Dallas Approves $42 Million Deal for Convention Hotel

DALLAS - The Dallas City Council has approved $42 million of certificates of obligation to buy land for a convention center hotel that could cost as much as $500 million.

By a vote of 11 to 2, the council on Wednesday approved the purchase of 8.4 acres adjacent to the Dallas Convention Center that has made the city a top-tier convention site.

However, without a connecting hotel, Dallas is losing business to Denver, Phoenix, Baltimore, Houston, and other cities that have built hotels with taxpayer dollars, according to Dallas Mayor Tom Leppert.

According to a study by HVS Consulting and Valuation Services Inc., the hotel is the price of entry for competing in the convention market.

"The Dallas Convention Center remains under-utilized due in part to the lack of an adjacent hotel which remains as a requirement high on the priority list of today's convention meeting planners," said Rod Clough, managing director of HVS in Dallas. "If the convention center headquarters hotel is not realized, the rebirth of the downtown Dallas landscape will be short-lived."

Opponents of the hotel questioned the assessed valuation of the property, which quintupled from $7.5 million to $36.5 million after the city asked to have it reappraised. Council member Mitchell Rasansky also questioned the proposed cost of the hotel and accused the city of conducting back-room discussions on the deal.

"There is no development agreement, and not one developer has committed to build this project for any amount," Rasansky wrote in an opinion piece for the Dallas Morning News. "To pay for it, Dallas wants to issue more certificates of obligation and bonds - a proposition that is likely to affect our future bond ratings. We are talking about amounts so massive that your children will be paying the interest back for years and years."

Dallas carries general obligation ratings of AA-plus from Standard & Poor's and Aa1 from Moody's Investors Service. Fitch Ratings does not provide an underlying rating.

Convention officials, including some hoteliers who would compete with the new facility, pointed out that the city would simply lose its competitive position if it waited for another hotel. The Dallas-based American Heart Association has promised to bring its annual convention to the city if a hotel is built by 2012.

"Of the top 20 competitive convention markets nationwide, Dallas is the only city without a convention center hotel announced, under construction or completed," said Phillip Jones, president of the Dallas Convention and Visitors Bureau. "In the state of Texas, Houston, San Antonio, Austin, and Fort Worth have constructed or are in the process of building a convention center hotel."

Denver's new convention hotel was a key element in attracting this summer's Democratic National Convention. The city-owned hotel operates under the Hyatt name and was built for $285 million using tax-exempt revenue bonds. The 30-year bonds issued in 2003 included $89 million for reserves and cost of finance. Issued in the name of the Denver Convention Center Hotel Authority, the bonds are not debt obligations of the city, and the authority reimbursed the city for all pre-issuance cost.

Denver officials estimate that the hotel will add 300,000 room-nights in reservations by 2010.

 

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