Archive for June 28th, 2010

These questions need to be answered before we OK a convention hotel

GUEST OPINION

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 ward6@tucsonaz.gov or (520) 791-4601.