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The Debate is on - Should Virginia Beach, Virginia Taxpayers Invest $67 Million
Toward the $109 Million Convention Center Hotel Project?

City Council to Vote on the 361-room Hyatt Regency Project on January 24 after Further Study

The Virginian-Pilot, Norfolk, Va.McClatchy-Tribune Regional News

Jan. 01, 2012--Advocates for a headquarters hotel at the Virginia Beach Convention Center are right that it's a worthwhile amenity, that it would boost the city's lucrative tourism industry, that it has potential to spur the revitalization of 19th Street.

And they're right that Virginia Beach has lost business to the cities it competes with for conventions -- Savannah, Myrtle Beach, Charlotte, Richmond, Louisville, Baltimore, Raleigh and Nashville -- because those cities built a hotel next to their convention center.

But it's not clear that a $109 million, four-star headquarters hotel would amount to a game-changer for Virginia Beach, enough to warrant investing tens of millions in tax money and taking on more long-term debt. And it's not clear, with the convention business stagnant, that the Beach isn't doubling down in a game of diminishing returns.

A consultant's projections -- 900 new jobs in Virginia Beach, $4.3 million in additional tax revenue annually and 96,000 more hotel stays -- bank on booking 59 new events, the equivalent of 20 Shriner conventions every year.

The state-of-the-art convention center is bringing little more than half the visits from conventions and trade shows that a 2000 study predicted. City officials say that's mostly because Virginia Beach lacks a top-quality hotel on site.

Even opponents of the current proposal agree that a hotel at the convention center is a necessity. They object to the level of public money being used.

The deal to get a 361-room Hyatt Regency across the street calls for a public investment of $34.7 million in additional conference and banquet space, $8 million for street-scaping and a bridge to the convention center, $19.1 million in loans to developer Armada Hoffler and a $4.8 million economic development grant.

That's too much from the taxpayer and too little from the developer. The city needs to find a better deal for the project.

The public's share would be paid from taxes on meals, admissions tickets and hotel stays -- the majority of which are paid by tourists.

City officials argue that the proposal holds taxpayers harmless, that revenues from the project will exceed the costs of debt service and other annual payments.

But that is still not reason enough to spend $67 million in public money, especially when other opportunities for economic development make more financial sense and have greater potential to draw people and transform the resort area.

One in particular -- development of the Dome site into an entertainment complex -- is in the pipeline, said to be coming before the City Council within a couple of months.

Even the strongest advocates for the hotel acknowledge they'd pick the Dome project if they had to choose between the two. But they say Virginia Beach can do both because tax revenues from these projects, not the general fund, will pay for them.

This decision is critical for the City Council, which is split 5-5, with one unknown. Mayor Will Sessoms delayed the vote a month ago to give the public and the council more time to study the deal, but now the vote is set for Jan. 24.

The delay has not made such a heavy investment of taxpayer dollars seem much wiser. Many question spending $67 million on a hotel, particularly at a time Virginia Beach has a $90 million hole in its budget.

Virginia Beach has made prudent decisions in the past to improve the quality of life for its residents, to provide impetus for more private investment. It has preserved thousands of acres of open space, expanded the Boardwalk and the aquarium, built a performing arts center and, using public-private partnerships, jump-started redevelopment in the resort area and at Pembroke with Town Center.

If the future of Virginia Beach depended on building the hotel under these terms, voting for it in the face of such public opposition would make sense.

But implying that the city's success in luring tourists to the resort area depends on Virginia Beach approving this hotel right now undermines the other great work under way here.

If the convention business has stalled, as studies indicate, Virginia Beach needs to pursue investments that make more sense. Such projects could provide leverage to forge a better deal in the future on a headquarters hotel.


(c)2012 The Virginian-Pilot (Norfolk, Va.)

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