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23rd May
2010
written by Downtown Dudette

Protect KC taxpayers in new, 1,000-room hotel plan

 

By The Kansas City Star Editorial Board

In the early stages, supporters of big-ticket projects in Kansas City walk on the sunny side of the street. They offer cost estimates and propose public subsidies that often sound quite reasonable.

It’s only later that the dark clouds move in, as expenses and taxpayer financing go up, sometimes dramatically.

Those are good history lessons to keep in mind as the city studies its latest mega-deal — a $315 million, 1,000-room downtown hotel. It will be the subject of more scrutiny today at a meeting of the Convention Hotel Steering Committee.

Supporters say the hotel would attract more conventions and tourist dollars. A few large conventions have moved elsewhere in recent years because the city lacks an adequate number of rooms near Bartle Hall. Bulking up on hotel space could woo larger conventions that now skip the area.

However, the financing of the project is far from a done deal. The subject requires much more scrutiny today and in the coming weeks.

Mayor Mark Funkhouser and the City Council must drive down the potential cost to taxpayers. They need to find a developer willing to shovel the most private funds into a strong hotel proposal. (Public/Private deal unlike Rio Nuevo’s Public only deal)

Eventually, the elected officials will have to determine whether going into further debt for yet another large convention-oriented facility is even a good idea. The city already has granted millions of public dollars to support the Kansas City Marriott Downtown, the Hilton President and the Hotel Phillips, among others.

The financial numbers for the new hotel already look problematic.

The city’s consultants estimate that a new hotel could create revenues of $18 million a year. But the annual debt for its bonds could reach $21 million, according to a civic leader involved in studying the issue. City officials say the figure could be higher or lower in the final financing plan.

Ultimately, taxpayers could be on the hook for tens of millions of dollars. For instance, it’s already a good bet that all of the new tax revenue that the hotel creates would be plowed back into the project.

Boosters contend that the hotel should bring in additional taxes from tourists who visit entertainment spots such as the Country Club Plaza. However, those tax funds could be wiped out if debt payments for the hotel soar. The result: no real increase in money for basic city services.

Recent history shows Kansas Citians can’t just look at one side of the equation when it comes to pursuing costly public-private projects.

Early optimism ruled discussions of the Power & Light District, when tax revenues were anticipated to cover 100 percent of the bonds sold for the project. Unfortunately, taxes are covering less than 50 percent of those costs. Taxpayers are picking up the rest — $8.1 million in the last city budget and $10.8 million this year.

Overland Park’s experience offers another cautionary tale: The city-supported convention hotel cost taxpayers $2.4 million to fully cover bond debt payments in 2009, far more than once expected.

Kansas City’s hotel steering panel soon is likely to request competitive proposals from developers asking what they could build, and at what cost, at the preferred site next to the Power & Light office tower.

Council members and the public would love to see a project that puts the full burden on the private sector. That’s the most optimistic way to look at the deal at this point.

Read more: http://voices.kansascity.com/node/9105#ixzz0ooCrdurl

374 Comments

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