DRAFT FOR POLICY DISCUSSION ONLY

DRAFT FOR POLICY DISCUSSION ONLY
Convention Partnership Update DRAFT FOR POLICY DISCUSSION ONLY December 21, 2010 James Rooney – Executive Director, MCCA Howard Davis - Director of Capital Projects, MCCA

Agenda What Have We Done? Where Are We Today? Where Are We Going?
A year-long, intensive, wide-ranging look at the MCCA and its future. Where Are We Today? Preliminary conclusions resulting from this process. Where Are We Going? A suggested “road map” for the next four months.

What Have We Done? 3

Convention Partnership Established
What Have We Done? Convention Partnership Established Established 27 member Convention Partnership to steward the public study and analysis of T5 initiative.

Convention Partnership: Statement of Purpose
What Have We Done? Convention Partnership: Statement of Purpose Boston will become a “Top 5” destination for conventions and meetings, substantially increasing its market share among North American competitors, enhancing the economic benefit to the City of Boston and the Commonwealth and be identified as the #1 destination for international meetings, conferences and exhibitions.

Convention Partnership: Relationships
What Have We Done? Convention Partnership: Relationships

Convention Partnership: Process
What Have We Done? Convention Partnership: Process

Convention Partnership: Information Phase [January – June]
What Have We Done? Convention Partnership: Information Phase [January – June] January: Overview of Industry “Convention Industry 101” MCCA – Who and History MCCA Success – Sales and Marketing Performance February: BCEC Success and Market Demand BCEC Case Study Market Demand and BCEC Potential Expansion Elements

What Have We Done? Convention Partnership: Information Phase [January – June] March: Customer Advisory Group Introduction of Customer Advisory Group Boston as a Convention Destination Boston Hotels and Site Venues Potential BCEC Expansion April: Hotels and BCEC Relationship between BCEC and Hotels Benefits of Additional Proximate Hotel Rooms Headquarters Hotel Financing and Trends Overview of City-wide Hotel Development

What Have We Done? Convention Partnership: Information Phase [January – June] May: Urban Context/Financing Trends/Westin Hotel Urban and Community Context BCEC Financing: Case Study Financing Overview of Other Convention Center Expansions BCEC Westin Hotel: Case Study June: The “Tough Questions” Panel Discussion, Chaired by David Luberoff with Panelists Charles Chieppo, Dan O’Connell, Lisa Petraglia, and Samuel Tyler

Convention Partnership: Analysis Phase [July – October]
What Have We Done? Convention Partnership: Analysis Phase [July – October] Finance Working Group Compare Pre-Development BCEC Projections with Actual Results Analysis of 1997 Johnson Report: events, room nights, exhibit hall occupancy Johnson Report: new hotel development requires public/private participation Analyze Convention Center Fund How it works & revenue sources How it has performed to date against initial projections Future revenue and expense projections Sensitivity analyses Identify Potential Revenue Sources for BCEC Expansion

What Have We Done? Convention Partnership: Analysis Phase [July – October] Finance Working Group Continued Review Convention Center Expansion Financings in Other Cities Financing models and revenue sources; case studies Review Headquarters Hotel Financings in Other Cities Ownership structures Financing models/flow of funds Case studies Current Hotel Financing Environment: Debt Structures and Requirements (private, public/private, public) Construction Costs in Boston Historical costs & cost differentials: Boston vs. other cities

What Have We Done? Convention Partnership: Analysis Phase [July – October] Hotel Working Group Examine Relationship Between BCEC and Hotels Evaluate Headquarters Hotel Demand Develop 10 Year Operating Proforma for Headquarters Hotel Evaluate/Rank/Select Potential Headquarters Hotel Sites Input of major headquarters hotel operators

What Have We Done? Convention Partnership: Analysis Phase [July – October] Hotel Working Group Continued Establish Programs for Headquarters Hotels (1,000 Rooms and 1,200 Rooms) Input of major headquarters hotel operators and survey of national headquarters hotels Review Headquarters Hotel Development/Ownership Options Explore How Other Headquarters Hotel Projects Were Financed Consider Approaches to Encouraging Mid-Priced Hotel Development

What Have We Done? Convention Partnership: Analysis Phase [July – October] BCEC Expansion & Urban Context Working Group Review of Convention/Tradeshow Industry Trends Analysis of Market Demand for BCEC Expansion Elements Analysis of Competitor Facilities Development Plans and Rationales Clarify/Articulate Benefits of BCEC Expansion Identify and Evaluate Location Options/Siting Requirements for Expansion Elements

What Have We Done? Convention Partnership: Analysis Phase [July – October] BCEC Expansion & Urban Context Working Group Continued Analysis of Existing Transportation and Infrastructure Conditions (South Boston Bypass/Haul Road, Track 61, HazMat Cargo) Develop Programs for Expansion Elements Develop Conceptual Designs for Expansion Elements “Right sizing” of elements and support space Consider Land Acquisition Strategies Investigation of existing land uses and major land owners surrounding BCEC

Where Are We Today? 17

Preliminary Conclusions: Information Phase
Where Are We Today? Preliminary Conclusions: Information Phase The BCEC was successfully developed as a joint MCCA/City of Boston project, opening in 2004. Initial marketing and operations were very successful, with exhibit space occupancy reaching over 62% (a solid, “stabilized” occupancy level) in FY 2007, just three years after opening. This success was evidenced by the BCEC’s selection by Events Solutions Magazine as “Convention Center of the Year” in 2007. When opened, the BCEC was the country’s leading convention center technologically, a position that has been maintained through continuous strategic upgrades. The BCEC was successfully developed as a joint MCCA/City of Boston project, opening in 2004. Initial marketing and operations were very successful, with exhibit space occupancy reaching over 62% (a solid, “stabilized” occupancy level) in FY 2007, just three years after opening. This success was evidenced by the BCEC’s selection by Events Solutions Magazine as “Convention Center of the Year” in 2007. When opened, the BCEC was the country’s leading convention center technologically, a position that has been maintained through continuous strategic upgrades.

Where Are We Today? Preliminary Conclusions: Information Phase Despite its substantial size and status as New England’s largest building, the BCEC is smaller than most competitive and comparable facilities – with total exhibit space ranking 13th out of 16 facilities reviewed in 2009, and total ballroom space ranking 11th out of 13 facilities reviewed in 2009. The BCEC has one of the industry’s highest ratios of meeting room space to exhibit space (1 to 3), an important feature in attracting desirable, high-impact events. Potential BCEC expansion components include a second, larger ballroom; expanded exhibit and meeting room space; and a fixed seat auditorium. Events categorized as “conventions/tradeshows” (events that use exhibit hall and meeting space, such as BIO, New England Grows, etc.) are the BCEC’s dominant event type in terms of number of events, attendance and hotel room night generation. Despite its substantial size and status as New England’s largest building, the BCEC is smaller than most competitive and comparable facilities – with total exhibit space ranking 13th out of 16 facilities reviewed in 2009, and total ballroom space ranking 11th out of 13 facilities reviewed in 2009. The BCEC has one of the industry’s highest ratios of meeting room space to exhibit space (1 to 3), an important feature in attracting desirable, high-impact events. Potential BCEC expansion components include a second, larger ballroom; expanded exhibit and meeting room space; and a fixed seat auditorium. Events categorized as “conventions/tradeshows” (events that use exhibit hall and meeting space, such as BIO, New England Grows, etc.) are the BCEC’s dominant event type in terms of number of events, attendance and hotel room night generation.

Where Are We Today? Preliminary Conclusions: Information Phase Only two consumer-oriented “gate shows” are held at the BCEC, the New England International Auto Show and the New England Boat Show, in contrast to many other facilities where such shows are common. Sought after medical and technology events, which generate superior economic benefits compared to most other types of events, have each represented more than 20% of total BCEC event activity. The BCEC has far fewer accessible hotel rooms than most competitive facilities, with only 1,700 rooms within a half-mile radius, compared to other facilities with five to ten times as many rooms within a half-mile radius. Most BCEC attendees stay at Back Bay hotels, resulting in time-consuming and expensive transportation from the facility to these hotels. Only two consumer-oriented “gate shows” are held at the BCEC, the New England International Auto Show and the New England Boat Show, in contrast to many other facilities where such shows are common. Sought after medical and technology events, which generate superior economic benefits compared to most other types of events, have each represented more than 20% of total BCEC event activity. The BCEC has far fewer accessible hotel rooms than most competitive facilities, with only 1,700 rooms within a half-mile radius, compared to other facilities with five to ten times as many rooms within a half-mile radius. Most BCEC attendees stay at Back Bay hotels, resulting in time-consuming and expensive transportation from the facility to these hotels.

Where Are We Today? Preliminary Conclusions: Information Phase Over the past 20 months, the MCCA has lost 65 future events at the BCEC and Hynes due to insufficient exhibit, meeting room or ballroom space; inadequate hotel room availability near the BCEC; or lack of hotel rate diversity. The potential economic impact of those lost events is about $480 million; the lost tax benefit is almost $30 million. In a survey of event planners, Boston’s appeal as an event location was ranked above all competitors east of the Mississippi except Orlando. The Hynes location, in the heart of the Back Bay, is superb, with a large supply of connected hotel rooms, diverse shopping and restaurant options, and excellent transportation access. Over the past 20 months, the MCCA has lost 65 future events at the BCEC and Hynes due to insufficient exhibit, meeting room or ballroom space; inadequate hotel room availability near the BCEC; or lack of hotel rate diversity. The potential economic impact of those lost events is about $480 million; the lost tax benefit is almost $30 million. In a survey of event planners, Boston’s appeal as an event location was ranked above all competitors east of the Mississippi except Orlando. The Hynes location, in the heart of the Back Bay, is superb, with a large supply of connected hotel rooms, diverse shopping and restaurant options, and excellent transportation access.

Where Are We Today? Preliminary Conclusions: Information Phase The Hynes and the BCEC are complementary facilities, each with its special attributes and market position. The BCEC’s proximity to Logan Airport is another significant advantage relative to competitors. High costs for hotels, auto rentals, and restaurants; the weather; and the BCEC’s setting in a location lacking a full complement of amenities are cited by meeting planners and attendees as locational disadvantages. Boston/Cambridge is the top destination for international meetings in the United States (with more meetings than any other U.S. location) according to the International Congress and Convention Association. The Hynes and the BCEC are complementary facilities, each with its special attributes and market position. The BCEC’s proximity to Logan Airport is another significant advantage relative to competitors. High costs for hotels, auto rentals, and restaurants; the weather; and the BCEC’s setting in a location lacking a full complement of amenities are cited by meeting planners and attendees as locational disadvantages. Boston/Cambridge is the top destination for international meetings in the United States (with more meetings than any other U.S. location) according to the International Congress and Convention Association.

Preliminary Conclusions: Finance Working Group
Where Are We Today? Preliminary Conclusions: Finance Working Group The MCCA has two distinct sources of revenue to pay operating expenses, capital expenses and debt service – revenues from operations (fees from rental of space and for providing services) and the Convention Center Fund (“CCF”). The CCF, established by Chapter 152 of the Acts of 1997 (“Convention Center Legislation”), collects revenue from various sources, as provided for in the Convention Center Legislation. The largest source of revenue for the CCF is hotel room occupancy taxes (predominantly from hotels in Boston and Cambridge), providing approximately 64% of all CCF revenues. Other CCF revenue sources include retail sales taxes (collected from limited types of establishments in accordance with the Convention Center Legislation), providing 15% of total revenues; a surcharge on car rentals in Boston (13% of total revenues); and surcharges on ticket prices for certain tours and cruises in Boston (2% of total revenues). The MCCA has two distinct sources of revenue to pay operating expenses, capital expenses and debt service – revenues from operations (fees from rental of space and for providing services) and the Convention Center Fund (“CCF”). The CCF, established by Chapter 152 of the Acts of 1997 (“Convention Center Legislation”), collects revenue from various sources, as provided for in the Convention Center Legislation. The largest source of revenue for the CCF is hotel room occupancy taxes (predominantly from hotels in Boston and Cambridge), providing approximately 64% of all CCF revenues. Other CCF revenue sources include retail sales taxes (collected from limited types of establishments in accordance with the Convention Center Legislation), providing 15% of total revenues; a surcharge on car rentals in Boston (13% of total revenues); and surcharges on ticket prices for certain tours and cruises in Boston (2% of total revenues).

Where Are We Today? Preliminary Conclusions: Finance Working Group CCF revenues have been more than sufficient to cover all obligations and, in fact, the CCF balance had been increasing in recent years. In response to the Commonwealth’s severe budget pressures, amounts were withdrawn from the CCF in fiscal years 2009, 2010, and 2011 and redirected to non-MCCA purposes. Since CCF receipts exceed funding obligations, a potential source of funding for expansion of the BCEC and related purposes is debt supported by the CCF. The CCF does not, however, have the capacity to support the cost of the full BCEC expansion program (a second, larger ballroom, expanded exhibit and meeting room space and other expansion components). CCF revenues have been more than sufficient to cover all obligations and, in fact, the CCF balance had been increasing in recent years. In response to the Commonwealth’s severe budget pressures, amounts were withdrawn from the CCF in fiscal years 2009, 2010, and 2011 and redirected to non-MCCA purposes. Since CCF receipts exceed funding obligations, a potential source of funding for expansion of the BCEC and related purposes is debt supported by the CCF. The CCF does not, however, have the capacity to support the cost of the full BCEC expansion program (a second, larger ballroom, expanded exhibit and meeting room space and other expansion components).

Where Are We Today? Preliminary Conclusions: Finance Working Group In other, competitive cities, major recent expansions have typically been supported by increased hotel occupancy taxes and new or increased food and beverage taxes, but other financing options have also been used, including imposing taxes and fees on services primarily used by tourists, and providing direct municipal support. Hotel financing differs fundamentally from financing of convention center expansions because hotels are income producing assets. The net operating income from new, full-service convention hotels is not sufficient to cover debt service and required returns on equity capital. All new, large convention center hotels developed in the last decade have been financed with significant levels of public support. In other, competitive cities, major recent expansions have typically been supported by increased hotel occupancy taxes and new or increased food and beverage taxes, but other financing options have also been used, including imposing taxes and fees on services primarily used by tourists, and providing direct municipal support. Hotel financing differs fundamentally from financing of convention center expansions because hotels are income producing assets. The net operating income from new, full-service convention hotels is not sufficient to cover debt service and required returns on equity capital. All new, large convention center hotels developed in the last decade have been financed with significant levels of public support.

Where Are We Today? Preliminary Conclusions: Finance Working Group Two approaches have been used to finance new, large convention center hotels in the last 10 years: the “public/private” model and the publicly financed and owned model. The Westin Waterfront Hotel’s financing model, which combines private financing with public support, is considered an example of the “public/private” model. Financing of the Westin Waterfront Hotel was predominantly private, with public support from the MCCA and the City of Boston constituting less than 20% of total costs. Hotels financed through the public/private approach are typically privately owned, with the associated convention center benefitting from the increased supply of hotel rooms and, typically, a “room block agreement” providing the center with certain rights to the hotel rooms. Two approaches have been used to finance new, large convention center hotels in the last 10 years: the “public/private” model and the publicly financed and owned model. The Westin Waterfront Hotel’s financing model, which combines private financing with public support, is considered an example of the “public/private” model. Financing of the Westin Waterfront Hotel was predominantly private, with public support from the MCCA and the City of Boston constituting less than 20% of total costs. Hotels financed through the public/private approach are typically privately owned, with the associated convention center benefitting from the increased supply of hotel rooms and, typically, a “room block agreement” providing the center with certain rights to the hotel rooms.

Where Are We Today? Preliminary Conclusions: Finance Working Group A recent example of a hotel developed under the public/private model is the Marriott Marquis in Washington DC, a 1,170 room, approximately $600 million hotel financed with more than $300 million of public support (including land). The other model for financing large convention center hotels is based on bond financing, using tax-exempt or taxable bond sale proceeds – or a combination of both – to fund all project costs. In nearly all cases, bond financed hotels are publicly owned, providing the public owner with a high level of control over operations including, most importantly, control over the sale of rooms, with the public owner also receiving cash flow and other economic benefits. A recent example of a hotel developed under the public/private model is the Marriott Marquis in Washington DC, a 1,170 room, approximately $600 million hotel financed with more than $300 million of public support (including land). The other model for financing large convention center hotels is based on bond financing, using tax-exempt or taxable bond sale proceeds – or a combination of both – to fund all project costs. In nearly all cases, bond financed hotels are publicly owned, providing the public owner with a high level of control over operations including, most importantly, control over the sale of rooms, with the public owner also receiving cash flow and other economic benefits.

Where Are We Today? Preliminary Conclusions: Finance Working Group The risks of ownership (principally the risk that revenues will not be sufficient to pay expenses and debt service) are also borne by the public owner. Bond financed convention center hotels have generally performed well with the notable exception of the bond-financed Renaissance Hotel in St. Louis. Boston’s high construction costs present an additional challenge to expanding the BCEC or developing new hotels near the BCEC. In the ten years since the construction contract for the BCEC was signed, Boston’s construction cost index has increased approximately 50%. The risks of ownership (principally the risk that revenues will not be sufficient to pay expenses and debt service) are also borne by the public owner. Bond financed convention center hotels have generally performed well with the notable exception of the bond-financed Renaissance Hotel in St. Louis. Boston’s high construction costs present an additional challenge to expanding the BCEC or developing new hotels near the BCEC. In the ten years since the construction contract for the BCEC was signed, Boston’s construction cost index has increased approximately 50%.

Preliminary Conclusions: Hotel Working Group
Where Are We Today? Preliminary Conclusions: Hotel Working Group Conventions and tradeshows – the principal market served by the BCEC – generate significant demand for hotel room nights. The 1997 “Johnson Report,” which established the framework and rationale for the BCEC, strongly emphasized the need for additional hotel rooms proximate to the new facility. The Johnson Report recommended that 3,800 new hotel rooms be available within seven years of the BCEC’s opening (i.e., 2011); fewer than one-half of this recommended total (1,682 new rooms) have actually opened. Inadequate hotel supply near the BCEC requires event attendees to stay at Back Bay hotels and other hotels even farther away, an inconvenience that is also expensive – transportation costs of as high as $1 million have been incurred by shows. Conventions and tradeshows – the principal market served by the BCEC – generate significant demand for hotel room nights. The 1997 “Johnson Report,” which established the framework and rationale for the BCEC, strongly emphasized the need for additional hotel rooms proximate to the new facility. The Johnson Report recommended that 3,800 new hotel rooms be available within seven years of the BCEC’s opening (i.e., 2011); fewer than one-half of this recommended total (1,682 new rooms) have actually opened. Inadequate hotel supply near the BCEC requires event attendees to stay at Back Bay hotels and other hotels even farther away, an inconvenience that is also expensive – transportation costs of as high as $1 million have been incurred by shows.

Where Are We Today? Preliminary Conclusions: Hotel Working Group When an event at the BCEC generates demand for hotel rooms in the Back Bay, a concurrent event at the Hynes Convention Center cannot be booked, as the necessary hotel room supply is unavailable. Additional hotel supply proximate to the BCEC would enhance the BCEC’s competitive position and allow concurrent events to be booked at the BCEC and the Hynes. The three hotels within walking distance of the BCEC are all full-service “four star” hotels; there are no limited service hotels within a half-mile radius. New hotels generate significant employment opportunities during construction and during operations (operating a 1,000 room hotel requires approximately 400 to 500 full time equivalent positions). The fiscal impacts from new hotels are also substantial (a 1,000 room convention hotel near the BCEC would generate approximately $6,700,000 per year in occupancy taxes, $1,350,000 per year in sales taxes, and $4,400,000 per year in property taxes (in today’s dollars)). When an event at the BCEC generates demand for hotel rooms in the Back Bay, a concurrent event at the Hynes Convention Center cannot be booked, as the necessary hotel room supply is unavailable. Additional hotel supply proximate to the BCEC would enhance the BCEC’s competitive position and allow concurrent events to be booked at the BCEC and the Hynes. The three hotels within walking distance of the BCEC are all full-service “four star” hotels; there are no limited service hotels within a half-mile radius. New hotels generate significant employment opportunities during construction and during operations (operating a 1,000 room hotel requires approximately 400 to 500 full time equivalent positions). The fiscal impacts from new hotels are also substantial (a 1,000 room convention hotel near the BCEC would generate approximately $6,700,000 per year in occupancy taxes, $1,350,000 per year in sales taxes, and $4,400,000 per year in property taxes (in today’s dollars)).

Where Are We Today? Preliminary Conclusions: Hotel Working Group Despite projections of high occupancy rates and substantial net operating income, unassisted private development of large convention center hotels is unlikely for the foreseeable future due to very high development costs, limited availability of debt for hotel development, and high rates of return required by equity capital. Since 2000, only two full service, business-oriented hotels of 700 rooms or larger have opened in the United States without public support (both in Times Square, in 2000 and 2002). Of the 15 other 700 room plus hotels opened since 2000, approximately half were publicly financed, using bond proceeds, and half were publicly assisted (through grants, favorable loans, favorable ground lease terms or myriad other forms of assistance). Despite projections of high occupancy rates and substantial net operating income, unassisted private development of large convention center hotels is unlikely for the foreseeable future due to very high development costs, limited availability of debt for hotel development, and high rates of return required by equity capital. Since 2000, only two full service, business-oriented hotels of 700 rooms or larger have opened in the United States without public support (both in Times Square, in 2000 and 2002). Of the 15 other 700 room plus hotels opened since 2000, approximately half were publicly financed, using bond proceeds, and half were publicly assisted (through grants, favorable loans, favorable ground lease terms or myriad other forms of assistance).

Where Are We Today? Preliminary Conclusions: Hotel Working Group Chapter 152 of the Acts of 1997 (the BCEC legislation) prohibits hotel development south of Summer Street in the area around the BCEC. The development of “limited service” (moderately priced) hotels near the BCEC is also inhibited by high development costs and lack of available financing, although these hurdles are less formidable than those facing larger, full-service hotels. There is land available near the BCEC for both larger- and smaller-scale hotel development, an opportunity not available in many other competitive locations. Competitors in other cities have recently decided to face hotel development challenges directly and move forward with new convention center hotels (for example, Dallas – bond financed; Washington DC – substantial (approximately 50%) public investment). Chapter 152 of the Acts of 1997 (the BCEC legislation) prohibits hotel development south of Summer Street in the area around the BCEC. The development of “limited service” (moderately priced) hotels near the BCEC is also inhibited by high development costs and lack of available financing, although these hurdles are less formidable than those facing larger, full-service hotels. There is land available near the BCEC for both larger- and smaller-scale hotel development, an opportunity not available in many other competitive locations. Competitors in other cities have recently decided to face hotel development challenges directly and move forward with new convention center hotels (for example, Dallas – bond financed; Washington DC – substantial (approximately 50%) public investment).

Preliminary Conclusions: BCEC Expansion & Urban Context Working Group
Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group With 516,000 s.f. of exhibit space, the BCEC’s exhibit hall area is smaller than the exhibit hall areas of almost all competitors. Exhibit space at the BCEC is well configured – all exhibit space is contiguous, ceiling heights are generous, and column spacing is good. The BCEC’s relatively small exhibit hall capacity prevents the largest shows from coming to Boston, and does not allow two or more large shows to be hosted concurrently. Expansion of exhibit space at the BCEC should occur directly south of the existing exhibit hall, with new exhibit space contiguous to existing exhibit space. With 516,000 s.f. of exhibit space, the BCEC’s exhibit hall area is smaller than the exhibit hall areas of almost all competitors. Exhibit space at the BCEC is well configured – all exhibit space is contiguous, ceiling heights are generous, and column spacing is good. The BCEC’s relatively small exhibit hall capacity prevents the largest shows from coming to Boston, and does not allow two or more large shows to be hosted concurrently. Expansion of exhibit space at the BCEC should occur directly south of the existing exhibit hall, with new exhibit space contiguous to existing exhibit space.

Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group Additional meeting room capacity should accompany any expansion of exhibit space, in approximately the same ratio as exists now (1 s.f. of meeting room space per 3 s.f. of exhibit space). Preliminary planning indicates that, depending upon the arrangement of other program elements on the site, between 335,000 and 390,000 s.f. of additional exhibit space could be accommodated in the “expansion area” between the existing BCEC and Cypher Street. Other competitive cities, including Philadelphia and San Diego, are currently expanding their exhibit hall and meeting room capacity. The ballroom at the BCEC is 40,000 s.f. in area, also at the lower end of the range when compared to competitive cities. Additional meeting room capacity should accompany any expansion of exhibit space, in approximately the same ratio as exists now (1 s.f. of meeting room space per 3 s.f. of exhibit space). Preliminary planning indicates that, depending upon the arrangement of other program elements on the site, between 335,000 and 390,000 s.f. of additional exhibit space could be accommodated in the “expansion area” between the existing BCEC and Cypher Street. Other competitive cities, including Philadelphia and San Diego, are currently expanding their exhibit hall and meeting room capacity. The ballroom at the BCEC is 40,000 s.f. in area, also at the lower end of the range when compared to competitive cities.

Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group With a high level of finish, a column-free configuration, and a generous pre-function area providing views of downtown Boston and the harbor, the BCEC ballroom is a desirable space for a variety of users. The location of the existing ballroom at the north end of the BCEC makes access difficult from exhibit and meeting room space at the south end of the building. Most BCEC events using exhibit space also use the ballroom, limiting the ability to book concurrent exhibit hall events. A second, larger ballroom would be highly desirable, allowing larger ballroom events to be accommodated and for two concurrent exhibit hall events – both requiring ballrooms – to be accommodated. With a high level of finish, a column-free configuration, and a generous pre-function area providing views of downtown Boston and the harbor, the BCEC ballroom is a desirable space for a variety of users. The location of the existing ballroom at the north end of the BCEC makes access difficult from exhibit and meeting room space at the south end of the building. Most BCEC events using exhibit space also use the ballroom, limiting the ability to book concurrent exhibit hall events. A second, larger ballroom would be highly desirable, allowing larger ballroom events to be accommodated and for two concurrent exhibit hall events – both requiring ballrooms – to be accommodated.

Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group This new ballroom should be located at the southern end of the existing BCEC, or in the expansion area to the south of the BCEC, for accessibility to an expanded exhibit hall and the southern portion of the existing exhibit hall. Exhibit hall expansion to the south of the existing BCEC, together with a new ballroom located on the southern portion of the site, should be complemented by a second, major BCEC entrance in this area. While locating a new ballroom at the west side of the BCEC would provide a number of benefits, including a connection between the BCEC and the Fort Point neighborhood, expansion in this direction would involve construction over the existing railroad tracks and Bypass Road and, consequently, formidable regulatory and building code challenges. Orienting expansion planning for a new ballroom to the east side of the BCEC provides functional, less expensive options, and would help activate and develop D Street. This new ballroom should be located at the southern end of the existing BCEC, or in the expansion area to the south of the BCEC, for accessibility to an expanded exhibit hall and the southern portion of the existing exhibit hall. Exhibit hall expansion to the south of the existing BCEC, together with a new ballroom located on the southern portion of the site, should be complemented by a second, major BCEC entrance in this area. While locating a new ballroom at the west side of the BCEC would provide a number of benefits, including a connection between the BCEC and the Fort Point neighborhood, expansion in this direction would involve construction over the existing railroad tracks and Bypass Road and, consequently, formidable regulatory and building code challenges. Orienting expansion planning for a new ballroom to the east side of the BCEC provides functional, less expensive options, and would help activate and develop D Street.

Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group The targeted size range for a new ballroom is 60,000 to 100,000 s.f. of ballroom area, together with necessary support space. A large fixed seat auditorium was considered as an expansion component, since some event sponsors indicated that such space would be desirable and a number of other convention centers have auditoriums. After extensive analysis, it became clear that the benefits of a new auditorium were not as compelling as the benefits of other expansion components under consideration, particularly in Boston, which has many existing auditoriums. As a planning principle, a “campus” configuration of existing and new buildings, with discrete but interconnected components is preferable to a massive, single building. The targeted size range for a new ballroom is 60,000 to 100,000 s.f. of ballroom area, together with necessary support space. A large fixed seat auditorium was considered as an expansion component, since some event sponsors indicated that such space would be desirable and a number of other convention centers have auditoriums. After extensive analysis, it became clear that the benefits of a new auditorium were not as compelling as the benefits of other expansion components under consideration, particularly in Boston, which has many existing auditoriums. As a planning principle, a “campus” configuration of existing and new buildings, with discrete but interconnected components is preferable to a massive, single building.

Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group Expansion plans should allow for both “all at once” development of a full expansion program and for incremental development of expansion components over time. A plan that is flexible, allowing for changes over time in response to new circumstances and priorities, is essential. Expansion planning must incorporate parking, truck marshalling and other essential support functions. Expansion plans must respect and support the residential neighborhoods near the BCEC, other planned and existing developments, existing and planned transportation infrastructure, and the city’s vision for the South Boston Seaport. Expansion plans should allow for both “all at once” development of a full expansion program and for incremental development of expansion components over time. A plan that is flexible, allowing for changes over time in response to new circumstances and priorities, is essential. Expansion planning must incorporate parking, truck marshalling and other essential support functions. Expansion plans must respect and support the residential neighborhoods near the BCEC, other planned and existing developments, existing and planned transportation infrastructure, and the city’s vision for the South Boston Seaport.

Where Are We Today? Preliminary Conclusions: BCEC Expansion & Urban Context Working Group All four sides of the expanded BCEC must be active and engage abutting neighborhoods – uninviting “back doors” should be avoided. An expanded BCEC will serve as a catalyst for growth in the area, bringing new customers to local businesses and promoting the surrounding “Innovation District.” Since a full BCEC program cannot be accommodated on the existing BCEC site, acquisition of property at the periphery of the BCEC is desirable. A thoughtful program of land acquisition is timely, as land is currently available and market conditions are favorable. All four sides of the expanded BCEC must be active and engage abutting neighborhoods – uninviting “back doors” should be avoided. An expanded BCEC will serve as a catalyst for growth in the area, bringing new customers to local businesses and promoting the surrounding “Innovation District.” Since a full BCEC program cannot be accommodated on the existing BCEC site, acquisition of property at the periphery of the BCEC is desirable. A thoughtful program of land acquisition is timely, as land is currently available and market conditions are favorable.

Where Are We Going? 40

Overview: 4-Month Game Plan December ’10 – March ‘11
Where Are We Going? Overview: 4-Month Game Plan December ’10 – March ‘11 Complete Our Analysis and Answer Four Key Questions: Why are we doing this? What do we propose to do? How much will it cost? How could it be paid for? Compile this Information Into: Options and Recommendations Implementation Plan Prepare Final Report Capturing A. and B. Make sure all “Tough Questions” are addressed.

1. Why Are We Doing This? Where Are We Going?
MCCA’s Existing Contribution to Massachusetts Economy How do we support other key sectors of the economy: health care, education, finance and insurance, information technology, life sciences? The importance of the hospitality and tourism sector. The role we play in the hospitality and tourism sector. The MCCA’s international presence – a special feature. The jobs we create. The taxes we generate. The spending we generate. Maintaining/Enhancing Our Leadership Position in the Convention Industry Responding to overall trends in the industry. Capitalizing on opportunities to move ahead of competitors. Addressing existing challenges at the BCEC and Hynes (shortage of hotel rooms at BCEC, inadequate ballroom at BCEC, etc.).

1. Why Are We Doing This? Where Are We Going?
BCEC and Hotel Expansion as Catalysts for Urban Development Making the “first move” to free up planned, stalled projects in the Seaport District. Creating additional demand for surrounding projects – restaurants, retail, and housing. The Importance of Timing: Now vs. Later Create jobs in time of high unemployment. Take advantage of favorable construction costs. Take advantage of favorable land costs. The Direct Economic Benefits of Expansion Jobs Taxes Spending

2. What Do We Propose To Do? Where Are We Going?
Overall: A Vision for the Future 5-20 year time horizon. Avoid trap of expedient, piece-meal, short-term thinking. Present more than one option for BCEC and hotel expansion. BCEC Expansion: Ballroom Why: The case for a second, larger ballroom (lost business, operational, marketing, industry trends, etc.). What: Size, program, etc. Where: Locational options; comparative analysis of options. BCEC Expansion: Expanded Exhibit Hall and Meeting Rooms Why: The case for an expanded exhibit hall and expanded meeting room supply (lost business, operational, marketing, industry trends, etc.). BCEC Auditorium Why: How do others with fixed seat auditoriums use them? Reasons auditorium is not part of proposed vision: Expensive; use/benefits don’t justify investment; Boston has adequate supply of venues.

2. What Do We Propose To Do? Where Are We Going?
Hynes: Repositioning as Congress Center Why: Capitalize on inherent strengths (location, hotel proximity, etc.). Why: Enhance international positioning/appeal (Congress Center). Why: Position as distinctive complement to BCEC. What: Proposed improvement program. Address BCEC Challenges Facility Challenges: Eastern lobby and registration area, inadequate administrative offices, etc. Context Challenges: Improve surrounding area. Interventions to Promote Hotel Development Headquarters hotel. Mid-priced hotels. Take Necessary First Steps Toward Future Land acquisition: West (USPS land); east (Intercontinental, etc.); south (Cypher to First block). Relocate existing parking; increase parking supply. Relocate testing lab and maintenance facility.

3. How Much Will It Cost? Where Are We Going? BCEC Expansion Costs
Construction Costs: Overall costs of construction; costs by expansion element (ballroom, etc.); costs by major components of each element; identify special premiums (e.g., site premiums). Other Development Costs: Land acquisition, permitting, design and engineering, etc. Cost of Enabling Activities: Relocate testing lab and maintenance facility; site remediation costs; relocated parking costs. Hynes “Congress Center” Costs Breakdowns: By program component; hard and soft costs. Headquarters Hotel Costs Program to Encourage Mid-priced Hotels Cost Breakdowns: By program component; hard and soft costs. Financing Costs Other Costs

4. How Could It Be Paid For? Where Are We Going?
BCEC Expansion and Hynes Repositioning Convention Center Fund: Capacity. Other Financing Options. Evaluation of Options. Program to Encourage Additional Hotels Headquarters Hotel: Options and evaluation of options. Mid-priced Hotels: Financing options.

5. Options & Recommendations
Where Are We Going? 5. Options & Recommendations BCEC Expansion Recommended expansion program. Priorities. Costs and financing. Hynes Repositioning Recommended program. Headquarters Hotel Recommended strategy.

5. Options & Recommendations
Where Are We Going? 5. Options & Recommendations Mid-priced Hotels Recommended strategy. Costs and financing. “First Steps” Toward Future

6. Implementation Plan Where Are We Going? Implementation Steps
Legislation, permitting, financing, design, land acquisition, construction, etc. Schedule for Implementation Cash Requirements Schedule

Discussion/Next Steps 51

Preliminary Agendas for 2011 Meetings
Discussion/Next Steps Preliminary Agendas for 2011 Meetings January BCEC Expansion Scenarios – 3 Options Hynes as “Congress Center” Initial Implementation Steps Answers to the “Tough Questions” February Costs Financing Options March Review Draft Report Focus on Conclusions and Recommendations

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