BRADENTON, Fla. — Palm Beach County, Fla., officials hope that Congress will extend federal stimulus bond and tax-credit provisions needed to provide a critical financing element for a long-planned convention center hotel.
County commissioners selected New York-based Related Cos. in March to build a $110 million, 400-room Hilton hotel next to the Palm Beach County Convention Center.
The project is expected to create 360 construction jobs and 300 full-time jobs after the hotel opens. An economic impact study projects the hotel will have a $6 billion economic impact over the next decade, according to county officials.
Earlier in the year it was predicted that a financing plan could be ready by May and that it would take another two or three months to negotiate the final contracts with Related. But developing the hotel’s financing plan has taken longer than anticipated, said Shannon LaRocque, an assistant county administrator who is overseeing the hotel project and finance plan.
“We have evaluated seven different capital stack options as sources” of financing, LaRocque said. “There are many factors that have prohibited us from finalizing our financial pro forma.”
Those difficulties include the county’s “unprecedented budget constraints,” she said. “The continued economic crisis across the U.S. makes traditional sources of capital difficult to secure, if not impossible, requiring us to get very creative.”
The need to get creative led the county to conclude that it should dedicate $51 million of its $53 million recovery zone facility bond allocation under the federal stimulus legislation to the convention center hotel and that it could use $10 million of new-market tax credits.
But the financing cannot be completed before the federal authorization for those programs expires Dec. 31.
“Our priority is the hotel and we’re feeling pretty confident that Congress will pass an extender or extension in the lame-duck session,” LaRocque said when asked if the county is willing to risk losing the recovery zone allocation for the hotel project if the stimulus legislation is not extended.
“We’re not ready to give up on a $6 billion economic impact over the next 10 years,” she added.
While triple-A rated Palm Beach County continues to have above-average resident wealth indexes and a high-quality tax base, analysts say it has not escaped the sharp tumble of property tax values that has hit Florida particularly hard in the ongoing downturn.
Several years of declining property values have forced many local governments in Florida, Palm Beach included, to reduce their budgets, use fund balances and reserves, and cut employment.
In Palm Beach County, the struggling economy has reduced taxable values by 25%, from a high of $169.4 billion in 2008 to $127 billion in fiscal 2011, according to a Sept. 14 report by Moody’s Investors Service. Another 5% tax base decline is anticipated in fiscal 2012.
The county has experienced a “significant and broad-based retraction” of its employment base since the collapse of the housing market and onset of the recession, Fitch Ratings said in a report earlier this month.
According to the U.S. Bureau of Labor Statistics, Palm Beach County’s unemployment rate in July — the latest currently available — was 12.2%, compared with 11.5% in July of 2009.
In August, Florida’s statewide preliminary unemployment rate was 11.7% compared with 11% in August 2009. The national jobless rate in August was 9.6% compared with 9.7% in a year ago.
The jobless rate and declining property values forced Palm Beach County to reduce its property tax levy in fiscal 2007, 2008, and 2009.
“The county entered the recession with very strong reserves and has used a combination of one-time expenditure reductions, fund balance, and personnel reductions to balance its budget,” said a Sept. 16 report by Standard & Poor’s.
The fiscal 2011 budget, which goes into effect Friday, includes $25 million in reductions, the elimination of 149 positions, and a decline in reserves from $154 million in fiscal 2010 to $134 million at the end of fiscal 2011.
“These are [reserve] levels that we still consider very strong, especially after four years of operating deficits,” Standard & Poor’s said.
On Tuesday, Palm Beach County commissioners reportedly approved a 9% property tax rate increase to avoid a deficit and support a $3.5 billion budget for fiscal 2011.
Despite budget problems, the convention center hotel project remains on the front burner for several reasons, according to LaRocque.
“We have a convention center [that] operates at a loss every year, about a $1 million loss that’s primarily attributable to fact that there is not a convention center hotel,” she said.
Currently, the nearest hotel is across the street, which requires convention-goers to cross an eight-lane divided highway.
The hotel also is important to the community because of the jobs it will create and its long-term economic benefits, LaRocque said.
But because the financing is currently dependent on federal stimulus provisions that are about to expire, officials picked up the phone and enlisted support from members of Palm Beach County’s congressional delegation. They called a press conference Sept. 17 that included Florida Reps. Ron Klein and Ted Deutch.
Klein said the federal stimulus programs would allow for investors and private sector debt to provide critical financing for the convention center hotel.
“To me, it’s all about jobs,” he said. “That is the most important thing we can do right now as we continue to rebuild from the recession.”
Deutch said the recovery zone bond and new-market tax credit programs would create more than 133,000 jobs across the country if their authorizations are extended.
Last week, Klein and Deutch co-sponsored federal stimulus extender legislation filed by Florida Rep. Alcee Hastings. It is among several similar bills pending in Congress. However, Congress is about to take a break for campaigning, which will leave only a few weeks afterward to consider extender legislation.
Palm Beach County is not alone in hoping that the recovery zone bond program, as well as the Build America Bond program, is extended. Market sources say recovery zone bond deals take longer to put together because municipalities need to work with private companies on such transactions.
If the recovery zone bonds and new-market tax credits are not extended, it’s unclear what will happen to the convention hotel project.
“We’ll have to regroup,” LaRocque said.