|By Elliot Njus, The Oregonian, Portland,
Ore.McClatchy-Tribune Regional News
Dec. 04, 2012--Plans for a proposed headquarters hotel at the Oregon Convention Center -- including new financing details -- are firming up, though its political outlook remains murky.
At a Metro Council work session Tuesday afternoon, the regional government's staff and the development team behind a proposed Hyatt hotel laid out new details that had emerged in their ongoing talks.
The two sides have coalesced around a single 600-room Grand Hyatt Hotel that would be located north of the Oregon Convention Center on land owned by Portland's Schlesinger family. Earlier, they were considering two smaller hotels on one of two nearby sites.
The new configuration better fits the needs of Travel Portland, which markets the Oregon Convention Center to groups that hold conventions. It wanted a block of at least 500 rooms that could be reserved during events.
But it will also add to the cost of the project, and correspondingly to the amount of a public subsidy.
In its initial proposal, a group led by Mortenson Development of Minneapolis and including the Schlesinger family said it would need between $10.4 million and $36.1 million in public loans or grants, as well a 30-year rebate of most of a city lodging tax that would be levied on the hotel.
To that end, a Metro consultant said Tuesday the agency is exploring issuing "conduit revenue bonds" on the project's behalf to be repaid with lodging taxes rebate.
That would bestow Metro's tax exempt status on the bonds, lowering the interest rate.
"That difference can make a big contribution to closing any funding gap," said Ken Rust, a financial consultant hired by Metro and former chief administrative officer for the city of Portland.
But the public agencies would not be responsible for paying back the bonds if the project went sour. The obligator -- Hyatt Corp., perhaps, or an entity set up to collect the tax rebate -- would be responsible for repaying the bonds, not the taxpayer-funded agencies involved.
"They take on no financial or legal liability by the mere action of sponsoring the financing," Rust said. "Ultimately it's the third party that is the obligator, that's who the bondholders are looking at when they're assessing if they want to buy those bonds."
If Hyatt threw its credit heft behind the bond, it could secure lower borrowing but could be responsible for making payments if the lodging tax didn't fulfill obligations to borrowers. If the lodging tax was the sole source of money to repay the bonds, the borrowing cost could be higher because of the greater risk to bondholders.
Tuesday, consultancy Strategic Advisory Group also released a study -- embedded below -- of the feasibility of a headquarters hotel mostly affirming Metro's earlier findings.
A survey of 135 meeting planners suggested a 600-room hotel near the convention center would increase the likelihood the planners would select Portland for their group's event.
The study says a headquarters hotel could bring an additional five to 10 events to the Oregon Convention Center, increasing its economic impact by $120 million a year. It also found Portland-area hotels are outperforming peers nationwide in filling rooms.
Metro Council President Tom Hughes said the study showed there's pent-up demand for new hotels in the Portland area.
"The difference is this is the only hotel that actually brings additional demand," Hughes said.
The study says also claims a convention center hotel, by luring new events, would increase citywide hotel occupancy by 1.4 percent within two years of opening .
The Metro Council, along with Portland and Multnomah County officials, had expected to be approving the general terms of a financing deal this month, with a final agreement up for approval in 2013. But prolonged negotiations between Hyatt and a hotel workers union, a precondition of starting negotiations, threw off the timeline and didn't wrap up until the end of October.
That means the term sheet will be presented in a very different political climate next year with new elected officials sitting on the Metro Council and the Portland City Council.
Teri Dresler, the manager for Metro's venues, said the "aggressive" timeline came in part because of support from departing elected officials, as well as current low borrowing and construction costs.
But Hughes said the new political climate won't threaten the project.
"Everything changes politically after the first of the year," Hughes said, "but not enough to do anything significant."
--Elliot Njus Follow @ORFrontPorch
(c)2012 The Oregonian (Portland, Ore.)
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