Will Metro be caught footing the bill if a proposed convention center hotel ever has a revenue shortfall that doesn’t match the debt service of a $300 million project?
Even after a special update meeting on Tuesday about the proposed convention center hotel project, that question has yet to be answered.
The most recent city to finance a public convention center headquarters hotel was Dallas, which just over a month ago finalized a package to include a moral-obligation pledge from the city in order to backstop its $300 million project.
That means if the revenues created to fund the hotel don’t match the debt service, the taxpayers will make up the difference. Dallas voters approved the project in a special referendum this year, but here in Nashville no such ballot measure is expected to take place. That’s because Mayor Karl Dean’s administration has promised not to use property taxes to fund the proposed $600 million convention center or its attached $300 million headquarters hotel.
Metro Council received an update on the status of the headquarters hotel project at a joint meeting of Metro's Budget and Finance and Convention Center, Tourism and Public Facilities committees. No details on the financing — including a potential moral-obligation pledge like Dallas used — were discussed.
Metro Finance Director Richard Riebeling promised to hold more special meetings to keep Council abreast on convention center-related developments, but offered no specifics on how the hotel might be financed.
“There’s been a lot of speculation to size and how the project is going to be financed,” Riebeling said. “Those decisions have not been made. We’ve reached no decisions as to anything about the hotel other than we know we need a hotel to make this project a successful one for the city.”
The Metro Development and Housing Agency board has approved Marriott to manage the proposed 1,000-room hotel and use its top-line Marquis brand. But the Dean administration has not committed publicly to a 1,000-room hotel, and it's possible the size could be reduced before a financing plan is presented to Council.
Council members conceded the need for a headquarters hotel, should the convention center project be approved, but questioned some of the data provided by representatives from the Dean administration, Marriott and the project’s underwriter Goldman Sachs.
Statistics provided to Council showed RevPar numbers (occupancy times room rates) spiked once a convention center hotel was built in cities like Austin, Columbus, Indianapolis and Denver. But those statistics stopped in 2006, well before last year’s recession kicked in and business travel took a downturn.
District 23 Councilwoman Emily Evans called for updated numbers to help Council better understand the impact of headquarters hotels in other cities.
A timeline offered by the administration showed financing packages for both projects would be presented before the end of the year.