Baker halts $1b expansion of Boston convention center

The Boston Convention & Exhibition Center.David L Ryan/Globe Staff

The Baker administration halted the $1 billion expansion of the Boston Convention & Exhibition Center on Wednesday, citing concerns that its economic impact has been overstated and its debt payments could drain money from the state.

Governor Charlie Baker also abruptly replaced seven of 13 board members at the Massachusetts Convention Center Authority, the quasi-public agency that oversees the sprawling South Boston convention center.

“The environment has changed greatly in the five years since this proposal was first introduced, and the Seaport District has experienced an economic boom,” Baker said in a statement. “[It] would be irresponsible given the vast amounts of taxpayer dollars necessary to not only build but operate the expanded facility.”

Postponing the convention center expansion could have ripple effects on other development projects on the South Boston Waterfront — a large hotel proposal may be scaled back, and two parking garages may be scuttled.

The architect of the expansion plan, departing convention center authority executive director James Rooney, said that any delays risk driving up the project’s debt and construction costs. Though disappointed in Baker’s announcement, he said he remains hopeful that the new board members will come to the same conclusion as their predecessors and recommend that the expansion proceed.

“I didn’t hear ‘never,’ ” Rooney said. “I heard ‘not now.’ ”

The Legislature approved $1 billion in borrowing to finance the expansion last year, but the Baker administration must sign off on the bonds before they can be issued.

Kristen Lepore, Baker’s administration and finance secretary, said Wednesday that the governor now wants the new board to reconsider the expansion, although no deadline has been set for a decision.

The expansion would add 1.2 million square feet to the roughly 2 million-square-foot center — including 335,000 square feet of exhibit space, additional meeting areas, and a new ballroom.

Mayor Martin J. Walsh of Boston, a supporter of the expansion, issued a brief statement Wednesday: “I look forward to a continued dialogue with the governor as we work to get things back on track.”

Baker’s move raises doubts about the scope of a massive hotel the Massachusetts Port Authority and the convention center authority want to build across Summer Street from the convention center. Massport officials are reviewing six bids to build a hotel with at least 1,200 rooms and costing $800 million or more, on two pieces of Massport-owned land.

Now, they’re looking at a backup option — a hotel that’s roughly half that size. Massport chief executive Thomas Glynn said his agency will move ahead with a market study to find out if there’s enough support for the smaller hotel without the convention center expansion.

“We will be working on the contingency plan, but we will still be able to kick in gear the original plan if that’s what [administration and finance] and the governor decide,” Glynn said.

The convention center authority said it has already booked 18 large events for the expanded complex, and another 23 are pending, for dates as far out as 2029.

All could be in jeopardy because such contracts typically have exit clauses if the project won’t be done in time.

In particular, the BIO International Convention committed to hold its annual event, which draws some 15,000 attendees, five times at the expanded complex beginning in 2021. The authority said that marks the first time BIO has signed a deal of that scope. A representative for BIO couldn’t be reached for comment Wednesday.

Rooney said the bookings show that the plan to build a larger convention center has already begun to pay off. He had once hoped to have the project done sometime in 2019.

“The notion that the marketplace would not react to this has been proven wrong, and we haven’t lifted a shovel,” Rooney said. “We’ve moved beyond the question of ‘If we build it, will they come?’ to an exclamation that if we build it, they will indeed come.”

The authority may also curtail plans to build two parking garages nearby in South Boston — garages that had been aimed at replacing spaces that would be lost on the vast surface lot where the expansion would be built.

The delay could also affect the effort to bring the 2024 Summer Olympics to Boston. The convention center figures prominently in those plans, with a volleyball competition slated for the new wing. A Boston 2024 Partnership spokesman said the group is early enough in the planning process to be flexible on picking sites.

Lepore cited several concerns that played into the Baker administration’s decision to pause the project, including whether the huge cost of the expansion is justified by the business it would bring to the economy. She said the existing convention center has failed to live up to projections of the amount of hotel business it would generate after it opened in 2004.

The administration is also concerned that the tax sources used to finance the convention center won’t generate enough money to pay off the new bonds. Right now, six separate taxes and fees — including hotel room, car rental, and sales taxes, primarily in Boston and Cambridge — are used to pay the debt on the existing convention center. If those are not sufficient to cover the expansion debt, other hotel taxes statewide would be diverted to cover the bill.

A Baker spokesman said the broader hotel taxes sent at least $90 million to the state’s general fund last year. The administration is concerned the expansion will eat some of those funds used for other priorities.

In addition to the financial questions, Lepore also pointed to the upcoming leadership transition at the convention center as a concern. Rooney is leaving his post to lead the Greater Boston Chamber of Commerce in July. It will now be up to a newly constituted board of directors to find Rooney’s replacement.

The seven new board members appointed by Baker are: Cindy Brown, general manager of Boston Duck Tours; Andrew Crane, a builder based in Chicopee; Karen Johnson, manager at financial adviser Debt Exchange; Amy Latimer, president of TD Garden; Gregg Lisciotti, a developer from Leominster; John McDonnell, former chief operating officer of tequila maker Patron Spirits; and Frederic Wittman, a senior managing director of real estate finance firm HFF.

Baker also retained two board members: Barbara Capuano, a tax manager at Raphael and Raphael, along with Paul Sacco, chief executive of the Massachusetts Lodging Association.

Mark Erlich, executive secretary-treasurer at the New England Regional Council of Carpenters, said he was disappointed, having only learned on Wednesday that Baker was replacing him on the board.

“I think the authority is a very well-run organization, and I thought we had an effective board,” said Erlich, who has been on the board for five years.

The remaining four board seats are held by Boston assessing Commissioner Ronald Rakow, former state senator Jack Hart and Michelle Consalvo — along with one held by Lepore or her designee. Hart and Consalvo are Boston mayoral appointees, with Hart discussed as a potential successor to Rooney.

Hart said he respects Baker’s desire to scrutinize the project and remains optimistic that the new board will still want to move ahead with the expansion.

“I think we can do good things here,” said Hart, who now works at the Boston office of law firm Nelson Mullins Riley & Scarborough. “Certainly the [development growth] in the Seaport has been proof of that. I think the convention center has provided the impetus for a lot of other things to happen down there.”