Feb. 28, 2013--The city will be forced to dip into its general fund for $1 million to help the city-owned Hilton Baltimore make debt payments this year, city officials said Wednesday.

Harry E. Black, Baltimore's director of finance, said the hotel needs the money to make payments in March and September. The Hilton is expected to contribute $2.8 million in taxes this year from the hotel occupancy tax to the general fund, so the hotel is drawing from money it created, he said.

"I expect it's going to be an ongoing thing for a period of time," Black said. "The key is navigating through this recession. ... The key is to find a way to ride it out until the recovery gets to a point where there are calmer seas."

Even though the hotel is having trouble covering its debt, Mayor Stephanie Rawlings-Blake said the Hilton generated $100 million in economic impact for Baltimore in 2012.

The city-owned hotel lost nearly $11.5 million in 2011 -- about $400,000 more than it lost the previous year, according to an audit released last May. Last February, after the Hilton experienced several slow months, the Baltimore Hotel Corp. withdrew nearly $4 million from a $12.4 million debt-service reserve account to make a semiannual bond payment in March, the audit showed

The convention center hotel, on West Pratt Street overlooking Oriole Park at Camden Yards, opened in August 2008, two years after Mayor Martin O'Malley and the City Council issued more than $300 million in tax-exempt bonds to finance its construction. The hotel has since lost $54 million.

The hotel's operating earnings "aren't enough to keep up with the projections that were made before the recession hit," Rawlings-Blake said. "I'm confident in the future we will continue the growth in our hospitality and tourism industry and the hotel will be a part of that."

Problems at the Hilton were mentioned briefly, but not specifically, in a report this month on Baltimore's 10-year financial projections.

"The city has some potential exposure to the performance of existing economic development projects," the report stated.

Black has said the report was referring to the Hilton, and that the city was considering dipping into the taxes generated by the hotel that usually go to the city's general fund.

"The hotel's bonds are backed by hotel revenues and debt service reserves," Black said this month. "As a backstop, if Hilton hotel revenues and reserves are not able to keep up with bond debt service, then pledges from the Hilton Hotel occupancy tax would be used to offset debt service shortfalls."

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