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Some Think Norfolk, Virginia's Offer of Incentives to Developer
 in Downtown Hotel Deal Are Over the Top

By Kerry Dougherty, The Virginian-Pilot, Norfolk, Va.McClatchy-Tribune Business News

Mar. 6, 2007 - Here we go again. Another city with stars in its eyes.

Hotel stars, that is.

Sunday's Pilot reported that Norfolk is so desperate for a posh hotel to go with its planned conference center that the City Council has offered a billionaire builder $7.5 million to sweeten his part of this public-private partnership.

Geez. Any more sugar and the developer will need insulin.

The total public investment in the hotel and conference center -- even without this pricey "performance grant" -- is a staggering $76.8 million. The developer is kicking in $47.7 million.

It's a familiar story. All around the country, local officials shower developers with dough in order to get high-brow hotels in middle-brow markets. Apparently, getting "Hilton" on the marquee and upscale mints on the pillows is priceless.

"Four-star, full-service hotels require incentives from a city," Mayor Paul Fraim said. "We hired consultants, and that's what they told us. In the competitive world like this, that's just the way it is."

"I don't know of any four-star hotels in second-tier cities being built without" public incentives, he said Monday.

Stanley Stein, assistant city manager, also is starry-eyed.

"The bottom line is, cities the size of Norfolk aren't getting four-star hotels of this quality."

Four stars, huh? We'll see.

It's one thing for mayors, city officials and consultants to talk about how many stars a hotel will have. It's quite another to actually get them. Those stars must be earned.

On Monday, I talked to Shane O'Flaherty, vice president of quality assurance at Mobil Travel Guide, one of the country's premier hotel-rating outfits.

Mobil is miserly with its stars. In the entire U.S. and Canada, only 117 hotels have a rating of four stars. Three are in Virginia. (Two are Ritz-Carltons in Northern Virginia, and the other is The Williamsburg Inn in, well, Williamsburg.)

It's not enough to have a swanky building. The stars are all about service.

And staffing the joint with first-rate hospitality workers -- the kind that make every encounter with guests a "memorable experience" -- is difficult. It takes more than a gum-chomping teenager in a bellhop suit saying "Dude, can I take your bags?" to get those stars.

But even if -- by some miracle -- Norfolk winds up with a four-star inn, is it worth the public investment?

City Councilman W. Randy Wright doesn't think so.

"I'm opposed to the $7.5 million upfront," he told me. "I think it's a bad business deal."

It's certainly unusual.

Performance grants are awarded once a project is operational. The money is a rebate to the developer on taxes collected directly from the business.

This $7.5 million advance isn't really a performance grant. It's more of a ground breaking grant.

Not to worry. Fraim says the cash will come from the Economic Development Authority and will be repaid out of taxes generated by the hotel. He assured me that Norfolk taxpayers will bear no financial risk.

The City Council is scheduled to vote on the project today. Wright says he'll vote no.

A stellar decision.

News researcher Jakon Hays contributed to this column.

-- Reach Kerry at (757) 446-2306 or kerry.dougherty@cox.net.

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Copyright (c) 2007, The Virginian-Pilot, Norfolk, Va.

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