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	Executive Chatter with Peter Bastulli By BRANDON GLENN 10:59 am, August 12, 2005 Peter Bastulli is no stranger to the positive effect nearby development can have on a complementary business. Mr. Bastulli, a partner with accounting firm Cohen & Co., once owned the popular downtown Cleveland restaurant Pete & Dewey’s Planet, which benefited greatly from the openings of Jacobs Field and Gund Arena in the mid-1990s. Now Mr. Bastulli, 40, is championing downtown development of another type, serving as chair of the finance committee of the Convention Facilities Authority. The group is charged with creating a plan to finance and construct a new convention center in downtown Cleveland. He says he knows the center, with an estimated cost of $450 million to $500 million, will be a tough sell to a public that just rejected property tax increases that would have funded Cleveland’s public schools. After Forest City Enterprises Inc. rescinded its bid to build a new center near Tower City, the CFA is planning to renovate the existing convention center on the mall near Lakeside Avenue. Most of the center’s construction costs would be funded by a bond issue made possible by city or county tax increases. A study on the demand for and economic impact of a convention center by consulting firm Pricewaterhouse Coopers LLP forms the basis for many of the CFA’s plans. The county paid PwC $136,000 to conduct the study. Mr. Bastulli recently sat down with Crain’s Cleveland Business: On The Web to discuss the tax increases Northeast Ohioans might face to help finance the convention center and why he thinks the money and jobs a new center could bring to the community justifies those proposed tax hikes. What was PricewaterhouseCooopers’ justification for recommending a 300,000-square-foot center? They have all kinds of models that they run. What they basically said was, “With this programming — 300,000 square feet of exhibition hall, 100,000 square feet of meeting rooms, etc. — you will achieve an occupancy of 50%.” The best optimization of these centers in the country is between 50% and 60%. And the cost is expected to be $500 million? Right now, the preliminary estimates are $450 to $500 million, affected by a lot of different issues out there. How big is the site? Do we need to go west and acquire property? Are there sufficient utilities coming to the site? Are there (hazardous materials) issues? There are a lot of qualifications and conditions on that price. It’s going to be a very expensive undertaking. What kind of a bond issue would that necessitate? You want to bond what you need to do for the project. Built into the bonding are reserves to make sure there’s enough guaranteed to pay the bonds, and obviously you’re going to build in construction contingencies. With the legislative authority that exists today, we have the ability to put on the ballot for countywide approval, increasing the prepared food and beverage tax up to 2% and the Cuyahoga Count Commissioners can increase the bed tax up to 2%. When you combine those with a couple other small increments, we probably can bond about $400 million. You know what the next question is. How do you make up that gap? ($500 million cost vs. $400 million bond.) I don’t know where the gap’s made up. First and foremost, we have to take a hard look at the design and the construction process of the existing site. Typically, you do these projects and the architects and engineers do these designs and drawings. Then you sit down and you hit them over the head, and you say, “Come on, you have to reduce the costs here.” Unfortunately for us, we’re not that far down the road. We have conceptual plans and a good amount of work has been done, but we haven’t done construction drawings and all those things. So how do you make up the gap? Design engineering first and foremost. Get the costs down. The initial design for instance, I believe, has free span space. You can put columns every 100 feet or so, and reduce the costs significantly and not impact utilization of the space. You go into most convention centers, they have columns that the minimum distance between is 90 feet. You probably don’t pay attention to them because the exhibits are built around them. I’ve learned more about this business than I think I want to know. Secondly, we need to take a very hard look at alternative sources of funding. Naming rights, signage, pouring rights — meaning Pepsi or Coke is the official soft drink of the Cleveland Convention Center. If the center is built on the mall, a lot of cars drive on the Shoreway every day. You see an electronic billboard on the Browns’ stadium. We probably should do the same kind of thing. We have to get very creative with sources of revenue. What about the possibility of increasing the county sales tax by up to 0.5%? I read that William Reidy, the CFA’s chairman, had mentioned that. What’s your take on that? Our chairman has mentioned that. I really would have no idea as to whether that’s a possibility. You’d have to ask the Cuyahoga County Commissioners, as they are the only individuals who could raise that tax. My job is to produce a financing plan, and tell the powers that be, the political leadership, the business community, foundations, how much debt service I need every year to pay for the center. Where it comes from, that’s for somebody else to figure out. This is my own personal feeling: I hope it comes from a source that is equitable to the citizens of Cuyahoga County. I don’t feel the burden of this should be shared by one citizen more than another. Except, I do believe that hotels and restaurants, especially those in downtown Cleveland, should pay more than their fair share. Call it a convention center district or whatever you call it. The owner of a downtown restaurant at Superior and East 9th probably should pay more than one out in the suburbs, because they’re going to more directly benefit. The hotel tax is designed to do that. Of course, that’s a countywide hotel tax.	<< Back

Executive Chatter with Peter Bastulli