Austin City Council to move forward on $1.2B Convention Center expansion—despite COVID

Austin City Council is poised to take the next steps toward a long-discussed, $1.2 billion expansion of the Neal K. Kocurek Austin Convention Center this week, despite the economic uncertainty brought about by the COVID-19 pandemic.

At a meeting on Thursday, members will consider whether to approve a contract with "all necessary parties for acquisition" of two adjacent downtown blocks as well as whether to commit additional funding to the project in the form of consultants and legal counsel.

Austin City Council will take the first step toward purchasing two adjacent downtown blocks on Thursday as part of a planned expansion of the convention center. (City of Austin Real Estate Services)

The convention center opened in 1992 and underwent an expansion between 1999 and 2002. Council members voted unanimously in May 2019 to approve a second, $1.2 billion expansion that will extend the convention center to the west. The proposal also ties in the preservation of the historic Palm School, development of Palm Park and improvements to Rainey Street.

Given the city's rapid growth, the current venue "has not been able to accommodate all event demand," according to a market study conducted by the consulting firm HVS published last month. An expanded convention center, however, is projected to drive economic activity by drawing more people to Austin—and the hotels, restaurants and other businesses that call it home.

The consultants estimate that the proposed expansion will increase the economic impact of the convention center by more than $300 million a year, leading to higher tax revenues for the city as well as the creation of more than 1,700 new jobs.

HVS Managing Director Thomas Hazinski told council members on Tuesday that he expects the convention center demand across the U.S. to return to normal in the next few years, in time for the 2024 opening of the first phase of the expansion in 2024.

"I think it is very fair to assume that this (pandemic), while it is much more prolonged than we ever expected it to be, is a temporary phenomenon and some resolution is going to happen before 2024," he said.

That said, Hazinski did raise concerns about the longer-term impacts of the economic recession occasioned by the pandemic.

"My bigger concern, and the concern that we built into this analysis, is what the pandemic's long-term impacts are on the economy," he said. "What we have seen in past recessions is it takes a long time to recover from a recession."

If council votes to approve these agenda items on Thursday, the next steps will include the design phase of the expansion project and the purchase of the two downtown blocks, which is anticipated to occur next summer.

"I think we obviously have a lot of open questions," Austin Mayor Steve Adler said on Tuesday. "(I) look forward to the action this week and answering some additional questions as we go forward."

The expansion project will be funded by hotel occupancy tax revenue. City Council voted to increase the hotel occupancy tax, or HOT tax, rate from 15% to the maximum 17% allowed under state law last summer. The city of Austin will use the revenue from the 2% increase for the expansion.

A group called Unconventional Austin gathered signatures for a citizen-initiated petition that would have required voter approval of any convention center expansion, but 54% of Austin voters rejected the measure last November.