Cobo looks to expand, raise funds
Cobo Center is considering another possible major expansion and shoring up its funding.
Hundreds of thousands of visitors are at Cobo for the Detroit auto show this week, but officials are looking years down the road to keep the convention center on a solid financial path.
In six years, a tax subsidy for Cobo ends. The regional authority that controls Cobo has to find another source for that money, which currently is $7 million a year. The center has an annual operating budget of about $16 million.
One of the ideas being explored is selling the naming rights; historians say the convention center is named after the wrong official — Albert E. Cobo, a ’50s-era Detroit mayor who campaigned against the “Negro invasion” of white neighborhoods, among other things.
Another option is to become a partner in the redevelopment of Joe Louis Arena, which is expected to be demolished next year. Other land deals could include a push to reconnect the Joe Louis site to downtown; that area is now separated from the rest of downtown by the Lodge freeway.
Asking for more tax money is yet another option.
“We still have cards yet to play,” said Patrick Bero, CEO/CFO of the Detroit Regional Convention Facility Authority, which has managed Cobo since 2009. A decision is probably still 18-36 months away, he said.
Cobo used to be run by the city. The regional authority took control because the convention center was losing $20 million a year. Its infrastructure was so outdated that organizers of the auto show threatened to leave, which would have been a demoralizing and financial blow to the city.
The regional authority includes representatives from Michigan, Detroit, and Wayne, Oakland and Macomb counties. Since 2009, Cobo has undergone a $279 million renovation and expansion, which ended last year.
Funds for Cobo operations come from its own sales revenues and a state tax subsidy that declines over time until it disappears in the 2024 fiscal year. That’s the gap Cobo officials are looking to fill.
According to Bero, these are the options being explored:
■Sell naming rights to a corporation. More than a dozen cities have sold naming rights to its convention centers, according to SMG, which manages a number of centers in the United States. Last year, Cleveland sold naming rights to its convention hall to FirstMerit Corp for $10 million. For 20 years, the facility will be called FirstMerit Convention Center of Cleveland. In 2014, Dow Chemical. Co. bought the naming rights to Saginaw’s convention center.
Changing the name of Detroit’s convention center also would help it shed the divisive legacy of Cobo. He was Detroit’s mayor from 1950-57, when the city was majority white. Cobo pushed for the demolition of the African-American neighborhood called Black Bottom to make way for freeway expansion, while at the same time supporting white Detroiters’ concerns to keep blacks out of white-majority areas. He helped kill city streetcar lines and was an advocate of “tough policing” on blacks, said Joel Stone, senior curator of the Detroit Historical Society.
“The convention center is a city jewel and an example of great regional cooperation,” Stone said. “That’s why removing Cobo’s name from that facility has validity.”
■Become major real estate developers. Officials for Cobo are open to adding convention space where Joe Louis Arena now stands. They may also want to buy or build a parking garage.
More space and parking are needed, Larry Alexander, president and CEO of the Detroit Metro Convention & Visitors Bureau, said recently. And preferably those additions, particularly the added conference space, would be connected to Cobo, he said.
The riverfront Joe Louis Arena became part of the city’s bankruptcy case. It was given to the last major holdout creditor who agreed to take control of the city-owned property along with a parking garage. Bond insurer Financial Guaranty Insurance Co. aims to replace the aging arena with a hotel, riverfront condominiums and retail.
Any possible development won’t happen until 2022, according to the terms of the bankruptcy deal. Officials have had “one or two basic conversations” about that development, Bero said. Bero added that if Cobo becomes part of Joe Louis development deal, Cobo officials would lobby for an overhaul of nearby Third Avenue so it reconnects with downtown.
Another real estate move being explored is to buy a nearby parking garage. “Or possibly build one,” Bero said.
■Ask for more taxpayer money. That would require approval from the state Legislature, which would back the money through the sale of bonds. Bero indicated that Cobo officials would explore other options before going to taxpayers.