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Nine Months after Winning and Signing Deal with City of Fort Worth, Omni Hotels
 Seeks Additional $18 million in Tax  Rebates and Cash for
 600 room Convention Center Hotel

By Mitchell Schnurman, Fort Worth Star-Telegram, Texas
Knight Ridder/Tribune Business News

Jan. 22, 2006 - Is Fort Worth an easy mark or what?

City leaders have spent years trying to land a convention hotel, and last April, they finally signed a deal with Omni Hotels of Irving. Fort Worth agreed to kick in $31 million toward a $90 million project, with an additional $19 million in tax breaks to come from the state and county.

When government covers more than half your expenses, that's pretty rich.

But nine months later, Omni is back, asking for more, even though it hasn't broken ground yet. The company says concrete and steel prices have soared, so it wants an additional $18 million in tax rebates and cash from Fort Worth.

The City Council has to say, "Get outta here," right? Maybe invoke that favorite line: "A deal is a deal."

Or at least insist on some competitive bidding. About two years ago, nine developers submitted proposals for a convention hotel with taxpayer subsidies. The city whittled that group to four, then two, and then had the finalists rework their bids.

If Omni wants a do-over on the incentives, it's only fair that competitors get a shot at new bids, too.

The council isn't thinking that way. It's trying to fast-track the deal, hoping to approve it Tuesday, less than a week after the first public hearing on the matter.

Maybe they should deliberate longer, or at least give people more time to digest the numbers.

Omni isn't seeking a minor adjustment here; it wants 57 percent more money from Fort Worth alone. (It plans to hit up Tarrant County later.) Omni says construction costs are up $25 million, and it wants Fort Worth to cover $18 million of it.

For some perspective, that's like Jerry Jones asking Arlington for an additional $185 million for a Dallas Cowboys stadium. And city fathers pushing it through in a few weeks.

Fort Worth initially agreed to rebate one-third of Omni's hotel costs. Under the new plan, it would pay for more than two-thirds of the overruns. There wasn't a good explanation for why we'd do this, other than the fact that city leaders covet a hotel. "We don't want to get hung up on facts and figures and throw out the baby with the bath water," Councilman Carter Burdette said at a public hearing Thursday.

No, let's play the chump, instead, and give Omni all the hotel taxes it collects for the next 18 years--eight years longer than the initial agreement. That's a long time to live with a bad deal.

Omni will put 97 condos atop the hotel tower, which helps the economics significantly. But it wants Fort Worth to subsidize that part of the project, too, until the condos are sold.

Hard to believe that Fort Worth has to give incentives to condo developers these days.

It's a tiny part of the package, but it's indicative of who's pulling the strings. Fort Worth ought to be negotiating from a position of strength, but it's acting as if Omni is the only game in town.

Scott Johnson, the company vice president who's been negotiating with the city, says Omni began spending money on the hotel design and cost estimates in April, after signing the city contract. That's when it discovered the higher costs.

Odd, isn't it, that Omni didn't study its costs more carefully before it put in a bid. Omni isn't a newbie to the hotel business, and Fort Worth didn't sign a cost-plus contract, although it's beginning to look that way.

Perhaps the situation unfolded exactly as Omni claims, that it's a victim of circumstance. But then again, maybe it's playing Fort Worth, by low-balling its initial bid and crawling back later to get the return it targeted all along.

Some competitors whispered as much when they didn't make the cut, which sounded like sour grapes. Now, it's less clear.

Maybe Omni's revised proposal is the best that Fort Worth can do.

Omni has certainly designed a lovely building that would complement downtown and the convention center and provide an economic boost. It would be a great landmark and a great asset for the city.

But that's not the point at the moment. The question is whether this is still a good deal.

Even more important: Is it the best deal Fort Worth can get?

Assistant City Manager Joe Paniagua, Fort Worth's point man on the project, says he believes that Omni would have been the choice, even if it had requested the higher incentives two years ago. But he didn't bother to call any of the earlier bidders to see if they wanted back in the game

Omni's appeal is that it's willing to pay for the project upfront and take all the risk. The city would build a $6 million parking garage and give $2.3 million to Omni after it completes the tower, but the rest comes only after the hotel generates tax revenue.

That means Fort Worth doesn't have to float bonds or dip into its funds too deeply--and that's a crucial selling point.

But it's not the whole enchilada.

The total rebate matters, too. Every dollar that Fort Worth gives up is money that could go to other public uses, including promoting tourism.

The only way to gauge this deal is through a bidding process. Perhaps all the new bids would reflect the higher construction costs. But they might also give more weight to the improving prospects in the hotel-condo market.

Condo sales have been strong in downtown Fort Worth, led by the huge success of The Tower, and prices have climbed. The hotel business is booming and reporting record profits. Downtown, hotel investors are eagerly revitalizing their properties.

A California company is buying the Fort Worth Plaza and plans to upgrade it to a Sheraton. A Fort Worth group recently bought the former Clarion Hotel and is remodeling it into an upscale Hotel Indigo. Major improvements are expected at the Radisson Plaza, including a nameplate change to a Hilton.

One council member said the upgrades are a response to the Omni. That's certainly a factor, but so is the improving Fort Worth market. Do these better prospects offset the rising construction costs? Omni's Johnson says it's not even close.

We should verify that--not with surveys, but with bids from other players.

In fact, maybe Fort Worth ought to rethink its plans entirely. Maybe it can get by with a 450-room hotel, rather than 600, now that so many other rooms are being overhauled.

Paniagua says the city has already gone through that analysis and shouldn't do it again. Same for bidding.

But Fort Worth also signed an agreement in April, and it's doing that over.

"I expect never to come back to renegotiate this deal," Paniagua told the council on Thursday.

That's good to hear, but it's not good enough.

Online exclusive

What's the hurry, Fort Worth? A good hotel deal is more important than a fast one. Check out The Schnurmanator at www.star-telegram.com, under blogs.

Mitchell Schnurman's column appears Sunday and Wednesday. (817) 390-7821 schnurman@star-telegram.com

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Copyright (c) 2006, Fort Worth Star-Telegram, Texas

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