Feb. 12, 2008 - The Broward County attorney has concluded that the county is on shaky legal ground if it pledges bed tax money for a long-sought convention center hotel at Port Everglades.

As a result, the developer of the hotel must come up with another backup funding source or financing for the $415 million project could unravel.

County commissioners last year gave tentative approval for a 1,000-room Hilton on a county-controlled site, subject to financing and other terms.

A financial package that won narrow approval from the Tourist Development Council two weeks ago would have put up to $21.6 million of bed tax funds at risk in the deal. The money, which has already been collected and is in a reserve, would only be used if primary financing mechanisms failed.

But in a memo to commissioners issued Monday, county attorney Jeffrey Newton said developer Hilton/Faulkner has been advised not to count on the bed tax revenue in any way. It said the developer's financial consultant, JP Morgan & Co., is analyzing the feasibility of alternate financing structures.

"JP Morgan has acknowledged that there are some unresolved questions with respect to a pledge of the tourist development taxes," the memo said.

The goal is to find an option that doesn't weaken the potential for repayment, thereby causing the hotel debt to get a lower grade from bond rating agencies, the memo said.

Tourist development taxes, often called bed taxes, are paid by hotel guests and used primarily for marketing campaigns that bring more tourists. But the tax has been tapped for other uses, including the financing of the county-owned BankAtlantic Center, a 19,250-seat arena in Sunrise.

Using the bed tax to back the hotel bonds was controversial for some hotel owners. "The objection of the hotel industry was that it had the look of using the bed tax to support one property," said Nicki Grossman, president of the Greater Fort Lauderdale Convention & Visitors Bureau.

The pledge passed the tourist council on a 4-3 vote. Proponents argued that the convention center hotel benefits the entire industry by attracting more meetings.

Efforts to reach a member of the Hilton development team for comment on Monday were unsuccessful.

A previous bid to build a 500-room convention center hotel by developer R. Donahue Peebles in 2000 also failed in part because of backup financing issues.

The county hopes to have a structure to finance the hotel in place by May 1.

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