Fix The Streets Or Build A $500 Million Hotel. Seems Like A No-Brainer

Wait a minute. Can we just talk here? I don't get the thing about how the city has a $50 million budget shortfall, but we can afford to build a $500 million hotel.

Can we be so poor that we can't fix our streets, but we can still afford to take a half-billion dollar gamble in the hotel business? And we're not in the hotel business?

Last week the Dallas City Council voted to go ahead with building a $500 million city-owned convention center hotel. At the same meeting they found out that falling tax revenues may force the council to: defer more than $8 million in needed maintenance of city buildings, slash library hours by 13 percent, cut street and traffic signal maintenance by $15 million, cut back legal staff, reduce park and rec youth programs, cut budgets for the zoo and aquarium, take the water out of neighborhood swimming pools and reduce park maintenance.

The city-owned convention center hotel in Myrtle Beach wasn't going to cost the taxpayers anything either. Guess what?
COURTESY OF Starwoodhotels.com
The city-owned convention center hotel in Myrtle Beach wasn't going to cost the taxpayers anything either. Guess what?

Reduce park maintenance? You mean reduce it more? The parks already look like The Grapes of Wrath.

Cut back on traffic signals? Yikes! Crash bam boom!!!

So how in the hell can we afford to build a 1,200-room hotel? Oh, I know, I know. It's free or something. Forget about the $500 million. A pittance, a piffle, a peck on the cheek. That mere $500 million! Skies are gonna be blue. It's all gonna come true. Don't let it worry you.

Mayor Tom Leppert has assured everybody that the city will turn the whole thing over to a good hotel management company, and everything will work out fine. Not to worry.

But you know what? I do worry. Personally I do not like the argument: "We'll own the hotel, but we promise not to pay any attention to it."

Why does that bother me? Because I believe it. Come with me on a journey to the place on the Internet that I call the "Street of Broken Dreams," otherwise known as the official Web site of the Dallas City Auditor's Office. There we shall find a sampling of reports.

Dip into the first one, called "Audit of Monthly Bank Reconciliations." Not too far down, we read the following: "Monthly bank reconciliations are neither accurate nor timely. The City Controller's Office and other departments' inability to prepare accurate and timely monthly bank reconciliations has been a longstanding issue and remains unresolved."

They can't balance the checkbook.

Dip into another one, "Audit of Smirnoff Music Centre's Lease Payments" about the venue at Fair Park where they put on rock concerts. That one says the city has been shorted $843,000 because the main tenant hasn't been making the payments. It also suggests broadly that city employees or elected officials have been accepting free tickets to events.

So here's the system: Do not collect the rent. Do collect free tickets.

One of my favorite audits is called "Fair Park Administration's Monitoring Controls Over Parking Contract Revenue." It's about how Fair Park handles parking fees for events at Fair Park.

Very badly.

Sometimes parking is free. Sometimes not. The city can't say how it decides. The city doesn't count the tickets. The city doesn't count the cars. The city doesn't count the parking spaces.

If I'm a hotel management company, I look at things like this and see a big neon sign over City Hall that says, "COME AND GET IT."

Do you have any idea how much money $500 million is? I didn't. I looked at the city's 2007 list of deferred maintenance. This is stuff they already can't afford to take care of, even before the additional cuts they're going to make to cover next year's shortfall.

According to the city's "2007 Needs Inventory," there are 114 local streets in Dallas that need to be rebuilt from scratch—dug up, carted off, built back from the dirt up—but there is no money. It would take $49 million to rebuild all 114 of them.

The money for this hotel is 10 times what it would cost to completely rebuild every bad residential street in the city that needs it.

We have to borrow the $500 million. Do you realize how much debt that is? The total "general obligation" debt of the City of Dallas right now is $1.7 billion, according to the city's "Debt Services" declaration on its Web site. The hotel represents 30 percent of that amount.

Stop right there, the city will say. The hotel debt won't be "general obligation" debt. That means the bonds to pay for the hotel will be "revenue bonds" paid for by income generated by the hotel itself. Taxpayers won't have to pay off those bonds. The hotel will pay for itself, the mayor has said. No skin off the taxpayer's nose.

But my nose keeps twitching. The city is basing all of its promises on an analysis done by HVS, a hotel consulting company. HVS calculates that strong occupancy rates and a very favorable mix of tax rebates from the hotel will produce an annual income to the city in the neighborhood of $35 million to $40 million a year.

I corresponded last week with A.C. Gonzalez, the assistant city manager who has shotgunned this deal. We were working on the question of what the annual payment will be on a $500 million mortgage.

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