Plans for the new convention center were initiated in 1993 by the District’s Hotel and Restaurant Associations, the Convention and Visitors Association, and the District of Columbia government. The Washington Convention Center Authority Act of 1994 (1994 Act) authorizes WCCA to construct, maintain, and operate the new convention center, as well as maintain and operate the existing convention center. The current design calls for a total of 2.1 million gross square feet, which includes approximately 730,000 square feet of prime exhibit space compared to the existing convention center which has a total of 800,000 gross square feet, including 381,000 gross square feet of prime exhibit space. The proposed new convention center is projected to rank sixth, based on the gross square feet of prime exhibit space, in the United States when completed, and the size of the proposed new convention center should remain highly marketable into the 21st century. According to WCCA officials, the proposed new convention center is intended to allow the District to compete for larger conventions and trade shows. A 1993 feasibility study by Deloitte & Touche, commissioned by the local hospitality industry, stated that even though the District is viewed as a desirable location, the existing convention center is small compared to the convention centers of other cities, such as Atlanta, New York, Chicago, and Philadelphia. The current master plan calls for constructing a new convention center at Mount Vernon Square, the legislatively preferred site, located at Ninth Street and Mount Vernon Place, Northwest. In the 1993 feasibility study, eight potential sites were identified and evaluated against certain criteria such as physical and location characteristics, historic preservation, parking, and cost, including land acquisition and construction. As a result of this analysis, the Mount Vernon Square site was determined to be the preferred site due to its close proximity to the District’s downtown businesses and because the District owns the majority of the land, thus minimizing the cost of land acquisition. On September 25, 1997, WCCA obtained site approval and preliminary building design approval from the National Capital Planning Commission (NCPC). NCPC approved Mount Vernon Square as the site for the new convention center, which is about two blocks north of the current center. However, NCPC did not grant final approval of the building design but instead made several recommendations to improve the aesthetics of the building. WCCA anticipates that final design approval will be obtained from NCPC by early September 1998. To determine the new convention center project’s estimated costs, proposed financing arrangements, and site selection process, we held discussions with and obtained information from various D.C. Council members and officials of the District government, WCCA and its consultants and advisors, NCPC, U.S. General Services Administration, the Washington Metropolitan Area Transit Authority (WMATA), the Committee of 100, the Hotel Association of Washington, D.C., the Washington D.C. Convention and Visitors Association, the Restaurant Association of Metropolitan Washington, Moody’s Investors Service, Standards and Poor’s, and Coopers & Lybrand LLP. We compared the cost estimates for the project as of June 19, 1998, with the estimates in our September 1997 report to the Subcommittee. We reviewed budget documents and held discussions with WCCA officials to obtain reasons for variations from the previous estimates. We also identified project cost components not included in the GMP and who would be responsible for those costs. As you requested, we asked the General Services Administration to review the proposed GMP amendment to the construction management services agreement for the convention center project. We reviewed financial records and current balances to determine the amount of dedicated taxes reported as collected and transferred to WCCA. We reviewed the legislation for the proposed new tax structure for the convention center and obtained forecasts from the District government of future collections under the proposed new tax structure. We interviewed officials of WCCA, the District government, and the lockbox trustee vendor regarding operation of the lockbox since its inception. We obtained information on WCCA’s financing plan for the new convention center project, and we reviewed the assumptions to determine whether they are reasonable. To evaluate the reasonableness of the dedicated tax revenue forecast, we reviewed the District’s and Coopers & Lybrand’s methodology and assumptions for the dedicated taxes. In addition, we reviewed the auditor’s workpapers of the reported taxes collected and deposited for the convention center project to determine whether the District government properly calculated and transferred dedicated taxes to WCCA. To determine how the site selection process was conducted, we reviewed the environmental impact study that was prepared for NCPC approval by a consultant hired by WCCA. We reviewed historical information on studies performed on alternative site consideration by the District and independent consultants and WCCA’s comparative analysis of costs to construct the new convention center at the Mount Vernon Square site and the alternative Northeast No. 1 site. We conducted our review from May through mid-July 1998 in accordance with generally accepted government auditing standards and considered the results of previous work. We requested comments on a draft of this report from WCCA and the District of Columbia Government. Since we last reported to this Subcommittee, the estimated costs for building the new convention center have increased. Table 1 compares current cost estimates with the estimates included in our September 1997 report. Project costs increased $58 million, from $650 million to $708 million, and nonconstruction reserves have increased the financing-related costs by about $51 million, from $87 million to $138 million for a current total funding requirement of $846 million. As of May 31, 1998, WCCA had spent about $27 million, primarily for contractual services ($22 million), such as for the program manager and design fees, acquiring the additional land at the Mount Vernon site ($2 million), and administrative expenses ($2 million). While WCCA has maintained a $650 million budget, a number of changes have been made among the budget components, with some components increasing and some decreasing. A few project components have been taken out of the budget. The following changes have been made within the $650 million budget: Building and site estimated costs have increased by $83.1 million based on a proposed GMP amendment. Predevelopment costs increased by $39.5 million largely as a result of shifting “Other Construction Costs,” estimated to cost $35.8 million, to the predevelopment cost category. Fixtures/furnishings/equipment decreased by $17.7 million in anticipation of negotiating arrangements with vendors to provide such equipment. Soil remediation and hazardous materials removal costs decreased by $6 million as a result of refined estimates. Section 106 mitigation cost increases of $5 million reflect some additional requirements not included in previous estimates. The Metro station upgrade, previously estimated to cost $22.3 million, has been taken out of the budget in anticipation of federal funding. The project contingency decreased by $45.9 million. Considering the $10 million contingency in the GMP, the decrease is $35.9 million. The following estimated project costs, when added to WCCA’s $650 million budget, result in total estimated project costs of $708 million: Portion of utilities relocation costs that are not included in the building and site costs for which WCCA anticipates $10 million of federal funding. Metro station upgrade for which WCCA anticipates $25 million of federal funding. Anticipated vendor provided equipment of about $17.7 million. Project administrative costs of $5 million, which have not been shown in the budget. As part of the prospective financing arrangements, some of the reserves have been increased and others established for a strengthened financial arrangement for an overall increase of $51 million. Making up the largest portion of the 1998 estimated project costs are the costs associated with the GMP (building and site). The $500.6 million GMP is 71 percent of the $708 million estimated project cost. Under the terms of the construction management services agreement between WCCA and the construction manager, the construction manager submitted a GMP proposal to WCCA. The proposal provides the basis for WCCA and the construction manager to negotiate the final price. Once the price and its basis (the terms, conditions, assumptions, and related drawings and plans) are approved by WCCA, these will be set forth in the GMP amendment to the agreement. To become final, the amendment must be approved by the D.C. Financial Responsibility and Management Assistance Authority (Authority). Under the GMP proposal, the contractor is to perform all necessary work to construct the project so that it is complete and a fully functioning, first-class convention center. The construction management services agreement and the GMP amendment will allocate the costs for the project between WCCA and the construction manager. Any increases in the cost of items allocated to the construction manager will be the responsibility of the construction manager. Any increases in the costs of items allocated to WCCA (or an increase in cost items allocated to the construction manager resulting from a change order issued by WCCA) are the responsibility of WCCA. The contract and proposed amendment also provide an incentive for the construction manager to complete the project for less than the GMP by giving the construction manager 25 percent of cost savings up to $9.5 million. The percentage is adjusted up or down depending on the construction manager’s success in meeting the established goals for using local, small, or disadvantaged business enterprises. There is a penalty of $50,000 a day for failure to meet the completion date. The GMP proposal (building and site costs in table 1) is $83.1 million greater, or about 20 percent more than the 1997 estimate of $417.5 million. A WCCA official attributed the higher cost to a 175,000 increase in square footage to accommodate support and public space, retail, and parking areas, design changes, inflation, and the $10 million construction contingency. Table 2 shows the components of the GMP. Site work, concrete, and steel account for $233 million or 47 percent of the GMP.