Despite a petition drive against the convention center hotel that even proponents are certain will result in a referendum, the mayor and council members, along with developer Jack Matthews, are continuing to move forward with the final stages of the project.
But as the city nears selection of an operator and a development agreement with Matthews, questions remain regarding the likelihood of selling bonds for the project in such difficult economic times. As Jeff Siegel points out today, rising interest rates mean the hotel will have to be even more profitable than originally anticipated to meet its debt payments.
And in this week’s paper version of Unfair Park, Dr. Heywood Sanders says, “Dallas has absolutely, positively no prospect of selling bonds for this hotel that are backed solely by hotel revenues.” But David Cook, chief financial officer for the City of Dallas, says the city has tested the market and “done some modeling” on the financing -- although, he admits, it was performed “relatively early” in the process of getting the project off the ground.
“We got some pretty good comfort that we can have a project that can work,” Cook tells Unfair Park. But don't get too comfortable just yet.
Cook says the study by HVS Consulting provided the city with revenue projections that gave a “picture of the financial future,” and the revenue bonds will be adequate because of the stopgaps in place, such as the $50 million to be set aside in a reserve account. However, he stresses, “There’s a lot to be done between now and then.”
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Then we dropped the $550-million question on him: Since the bonds are scheduled for sale in January, and the signatures will be verified December 15, won’t it be extremely difficult to sell bonds on the project if a referendum is pending?
“I guess I’d have to say yes, but I don’t think that’s a place that we will be,” Cook says. “I don’t think we would find ourselves selling bonds if there’s an uncertainly with the project.”
Ultimately, it will be the decision of the City Attorney’s Office whether or not the city can legally sell the bonds with a pending vote, but Cook offers little hope to those expecting the project to break ground before a likely vote in May.
“If there’s that degree of uncertainty, I don’t think we would be selling bonds. We’re only going to sell bonds when we think we need the money,” Cook says. “If we don’t have a project, we’re not going to sell bonds, because it’s a pretty costly proposition to sell bonds. There are a lot of costs involved, and we don’t want to find ourselves sitting on a lot of money with nothing to do with it. That’s no good, and costly too.” --Sam Merten