More Convention Center Hotel News: What Pittsburgh Can Expect?

There's a letter to the editor in today's Baltimore Sun from the head of the Baltimore Development corporation detailing why the city should shell out $305 million to build a hotel that no private developer has seen fit to finance. He says, in part:

The hotel project would be expected to finance itself: first, through its own revenues; second, through payment of full property taxes (which can be used to pay for debt service if necessary); and third, through its own hotel occupancy tax (which can also be used to pay for debt service) - all of which would support the revenue bonds that would pay for the hotel's construction and also create additional reserve funds.

Only to satisfy the demands of bond rating agencies (and to obtain the lowest possible cost of funds) has a pledge been included against the citywide hotel occupancy tax. But this pledge is limited to 25 percent of the bonds' debt service (or approximately $4 million per year).

The funds (the revenue bonds) proposed for the hotel are not city general obligation funds; they can be created only because there is a revenue stream to pay the debt service on the bonds. So these bonds are not available for other city purposes.

Let me be the first to say: Huh?

I especially like the first part of the quote: "would be expected to finance itself." Yeah, and what if it doesn't meet expectations? Private financiers are not forthcoming. So what's that tell you?

Why so cynical? Well, remember the convention center? The one that was supposed to revitalize everything? Like, say, the area right next to it? And the one that didn't do so?

And remember the Inner Harbor? One of the most "successful" redevelopment projects in urban history? And Camden Yards, the most bestest stadium, like, ever? The one that was supposed to draw more private investment? Those are right next door to the proposed hotel site. And still no hotel. Because no one wants to finance it.

What gives? And why expect THIS project to live up to wildly optimistic claims? And what happens when it doesn't?

People in Pittsburgh would do well to watch this closely.

Comments

[Al L'Agheny]

Note also, who in their right mind will sink 100% private money into such an area? If you are the entrepreneurial risk leader -- the one willing to be first, you'll run the risk of politicians with election demands forcing development into the area by offering all sorts of tax breaks and financing deals, if not outright grants. Good luck at competing toe to toe with the heavily subsidized politically connected types who always seem to be in public/private partnerships...

If you are willing to invest 100% of your own money into that type of deal, you may as well try and buy the Brooklyn Bridge. From me, of course.