complete job of renovation if had secured a lower-caliber brand for the hotel. But at the end of the day, it would have still had a 30-year hotel it couldn't sell.

“You have to upgrade the hotel's systems, you just can't change the bed sheets,” Frew said. “There is virtually nothing in this building, inside or out, that won't be touched or improved.”

He said the building's mechanical, electrical and plumbing systems are being replaced as well as the roof, boiler and window systems, not to mention every customer item in each of the rooms.

Making the kind of improvements to the hotel and securing the DoubleTree by Hilton brand will allow the hotel to charge higher room rates and bring in more revenue to cover the debt payments on the increased project costs, Frew added.

Of the now $85 million figure for Convention Complex project, the mayor noted that the city has obtained $35 million in federal funds and $15 million in state I-JOBS funds for the project. He puts the city's investment now at $32.4 million when private funding is added. He said the federal and state help makes the city investment “look like a bargain.”

Corbett acknowledged that convention centers don't make money, but they “do bring money to town.” He noted that one event alone, the girls state volleyball tournament, brought $18 million of spending into the city over the last 10 years.

Frew said the cost jump at the Convention Complex is less than it appears. He said the most-recent project cost figure, $75.6 million, did not factor in the cost to issue bond debt for the project nor did it include Frew's fees, about $4 million. Frew‘s firm, Frew Nations Group, serves as both project manager and construction manager. Bids on project work, including electrical and mechanical work, came it about $3 million over budget, he added.

As for the U.S. Cellular naming rights deal, Corbett called the deal the biggest one ever for the city.

The previous arrangement with U.S. Cellular expired on June 30, 2011, about the time the city closed the arena for renovation. The new contract starts July 1, 2013. The arena and convention center are slated to be open by then.