Mar. 1, 2010--Downtown Riverside's two heavyweight hoteliers are opposing the city's plan to loan a developer $20 million to build a Hyatt Place hotel just blocks from them.

The owners of the Mission Inn and Marriott say a new city-financed hotel isn't needed and would create unfair competition when they've already been hard hit by the recession.

The Greater Riverside Chambers of Commerce, which supported plans for a privately-financed downtown Hyatt in 2006, will hold an emergency board meeting today to reconsider its position ahead of a Tuesday City Council vote on the hotel loan deal.

The 125-room Hyatt would be built by MetroRiverside LLC, which also has a deal with the city to develop Fox Plaza, a residential and retail project near the hotel and the Fox Performing Arts Center. The city would raise the money by selling tax exempt bonds available under a federal stimulus bill.

City leaders, who have an existing deal with the developer to help pay for the hotel's construction, have said the new hotel is necessary to support a planned expansion of the downtown convention center, and more convention activity, in turn, will help all downtown businesses.

The Mission Inn and Marriott operators argue business is already struggling and added competition will make things worse at time when hotel bookings have declined.

The new Hyatt would open in 2012, but Barry Lall, president of Marriott owner Pinnacle Hotels, said he doesn't expect a rebound in revenues until at least 2014.

"The concern is that whilst we're suffering significantly, whilst we're trying to keep our doors open, we're hearing that a developer is going to be given public funds to build a hotel," Lall said Friday. "That just seems totally irresponsible."

In a letter to Riverside Mayor Ron Loveridge, Mission Inn owner Duane Roberts wrote that "there is little the city could do to cause greater economic harm" to hotels than to grant the Hyatt loan.

If the Hyatt project is viable, Lall said, the developer should be able to get private funding.

But Siavash Barmand, principal with MetroRiverside, said there's simply no private financing out there right now, and projects like the hotel are what these stimulus bonds were intended for.

"If we hadn't taken advantage of this, the bond capacity would have been taken away from the city" and doled out elsewhere, Barmand said.

City Chief Financial Officer Paul Sundeen confirmed that only private projects are eligible for the bond money that would go to the hotel. The city will use a separate $13 million in stimulus bond money, earmarked for public projects, to build a parking structure for the Fox theater.

Sundeen said the hotel loan and other proposed changes to the city's deal with MetroRiverside LLC actually mean the city would spend less on the development and reduce its exposure to default.

In the existing deal with Barmand's company, the city would put in $4.3 million for land, parking and other costs, and it would loan $5 million for the hotel but not be the first creditor in line, according to a city report.

The new deal requires the developer to chip in more, while the city only would spend $2.2 million and would be first in line in the event of a default, Sundeen said.

"Our dollars into this project are dropping dramatically," he said. "It's far better for the city in terms of its out-of-pocket costs."

Councilman Mike Gardner, who represents downtown, said it's impossible to say today whether building the Hyatt would set off a "room rate war" that the other downtown hotels warn of.

"Having both hotels oppose (the loan) does change the picture a little bit," Gardner said. "I think the real bottom line decision for the council to make is whether on balance having a new hotel has more long-term benefits than short-term detriment."

Reach Alicia Robinson at 951-368-9461 or [email protected]

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