A long-awaited expansion of Cobo Center convention hall in Detroit may not happen after all.

 

Members of the regional five-member authority that took over Cobo last year told Free Press editors and writers Monday that they would proceed with an expansion of Cobo only if a solid business case emerges from a strategic planning study that is now starting. The results of the study are due around June.

Asked whether an expansion may not take place, Larry Alexander, chairman of the Detroit Regional Conventional Facility Authority, said: “It may not. And we hope that the business case will help us come up with that right answer.”

Alexander made clear that even if Cobo doesn’t get any bigger, the authority would improve it with numerous upgrades.

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Any decision to shelve expansion plans could provoke controversy. Barron Meade, senior cochairman of the 2011 North American International Auto Show, said Monday that the Detroit Auto Dealers Association, which sponsors the auto show, continues to believe a bigger Cobo is necessary.

“We’ve been very clear all along,” he said. “Expansion and renovation are needed for the future success of the North American International Auto Show.”

Focus on how to pay for it

For years, the debate over Cobo Center has focused on how to pay for an expansion of the aging 700,000-square-foot facility to keep the signature North American International Auto Show in Detroit.

So it came as a surprise Monday when members of the new five-member regional authority created to manage Cobo told Free Press editors and writers that an expansion may not be in Cobo’s future after all.

Alexander said the authority has hired Conventions, Sports & Leisure International, a Minneapolis-based consulting firm, to help it determine a course for Cobo. This strategic planning study will cost $100,000 and should be done by June, Alexander said.

Only then will the authority decide whether to make Cobo bigger or to upgrade its facilities, Alexander and other authority members said.

A decision to expand Cobo probably would require the authority to find new customers for Cobo and to decide whether the auto show, its biggest and most important annual event, really needed the extra space.

Alexander and other members of the board raised some doubts about that during the meeting with the Free Press.

“If Cobo’s expanded, how many more exhibits can the auto show bring in?” Alexander asked. GM has reduced its brands and uncertainty remains in the industry, he said.

Waymon Guillebeaux, secretary and member of the authority, added: “Keep in mind that when you expand the facility, you’re also expanding the maintenance costs.”

A shift away from a bigger Cobo will likely trouble leaders of the Detroit Auto Dealers Association, which puts on the annual auto show. DADA leaders have been warning for years that Detroit might lose a big chunk of the show to other cities if Cobo didn’t provide more exhibition space.

Meade made it clear when told of the authority’s remarks that the dealers think expansion is still necessary.

“We’re the customer, and we’ve asked for both an expanded and an updated facility,” Meade said.

Alexander said he and other authority members were working closely with DADA leaders to come to an agreement on Cobo’s future.

“We all want the North American International Auto Show to remain the premier auto show around the world,” Alexander said.

Former Mayor Kwame Kilpatrick, while still in office, had suggested converting the adjacent Cobo Arena into exhibition space for the auto show. But that’s just one idea, and the authority could carry out that plan or choose another way to expand Cobo, or shelve the expansion all together.

Beginning with a plan put forth in late 2006 by Wayne County Executive Robert Ficano, an expansion of Cobo has been a major point of regional debate.

The Legislature finally settled the issue in late 2008 when it created the regional authority to operate Cobo.

When the Legislature created the regional authority, it authorized $299 million in potential funding out of hotel and liquor taxes to pay for operations, upgrades and an expansion.

The authority has committed about $58 million on immediate maintenance and upgrades, including a $20-million payment it must make to Cobo’s owner, the City of Detroit, to replace parking revenues that will now go to the authority instead of the city.

That leaves about $240 million in potential financing for a Cobo expansion. But the legislation that created the authority required that it at least break even.

That will prove difficult. In recent years, Cobo has earned about $4 million in revenue but cost $20 million for the city to operate.

The state will provide an operating subsidy until 2013, Alexander said, but Cobo must break even after that.

 

Source:freep.com/JOHN GALLAGHER