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Thursday, November 14, 2013

Welcome to the Hotel Cuyahoga

County and City Leaders Team Up To Bankroll a Downtown Hilton Hotel With Tax Dollars

Posted By on Thu, Nov 14, 2013 at 12:19 PM

click to enlarge Rendering via Cooper Carry
  • Rendering via Cooper Carry
So you want to build a hotel!

(...“You,” of course, being the taxpayers of Cuyahoga County and Cleveland footing the bill for the $260-million Hilton hotel slated for Ontario and Lakeside downtown. And though some of “you” may not want to build or  fund or even cast a wayward glance at the comped breakfast offerings, it’s all happening.)

Here’s the gist: Cuyahoga County Executive Ed FitzGerald is pushing plans to fund a Hilton boasting 600 rooms on 30 floors - plus 55,000 square feet of meeting space. The marquee rationale is that the hotel will link up with the Cleveland Convention Center located next door and give all those people flocking to Big Events a classy place to crash. The executive (who is, of course, eyeing a shot the guvnah’s seat rather than a second term with the county) has billed this hotel as the cherry on top of the Convention Center/Med Mart development spree. A very important cherry, he and others have said.

"Is downtown going to move forward, or are we going to wait for somebody to come and rescue us?" FitzGerald rhetorically (?) asked The Plain Dealer last month. "We just had this property out on the market, and there wasn't one single hotel developer inquiry. Not one."

“This property” refers to the parcels now occupied by the now-vacant county headquarters. But many are pointing to private developer ambivalence as quite the tell. That’s because if the county and the city are going to sink millions of public dollars into this project, many would like at least a miniscule assurance that there’ll be a healthy return on that investment. The only private plan that approached the county was for a shitty parking garage. Thankfully, Fitz passed. But then...

There’s about $93 million in public taxes left over from the convention center sales tax hoopla, leaving Fitz and Co. shuffling their feet and wondering just what in the hell they can do with it. Via naming rights transactions, private dollars and grants, the “historic agreement” between FitzGerald and Cleveland Mayor Frank Jackson establishes a working pool of millions more. That’s where the publicly-financed hotel comes in. Hilton Worldwide will likely chip in a “seven-figure” investment, which could presumably account for just under 1-percent of the total cost.

(View a slideshow of the evolution of the county-funded hotel plans.)

Cuyahoga County will issue bonds generating $150 million for the hotel project. The funds will come by way of new bed taxes, property taxes and hotel revenues. Millions more will come from the savings, as FitzGerald describes it, from the convention center. The pie totals about $260 million, though the budget is still in flux, toward a hotel.

At the same time, look: Privately-owned and -developed hotels are cropping up across downtown. There’s a Westin (500 rooms), a Drury (180 rooms), an Aloft (150 rooms), a Kimpton (161 rooms), a Le Meridien (206 rooms), a Metropolitan (Marriott) (150 rooms) and, possibly, a Crowne Plaza (194 rooms) all setting up shop around the neighborhood. All that development was spurred in part by gimmicky attractions like Horseshoe Casino, The Cleveland Convention Center and the Global Center for Health Innovation. The word “hollow” can’t help but come to mind, but, nevertheless, the rooms are available.

***

“I don’t believe the taxpayers should be on the hook for a $260-million hotel,” District 1 County Councilman David Greenspan tells Scene. “If the hotel is not profitable, the county is liable for that debt service. That’s an exposure I’m not comfortable with encumbering upon the residents of this county.” He adds that the concept - a hotel to pair with the convention center - makes sense. But now that the plan for the property is a bit more developed (via greenpointing and the looming demo of the county HQ), it might be time to pitch the improved project to private firms outright.

“I don’t believe the county should be in the hotel business,” Greenspan says.

And his concern is one that’s shared not only in Cuyahoga County, but in major metropolitan areas across the country. This publicly-funded convention center hotel deal isn’t new. It’s been tried time and time again in cities similar to Cleveland - St. Louis, Mo.; Baltimore, Md.; and currently in the works in Portland, Ore.; - with questionable results.

click to enlarge Sanders
  • Sanders
Heywood Sanders, a noted expert on these sorts of tax-financed matters and a public administration professor at the University of Texas-San Antonio, has spent years studying this type of public development. He’s not sold on its efficiency. And the Hilton coming to town is the epicenter of this burgeoning mindfuck here in Cleveland.

"The dynamic is that downtown hotels will vigorously compete for business," if they aren't being filled by conventions, Sanders told Tucson City Council when that city was salivating for a convention center hotel. "When there's an oversupply, rooms get down to rates that are pretty remarkable."

Just about the same exact thing happened in Baltimore. After city leaders there realized that they’d have a tough go at the convention business without a convention center hotel, they nailed down plans to fund the $301-million Baltimore Hilton. That was back in 2005, and the hotel hasn’t produced dick for the city, nor has it been able to efficiently pay down its debt service. Tens of millions have been lost. Investment advisory firm Davenport and Co. recently reported that it may take another 10 years for the hotel to see a profit.
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