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Ignoring Complaints from Suburban Hoteliers, the City of Durham Approves
 a $4.2 million Incentive Package for a Downtown Luxury Hotel

By Ray Gronberg, The Herald-Sun, Durham, N.C.McClatchy-Tribune Regional News

September 21, 2010 --DURHAM -- Ignoring last-minute complaints from three suburban hoteliers, the City Council on Monday voted unanimously to approve a $4.2 million incentive package that's supposed to help Greenfire Development convert downtown's SunTrust tower into a luxury hotel.

The decision capped a public hearing that saw the project receive backing from key business groups, preservationists, advocates for small black-owned business and even the management of the main hotel now serving downtown, the Durham Marriott.

Supporters agreed Greenfire's success in pulling off the $52.7 million project is critical to helping maintain what Downtown Durham Inc. President Bill Kalkhof termed "the momentum that's a key driver of investor confidence in a community."

They also noted that the developers have estimated that the new hotel would likely employ 125 people full time, and at least that many more in construction work while the conversion's under way.

"We have a community that's in desperate need of jobs," said Fayetteville Street shopping center owner Larry Hester, who praised Greenfire for working with community leaders to "foster inclusion" by minority contractors.

The only opposition to the incentives during Monday's hearing came from local Libertarian Party activist Matt Drew and a group called the Hospitality Alliance of North Carolina.

The Hospitality Alliance spoke up on behalf of hoteliers Roddy Jones, Bob Winston and Doyle Parrish, whose companies are behind, respectively, RTP's Sheraton Imperial, Meadowmont's Courtyard Chapel Hill and south Durham's Hilton Garden Inn Durham Southpoint.

In a letter delivered to the council earlier on Monday, they said the tower's 165 rooms would cannibalize business from other hotels.

They had no apparent confidence in the possibility of growing demand. "Hotel demand is a static market issue," alliance Director Jim Hobbs told council members during the hearing.

They hoteliers also argued that the tower's operators would be unable to command the premium room rates -- around $185 a night -- that Greenfire claims. That, they said, likely makes the city's projections of sales and occupancy tax revenues over-optimistic.

Other business leaders, however, stood behind the possibility of the project's expanding the economic pie.

The president of the Durham Convention & Visitors Bureau, Shelly Green, said Durham has fewer hotel rooms than most cities its size, fewer even than cities like it in North Carolina.

It also has a track record of being able to expand the market. "Looking at our history over the last 15 years, when new hotels have been built we've been able to generate additional demand that fills those rooms," Green said.

Meanwhile, Greenfire partner Steve Mangano said the firm is taking its price cues from potential competitors like the Siena and Franklin hotels in Chapel Hill and the Washington Duke Inn here in Durham.

City officials stressed that no public money will go into the project unless Greenfire delivers an operational hotel by midsummer 2013.

Monday's vote set the stage for an additional debate by County Commissioners, who have been asked to chip in another $1 million.

The balance of the project's financing relies on private equity, an assortment of state and federal tax credits and $25 million in so-called "recovery zone" bonds authorized by last year's federal economic-stimulus bill.

City Finance Director David Boyd said the recovery bonds didn't place any public money at risk. The stimulus bill merely authorized the feds in some cases to allow developers to sell tax-exempt debt to investors, just as local governments do.

Greenfire will still be responsible for paying back the recovery bonds. Boyd estimated its annual debt payments would clock in around $2.5 million, and last for up to 22 years.


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Copyright (c) 2010, The Herald-Sun, Durham, N.C.

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