While his colleagues assembled at City Hall, council member and Build the Hotel'er Ron Natinsky spent yesterday morning at the Farmers Branch Recreation Center selling the convention center hotel to approximately 40 members of the Preston West Republican Women's Club. Several of the audience members aren't Dallas residents and can't vote on the May 9 referendum, but Natinsky said he hopes some of them can influence friends who do have a vote.
Of course, that assumes their votes will actually mean something.
When Natinsky was asked what happens if citizens vote against the hotel, he made it clear that it may be too late. "If we are successful in selling the bonds before then, we will sell the bonds," he said. "We will break ground, and we will move forward with the hotel."
Speaking in front of a group that included council candidate Ann Margolin, Natinsky explained that the only way a failure at the polls will result in the project dying is if the bonds aren't sold before the referendum. If it's endorsed by voters and the bonds haven't been sold, then the city will wait until it gets the 5.5 percent interest rate it's waiting for on the bonds.
Anne Raymond of Crow Holdings and Citizens Against the Taxpayer-Owned Hotel offered a translation. "They're doing everything in their power to start before the voters have a right to vote because they're probably fearful that the voters don't want it," she said.
Natinsky said he felt it was necessary to rebut Raymond's statement, but he was unable to do so, asking if anyone in the audience could tell him when the bond market would be ready and stressing that the city is sitting back and waiting. "I'm waiting for my Blackberry to ring and say we have the 5.5 percent," he said.
Natinsky maintained that the debate is about more than a hotel, claiming it's about jobs, economic development and moving Dallas forward. He pointed out that local convention business accounts for nearly $3 billion in economic impact, employs 50,000 people and represents 10 percent of the economy.
"For those of you in the room, picture one out of 10 dollars in this city just disappearing or 50,000 jobs disappearing from an already impacted city," he said.
Natinsky tried to comfort everyone by saying that the hotel would be operated by professionals (Omni Hotels); the Dallas Convention & Visitors Bureau doubled their bookings for 2012 (the first full year the hotel is scheduled to be open); and the funding method is revenue bonds as opposed to general obligation bonds.
"It is not a taxpayer-funded hotel," he said.
Raymond countered that revenue bonds were also used to pay for the $130 million expansion to the Dallas Convention Center opened in September 2002, and the convention center has required financial help from the city's general fund in recent years (the council approved subsidies of $3.9 million in FY 06/07, $3.9 million in FY 07/08 and $2.4 million in FY 08/09).
Natinsky said the hotel will help protect against dipping into the general fund in the future, and used $5 million as an example "because it's an easy figure to use."
"If you take $5 million over the 30 years of the program on the hotel, that's $150 million that I can stand here and tell you we are absolutely going to lose -- if not more."
That number rapidly doubled as he discussed how Dallas slipped from a Tier 1 convention city (ranked No. 5) to a Tier 2 city (ranked No. 9), saying "our convention people" expect the city will drop to No. 16 without a hotel and estimate the convention center will lose approximately $10 million annually.
"Well, $10 million a year of your taxpayer money is $300 million at the end of 30 years, and we will lose that," Natinsky said. "We made a decision that the risk of losing $300 million is significantly larger than the risk that we calculated on the other side."
One of the biggest points of contention was the price tag of the project, with Natinsky saying the price is $356 million and Raymond stating the cost at $550 million.
Natinsky's number is actually the old Guaranteed Maximum Price, which has been modified in the current development contract with Matthews Southwest approved by the council February 18. According to the contract, the new GMP is slightly more than $335 million, with an additional $10.6 million in legal and accounting fees and the developer fee. This $346 million number is generally discussed as the new price of the hotel.
However, as we've noted before, this does not represent the bond issuance amount, which has been at approximately $525 million (down from the $550 million quoted by Raymond since the announcement of the original GMP). This number includes costs for the land purchase ($42 million), reserve account (approximately $50 million) and capitalized interest (money paid back on the bonds while the hotel is under construction).
We're waiting for an updated number from Assistant City Manager A.C. Gonzalez given the recent change in GMP, but the issuance will certainly be more than $500 million.
Natinsky made a poor comparison while explaining why the larger number was incorrect, saying it was like adding the interest onto the cost of a home. Then he referenced the $50 million reserve account without explaining where the money would come from.
"We put $50 million worth of reserve money out there in case there's a rainy day -- God forbid there's another 9/11 happening or something like that."
Raymond failed to expose Natinsky's description of the reserve as false, simply saying the money would be exhausted within a few years instead of explaining that the account likely will need to be replenished.
Natinsky touted the $30 million ancillary development project with developer Matthews Southwest, but he failed to mention that the city is giving Matthews $30 million back in capital. He also said the development will "happen at the same time as the hotel."
Raymond disputed this claim, pointing to failed developments in Victory Park and Glorypark. "If Hicks and Jerry Jones can't get development out in Arlington with all new stadiums, then a developer isn't going to make it happen in downtown Dallas."
She used Fort Worth as an example where a mayor listened to the citizens after a petition drive yielded more than 15,000 verified signatures opposing a publicly owned convention center hotel. Without a vote, the city decided against moving forward with public ownership, and the result was the privately owned Omni Hotel opened in January.
"It can be done if you have the will to push the private developers to do the right thing," Raymond said.
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Raymond cited her service on the convention center hotel task forces for both mayors Laura Miller and Tom Leppert, saying both times the conclusion reached was the hotel couldn't be built without putting the taxpayers at risk. She said the best deal would have been for the city to agree to pay $140 million to subsidize the project, and then put it to a vote much like the American Airlines Center.
She said the argument that the city can get a better rate than a developer on the project doesn't make sense because the mortgage rate on the Hilton Anatole Hotel is cheaper than the one the city is hoping to land for its hotel. Raymond also mentioned that the St. Louis convention center hotel was foreclosed on and is now owned by the bondholders, the Dallas hotel market is the second weakest in the country and bookings are down at the Anatole.
"We're in a tsunami, not a rainy day, in the hotel business," she said.
Natinsky said the final authority on the project is the bond market. "If they don't buy our story, they will not buy our bonds."