By Mike Cleary, The Washington Times
Knight Ridder/Tribune Business News

May 23, 1998 --The proposed convention center at Mount Vernon Place downtown cleared a major hurdle yesterday when the Washington Convention Center Authority and its contractors agreed on a $500.6 million construction price tag.

"The negotiated guaranteed maximum price allows us to build the project within our ($650 million) budget and will reap enormous economic benefits for the city's economy," Terence C. Golden, the authority's chairman, said in a statement. "Soft" costs such as engineering and legal fees will make up the rest of the project's cost.

"We are on the way this fall to groundbreaking for a world-class, state-of-the-art facility," Charlene Drew Jarvis, Ward 4 Democrat, said in a statement. "The council will take immediate steps to approve project financing," she said.

In March, the District named a joint venture of Clark Construction Group of Bethesda and Sherman R. Smoot Co. of the District as construction manager for the 2.3-million-square-foot center.

The center would generate $776 million in total economic output and 9,750 hospitality industry jobs for the District by 2006, the authority says.

Critics have said the center will not hold to its budget. The Committee of 100 issued a report Thursday, the day before the agreement was announced, saying that it would cost nearly $900 million.

Convention center organizers apparently managed to disprove the group, while adding that a market analysis shows the project can pay for itself.

A Coopers & Lybrand study, commissioned by the authority, has found that the project can generate the $44 million in hotel and restaurant taxes proposed to repay its bond and cover its operating costs, the authority said.

Legislation for the project currently spreads the tax burden on businesses citywide through the franchise taxes. However, many of those businesses didn't want to pay for a center that they believe will help only hotels and the tourist trade.

Council member Frank Smith, Ward 1 Democrat, has been working on an amendment that would not allocate business franchise tax revenues to pay for the project, leaving that burden entirely on hotel sales taxes. He plans to introduce the amendment Friday before a joint meeting of the council's committee on economic development and the committee on finance and revenue. The study assumed the change would be approved.

The legislation also would eliminate the hotel occupancy tax, at $1.50 per room per night. Hotel sales taxes -- and the proportion used to pay for the project -- would be increased to make up for the $8 million shortfall.

"I was not willing to accept a surcharge arrangement going outside the hotel industry," Mr. Smith said. "They had to find a way to pay for it within the industry."

Coopers & Lybrand's finished market analysis has been delayed by negotiations on the construction costs, said Tony Robinson, spokesman for the convention center authority.

The authority, having raised $100 million already, hopes to float a $550 million bond later this year to pay for the project.

D.C. officials and the convention center authority intend to present the breakdown of the construction costs Friday.

The council could vote on final site approval in mid-June. Mayor Marion Barry, the financial control board and Congress also must approve the project.

D.C. officials hope to present the proposal to Congress before it recesses in August. After the Clark-Smoot joint venture won in the bid in March, both sides tried to speed talks to meet that deadline, Mr. Robinson said.

If the project wins the approvals, utility relocation could take place this fall and winter, excavation early next year and construction could finish within three to five years, D.C. officials said.

Negotiations continue on details of the large and complex project, and the contractors and the center's authority have not signed a deal, D.C. officials said.