PHOENIX — Officials at Portland, Ore.'s Metro want to complete the bond financing of a long-delayed hotel adjacent to its convention center after a recent major courtroom victory.
Metro, the state-authorized regional government agency serving the Clackamas, Multnomah, and Washington County region, wants to sell more than $60 million of revenue bonds backed by hotel taxes before 2016, said Andy Shaw, who is chief of staff to Metro council president Tom Hughes.
If that goes smoothly, the idea is to break ground on the project next year with a hoped-for completion in 2018.
"That's our target," Shaw said.
The legal fight that has tied up the hotel project is not over, though.
Metro, which operates the convention center, has said the hotel would attract five to ten more conventions every year, boosting tourism spending and creating jobs. The plan to build the hotel had been debated for more than 20 years, and the Hyatt Corp. won the rights to it in 2012, beating out Sheraton.
Metro, on the
"One of the key reasons the Portland region doesn't do as well as it should is because it's hard for convention organizers to make hotel arrangements near the Oregon Convention Center," Metro argues. "There just isn't enough hotel space near the center to accommodate large conventions. Even the [National Basketball Association] All-Star Game has passed over Portland because of a lack of a major hotel near the convention center."
Opposition to the project has been driven by hotel operators who don't want subsidized completion.
Metro said that the public sector agreed to take on some of the financial responsibility of the hotel in part because operating convention center hotels is more challenging than others, such as requirements to hold large blocks of rooms open for conventions. Besides the more than $60 million in revenue bonds backed by the hotel room taxes, another $18 million in loans and grants would come from the city, state, and Metro. The remaining costs would be funded with investments from Hyatt, its development partners, and other private investments.
Proponents of the proposed $212 million, 600-room hotel, a partnership between Metro, Mortenson Development, the Schlesinger Companies and Hyatt, have been battling legal issues for most of the past two years since a 2013 petition by a group of hotel owners spearheaded by the Provenance Hotel Group sought to refer the project to the ballot for a popular vote. They gathered thousands of signatures on a petition to give voters a chance to revisit the Multnomah County commissioners' decision to allocate hotel taxes to debt service for the project.
County officials rejected that petition on the grounds that Oregon law does not allow a ballot initiative to challenge an administrative decision - only a legislative one. The Multnomah County Circuit Court sided with Metro and the county elections division in a decision last November, and the plaintiffs quickly appealed to the Oregon court of Appeals. That court affirmed the lower court's decision in a July 29 opinion that Shaw said overwhelmingly favored Metro.
"We had a very strong ruling in the Oregon Court of Appeals," he said. "The court confirmed our understanding of the law."
The court found that the county's tax allocation did not impose a new tax or create a tax exemption, which would have possibly made it subject to a voter referendum under the Oregon Constitution.
"Most importantly," the appeals court found, "adoption of the pledge of tax funds and the convention center hotel bond funding portions of the ordinance were preordained and compelled by the previously adopted intergovernmental agreement and board resolution. In contrast, legislative choices, whether by a local governing body or its voters, are discretionary in nature, and are not required to be made."
Hughes issued a statement following the release of the court's opinion in which he called for an end to the legal wrangling.
"These legal battles have been costly and without merit," Hughes said in the July 29 statement. "We've fought hard and won. With this ruling, we have cleared away any lingering doubts that this project should proceed. Any further legal challenges are simply about delay. I invite the opponents to end their senseless lawsuits and find common ground towards building a stronger and more prosperous region."
James McDermott, an attorney at Ball Janik in Portland who argued the case against Metro, vowed after the decision to take the fight to the Oregon Supreme Court.
He told The Bond Buyer this week that his petition to the state's top court is due Sept. 2 and that he has another case against the hotel project set for argument in the Court of Appeals in November. His clients in that case argue that Metro doesn't have the authority to build the hotel without giving its constituents a chance to vote on it, though Oregon Senate Bill 927 attempted to clarify that Metro does indeed have that power earlier this year.
"My endgame is to win one of the two cases," McDermott said.
He added that despite Metro's hope to issue its bonds for the hotel this calendar year, it might take considerably longer if it happens at all.
"The bonds really can't be issued until the issuer is free of the litigation," McDermott said, adding that if the Oregon Supreme Court takes the first of his cases it could be another year before that one is resolved.
"It has a lot of reasons for the Supreme Court to take it," McDermott said.
McDermott and attorneys for Metro have been in talks to settle the litigation, he said, including an offer by his clients to build a convention center hotel for $10 million less to reduce the public subsidy imposed on taxpayers. He said he is not sure where those negotiations stand right now.
"There's always the possibility it all settles," McDermott said.
Meanwhile, Shaw said, developer Mortensen will go ahead with a review by the city design commission next month.
The eight-member commission "provides leadership and expertise on urban design and architecture and on maintaining and enhancing Portland's historical and architectural heritage," according to the city.
"There are just a lot of considerations about how people flow through and around the project," Shaw said.
