A plan to transform an underperforming satellite wagering center at the Del Mar Fairgrounds into an indoor concert venue hit a major snag when construction bids came in at double the cost of earlier estimates.
The board of the 22nd District Agricultural Association, which runs the state-owned fairgrounds, voted 9-0 at its meeting on Tuesday, May 22, to dismiss all the bids it received on the project and work with the project architect to redesign the project in an effort to cut several million dollars' worth of costs.
"The way it looks now, I wouldn't be comfortable moving forward with this. It needs a serious overhaul," said board member Pierre Sleiman before the vote.
"For me, it's too big a risk to go forward," said board vice president Richard Valdez.
Fairgrounds officials expressed optimism that costs can be cut sufficiently to allow the project to proceed later this year.
"I think the concept is viable. We need to work on the price," said board member Russ Penniman.
"I still think it's very doable," said Tim Fennell, the fairgrounds' CEO and general manager.
The board has been considering a number of different options for the satellite wagering center over the past five years, including such ideas as a bowling and entertainment center, a craft brewery and a movie theater complex. Both revenue and attendance have plunged in recent years at the satellite wagering center, which was built in 1991. Officials have blamed industry changes such as the rise of internet betting and Indian casinos for the decline.
After officials decided to pursue the concert venue, which would include a restaurant, beer tasting area and museum about beer-making, plans started moving forward. Last year, the 22nd DAA settled a lawsuit with the city of Solana Beach, which had sought additional environmental review of the project, and received the blessing of the California Coastal Commission. As recently as December, the agency had hoped to break ground on the project this spring.
Penniman reported to the board Tuesday that construction bids for the 1,869-seat concert venue came in at about $19 million, or double an estimate the board received in February 2017 of $9.5 million.
Higher-than-expected bids for two projects - renovation of the satellite wagering center and a stormwater drainage project - left the district short by $4 million to complete both jobs, Penniman said. The district has already spent some $1.3 million on the concert venue project, mostly for architectural design work.
The higher cost for the concert venue also lowered the projected return on investment for the project - how much the district will make each year based on its investment - to about 3 percent, which could be improved several percentage points by trimming the project's cost, Penniman said.
After the meeting, board president Steve Shewmaker said the district would like to see a return on investment in the "double digits."
Shewmaker said the venue could reasonably host as many as 80 concerts per year at the venue, a number that according to financial projections would allow the facility to generate a profit. During the run of the San Diego County Fair in June and July, he said, there could be as many as 26 concerts.
But he said the facility as envisioned would not just be a concert venue. Officials plan to continue offering satellite wagering at the facility, and it could also host weddings, corporate meetings and other events, Shewmaker said. In addition, a future use could include a sports book, where patrons can bet on sports events.
He prefers to call it a "multi-purpose performing arts center," which better describes its functions.
The strength of the economy is one factor that pushed the construction bids higher than anticipated, Shewmaker said.
"All the contractors are busy," he said.
Shewmaker said he would like to see $4 million or more cut from the cost, before putting the project back out to bid within the next few months.
Currently, the total price tag for the project is $23.6 million, which includes design costs as well as a new heating and air conditioning system for the building. The 22nd DAA will be looking for ways to cut costs wherever possible, officials said.
"We're going to go back to the architect and re-scope the project," Penniman said.