DALLAS - Dallas would own a proposed downtown convention center hotel, financed with up to $500 million of revenue bonds, under a plan adopted Tuesday by the City Council's economic development committee.
The panel's unanimous decision reverses earlier proposals that called for the city to participate in the financing but with the hotel being owned and operated by a developer selected by the council. A plan outlined to the council in April indicated the city would provide up to $100 million in bond proceeds for a $300 million hotel.
Councilman Ron Natinsky, chairman of the economic development committee, said the advantages of public ownership include the city's exemption from property taxes and lower borrowing costs with the use of tax-exempt bond proceeds to develop the project.
"It becomes a better financial deal for the city," Natinsky said during the committee meeting. He added that the hotel would be "a money-maker for the city."
Assistant city manager A.C. Gonzalez told the committee that the revenue from the hotel, as well as money received for naming rights to developments adjacent to the hotel and negotiated fees from the eventual developer, would be more than sufficient for debt service on the bonds.
Gonzalez said he expects Dallas will use any surplus revenues to pay off the bonds before their scheduled maturities.
Four developers are in the running for the hotel project. Gonzalez said proposals from the four - Faulkner USA, Matthews Southwest, Hamilton Properties, and Woodbine Development - range in cost from $343 million to $850 million. The city refuses to discuss details of the proposals, with all discussions on the developers held in closed executive sessions.
However, Dallas Mayor Tom Leppert said he expects the hotel, which is to be built on an eight-acre site adjacent to the downtown convention center, will cost between $450 million and $500 million.
The City Council is set to vote May 14 on purchasing the hotel site for about $40 million. Selection of the developer is expected sometime this summer.
City ownership of the convention center hotel is opposed by Crow Holdings, a Dallas-based real estate firm that owns a large hotel north of downtown.
"We think it is a bad idea for the city to own the hotel," said Anne Raymond, chief financial officer for Crow Holdings. "The reason there is not a hotel there right now is because it is not economically viable. There is no reason to saddle the taxpayers of Dallas with a project that we think will lose $200 million in the first 10 years, and that's on top of $500 million in debt."
Raymond said Dallas is the second-worst hotel market in the country in terms of occupancy rates, second only to Detroit.
"It would make more sense for the city to spend its money on attractions that draw people to the city rather than on a hotel," she said. "Every city has a 1,000-room hotel, but people go to cities that have things like San Antonio's River Walk or New Orleans's French Quarter."
A letter sent to Mayor Leppert by Harlan Crow, CEO of Crow Holdings, and Raymond after the committee's decision said they were "astounded by the jubilant announcement" by Councilman Navitsky that the hotel would make money for the city.
The letter said the plan to issue revenue bonds for a city-owned hotel "shows a complete disregard for the economic realities that will be irresponsibly imposed on the taxpayers." Raymond said Crow Holdings and other opponents to the hotel plan will investigate ways to bring the question to the voters for a decision, despite the city's plan to finance the project with revenue bonds that do not require voter approval.