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Cobo funding splits Detroit & suburbs

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Tourism officials fear that without an improved Cobo, Detroit's auto show could be diminished.

Cobo funding splits Detroit, suburbs

Tired of footing the bill, communities hope private money will pay for upgrades.

By John Wisely / The Detroit News

DETROIT -- Suburban opposition to spending tax money on Cobo Center is mounting even as competing cities like Chicago work to supplant Detroit as home to the nation's premier auto show.

One year after Mayor Kwame Kilpatrick proposed replacing Cobo with a bigger facility, tourism officials are fretting that a failure to resolve a city-suburban clash on the center's future could cost Detroit its premier show, relegating it to a regional show without new vehicle introductions and worldwide attention.

Auto companies have not publicly suggested such a move, but many new vehicle introductions already occur in other cities, including Chicago, New York and Los Angeles.

Some auto show fans say they would hate to see a diminished show.

"Too much is pulled out of Detroit," said Jay Laramie, 36, of Rochester Hills, who has been attending the auto show since he was a child. "Pretty soon Detroit won't be Detroit anymore. It wouldn't be the Motor City."

One expert says the potential loss of new product premieres in Detroit would diminish the status of the show as a must-see event for the world press and would be seen as a retrenchment for the city. Another says that without a resolution to the dispute, the city would be risking its claim to being the auto capital of the world. Moreover, the estimate of economic impact of the show is more than $500 million per year. The city and its suburbs are, nonetheless, far apart on a plan for the future. Suburban leaders are increasingly touting private funding for a new center, possibly tied to a casino and a hotel or on a different site.

City leaders and tourism officials still are considering public funding, estimated to be $650 million, to expand the current Cobo facility but have dropped plans for a new building.

Citing other budget priorities and almost no taxpayer support, leaders of Wayne and Macomb counties have joined Oakland County Executive Brooks Patterson in saying a privately funded center is the city's best hope for reviving its convention business.

"There is sort of a growing hostility toward supporting Cobo," Patterson said. "I'm confident a (private) offer will be made, but I'm not confident the mayor will take it. If we can cobble together a privately funded deal for a convention center and a hotel and maybe a casino, and present it to the mayor, he damn well better take it."

In addition to the economic impact from the auto show, the region's image is at stake in the debate, said Michael Bernacchi, a marketing professor at the University of Detroit Mercy.

"A city our size, where we are located, we don't have any real world acclaim," Bernacchi said. "The auto industry gives us our world-class status. The auto show stakes our claim as the auto capital of the world."

The city hasn't ruled out a private-sector option, said Detroit's chief development officer, Walt Watkins, who chairs the tourism action group studying a new or expanded Cobo. The group has focused on the engineering for an expansion first and hasn't yet tackled the financing issue.

"But until a feasible private plan materializes, the group will continue to study an expansion that would add about 250,000 square feet to Cobo, said James Townsend, the executive director of the Tourism Economic Development Council, a regional group trying to draw more visitors to Metro Detroit.

"I think it's very unlikely you'd see 100 percent private financing for the simple reason that most of these (convention centers) don't make money," Townsend said.

"You're building infrastructure. That's why the public sector is involved. But just because we're studying that model doesn't mean we wouldn't turn on a dime and welcome a private investor."

Wayne County Executive Robert Ficano and Macomb County Board of Commissioners Chairwoman Nancy White also echoed Patterson's call for a private investor, and area businesspeople also have begun to discuss the possibility.

Auto show introductions

Show organizers expect at least 65 new product introductions this year, and that number could climb as the show approaches. Last year's show included 79 introductions.

"What's really at stake is being the destination for the lion's share of the new vehicle introductions," Townsend said. "That takes space to do. If you don't have it, they will do them somewhere else. There's no sentimentality here. They can do them somewhere else. They did them somewhere else before 1989 (when the show expanded to its current size and format)."

Automakers determine which city gets car debuts. Detroit, which has the largest number of debuts in the United States, also draws the biggest media contingent.

Those elaborate debuts are one reason Detroit has the only show in the nation accredited by the International Organization of Motor Vehicle Manufacturers, a Paris-based group of automotive trade associations around the world. Those introductions also draw executives from around the globe and more than 6,000 media members.

"In new vehicle introductions, we're probably in the top two in the world," said Rod Alberts, executive director of the Detroit Auto Dealers Association, which sponsors the show. "The reason we're No. 1 (in North America) is we are a media show."

Richard Blouse, president of the Detroit Regional Chamber, has in the past sounded an alarm about the Detroit show.

"We jeopardize ourselves in the future with that space," he said, referring to Cobo.

He said if automakers are denied more space, they are likely to save their major vehicle introductions for other venues.

A diminished show would be viewed in the auto industry as a "retrenchment" for Detroit, said David Littmann, chief economist at Comerica Bank.

The existing auto show will use every inch of Cobo's 700,000 square feet and then some. By building second decks on elaborate displays, the total square footage of the show will exceed 1 million, Alberts said. The displays are valued at between $200 million and $300 million.

Domestic rivals Chicago, New York and Los Angeles also are bigger. Officials in Chicago said the North American International Auto Show needs a bigger better home, like Chicago's McCormick Place, which is adding 369,000 square feet to bring the Chicago auto show to more than 1.2 million square feet.

"It should be in a facility that has the space (for it), in a world-class city," said David Sloan, a vice president of the Chicago Automobile Trade Association, which produces the show. "I grew up in Detroit; I know what it's like. I just don't know why they keep trying to shoe-horn that show in Detroit."

The expansion being studied would increase Cobo to about 950,000 square feet, which Alberts said would make the venue competitive with its peers.

High costs

Townsend acknowledges that the auto show is probably the only show at Cobo that needs more space. The other big annual shows have used up to 600,000 square feet at Cobo but aren't demanding more space.A new or renovated facility also must address Cobo's high costs to operate, which hinder its ability to compete, Townsend said. Cobo has among the highest labor rates in the Midwest, according to Tradeshow Week magazine, a trade journal that covers the convention industry. The facility's layout and tight quarters also mean show assembly must begin in October.

"It floors me that the automakers put up with that," said Sloan of the Chicago Auto show. "The contractors for our show say they could build the Detroit show in McCormick in about three weeks and save the automakers about 30 percent in labor costs."

"Are we actively gunning for the Detroit show?" Sloan asked. "We see the automakers spending too much of their auto show budget in Detroit, and we want a bigger piece of the pie."

Townsend said both cost and space must be addressed in any new plan.

"The challenges are not strictly about the size of the facility," Townsend said. "The driving issue for the auto show is size, but the show also has a real stake in the modern, efficient operation of Cobo. We're looking forward to the day when you get a double benefit, where you get a state-of-the-art facility and efficient, modern operation."

But with declining convention business in recent years and fierce competition nationally for other big shows, some people question whether the auto show is reason enough to expand a facility that runs annual operating losses between $16 million and $20 million.

"You don't build your church for Easter Sunday," said Thomas Guastello, who owns four suburban hotels, which still pay a 5 percent tax on revenues to fund the 1989 expansion of Cobo. Wayne County Executive Robert Ficano said a casino license may entice someone to build a new facility privately. The casino would help draw conventions to the center and the center would do the same for the casino, he said.

MGM Mirage chairman and CEO Terrence Lanni told The Detroit News in June that his company would likely sell MotorCity Casino after it completes its acquisition of Mandalay Resort Group, which holds a 53.5 percent stake in MotorCity. MGM already owns MGM Grand Detroit Casino, and Michigan gaming laws prohibit a company from owning more than one casino in the city.

"There might be a window of opportunity when one of those licenses transfers," Ficano said.

Detroit News Staff Writer Tony Manolatos contributed to this report. You can reach John wisely at (313) 222-2035 or jwis[email protected]

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