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West Palm Beach, Florida's Insistence on Upholding Tax 2005 Pact
Could Threaten $100 million 400-room Convention Center Hotel

By Andrew Abramson and Jennifer Sorentrue, The Palm Beach Post, Fla.McClatchy-Tribune Regional News

July 23, 2012--A $105 million plan to build a long-awaited hotel next to Palm Beach County's convention center could be in jeopardy of falling apart for a third time.

West Palm Beach officials pointed out Monday that the terms of a 2005 agreement between the county, city and developer requires the city to receive property tax revenue from the hotel project if no condos are included.

But under the terms of the new deal between the county and The Related Cos., the county would retain ownership the hotel property on Okeechobee Boulevard, and as a result, the land would be exempt from all property taxes.

County commissioners will be asked Tuesday to conceptually approve the proposal, which includes a $27 million taxpayer subsidy for the construction 400-room hotel. It is the third time the commission will consider the project since 201.

County administrators have said the approval would allow The Related Cos. to begin renegotiating the terms of the 2005 agreement with West Palm Beach officials.

But in a statement released Monday, the city said there was no need to renegotiate the agreement.

The 2005 agreement requires the hotel property to remain on the county's tax rolls, if condominiums are not built as part of the project.

The hotel proposal originally included a plan to build up to 100-condo units on the property. But those condos have been removed from the newest version of the plan.

"We agree that the current economic climate may not be ideal for the construction of condos as part of the project," a statement from West Palm Beach spokesman Eliott Cohen said. "Fortunately the Settlement Agreement already provides for this possibility."

"The existing agreement between the City of West Palm Beach, the County, and Related allows for the project to move forward without condos as long as the hotel is on the tax roles," the statement said." Since both the County and Related signed the Settlement Agreement, and given the project's importance to the community, we look forward to the fast-tracking of this project as it will not require any additional renegotiation involving the City of West Palm Beach."

After more than a year of negotiations, county administrators announced last week that they had reached an agreement with The Related Cos., the developer that commissioners selected in 2010 to build the 400-room hotel project in downtown West Palm Beach. Related also developed CityPlace, which is located across the street from the convention center on Okeechobee Boulevard.

Supporters say the hotel will create more than 1,500 construction and tourism jobs and contribute more than $1 billion to the county economy over 10 years, but two commissioners -- Steven Abrams and Priscilla Taylor -- have expressed concerns about the $27 million subsidy from the county. Both voted against the contribution last year.

The subsidy would increase the county's annual debt payments by about $2.2 million a year.

Tourism leaders say the convention center will never be profitable until there is an adjacent hotel. They say the hotel would put the "finishing touches" on the county's convention and entertainment district, which includes the Kravis Center, CityPlace, and nearby restaurants.

The entertainment hub is located 3 miles from Palm Beach International Airport -- an amenity for those looking to hold conventions here.

Under the proposed deal, Related would contribute $70.8 million to the project. An additional $8 million would come from federal tax credits.

The county would not give Related its $27 million subsidy until the company had invested at least $20.8 million in the project, Assistant County Administrator Shannon LaRocque said.

Even then, the county's money would be released only in increments that are proportionate to the amount that Related has spent on the hotel.

Related also would be required to give the county a $5 million security deposit, a requirement LaRocque said is intended to prevent construction on the project from stalling again.

After construction is completed, the county would own both the hotel and the land that it sits on.

Related would lease the hotel from the county. The 33-year lease would require the company to start paying the county 25 percent of the hotel's profits once Related has made $7 million from the project.

County commissioners conceptually approved the $27 million subsidy in April 2011, a move that allowed LaRocque to negotiate the terms of five separate contracts with the company.

In 2001, Related was set to build the hotel with no taxpayer money, but the deal fell apart after it asked the county to guarantee a loan and the county refused.

Next the county picked Delray Beach-based Ocean Properties and bought the hotel's land for $10 million from Related.

The Ocean deal tanked amid the floundering real-estate market and then-Commissioner Mary McCarty's honest services fraud conviction, a charge based partially on free hotel stays she took from Ocean.

In 2010, the commission picked Related, run by Miami Dolphins majority owner Stephen Ross, to try again, building on the land Related sold the county.

"We continue to work closely with Palm Beach County to realize their vision of a convention center hotel, which will be a powerful tourism attracter, key amenity and bring significant economic benefits to the area, including hundreds of construction and permanent jobs," Related Vice Chairman Bruce Warwick said in a prepared statement released by the company Wednesday.

The hotel's construction is expected to create 560 jobs, generating $54 million in annual wages, according to the county.

Under the deal, 60 percent of the unskilled workers hired to fill those jobs must be Palm Beach County residents.

Forty percent of the skilled labor force must reside in the county.

The county said that an additional 997 jobs hotel and convention center jobs would be created as a result of the project. Annual wages for those positions are expected to total $51 million.

The economic impact of the hotel is expected to be $1.07 billion over a 10-year period, the county said.


(c)2012 The Palm Beach Post (West Palm Beach, Fla.)

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