News for the Hospitality Executive
|By Dawn Bryant, The Sun News, Myrtle Beach, S.C.
Knight Ridder/Tribune Business News
Apr. 1, 2004 - Myrtle Beach will take on more debt to bail out the city-financed Radisson Plaza Hotel by issuing $47.7 million in bonds, a move approved Tuesday that could slow down some downtown redevelopment.
Pushed to approve a plan before Thursday's bond default, City Council decided 4-2 to issue new bonds once negotiations for a buyout of current hotel bond holders is complete.
The new bonds will cover the hotel's first-year losses and pay for improvements between 12th and 16th avenues North, a project that was set to go to the bond market later this year.
Mayor Mark McBride and Councilman Phil Render dissented.
McBride, who pushed the council for a decision last week, wanted to delay the vote Tuesday to get a second opinion from a different consultant and allow Councilman Chuck Martino to return from a funeral.
Most members wanted to have a turn-around plan decided so they can try to soften the blow of Thursday's default, which will occur when leaders dip into hotel reserves to make that $2.6 million payment.
"The potential for disaster was there," Councilman Randal Wallace said. "I'm just ready for us to move on."
City Manager Tom Leath and Hotel Board Corp. Chairman Walt Standish urged the council not to delay the decision and said that could cost the hotel business and hurt the city's financial reputation. The city needs to be able to explain how it will turn around the hotel once the default goes on the books, they said.
"If we don't have an agreement hammered out when we go into technical default, the risks get greater," Standish said.
Delaying the decision might produce more attractive options for the council, McBride said.
He also said he did not want the city to shoulder more debt for the hotel.
"The knee-jerk reaction is to put $47.7 million on the taxpayer. This is the easy, no-brainer way of doing it," McBride said.
Issuing new bonds at a 4.7 percent interest rate, using hospitality fee revenues as backup, is the best plan for the taxpayers and city, Councilwoman Judy Rodman said.
"We have rehashed this for the fourth or fifth time," she said. "I am confident this is the safest thing. There are cities all over the Southeast looking at how we handle this. Our reputation is literally in how we handle this."
The bonds will create a 32-year debt the city will back with hospitality fee revenues, which hit about $7 million annually. The hospitality revenues would have to be used if the hotel does not make enough to cover the debt payments.
Using those revenues to back hotel debt will keep them from being pledged for downtown redevelopment, including burying overhead utility lines and installing decorative sidewalks.
Downtown Redevelopment Corp. Director Dave Sebok planned to talk about other funding options with the council during its retreat this week in Moncks Corner. He is optimistic the city could find a way to keep the projects going but did not want to go into details before talking with the council.
"We are clearly going to have to identify alternatives," Sebok said. "There are several options we plan on exploring." The Radisson has fallen behind revenue projections since opening in January 2003.
Hotel leaders say performance is improving, with increased bookings for future business.
Render opposed the bond issuance because he did not want the city to get deeper into the hotel business.
"The free marketplace should drive the success or failure of the convention center hotel," he said. "For government to interfere in any way, I feel, puts other small businesses at a disadvantage."
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(c) 2004, The Sun News, Myrtle Beach, S.C. Distributed by Knight Ridder/Tribune Business News.