Portlanders will have to wait a little longer for a deal on a new convention center hotel. Officials with the Metro regional government decided Tuesday to give negotiations with the Hyatt Hotel developer until next spring, before taking a vote.
Since the Oregon Convention Center opened 22 years ago, backers have wanted a hotel to go along with it. There’ve been several attempts to build a hotel.
This week’s joint meeting of the Metro Council and the regional commission in charge of event venues was supposed to be a prelude to a vote next week.
That’s not going to happen, to the disappointment of outgoing Metro Councilor, Rex Burkholder.
“I just want to say that I’m not going to be able to vote ‘yes’ on this, but you have my vote, for what it’s worth – and it’s not worth much, after I’m gone,” Berkholder said.
Negotiators -- local governments on one side, and the hotel development team on the other -- haven’t agreed to a specific funding strategy. But the two seem to agree on some principles.
Ken Rust used to supervise the finances of the city of Portland. He’s representing local governments in the hotel talks.
He says the two sides agree on this much: hotel room taxes should be used to help cover construction costs, estimated at up to $200 million.
“The goal I’ve been working on is how do we take advantage of the site-specific Transient Lodging Taxes that will be generated by the project – if it’s built – and utilize those tax revenues paid by the hotel to help in fact, the construction of the hotel. So that’s really what we’re trying to do here,” Rust said.
One question is who takes out the loan, and who handles the risk. Rust says it could be all on Hyatt.
“One of the challenges that we have in looking at that is Hyatt as a private entity hascertain expectations on rates of return for its shareholder equity, certaincosts of capital for its own corporate borrowing – and those are relatively high rates, in the 10 to 15 percent range,” Rust says.
But Rust says there’s another option he calls “intriguing.” It’s a government-procured loan, called a “conduit revenue bond.”
Rust says it’s used regularly, and involves a third-party arrangement -- like when the city of Portland helped finance a public housing project.
Tom Lander is with Mortenson -- the developer connected to the Hyatt project. He supports looking into the bond option, as well.
“We’re going to be able to get more efficient financing, have a lower interest rate on the financing, and so we’ll generate more dollars on the conduit financing, and that’s why we’re investigating that as an option,” Lander said.
Regional officials also received a market study. The study’s survey found that interest in Portland among convention planners increased, if there were a big convention hotel.
It also showed that existing hotels would not suffer, if Hyatt built a 600-room hotel near the convention center. The study looked at how hotels in other cities fared when a big hotel moved in.
Metro is not planning to take up the hotel again publically until spring, although private talks may continue.
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