News for the Hospitality Executive
August 11, 2011 -- FORT COLLINS - Citing a need to hear the full council's position on any potential role by the city in helping finance a downtown hotel, Fort Collins Councilman Kelly Ohlson said he would schedule a work session to give all seven members a chance to be heard on the subject.
Ohlson said the council should have an opportunity to discuss a decision by the council's finance committee on July 18 to essentially remove the city from a direct financial role in the building of a downtown hotel and conference center as is advocated by the Downtown Development Authority.
"This is a big issue and something we need to get a read on from the whole council," Ohlson said Aug. 11 during a meeting of the DDA board of directors.
Ohlson, along with fellow councilman Ben Manvel and Mayor Karen Weitkunat, told DDA representatives at the July finance committee meeting they believed the city should not have a role in financing the proposed hotel, given the downturn in the national economy and the competition it would provide to existing hotels.
The council finance committee specifically rejected a request by the DDA to put out a Request for a Proposal for a potential development partner in the project. That partner would have helped the city better understand the cost of a downtown hotel project and suggest various funding alternatives.
Patty Spencer, DDA board member, said at the DDA board meeting that she was "extremely disappointed" by the council finance committee's action.
"I felt we had the support of city staff, and I think it was a poorly thought-out decision and wouldn't have cost anything to take a look (through the RFP)," she said. "I really felt we were making some traction and that we were moving forward in a responsible way."
A DDA-funded study of the downtown hotel project - which calls for a full-service hotel with a conference space of between 15,000 and 20,000 square feet - has always hinged on some degree of city financial participation, up to and including the city guaranteeing the debt on the project.
Ohlson told the DDA board that he and the rest of the city council supports a downtown hotel as an economic engine for the downtown and the rest of the community. But he said he's reluctant to see the city back a private project.
"When it comes to public financing of private projects, I'm rapidly reaching my saturation point," he said. Ohlson said city financial backing of the project was "a bridge too far" for him to support.
He said the odds of the rest of the council going against the decision of the finance committee and approving the issue of an RFP were "really slim."
But Ohlson said that shouldn't prevent a wider look by the entire council. "It doesn't mean our decision wasn't wrong," he said of the finance committee. "Things continue to evolve and I'm open to listening. It's not like I'm trying to block any hotel downtown."
Nolan Rosall, consultant to the DDA with RRC Associates, said the timing was right to pursue going forward with a downtown hotel.
"The best time to invest is in the beginning phase of a business cycle," Rosall said. "The tracking we have of the Fort Collins market is we're in the beginning stages of recovery."
Rosall said occupancy rates in the city have been going up since early 2010 and occupancy is up 10 percent so far this year. Average daily room rates have also started to rise with demand, he noted.
"One of the risks of waiting (for a private developer to do the project without city funding) is it takes two years to open a hotel and you open at the wrong time of the (business) cycle.
"Sometimes what seems like the worst time is actually the best time," he said.
But Ohlson said those indicators should motivate private developers to step up without government assistance.
"If it's such a good market, why would they need government help?" he asked.
Josh Birks, city economic advisor, said a downtown hotel needs a public player because of the higher costs of building downtown and to get the services needed to make it a facility that will attract new business to the city.
"Do we want what the market will provide without assistance or get what we want with public assistance," Birks asked. "The crux of the question is do we want to help scope the project or do we just accept whatever the private sector brings?"
Board member Bill Sears said he believes the DDA should go ahead and put out an RFP. "Without the RFP, we won't know if the private sector wants to participate - with or without public participation," he said.
Wynne Odell, DDA chair, said she was glad to hear the entire council would discuss the issue at a future work session.
"It gives the DDA an opportunity to continue moving this forward if it's at all possible," she said.
Ohlson said he didn't know when the work session would be held but acknowledged it was an issue that needed further discussion.
"It's deserving of taking it to the next level," he said. "It's finding the sweet spot in this (of public-private participation) - that's the challenge."
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