|By Rick Smith, The Gazette, Cedar Rapids,
IowaMcClatchy-Tribune Regional News
May 25, 2011--CEDAR RAPIDS -- The City Council last night agreed to take on up to $35.4 million in bond debt to pay for its purchase in March of the downtown hotel, for the hotel's renovation, for interest and other costs and for the construction of a skywalk across First Avenue from the hotel to a proposed new parking ramp.
City officials listed the hotel-related costs as these: $3.2 million for the purchase; $21.8 million for renovation; $1 million for carrying costs during the period when the hotel remains closed, prepares to reopen and reopens in the fall of 2012; $2 million for a new skywalk; and interest charges.
John Frew, the city's consulting project manager, said interest charges could range from $2 million to $3.5 million. He said the city will take on bond debt for the hotelrelated matters a step at a time, so the $35.4 million figure approved last night was a high end of what might be total debt of $32 million or less, he said.
At the same time as the council cemented its financial commitment to the hotel renovation project, it also agreed to file a formal application with Hilton Worldwide to secure the Doubletree by Hilton franchise for the hotel. The application comes with a fee not to exceed $75,000.
Frew told the council he expected to be back on June 28 to announce 'the wedding' between the city and Hilton.
City Council member Monica Vernon, who chaired last night's meeting as mayor pro tem, said the council had taken a 'visionary step' when it agreed to buy the longstruggling Five Seasons Hotel from its creditors with a mind to returning it to its former, upscale self.
Vernon said the council decided it made sense to buy the 32-year-old hotel and renovate it at the same time as the city was renovating the U.S. Cellular Center arena attached to the hotel and building a new convention center next door. The arena and convention center project, called the Convention Complex, is a $75.6 million undertaking in addition to the hotel work.
At the same time, Vernon stressed that the city's interest is to sell the hotel once renovated.
City Manager Jeff Pomeranz said the hotel renovation along with the new Convention Complex will put the city in a good position to sell the property if the council decides it wants to. But the value of the hotel will depend on its success and the success of the Convention Complex, he said.
'We need to move forward so we have an asset we can sell,' Pomeranz said. '. . . We probably don't want to be in the hotel business forever.' Lee Clancey, the city's mayor from 1996 through 2001, applauded the council last night for what she said was a 'brave move' to take on the temporary hotel purchase and its permanent renovation as well as the Convention Complex project, while continuing to work on recovering from the 2008 flood.
Clancey said a city the size of Cedar Rapids needed a first-class hotel and convention complex if was going to have a healthy downtown and compete against other cities.
Of the different hotel franchises courted by a City Hall evaluation team, Frew said Doubletree by Hilton was the 'most flexible' in its demands about the hotel's renovation, and Hilton brings with it an attractive customer reservation system. Frew said the city's proposed hotel operating budget anticipates charging $10 a night less than the Marriott Hotel on Collins Road NE, with an expected occupancy rate of 64 percent.
City Council member Kris Gulick called the Doubletree brand a good choice, and he said it sounded as though the franchise would help the city hit the 'sweet spot' to maximize a return on its investment.
The city-owned hotel has been closed since February. In late June and July, its contents will be put up for public sale in preparation for the hotel's renovation. The building is slated to reopen in the fall of 2012.
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Copyright (c) 2011, The Gazette, Cedar Rapids, Iowa
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