When the debate over a new $585 million convention center reached its most fervent pitch nearly a year ago, some Metro Council skeptics said they had been painted into a corner.
After all, long before Mayor Karl Dean asked the council to approve financing for the Music City Center in January, the council had already signed off on several incremental phases of the project, including predevelopment work, land acquisition and the creation of the nine-member Convention Center Authority. In the end –– with the council serving as the final hurdle on a project that was in some respects well underway –– loud cries of opposition didn’t turn into votes and the council signed off on Dean’s signature project by an overwhelming 29-9 margin.
Now the council is poised this fall to vote on a public-private finance plan that would pave the way for Irving, Texas-based Omni Hotels & Resorts to construct a $250 million, 800-room convention center hotel, a component universally understood as crucial to the success of Music City Center. As Dean framed it when he announced details of a predevelopment hotel agreement, the convention center by itself would be a “home run,” but the addition of an anchor hotel would turn the project into a “championship win.”
Based on early reviews, council members who voted against bankrolling the Music City Center seem pleased that the hotel would not be publicly owned. Still, most are taking a wait-and-see approach. But with construction on the 1.2 million square-foot facility steadily moving forward, it could be difficult for convention center skeptics to vote against Dean’s hotel deal even if flaws are discovered.
“Now that we’ve obligated ourselves to build a convention center, I think we have to probably move forward on a hotel deal even if it’s not a good hotel deal,” said Councilman Jason Holleman, who voted against financing for the convention center. “The reality is, once you’ve made a decision to build a convention center, your ability to objectively analyze the hotel deal becomes more theoretical.
“If it’s a mediocre hotel deal, but it’s going to marginally improve the performance of the convention center, then I think since you’ve already decided to move forward with the convention center, you have to take that deal,” he said.
Councilman Eric Crafton, who voted against the Music City Center’s financing, said he still needs to review all the details, but said his ultimate position would come down to one criteria.
“As long as the taxpayers aren’t put at risk to guarantee a loan to fund the business, then I can support it,” Crafton said. “If they are put at risk ... then I don’t think I’d be able to support it.”
Addressing a boisterous room of convention center supporters and stakeholders last week, Dean summarized the hotel plan this way: “We need to be clear,” he said. “This will be a privately financed hotel.”
Omni would take on $250 million up front to cover construction and other costs under the still-to-be-finalized plan. In return, however, Metro would pay Omni $103 million over the next 20 years. The funds would be collected from tourism and hotel taxes generated by the new hotel’s operation. Because those revenue streams are by law obligated to first pay off debt accrued by the city during the construction of the Music City Center, non-tax revenue –– which includes money collected from fines, fees, etc. –– would back up Metro’s hotel commitment. Another part of the proposed finance plan includes $25 million that would be delivered to Omni through tax increment financing, which Omni is to use to pay for the land acquisition.
Unveiling the plan, Dean referred to Metro’s financial obligation as “financial incentives.” The plan calls for “little risk to the taxpayers of Davidson County,” he said.
The building itself, which still lacks a final design, would be constructed directly south of the Country Music Hall of Fame and have a physical connection to the hall of fame’s eventual expansion. The structure would be bounded by Korean Veteran’s Boulevard and Fourth and Fifth avenues. Project leaders say the new hotel, featuring street-level restaurants and retail and 80,000 square feet of meeting space, would be uniquely themed to follow Nashville’s “Music City” brand.
“Omni’s financial commitment is not the only reason why they’re the right partners for this project,” Dean said. “Each of their hotels is unique. An Omni in Nashville will not look like an Omni in Dallas or in San Diego.”
Robert Rowling, owner of TT Holdings, the company that runs Omni, said that while the economy is “precarious,” the company’s financial commitment made sense because of Nashville’s appeal. (He should know. Until last week, he held a seat on the board of Nashville-based Gaylord Entertainment Co.)
“There’s probably no other place in the United States or the world where I’d be willing to write $250 million in checks to build a hotel right now,” Rowling said.
In addition to “completing the picture for our downtown convention center,” Dean said the hotel would have its benefits in terms of job creation, with 300 people expected to hold permanent full-time jobs as a result of the construction. Two hundred of those workers would be required to be Davidson County residents, and another 50 workers must reside in Middle Tennessee. Construction work could create a projected 1,000 jobs.
To date, Dean and his administration have only drafted a predevelopment agreement, which is to go before the Convention Center Authority in September. The predevelopment agreement obligates the authority to cover $1 million in land option costs if an actual development agreement is not reached.
In the coming weeks, the mayor’s office and Omni are expected to reach terms on a formal agreement, which would go before the council in the form of an ordinance. If all goes according to the administration’s plans, the council could sign off on the financing plan by the end of the year, which would allow the hotel to be completed by the late spring or summer of 2013, a few months after the Music City Center is slated to open.
Given the prevailing thought that an anchor hotel is indispensable for the well-being of Music City Center, the proposed hotel finance plan comes across as an easy sell.
But Councilwoman Emily Evans, perhaps the most outspoken critic leading up to the council’s approval of the Music City Center, doesn’t agree with the notion that the council is cornered into giving its nod of approval.
“Do I think we’re being put into a corner now?” Evans asked. “I don’t, because I knew back in January that when the decision was made to vote for the convention center or not for the convention center that part of that decision was what’s going to happen with the hotel.”
For now, Evans seems satisfied that the hotel wouldn’t be government-operated, but said she still needs to form a complete evaluation.
“First and foremost, what the council was told in September of last year was that we were likely to be asked to approve a 1,000-room, government-owned, government-financed hotel,” Evans said. “The fact that we’re not doing that, I think represents some good news.
“It’s going to be a risk-reward evaluation,” Evans said of the months ahead. “What’s the downside of not having a hotel? What’s the upside of this $5 million a year payment?”