Wednesday, May 14, 2008

$500 million convention center hotel: economic engine or boondoggle?

The Dallas City Council is set to vote today on the purchase of land adjacent to the convention center for the purposes of developing a connected hotel, which apparently the convention folks have long told us we desperately need. Price tag for the land: $42 million. The tax appraisal was recently raised from around $7 million to closer to the purchase price to reflect the fact that it won’t be used as a parking lot any more.

Mayor Leppert is leading the charge for this convention center hotel. He had the council in executive session (read behind closed doors) a week or two ago and it was then decided that Dallas not only needed this hotel now, but Dallas needed to own it outright rather than just subsidize it. And it might cost $400-$500 million to build. And we don’t even know if it will make money, so add years of potential operating losses to that number and all of a sudden we’re talking real money.

And of course the voters shall have nothing to say about it. This hotel is to be financed with revenue bonds that do not require a vote of the citizenry.

Leppert has almost the entire council behind him on this, as he did with the Trinity River referendum, with the exception of council members Mitchell Rasansky and Angela Hunt. You’ve got to admit, the man can build a coalition. They’ve managed to keep Rasansky quiet with a ruling that he could not engage in vote or debate on this issue due to some Citigroup stock he held (the company that will underwrite bonds issued by the city for this deal). I thought this was a flimsy excuse to silence Rasansky when the city attorney announced it, but there it is. It’s not like this is going to really affect his Citigroup stock value, a company with a $122B market cap. I’ll just note that anyone with a mutual fund indirectly owns shares of Citigroup, but I digress.

At any rate, Rasansky is silent no more. He has spoken in an Op-Ed piece in this morning’s DMN, ethics be damned. And it’s a good piece.

Here’s the thing. Neither Rasansky nor Hunt has come out against the hotel! They have both just stated that they would like to look at it further before putting taxpayers on the hook for half a billion dollars. And that is a very prudent position, especially in a city with a low hotel occupancy rate (Rasansky states it is less than 65 percent) and in a location that no private hotel developer has yet said this is where we want to put 1,200 rooms. Add to that a convention business that may be about to change radically with the advent of $120/bbl oil and the fact that Dallas is not a destination city like Miami or Las Vegas.

I haven’t read Leppert’s response yet, but I’ll bet he plays the old “world class city” tune, the one that lulls Dallasites into believing that we are just one signature bridge, one road in our drainage ditch, and one fancy publicly owned hotel away from being Los Angeles.

Leppert and his cronies on the council want to rush this through. And they might yet get away with it. Astonishing, really, that something this big could get slipped in under the public’s apathetic nose. Even the Morning News editorial board, Leppert’s lead cheerleader on the Trinity vote, is saying to slow down.

Slow down, Council. You still answer to the voters.

Update: Unfair Park is reporting that the council voted (with 2 dissents) to "get into the hotel business." I don't know yet if that means they voted to purchase the land or to actually go ahead with development of a hotel. If it's the latter... wow, that was fast!

Update 2: It appears from the resolution language that the council has authorized the sale of bonds for the land purchase and directed the city manager to enter into negotiations with developers and operators to build and operate the hotel. Funding for the actual hotel would have to be at a later meeting. Again... wow!

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