City of Tucson
Downtown Hotel Hell Phoenix built one and they didn’t come
by Dave Devine
While Tucson leaders ponder the wisdom of building a Sheraton convention center hotel, Phoenix opened one in October 2008. But its occupancy rates have fallen significantly short of expectations.
In 2005 the consulting firm HVS International prepared a market study for the proposed Phoenix hotel. It predicted in the first nine months of operation there would be 60-percent occupancy, increasing to 63 percent the following year.
Reality was quite different. For 2009, according to a City of Phoenix financial report, the hotel had a 49.4-percent occupancy rate.
Phoenix’s finance director, Jeff Dewitt, says the underperforming hotel presents some financial challenges.
The city committed non-general fund taxes to cover any shortfall in operating proceeds to pay a portion of the hotel’s construction bonds. Despite that, earlier this year, Standard and Poors changed the rating on these bonds from stable to negative.
Dewitt says hotel revenues will cover 2010 construction debt service and believes they’ll be sufficient for 2011. After that, he admits, it’s questionable.
Stating he didn’t work on the Phoenix market study and can’t comment on it, Thomas Hazinski of HVS does say, “There’s one obvious fact—(the report) was completed before the financial crisis.”
Hazinski did help prepare a recent HVS analysis for the proposed $202 million Tucson convention center hotel. It anticipates an initial occupancy rate of 55 percent, rising to 67 percent within two years and then stabilizing at 69 percent.
These figures, Hazinski acknowledges, are based upon an economic recovery. “If that doesn’t happen,” he says, “in Tucson the projections won’t be met.”
Those projections are critical to local taxpayers because they might be on the line to pick up at least some of the construction costs of the hotel.
If the Tucson Sheraton doesn’t perform as anticipated, the shortfall in revenue to pay for construction bonds might have to be paid by severely budget-challenged City Hall. That is not a prospect Councilwoman Regina Romero endorses.
To avert that scenario, on July 13 she sent City Manager Mike Letcher a memorandum. It was also published as a guest editorial in the Arizona Daily Star.
In her memo, Romero writes that she favors the hotel project but calls for lowering the city’s risk by requiring greater financial participation from Sheraton and Garfield Traub, the firm managing construction. As of last week, Romero hadn’t received an official response to her suggestions.
Regardless, Romero believes Letcher has been clear in his public statements about the proposal.
“He won’t get the city into a situation,” Romero suggests, “where the city’s general fund is on the line.
“The hotel has to be able to support itself,” Romero continues. Additional financial assistance “needs to be pledged from others before it gets to the general fund. If that doesn’t happen, (the city manager) won’t recommend it and I can’t approve something that won’t be a success.”
Alan Willenbrock is skeptical of the Tucson hotel being as successful as the HVS study portrays. He recently stepped down from the Rio Nuevo Multipurpose Facilities District Board, the appointed body that, with the City Council, will decide the hotel’s fate.
Willenbrock calls the HVS study “very sloppy” and believes the information provided “is not consistent with the evidence.”
Pointing out that the HVS report shows an average length of stay for Tucson convention goers twice as long as that in Phoenix and several other cities, Willenbrock contends the explanations given for this discrepancy haven’t been satisfactory.
“I’m not for or against the hotel,” Willenbrock continues, “but I am against misleading taxpayers toward expectations not likely to be realized. I can create a strong case why the hotel is likely to be less successful than the consultants say.”
If that happens, Willenbrock thinks paying for the hotel’s construction bonds “will likely require significant (city) general fund subsidies.”
Heywood Sanders, a professor at the University of Texas-San Antonio and a frequent critic of the convention industry, spoke to the City Council in July. He believes the message Tucson leaders should take from the less-than-anticipated Phoenix hotel occupancy rate is simple.
“Projections,” Sanders says of convention center hotel studies, “often aren’t realized.”
Another assumption made in the Phoenix HVS analysis, Sanders stresses, is that the recent enormous expansion of that city’s convention facilities would bring many more customers to downtown hotels. That, he says, hasn’t happened.
Addressing a major contention of Tucson hotel proponents—that the facility is needed to spur downtown revitalization—Sanders observes, “It’s much the same argument made in every city in the country. … The problem is, the more places that do it, the more competition there is. The result is what happened in Phoenix. You don’t see much increase in business.”
David Pittman works for the Arizona Builders Alliance, an organization representing about 150 construction companies. He cites job creation and economic stimulus as two reasons he supports building the hotel.
Since the height of the building boom in 2006, Pittman points out, Pima County has lost almost 14,000 construction jobs, or about one-half its former total.
“There are a lot of good things about the hotel project,” Pittman emphasizes. “I think the city needs the downtown hotel. We have a lot of things going for us and we want to bring people downtown.”
Then Pittman returns to his original theme: “It will put a lot of people back to work who need jobs,” he says of the hotel proposal. “Let’s look on the bright side.”
Giffords takes on Kelly about his statements about reforms to Social Security. See the entire KUAT interview HERE. The social security statements are around the 45 minute mark. Kelly suggests a dual track for social security, one for those that already paid in and are about to receive benefits and those younger workers that most likely will never see social security benefits when they retire.
From TIME magazine, a story about the Democrats strategies to cloud up the mid terms.
In a move as predictable as Lucy pulling the football away from Charlie Brown, Democrats are using Social Security scare tactics to gain ground before the November election. President Barack Obama is not only tolerating this classic old politics maneuver by his party — he is leading the charge.
Amid a flurry of Democratic Party news releases and press conferences warning voters that Republicans are targeting Social Security for destruction, the President devoted his radio and Internet address last week to commemorating the 75th anniversary of the signing of the law that created the program. He cautioned that “some Republican leaders in Congress don’t seem to have learned any lessons” from the past and are “pushing to make privatizing Social Security a key part of their legislative agenda if they win a majority in Congress.” This familiar refrain might indeed help the Democrats limit their midterm losses, but Obama’s involvement shows that on this issue he is putting party before bipartisanship and that he sometimes can be tone-deaf to the human element required to change Washington’s acid culture.
(See pictures of Obama signing the health care bill.)It is clear why Democrats are raising the specter of Republican
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Something to ponder when you hear about public employee pensions and the state or local government budget.
The heat is being turned up on Tucson’s own front runner for the Democratic nomination for US Sentate, Rodney Glassman. Those of us south of the Gila have come to love the guy if for nothing more than plenty of fodder to glob about.
Looks like campaign staffers are leaving the Glassman campaign, according to Arizona Capital Times, because of:
But sources said staff is fed up with Glassman’s unwillingness to spend money, excessive micromanaging, berating campaign workers and misleading comments about his willingness to self-fund.
A second story was sent to us by Investigative Journalist turned Senate Candidate, John Dougherty. It has to do with who controls Glassmans personal campaign loans, him or his family.
PHOENIX (Aug. 22) – The Arizona Capitol Times reported Saturday that sources inside Rodney Glassman’s U.S. Senate campaign contend Glassman does not have direct control over a $500,000 personal loan Glassman claims to have made to his campaign.
The Capitol Times cites multiple sources close to the campaign stating that “the candidate’s family” put $500,000 into the Glassman’s campaign and that “Glassman’s father is controlling the purse strings.”
Federal Election Commission regulations allow candidates to make unlimited personal loans to their campaign committees. However, FEC requires a candidate to have direct control over the money loaned to the campaign.
Loans, including those from a candidate’s relatives, including parents and spouses, are considered campaign contributions and limited to only $2,400 in the primary and general election cycles.
The reality is the defections and campaign contribution allegations are a little too late with the role of early ballots. Watch for McCain to have a great time with Rodney should he win the primary.
Phoenix Business Magazine reports the findings from Tax Foundation annual survey of top cities for sales tax rates. A total 6 Arizona cities landed on the top 25 list. It looks like our States recent 1 cent sales tax for education moved us way up the list.
Tucson lands this year at #16.
The good news is if the voters approve Prop 400 in November , which is the new 1/2 sales tax proposed for City of Tucson core services, we’ll climb up the list to #8.
So tell me, do you feel like we are getting our money worth to justify a 9.6% tax rate? At what point will people start shopping online? Do we trust this council enough to give them another $200 million (estimated revenue of $40m per year for 5 years) to spend at their discretion? Are the voters going to vote for the tax?
Here’s the top 20 list.
Independent, Influential, Experienced & Relevant since 1917.
Albuqurque Chamber has 5,656 Members and Growing (Tucson Chamber stands at about 900-1100 down from 3300 in 1997)
The Greater Albuquerque Chamber of Commerce works every day to make our community a place where businesses can grow and prosper and where people want to raise their families. As the voice of business since 1917, we envision New Mexicans living in safe neighborhoods, working in rewarding careers at thriving businesses, while their children attend great schools, and enjoy their leisure time in one of the most beautiful regions on Earth.
Check out their areas of focus - HERE
Check out the Chamber Board and their visions for New Mexico, imagine having vision? - HERE
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