|By Mike Hendricks, The Kansas City Star,
Mo.McClatchy-Tribune Regional News
Apr. 28, 2010--As the brain trust at 12th and Oak considers subsidizing a new downtown convention hotel, let's see how a similar project is faring out in the 'burbs.
And -- surprise, surprise -- the answer is ... not so hot.
"The hotel market has experienced a difficult year, no question about that," Overland Park Councilman Terry Goodman said Tuesday when I asked for a status report on the hotel his city built eight years ago with tax-backed bonds.
Sitting alongside the Overland Park Convention Center, the swanky Sheraton was to have been self-sufficient by now. But consultants didn't adequately take into account the lingering effects the terrorist attacks of Sept. 11, 2001, would have on the travel industry or the hotel, which opened in 2002.
Nor did anyone predict our Great Recession. As a result, the city had to pony up $2.4 million in 2009 to help pay the debt service that falling hotel revenues couldn't cover.
The subsidy for the previous six years combined was $5.3 million.
"It was obviously higher than we would have liked," said Goodman, who heads the aptly described nonprofit corporation that the city created to build the hotel.
What's more, he figures the city will dig deep into its pockets to cover this year's expected deficit, while projections showed the hotel carrying its own weight after 2006.
Is that a sign of failure? Not the way city officials look at it.
When I asked Overland Park Deputy City Manager Kristy Stallings for an accounting of the subsidies, she felt it necessary to supply me with a list of the property, sales and hotel/motel taxes the Sheraton returns to area taxing districts each year.
We're talking $25 million in the last seven years -- three times more than the subsidies.
"I believe that it is," Goodman said when I asked if the hotel has been a net benefit to the city.
Besides the tax receipts, he said, consider the boost that having a first-class hotel next door gives the city's convention center.
"The convention center has turned a profit from Day One, including last year."
All this goes to my suggestion of last week that the Kansas City Council should do lots of homework before jumping on the hotel bandwagon.
By one measure, the OP hotel costs out. But will it over the course of a 30-year loan? Will there even be a need for face-to-face business conventions in 2040?
And what of the lost opportunity costs? What programs might Overland Park have funded in '09, but didn't, because it had to cover the hotel's deficit?
We still don't know how the Kansas City hotel will be financed. But any promise of taxpayer support deserves a skeptical look at every scenario.
Not just the rosy ones.
To reach Mike Hendricks, call 816-234-7708 or send e-mail to firstname.lastname@example.org.
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