Update on Occupancy and Prepared Food and Beverage Taxes and Interlocal Agreements

1. Update on Occupancy and Prepared Food and Beverage Taxes and Interlocal Agreements Stakeholders January 23, 2019

2. Presentation Overview • History and Context • Wake County Destination Strategic Plan • Financial Review – Revenues and Financial Models • Stakeholder Review Process • Request for Information Results • Future Meetings 2

3. Authorizing State Legislation • State legislation approved in 1991 and amended in 1995 • Tax levies 6% on occupancy stays; 1% on prepared food and beverage • Revenues must be used for projects supporting arts, cultural, sports or convention • Revenues in FY95 = ~ $12 million • Revenues in FY18 = ~ $55 million • Revenues projected for FY34 = ~$104 million 3

4. Governed by Interlocal Agreements • An interlocal agreement between the City of Raleigh and Wake County along with 20 amendments articulate the oversight and uses of the revenues • 20th Amendment calls for a public review • Review Financial Models • Current Projections and Forecast • Review PNC Capital Plan • Review Convention Center Capital Plan • Inclusive of stakeholders • Complete by January 1, 2020 4

5. Operating Principles During the last review process, stakeholders created Operating Principles to articulate the values of the community and stakeholders as it relates to the uses and governance of hospitality taxes in Wake County.

6. Since Our Last Review • Review Team monitored revenue performance, assisted with revenue recommendations for budget and developed review process • Review Team includes staff representatives from: • Centennial Authority • City of Raleigh • Greater Raleigh Convention and Visitors Bureau • Town of Cary • Town of Knightdale • Town of Morrisville • Wake County • Wake County Hospitality Alliance

7. Since Our Last Review • Facility CapEx Plans completed • Raleigh Convention Center • Raleigh Performing Arts Center (Duke Energy Center) • Cary Sports Facilities (baseball, soccer, tennis) • Small Projects Competitive Process Completed • 9 projects submitted requests for >$10M for projects totaling >$75M • 5 projects awarded funding • Wake County Destination Strategic Plan Completed by JLL

8. Wake County Destination Strategic PlanDenny EdwardsPresident and CEO, Greater Raleigh Convention and Visitors Bureau

9. Destination 2028

10. Destination Strategic Plan Findings The recommendations on funding are based on those projects with the potential to most positively impact increased overnight visitation using the following guidelines…

11. Guidelines • Generate overnight visitors tied to funding • Utilize assets that are proven to cause overnight stays • Identified target markets with corroborating research • Require direct tracking of program conversion • Leveraging partners and creating collaborative projects

12. JLL Recommendations and Priorities

13. Meetings and Conventions • Raleigh Convention Center enhancements and expansion • A new downtown full-service hotel

14. Sports • Multipurpose indoor sports complex • PNC Arena upgrades and enhancements

15. Leisure • Create funding for signature events and blockbuster exhibits

16. Required Measurement and Metrics

17. Thank you! DENNIS EDWARDS, PRESIDENT AND CEO, GRCVB 919.645.2656 or dedwards@visitRaleigh.com

18. Financial Review 18

19. Financial Models on website

20. Financial Planning Models • County serves as fiscal agent • Financial models jointly maintained • Major Facilities Cash Flow Model – Wake County • Convention Center Complex Financing Plan - City of Raleigh • Consider long-term expenditure commitments within a model sensitivity analysis to minimize project and financing risk with debt repayment the highest priority • Maintain fund balance targets that provide adequate margin of error to minimize financing risk should revenue estimates fall short of projections 20

21. OccupancyTaxRevenue 21

22. OccupancyTaxRevenue 22

23. Prepared Food Tax Revenue 23

24. Prepared Food Tax Revenue 24

25. Major Facilities Model – Approved with 20th amendment Major Facilities Model – Year-End FY2018 Revenues Since 2016 Review

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27. A Quick Primer on the Agreements • Section 1: • First dollars out – per legislation, specific entities get money before any projects are funded: • Wake County Cost of Collection/Administration • 3% of gross proceeds for administering and collecting the taxes • City of Raleigh “Holdback” • $680K for visitor-related activities and programs • Town of Cary “Hold Harmless” • 5% of occupancy for public relations, and visitor-related programs and activities • Greater Raleigh Convention & Visitors Bureau • Approximately 22% of total Occupancy taxes and up to $675,000 Prepared Food and Beverage tax for operational expenses associated with promotion of travel, tourism and conventions 27

28. A Quick Primer on the Agreements • Section 1: (Cont’d) • Centennial Authority • 7% for operational expenses for PNC Arena • PNC Arena Debt Service • Approx. $5.2 million annually; paid off in FY2020 (Total = $60M) • PNC Arena Maintenance • Paid off in FY2021 (Total = $22M) • Wake County and Raleigh • $1 million per organization per year for discretionary projects • Wake supports Marbles, Five County Stadium maintenance • Raleigh supports Duke Energy Center for Performing Arts 28

29. A Quick Primer on the Agreements • Section 2: 85% of all net revenue dedicated to the Convention Center • RCC - Debt Service, Maintenance and Operating • Performing Arts Center Maintenance Support • Business Development Fund • Section 3: 15% of remaining net revenue available for other qualifying uses • Cary Sports Facilities; paid in full FY2019 (Total = $10M) • Competitive Projects Fund; $2M annually • Next competitive process to begin late 2019 29

30. Major Facilities Cash Flow Model 30

31. Convention Center Complex Financing Plan 31

32. Review Process and RFI Results 32

33. 2019 Interlocal Review Schedule • September/October – Briefed Wake County Commissioners, Raleigh City Council and stakeholders • October 2018 – Released Request for Information (RFI) • Goal of RFI: Seek to learn about capital projects that are being planned or proposed in Wake County related to arts, culture, sports or convention from period 2019 – 2024 with a minimum project cost of $20 million that may request interlocal funds at a future date • January 10, 2019 – Received RFI responses 33

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35. 2019 Interlocal Review Schedule • January/February 2019 – Stakeholders meet to review financial models, results of capital maintenance plans for Raleigh Convention Center Complex, PNC Arena and Cary Sports Facilities and opportunities for future investments • March 2019 – Develop recommended modifications to financial models to address findings of facility studies and new investments • March/April/May 2019 – If funding available, conduct process for consideration of additional investments 35

36. Future Meeting Dates • Thursday, February 14, 2019 - 8:30 am Duke Energy Center for Performing Arts • Thursday, February 28, 2019 - 8:30 am Herbert Young Community Center - Cary • Thursday, March 14, 2019 - 8:30 am TBD • Thursday, March 28, 2019 - 8:30 am Raleigh Convention Center – Room 304