Archive for June, 2010
These questions need to be answered before we OK a convention hotel
By Steve Kozachik, special for Inside Tucson Business
Published on Friday, June 25th, 2010
The Tucson Convention Center renovation and expansion, a headquarters hotel and associated parking garage, collectively comprise what may be the largest public works project the City of Tucson undertakes in our lifetimes. Because the downtown redevelopment Rio Nuevo Multipurpose Facilities District is unable to financially carry the project, city taxpayers will be asked (through city-backed bonds) to backstop over $230 million in debt. I do not take this decision lightly, and neither does the council, city staff or the community.
Over the last several months, the council has been receiving information from many sources about building a convention center hotel. We have spent very little time discussing funding for the convention center expansion or the costs of the associated parking garage. The city Finance Department has correctly declared this package is “all or nothing.” One piece cannot stand on its own and be a success.
With that larger picture in mind, I have been asking hard questions surrounding this project. Other council members also have asked important questions that still need answered. I believe, as representatives of all city residents, we must carefully and critically consider all relevant questions, data and solutions before making a decision that implies this project is the best and most cost-effective way to achieve a vibrant and thriving downtown.
Before the council engages in the “critical path” decision-making process that irreversibly leads to a decision with far-reaching consequences, it should consider some basic questions about this project. Some of these questions are philosophical and some are simply data-driven.
Before we cross the line at which we are committed to moving forward with any of the proposals now on the table, we need to consider and discuss questions from other council members and these:
• City vs. private ownership1. Is building a convention hotel the best way to create a vibrant downtown at this time?
2. Does Tucson need a new hotel downtown? If so, who should build and own it?
3. What are the costs and benefits for city ownership of a hotel? Will committing to backstop the $230 million mean the City of Tucson is unable to proceed with any other downtown projects?
4. In recent years, the city has received several proposals for building a new hotel. Would any of those developers be interested in building a hotel today? If so, what financial package would they propose? Is that a better alternative? If not, why not?
5. Should the Mayor and Council approve a project that places the city in direct competition with privately owned and operated hotels in Tucson?
6. Would the city prevent construction of a major, privately owned hotel in order to prevent competition with the proposed city-owned hotel?
7. Is there another project scenario that would better create a vibrant downtown?
• What are the possible negatives?1. If the economy were to face another downturn, what are the potential consequences? Would the city subsidize room rates in order to boost hotel occupancy? (The Phoenix Sheraton is offering to fly in potential customers, offering up to 45 percent off on prices, 15 percent off on information technology and communication services, 33 percent off convention center group rates and 10 percent off room blocks — all to try to drive traffic into their hotel.)
2. If the hotel failed to generate enough revenue to cover operating expenses, how much money is the city prepared to earmark for payment of debt service on hotel bonds?
3. Given the level of competition for conventions, will Tucson be caught in a never-ending cycle of building bigger and better to stay competitive? On the flip side, with the impact of technology and the economy, will convention bookings reach a saturation point that makes convention center-sized hotels reach a state of having been overbuilt? Does such a facility even reflect the ethos of what Tucson is and wants to be? Specifically, is a 28-story tower compatible or out-of-scale with Tucson’s historic barrio located just across the street?
4. What additional financial resources are needed to market the property and remain competitive over time? With limited funds available, how can we commit to these additional general fund expenditures for the future?
• Is the information reliable?1. As the competition among cities for convention business grows more intense, and new convention center space is being built around the country, how likely is it the hotel will fail to attract significant new business to the convention center?
2. Given that the HVS Feasibility Study does not quantify the assumptions on which their study relies, how do we as a council weigh their conclusions, which are based on assumptions, many of which will never occur? Has HVS been wrong in the past and if so, what were the consequences for the cities that relied on their analysis?
3. If the HVS study conclusions are in question, how does that affect all of the other studies that use them as a base?
4. Has anyone asked convention bookers if the condition of Tucson’s downtown will affect their decision to book conventions here? Are the amenities that Tucson currently lacks important to their decisions?
• Who pays to play?1. If Tucson taxpayers are going to be at risk, should all players have “skin in the game?”
2. What is the financial role Rio Nuevo should play in contributing to debt service and what does that do to the district’s ability to fund other projects going forward?
3. Should the city demand that all players, including Garfield Traub and Starwood Hotels, share equally in the risk?
4. Should the city place a cap on the amount of money from the general fund that can be put at risk for this project?
We should not make this decision in a vacuum, hearing only the voices of proponents of the hotel. I’d like to hear from Heywood Sanders, author of a Brookings Institution study on convention center hotels, and HVS’ Thomas Hazinski at the same Council meeting. We should invite operators of existing hotels in the city to discuss the impact of a publicly funded convention hotel on their operations.
We should meet jointly with the board of the Rio Nuevo Multipurpose Facilities District and then have an open dialogue among members of both the council and the board. We should do all of this prior to authorizing the city manager to move forward spending staff time and taxpayer dollars in support of the arbitrary timeline that has been established.
To reiterate, we as a city council are faced with decisions about what may be the largest public works project the City of Tucson will undertake for decades. We share that responsibility with the board of the Rio Nuevo Multipurpose Facilities District. I have asked for a joint meeting with our partners on that board. That request was denied. I continue to believe such a meeting would be not only beneficial, but is essential for us to share our mutual hopes and concerns, and to jointly develop a critical path for decision-making.
Contact Tucson City Councilman Steve Kozachik at firstname.lastname@example.org or (520) 791-4601.
A local Tucson restaurant that has been in operation for years and employs 40 people catches fire. It’s an accident and everyone was safe. The owner is interviewed with his burning family business in the back ground and what is he worried about? Getting his business rebuilt because of delays in development services. How is that for a sad story?
Koga said his 40 employees will be out of work until Takamatsu can rebuild and reopen – a process his contractor says could take four to six months.
He thinks getting the permit to reopen will be the biggest roadblock to getting back in business.
“The city of Tucson doesn’t hand out permits too easily,” Koga said. “Hopefully the city is kind enough to let us get going as soon as possible so we can get back on our feet.”
Businesses that suffer fires must submit a fire damage report from the Fire Department that details the damage and identifies what needs to be replaced, said Ernie Duarte, director of the city’s Planning and Development Services.
The business selects a contractor to complete the repairs, and Planning and Development Services inspects the reconstruction.
After the city approves of the necessary work, it issues the business a general repair permit that allows it to operate again.
“It’s an expedited process,” Duarte said, noting the city typically responds within two days. “We realize people need to get back in business.”
DISASTROUS DOWNTOWN DEAL from the Tucson Weekly, The Skinny, Jim Nintzel
The Tucson City Council has settled a year-long legal dispute by handing over $750,000 and at least $125,000 in subsidies to downtown developers Scott Stiteler and Don Martin.
The city entered into a predevelopment agreement with a partnership that included Stiteler and Martin back in December 2008. The idea was to give the developers land in exchange for private investment and redevelopment downtown, with a provision calling for the city to pay damages if a development agreement couldn’t be reached.
Last summer, the deal completely fell apart, partly because of complaints from the Rialto Theatre Foundation. Rather than trying to salvage the deal, Stiteler and Martin walked away and then demanded compensation.
Stiteler and Martin will get $750,000 from the city’s strapped budget after they’ve shown that they’ve spent three times that amount fixing up their own properties on Congress Street. They’ll also get $125,000 in permit-fee waivers for that work, and a special, below-market-rate deal on parking spaces in a new city garage. That element of the deal has the new Rio Nuevo board hopping mad, because they want that revenue to help pay for the parking garage.
The city will get money for a piece of downtown land that it’s selling to Stiteler, and the developers will give $50,000 to Skrappy’s Youth Club.
“I wouldn’t support that kind of provision in the future,” Uhlich says. “Unfortunately, it’s a lesson learned.”
Uhlich calls the settlement “the best we could make in this situation.”
By Yellow Sheet Report
Published: June 23, 2010 at 9:40 am
In day two of Rasmussen Reports releasing results about its June 16 survey of 707 likely Republican primary voters, the conservative-leaning firm reported that McCain has a 47-36 lead over Hayworth, shifting from a May Rasmussen poll, which had McCain leading 52-40. Although the Hayworth camp trumpeted the poll, saying McCain is vulnerable and that his attack ads aren’t paying off, the poll’s underlying numbers send a different message.
Suburban hotel busts may hit taxpayers
REAL ESTATE | Revenue projections way off in Wheeling, Schaumburg
June 23, 2010
Two convention-sized hotels built during the boom years in the Chicago suburbs have become monuments to municipal hubris. If the lodging market doesn’t turn around soon, they could become a burden on taxpayers.
In 2005, village officials in both Schaumburg and Wheeling were boasting of their investments in hotels. Schaumburg itself is the owner of the Marriott Renaissance at the village’s convention center, Interstate 90 and Meacham Road. Wheeling provided a $23 million subsidy for the new Westin North Shore, 601 N. Milwaukee. The hotel’s developer said the subsidy was “totally, completely, unequivocally essential” to the project.
Because of the recession’s effect on hotel occupancies, the hotel might be worth only half of that amount. Wheeling, meanwhile, could have to pay the difference if the 411-room Westin cannot generate the tax revenue pledged as bond payments.
This year’s budget for the Schaumburg hotel estimated its financial loss at $5.7 million in 2009, $4.6 million this year and said the village’s cash reserve for the hotel will dwindle to about $4.4 million by year-end. Its projected revenue this year is about 40 percent less than what was assumed in a 2004 financial plan used to sell the investment to the Village Board.
Schaumburg Finance Director Douglas Ellsworth said the reserves can cover operations into 2011. “If things don’t pick up, the village will have to have some discussions about the [Marriott] Renaissance,” he said.
To my many friends,
This is so important. Mayor Bob and a few tagalongs like Regina Romero, are planning to ram this hotel (along with His famous Legacy TROLLEY) down our throats and we will be paying for these $300,000 a piece rooms for the rest of our lives. They don’t really care about the cost or how it will be paid for (see Councilman Steve K’s attached letter to the Mayor). They don’t want to meet with the new Rio Nuevo board that was mandated to oversee downtown development by the state legislature. They just want to ram it through in the middle of summer when half the city is on vacation. (If it is such a good idea, a private hotel company would be jumping to build – like they are next to the existing University Marriott.)
Obviously this is a ‘pig’ that no other builder wants to touch without tens of millions of dollars of ‘subsidies’ from you and me –hard working – tax payers.
Please tell the council people – who have yet to show any foresight or responsibility in the Hundreds of Millions they have already wasted with nothing to show- how you feel. Take a look at the roads, the weeds in all the medians, the closed pools and parks, etc. We have more pressing, important needs/programs in this town than for Mayor Bob to build his monument before he retires from public life. Just look at the ‘wonderful monument’ a few county supervisors built for themselves at Tucson Electric Park on Ajo and Kino! ENOUGH of this Irresponsible leadership and spending.
Please read the attached letter to the mayor from the one councilperson with a business background, Steve K.
Through focus, hard work and pulling in the same direction, Glendale is proving that companies and industries will focus on Arizona if given the opportunity. Glendale built the sports mega complex including the football stadium and hockey arenas.
Could Tucson have been Glendale? Ed Beasley, a young assistant city manager in Glendale, applied but was looked over for the top spot in Tucson eight years ago.
Not long after that, Beasley took the reins in Glendale and has led the city through some amazing transformations.
Glendale able to attract jobs
by Rebekah L. Sanders – Jun. 19, 2010 12:00 AM
The Arizona Republic
Jobs are on almost everyone’s mind as the economic slump continues to strain company budgets and keep people out of work.
Glendale hit its highest unemployment rate in at least a decade last year, an average 8.6 percent, according to the federal Bureau of Labor Statistics.
But the city’s economic-development professionals, tasked with bringing new companies and jobs to Glendale, see signs of progress.
In the past year, Banner Thunderbird Medical Center, the largest private employer in Glendale, hired 225 workers. Hundreds more jobs are expected as part of a massive expansion.
In the private, non-retail sector, Glendale added a company to its top-five employers list: Humana, a Fortune 100 pharmacy-benefits administrator that has a staff of 400 at 91st and Glendale avenues.
The other top-three employers in Glendale are Arrowhead Hospital, AAA’s vehicle-assistance call center and Honeywell, an aerospace manufacturer. Together, they employ more than 3,000 people.
City figures show in the past fiscal year that 20 companies moved to or expanded in Glendale. The 1,776 positions created at Banner, Humana and others represented a 50 percent increase from the previous year.
Several other large companies are weeks away from announcing an arrival in Glendale, according to Economic Development Director Brian Friedman.
“It’s been a fantastic year,” he said.
The economic slump helped many cities retain existing employers, but market uncertainty can have “a paralyzing effect” on businesses expanding or relocating, he said.
Friedman’s team focused its efforts on high-wage, professional industries that Glendale wants to attract. Those industries are health care, education, renewable energy, aerospace/defense, advanced-business services and businesses related to sports, entertainment and tourism.
The F-35, also called the Joint Strike Fighter, has long been regarded as the savior of Luke, a base in Glendale where F-16 pilots are trained. McCain was addressing Westmarc, a West Valley consortium of business, government and community leaders.
“I can say with great confidence, we will have the F-35 at Luke Air Force Base where training for every Air Force pilot will take place,” he said.
The Air Force is in the midst of an environmental-impact study to determine the aircraft’s effect on such things as air quality and noise. A first draft is expected in September.
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