FROM: Steve Kozachik, candidate, Tucson City Council Ward 6
RE: Downtown hotel
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First, I should point out that over the past three weeks in each of the public forums at which I have spoken alongside incumbent Nina Trasoff, she has taken the position that in objecting to our moving ahead with the hotel, I am imperiling the future of Tucson hosting the annual gem show. Had we not spent over $91 million in Rio Nuevo dollars since Ms. Trasoff took office on projects that have no bearing on either the expansion of the Tucson Convention Center or a new hotel, I might be convinced she has had this project front and center on her radar screen for the past four years. The facts beg to differ.
In February 2009 then City Manager Mike Hein and Rio Nuevo Director Greg Shelko — the same Greg Shelko who is now a $100 per hour consultant to downtown — said they were making “progress on the hotel.” At the same time Mayor Bob Walkup said he “expects the hotel to be serving the gem show in February 2011.”
Really? Then why does the pro forma from hotel bidder Garfield Traub show a net operating income of zero in 2011 and 2012? Servicing the gem show?
And why does Garfield Traub’s pro forma call for $63 million negative cash flow until 2017? With occupancy rates of 72 percent at $185 per night. And it takes 8 percent site specific taxes out of the city’s general fund. Further these figures are based on both the expansion of the convention center and a new arena, or “require a reassessment of our current forecast.” To top it all off, the $189 million in bonds are public, not from the private sector.
If this is such a screaming deal, where are the private sector developers who would sign on to make themselves a boatload of profit?
The Mayor and Council held a rally to celebrate the ground breaking on a downtown parking lot that will cost $15 million of taxpayer money to try to show the gem show people they are finally serious.
Mayor Walkup says “after the first of the year we’ll consider if we can afford the hotel and how we can finance it.” Nina Trasoff says “we will not move forward unless all research indicates the hotel model will be successful.”
What part of this model looks “successful”?
It would be a good thing to be able to retain the annual gem show. It would have been a good thing to have retained AAA Baseball, Major League Baseball Spring Training, the annual Waste Management Convention, the HOG Rally, and on and on. But our Mayor and Council have had other priorities, so now we’re faced with the lose/lose proposition of either bankrolling an unwise public debt or losing yet another event that has been an economic engine for our tourism industry.
It’s too little, too late. This election is a defining moment for our community. The incumbents have had four years to dip their toes into the water of governance to see if they had a penchant for it. If you like their track record, vote for four more years of the same. If you’re ready to say ‘enough’ - you may speak that out loudly and clearly Nov. 3.
Comments
bob wrote on Oct 29, 2009 6:39 PM:
Let me show you the $130 million subsidy from the general fund that is needed to build the hotel.
Private investors
The City has been asking private investors for years to consider building a convention center hotel. Private investors have said NO! Their message is that the hotel does not make financial sense.
That doesn’t work – so now what?
If the hotel is owned by the Rio Nuevo, the hotel won’t have to pay property taxes and many other taxes. Plus, Rio Nuevo can borrow money at lower rates than private business because they can issue tax-exempt bonds; this is very helpful because we have to borrow almost $200 million to build the hotel. This should make the hotel profitable…but NO, the hotel would not be able to make the debt service payments of $16 million/year.
That doesn’t work – so now what?
How can we make the debt service payments? Here’s an idea, let’s impose a bunch of special taxes if you stay at the hotel or hold an event at the convention center. Over the life of the bonds, these taxes will be over $100 million. This money could go to the general fund to help pay for core services. Instead, the money is needed to pay for debt service. You would think that a $100 million subsidy, no property taxes, and lower interest rates would be work… but NO, the debt service coverage is still not sufficient.
That doesn’t work – so now what?
What if we have the City make a direct cash subsidy of $1.1 million/year for the life of the bonds? This will provide over $30 million. So now we have over $130 million of cash subsidies and you would think we should be able to finance the hotel…but NO!
That doesn’t work – so now what?
What if the City of Tucson (i.e. Taxpayers) guarantees the loan if the hotel turns out to be a bust? This has to work because the city is in such great financial shape that investors should be chomping at the bit to loan $200 million for the hotel. Well guess what…we now learn that investors still are not interested. Apparently, investors are concerned that the City is running a large ‘structural budget deficit’ and their credit rating is falling (6)
That doesn’t work – so now what?
Hoping and praying
Several City officials have stated that the new plan is to: Let’s wait until next spring and hope investors change their mind.
No property taxes, lower interest rates, $130 million subsidy, City guarantee – at some point you have to come to the conclusion that the hotel is not a good idea. "