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Editorial: Hotel Incentives Offered as Enticement for
Development Need Further Answers

Messenger-Inquirer, Owensboro, Ky.McClatchy-Tribune Regional News

Nov. 29, 2010--Whenever government starts handing out incentives to entice development, there will be those who scream that someone is getting a sweetheart deal or that tax dollars are being wasted.

Incentives are controversial by nature, creating a divide between those who think providing free land or tax breaks are a necessary investment in the community's future, and those who don't believe public dollars should be used to spur private development.

But Mayor Ron Payne stoked this fire with his comments last week about the agreement on the proposed downtown hotel recently reached by the city and The Malcolm Bryant Corp.

That agreement calls for the city to give Bryant nearly 2.1 acres on the northwest corner of West Second and St. Elizabeth streets -- valued at $1,389,185 -- to be the site for a $20 million Hampton Inn & Suites.

There's nothing really controversial about that, as it has long been known that the city would provide the land for the hotel. But the deal also includes a provision that if the hotel fails to reach 65 percent occupancy for three years during any five-year period in its first decade, the city will reimburse Bryant an amount equal to the city property tax paid by the hotel, which would be about $52,000 annually.

The money would come from occupational and tangible property tax revenue generated by the hotel.

The obvious question is how did the city determine 65 percent occupancy as the baseline for incentives? When asked this question by a Messenger-Inquirer reporter, Payne said it was the number Bryant asked for and that the city agreed to in negotiations.

Sorry, but that answer doesn't exactly inspire confidence that city officials did everything possible to protect the interest of taxpayers in the negotiation process. Don't we all wish we could just go to City Hall, tell officials what we're willing to pay in taxes, and have them accept whatever number we throw out?

Bryant and City Attorney Ed Ray were at least able to shed some light on how the number was reached. Bryant said the national occupancy rate for Hampton Inn and Suites ranges between 65 percent and 70 percent. And Ray said the city consulted with people knowledgeable of the hotel industry and was told 65 percent is not unreasonable for such an incentive.

But Payne's response is baffling. It shows either an arrogance that people don't deserve a better answer as to how this number was arrived at, or a lack of knowledge as to how it was reached.

It's hard to say which is worse.

There's another issue, however, that shouldn't be ignored. For the longest time, city officials have said a big reason why such incentives are needed is there weren't a lot of people interested in investing in Owensboro's downtown without some sort of safety net.

The perceived lack of interest by developers -- or at least developers who could make a larger hotel work -- is also the reason we've been given for why the hotel will be 150 rooms, instead of the 225-room hotel the city originally sought.

All of this is likely true, and we're thankful that Bryant stepped forward with a plan for reinvesting in his hometown. But how many other hotel developers would have been at the table if they had known up front the type of incentives that would be available?

Free land is one thing. But guaranteed 65 percent occupancy rates and the right of first refusal to build a second downtown hotel on city-owned land immediately surrounding the planned convention and events center change the game all together.

Would these incentives have made enough difference to bring more developers to the table? Would more developers bidding on the project given the city a better negotiating position, thereby reducing the need for such generous incentives? Was it a mistake not to spell out all of the incentives that would be available prior to the request for proposals being issued, not after a developer had already been selected?

For residents to have faith that this truly is the best deal the city could have reached to get a hotel built downtown, officials need to be able to answer these questions.

And they deserve a better answer than just "this is what the developer wanted, so it's what we gave him."


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Copyright (c) 2010, Messenger-Inquirer, Owensboro, Ky.

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