DALLAS - Dallas will not be able to sell up to $500 million of taxable revenue bonds in the next 30 days for a convention center hotel due to a weak credit market, Mayor Tom Leppert said Thursday in a radio debate with a hotel opponent.
The delay means construction of the facility cannot begin before a May 9 referendum on amending the city's charter to prohibit Dallas from financing, constructing, or owning a hotel.
City officials had planned to issue the bonds supported by revenue from the 1,000-room hotel in January, but determined it could not obtain an interest rate of 5.5% or less on the debt due to tight credit. If construction could get under way with bond proceeds before the vote, city officials said, the results of the May referendum would not be relevant to the project.
At Thursday night's debate, Leppert said the city will not be able to issue the bonds for at least the next month.
"You've got a bond market that simply is not going to allow you to do it," he said. "That is what the situation is. Everybody who looks at the credit market knows that. There is nothing surprising in what I am saying."
Anne Raymond, a real estate industry professional who is leading Citizens Against The Taxpayer-Owned Hotel, said during the debate with Leppert that the plan to issue hotel debt before the election insulted the 60,000 voters who signed petitions last September to require the referendum.
"In the ensuing five months, the Dallas City Council has done everything in their power to get this hotel under way, get the debt issued, and undermine the will of the people to avoid being saddled with a half-billion dollar mortgage," Raymond said.
The anti-hotel group maintains that the convention center hotel revenue would not be sufficient to support debt service on the bonds.
Leppert said he does not expect the credit market to improve sufficiently to issue the bonds before the election. The City Council would have to approve the bond sale by April 9, and the mayor said that appeared impossible.
"We're not going to be in that position," he said. "You are not going to have a market that is going to allow you to do that."
Asked if he envisioned anything that could result in council action on a hotel bond issue before the election, Leppert said: "I certainly do not."
He said if voters approve the charter amendment banning city ownership of a hotel, the city's effort to build the hotel would end.
"I believe this vote is extremely important," the mayor said. "That's the vote that I'm looking at."
Conditions could change over the next four weeks, "but I certainly believe this vote is the critical thing," he said. "It is a big vote."
David Cook, the chief financial officer for Dallas, said the city is making preparations for a bond sale, but he expressed doubts it would occur.
"We want to be prepared if the market changes, but it hasn't and it doesn't appear that it will," he said. "We've been working on this for a long time, step by step, and arranging the financing is the next step.
The City Council created the Dallas Convention Center Hotel Development Corp. in August 2008 to issue the hotel bonds.
