July 2, 2008 - Portland's long-running quest to build a convention center hotel got more expensive Tuesday when the developers announced that the construction cost had risen 36 percent to $247 million.

Developers Ashforth Pacific of Portland and Garfield Traub Development of Dallas, Texas, say the previous estimate of $181 million was based on a conceptual plan for a 600-room hotel owned by Metro, the regional government.

But a more detailed design done since last fall showed some elements of the project would be pricier than expected. The new cost also accounts for construction price increases of more than 30 percent since 2006, the developers said.

The fate of the hotel, which has suffered tepid political support, remains unclear. The price bump will likely require more annual taxpayer subsidy. But it's too early to know exactly how much more, or whether politicians will ante up with taxpayer money to make the hotel happen.

"I think it's still within the realm of possibility," said David Bragdon, president of the Metro Council. Metro owns the Oregon Convention Center and is considering floating public bonds to pay for the hotel's construction.

Portland's political leaders have wrestled with the convention center hotel proposal since the late 1980s. Supporters say the hotel would attract more and bigger conventions and spur more visitor spending and the economy. Opponents, including other hoteliers, argue a publicly subsidized hotel would flood the market and drive down room rates.

In the current model, Metro expects to float the bonds because public bonds carry lower interest rates.

The hotel's previous cost estimate of $181 million was based on the developer's estimate of a $168 million construction budget plus an $8.4 million contingency and $4.5 million in pre-opening expenses. Dan Cooper, Metro's attorney, said it was a "hypothetical what-if" figure used by financial consultants to forecast bond costs.

Last fall, Metro agreed to pay the developers $600,000 for a more detailed design and a more firm cost estimate.

That figure, the developers said Tuesday, is $247 million.

That's not a guaranteed maximum price.

But Stephen D. Moffett, Garfield Traub Development's hospitality division president, said he doesn't expect the eventual guaranteed price to be any higher. He said the developers don't want a repeat of the skyrocketing costs of Portland's aerial tram.

The hotel's estimated price grew by $65 million for several reasons, Metro and the developers said.

Two of the biggest are a jump in construction costs driven by the demand for materials in booming China and India and the price of oil.

The hotel's total size also grew as Zimmer Gunsul Frasca Architects of Portland drew more detailed designs.

Survey crews found the site across from the Oregon Convention Center was smaller than originally projected. That meant the building grew to fit all the rooms and meeting spaces. The size of the hotel rooms also went up from 12 feet, 6 inches wide to 13 feet.

The budget for contingency, pre-opening expenses and Metro's costs during construction also have grown by a combined $4.8 million since last fall.

The $181 million estimate also didn't include all the required city fees.

"It probably should have," Cooper said. "I don't know why it wasn't in there."

Now, it's Metro's job to figure out how to pay for the hotel -- if the project goes forward.

At $181 million, the hotel had an annual funding gap. The expected revenues wouldn't have been enough to cover the building's mortgage payments and provide the financial cushion required by bond holders. At that construction cost, Metro's consultants estimated the hotel would need $7.8 million in annual public subsidy for the first eight years.

Metro has talked about tapping existing hotel/motel taxes to fill the gap. Cooper said Tuesday that Metro officials have talked to legislators and state economic development officials about using Oregon Lottery dollars.

The Metro Council hasn't been interested in offering its general fund as a backstop for the bonds, a move that would score a lower interest rate. But Metro officials have talked with Portland leaders to see if City Hall would be willing to make such a move, Cooper said.

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