DALLAS - Phoenix is joining a parade of Southwestern cities considering hotels toenhance the appeal of recent or planned convention center expansions.
Although discussions in Phoenix are in the very early stages, officials have floated thefigure of $300 million - possibly in the form of tax-exempt revenue bonds - for a city-owned hotel that would compete with private hoteliers. The hotel is seen as an importantcomponent of Phoenix's $600 million expansion of its Civic Plaza convention center thatwon a hard-fought battle for state backing in this year's legislative session.
With revenue bonds for the convention center construction likely to be issued next year,Phoenix is running behind other major cities across the U.S. that are expanding theirconvention centers. In the Southwest region, Denver, Dallas, and Houston are planning orbuilding major convention center hotels to improve their competitive profiles againstLas Vegas and San Diego.
In Houston, city officials are completing a 13-year effort to build a major hotel withnearly $300 million of revenue bonds to serve the expanded George R. Brown ConventionCenter. The 1,200-room Hilton facility will make a major splash as host for the NationalFootball League's 2004 Super Bowl in February.
Houston officials say the expansion and city-owned hotel will make Houston eligible tocompete for 97% of the nation's convention business, a goal shared by Phoenix in itseffort to attract more conventioneers as an adjunct to its tourism business.
The Houston effort makes that city a worthy rival to Dallas as a convention site afteryears of playing second fiddle to the second-largest city in the state. Dallas officialsare still jousting over plans to build a new privately owned hotel in a tax-incrementdistrict to accommodate a recent expansion of the convention center.
In Denver, meanwhile, construction has already started on an 1,100 room city-ownedconvention center hotel financed with up to $349 million of insured revenue bonds.
Robert Swerdling, managing director at US Bancorp Piper Jaffray, said recently that heis in discussions with 20 municipalities across the country about potential conventioncenter hotel deals.
Like Denver and Houston, Phoenix is considering building the convention center hotel onits own rather than seeking a private developer willing to build the project based ontax incentives. But assistant city manager Sheryl Sculley said the city is not rulingout any options.
Building and owning the hotel outright could circumvent legal challenges based on anearlier court ruling that public-private hotel ventures are unconstitutional underArizona law. That ruling came three years ago when private hotel operator Steve Cohnchallenged Phoenix's plans to provide financial backing for two new hotels. The courtagreed with Cohn that the deal would make the city a joint owner in a private business,thus violating the state constitution.
The city's ability to use tax-exempt financing is a major factor in making the hotelproject viable while private hoteliers say that kind of financial arrangement puts themat a competitive disadvantage.
Phoenix Mayor Skip Rimza said the hotel will be crucial to the success of the conventioncenter, whose financing comes half from the city and half from the state.
"We've talked to a lot of convention organizers who said they would like to come toPhoenix, but the lack of hotel space made it impossible," Rimza said.
