DALLAS - With a fight on its hands over construction of a convention center hotel, Dallas will restructure its existing debt on the center with $316 million of insured revenue bonds today.
The Dallas bonds, pricing through negotiation with a syndicate led by senior manager JPMorgan, will be insured by Assured Guaranty Corp. for ratings of AAA from Standard & Poor's and Aa2 from Moody's Investors Service. The underlying ratings are A from Standard & Poor's and A1 from Moody's.
Under a finance plan approved by the City Council in October, the bonds were expected to be issued in November, with proceeds available in December. But the muni market went into a deep freeze due to the liquidity crisis.
"The market's kind of moved in our favor since then," noted Jeanne Chipperfield, director of budget and management services for the city. "It's improved since we first started looking at this deal."
The new issue for Dallas will refinance all of the convention center debt, which was issued in 1998 and also included refunding bonds. The goal is to extend the final maturities nine years to 2037, thereby relieving debt-service pressure on the general fund and ensuring that revenues meet the pledged ratio of 1.25 times debt service obligations. The deal also exempts the convention-center hotel from Dallas' 7% hotel occupancy tax.
The City Council meets tomorrow to consider a proposed deal with Irving-based Omni Hotels to operate the convention center hotel. The city had hoped to have a deal signed already as it sought to launch the project before opponents could stop it.
Mayor Tom Leppert and other city leaders say the lack of an attached hotel will cost Dallas its valuable convention business as other cities offer lodging as a basic amenity. The center is the ninth-largest in the nation, with more than two million square feet of space. The proposed 1,000-room hotel would include 100,000 square feet of meeting space and a variety of business amenities, with completion expected in 2012.
Under the city's current plans, a vote on a referendum opposing the hotel would come after construction had already begun. The petition for a referendum, validated in November, will appear on the May 7 city ballot.
Opponents have raised nearly $1 million through an organization called Citizens Against the Taxpayer-Owned Hotel led by rival hoteliers and Dallas real estate mogul Harlan Crow.
Proponents of the convention center hotel, operating under the name Build the Hotel, have raised only $75,400 but expect to accelerate fundraising as the vote nears.
While the hotel would theoretically open after a period of economic recovery, the current decline in convention and business travel could factor into the debate over Dallas' hotel.
In Washington, state lawmakers are considering a $766 million expansion of the state convention center in Seattle, despite a decline in bookings and studies that show convention centers are overbuilt.
For Dallas, however, the lack of a convention center hotel could be a turning point toward its decline as a top-tier convention city. Competition has increased sharply in the past five years as Phoenix, Denver, and Houston added hotels to their centers. Las Vegas, one of the top convention cities, has long touted its abundance of hotels, including one attached to the convention center.