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Seeking Financial Incentives from the City, Lawyer for the Troubled Hotel Arizona
in Tucson Outlines Proposal for Private-Public Partnership for the Property

By Rhonda Bodfield, The Arizona Daily Star, TucsonMcClatchy-Tribune Regional News

Jan. 21, 2012--The financial incentives the city is considering for downtown businesses will not be enough to resolve the problems confronting the troubled Hotel Arizona without additional monetary assistance, an attorney for the property said Friday.

Attorney Ted Hinderaker publicly released for the first time hotel owner Humberto S. Lopez's latest pitch for a city rebate of tax dollars, saying it's a good deal for taxpayers. "Any private-public partnership has to be a win-win for both parties."

Here is a look at some of the key points.

--What would Hotel Arizona agree to do under the offer?

Hotel Arizona, which averages 30 percent occupancy, would obtain a franchise license agreement to rebrand the hotel as part of a major upscale chain. The hotel would then obtain $25 million in renovation financing.

The hotel's ownership is also trying to make a stronger link to the Tucson Convention Center, pledging a walkway, with signage and landscaping. It also plans to offer priority booking and 5 percent discounts for guests attending TCC-related events.

The owners would sign over title to the hotel and the 318-space garage to the city as collateral.

--What would the city do?

Rebate taxes collected at the hotel -- the 6 percent transient rental tax, the 2 percent city sales tax and the $2 per-room surcharge -- back to the hotel for up to 20 years to leverage and repay the financing.

--What is it going to cost the city?

Records from Lopez's HSL Properties indicate over the past year, the hotel has paid nearly $286,000 in site-specific sales taxes to the city. But Hinderaker contends taxpayers aren't going to pay an extra cent.

The owners would only be able to get the title back from the city if they repay all the taxes they had kept, he said. If they repurchase the hotel in the first five years of the arrangement they would pay an additional $100,000. If they take more than 20 years, the amount ramps up to $1 million, plus $100,000 for every year the agreement continues to run.

Hinderaker contends the hotel isn't likely to continue running as a hotel without some intervention because it is losing money. If it is converted to residential use, such as apartments, there wouldn't be any tax revenues coming in anyway.

--If it's such a good deal, shouldn't the private sector be willing to pay for it?

HSL officials contend it isn't easy to get financing of that magnitude.

Hinderaker notes Hotel Arizona isn't alone -- others, from the Doubletree to Starr Pass and Westin La Paloma, also are struggling.

"We've had dire economic times," he said.

Since the hotel is currently losing money, he said, no lender is going to think that's an attractive loan without the incentives from the city.

--Why is the company buying up other properties around town but can't afford to fix up the hotel?

Again, it comes down to financing, officials contend. The company is able to get financing for some properties, since the Embassy Suites on Broadway, for example, is a different kind of market from the downtown hotel.

--The city is already weighing property tax abatements in a "central business district." Wouldn't that be enough?

"It would be helpful, but it won't be enough to obtain the financing or renovate the hotel," he said, adding the company would certainly apply. The district, once formed, also requires a year's moratorium on incentives, however, and Hinderaker said HSL would like to move before that.

--How much in taxes would the hotel retain?

"That will end up being a function of how successful the hotel is, how successful the convention center is, what the economy of Tucson does overall and what type of franchise we have. There are a ton of variables that would go into that," Hinderaker said.

--Could either side back out?

The parties could back out of the deal if no acceptable franchisor can be found within a year. The city could also back out if the renovations aren't completed within 24 months.

Contact reporter Rhonda Bodfield at rbodfield@azstarnet.com or 573-4243

___

(c)2012 The Arizona Daily Star (Tucson, Ariz.)

Visit The Arizona Daily Star (Tucson, Ariz.) at www.azstarnet.com

Distributed by MCT Information Services



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