Playing With The Convention Center Hotel Numbers, And ... Wait. What? Someone Wanted To Build This Thing With Their Own Money?
When Mayor Tom Leppert brought his Christmas list to Capitol Hill yesterday, he wasn't shy about asking for $386 million from the government to pay for a shiny convention center hotel. After taking a look at our story, Becky Mayad, spokesperson for Build the Hotel, sent an e-mail to Robert correcting the cost at $356 million, claiming "every $30 million counts!"
Indeed, 30 mil is a lot of dough. But, as Robert pointed out to Mayad, he grabbed the number from page 374 of the official release by The United States Conference of Mayors. To which Mayad responded: "That amount may have submitted before the cost of the project was finalized."
Having attended Friday afternoon's Economic Development Committee meeting, I knew exactly what the $30 million was all about, and Mayad should have too since she was also there. But just to be sure, I double-checked with Assistant City Manager A.C. Gonzalez, and, sure enough, the gap was discussed Friday. This amount represents "project enhancements" that were set aside for private funding. The enhancements include a $2 million staircase, the use of natural stones and more than $10 million to be set aside for a contingency for Matthews Southwest, Gonzalez tells Unfair Park.
So, with that settled, I asked Gonzalez for a new bond issuance estimate after Friday's announcement of a Guaranteed Maximum Price and probed him about a rumor I heard about one of the rejected proposals offering to build the hotel without taxpayer funding. Interested? Then let's jump.
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As I mentioned Friday, the GMP of $356 million only represents the maximum price of the hotel and does not include money for the land, reserve account, capitalized interest and other costs. Previously, the number the city was using for the bond issuance was $550 million, with $400 million earmarked for the hotel's construction. (I've also used $555 million as the cost after finding it on the Build the Hotel Web site.)
OK, now stay with me here. It seems reasonable to then take $550 million and subtract $44 million (the difference between the two construction amounts for the hotel) to come up with approximately $506 million as the new bond issuance amount. But I know there's a big difference between conventional math and City Hall math, so I asked Gonzalez for the new number. "We haven't really talked about it," he said. "We still have other things to get nailed down."
After a long pause and some paper shuffling, he told me it would be "in the $520 million range." Of course, I was curious as to where the extra $14 million was coming from.
"Well, there are all kinds of different things that are moving on this, but when you talk about the larger number, you're talking about a good bit that's capitalized interest, insurances and other stuff," Gonzalez said. "So you have those numbers moving as well."
Translation: Because the economy is in the crapper, interest rates are all over the map, which means we'll be paying more in interest while the hotel is under construction since, well, it won't be providing any revenue to pay back the bonds.
One last thing to ponder about all this before we move on: The old number was assuming the hotel would be 1,200 rooms. The new number is based on a 1,000-room hotel. So the room count dropped 17 percent, the hotel cost dropped 11 percent and the bond issuance cost dropped five percent.
With the numbers game outta the way, I was anxious to find out about something I'd heard regarding a proposal from Jones Lang LaSalle of Chicago, which was using some of the development team that handled the wildly successful Gaylord Texan Hotel and Convention Center in Grapevine. LaSalle was one of the six responders to the city's Request for Proposals for the project, but it didn't make the final cut because of the high price tag of its proposal (more than $800 million) and "incompatibility with downtown objectives."
I had pretty much dismissed LaSalle, especially since the proposals are still off limits to the press. However, a source told me their proposal was to build the hotel on their own dime and even pay for the land themselves. The only thing they were looking for from the city was a reasonable lease on Reunion Arena, which they wanted to use as an entertainment venue.
Gonzalez wouldn't comment on specifics of the deal because it's presumably still in contention if Matthews Southwest, FaulknerUSA and Woodbine would all somehow botch the deal. However, he did confirm that they were planning on subsidizing the project themselves.
"That's what they said, but when we went through their proposal, it was a much different situation," Gonzalez said. "We didn't get the same thing out of their proposals as they were suggesting."
He added that LaSalle's proposal was "very optimistic," but it's not unreasonable to suggest that Mayor Tom could get plenty of, um, grief if there's any reasonable way the hotel could have been built privately and Reunion could have been utilized.
Finally, I wanted to find out why votes on the GMP and final hotel developer have been delayed. Both were originally planned for Wednesday, but now the council will instead vote on Addendum Item No. 15, which extends the deadline for both until January 31. Gonzalez stresses that "nothing is being delayed" and says some of the documentation simply wasn't prepared. "We want to make sure the council has all of the information before moving forward."
And once the GMP, the developer agreement with Matthews Southwest and the hotel operator agreement with Omni are approved by the council in January, the city will wait for the right time to sell the bonds. "What is being targeted right now is the financial markets, and that's where there's a degree of uncertainty," Gonzalez says.
Oh, that's where there's the degree of uncertainty. I knew it was there somewhere. --Sam Merten