Dallas Opponents of City-Financed Hotel Seek Referendum

DALLAS - Opponents of a plan to build a city-financed, privately operated hotel in downtown Dallas submitted petitions Thursday seeking a referendum on the project.

The city hopes to issue revenue bonds in January for a 1,000-room hotel adjacent to the Dallas Convention Center, but the opponents are asking for an election in May on whether the city should be involved in the hotel project.

The City Council has authorized the sale of $42 million in certificates of obligation to purchase the site for the hotel, with that debt expected to be called in when the revenue bonds are issued. The council has also endorsed a financial plan for the hotel that includes up to $519.1 million in senior debt, $10 million in junior debt, and $10 million from the developer.

The opponents, Citizens Against the Taxpayer-Owned Hotel, filed 13 boxes of petitions with some 60,000 signatures with the city secretary Thursday morning, far more than the 20,000 valid signatures from registered voters necessary to trigger an election on amending the city charter to prohibit publicly owned hotels.

City Secretary Deborah Watkins has 30 days to determine if the signatures are valid. If they are, the council must decide by Nov. 28 to either amend the charter or set a vote on the issue in conjunction with municipal elections on May 9.

Proponents of the city-financed hotel, including Mayor Tom Leppert and most of the 14 city councilors, said a vote in May would not affect the convention center hotel because it would be under construction by that time. Leppert said the hotel is vital to downtown's future and to the financial health of the city's convention center.

"The Dallas Convention Center hotel is a $1 billion asset, an economic engine that currently generates millions every year to help to relieve the burden on our taxpayers," Leppert said. "A new convention center hotel will allow us to compete for big, national conventions and maximize our convention center investment."

The City Council is scheduled to sign a hotel development agreement with Dallas-based Matthews Southwest in December, and then sell the bonds in early 2009.

A spokesman for the anti-hotel group - which was formed by representatives from four Dallas-area hotel operators and executives from several local real estate firms - said the council should wait for the outcome of the May vote before selling the bonds for the project.

"We are shocked by the apparent complete disregard of the voices of 60,000 voters," said Brooks Love. "We cannot believe the city would proceed on this project without popular support from the voters."

Anne Raymond, managing director of Crow Holdings, which owns a large hotel near downtown and leader of the hotel opponent group, said the convention center would not generate sufficient revenues to support debt service on the bonds.

"This hotel is destined to fail," Raymond said at press conference as the petitions were submitted. "And taxpayers will cover the cost when this hotel fails."

Dwight Burns, a municipal credit analyst with the Dallas office of Moody's Investors Service, said it was unclear if a looming referendum would affect the rating of the revenue bonds.

"We have to take a wait-and-see attitude at this point," Burns said. "We don't even know the structure of the financing, so it is premature to talk about the impact of a referendum."

The council created the Dallas Convention Center Hotel Development Corp. in August to issue the hotel bonds.

The city has selected Citi as the book-running manager and co-senior manager. Other co-seniors are Goldman, Sachs & Co. and Siebert Brandford Shank & Co. Co-managers include Jackson Securities LLC, RBC Capital Markets, and Southwest Securities Inc.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER