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HomeMy WebLinkAbout2003/07/22-Minutes-HEDC The City of Fort Worth City Council Central City Revitalization and Economic Development Committee Highlights of the Special Town Hall Meeting Held July 22, 2003 Committee Members Present: Wendy Davis, Jim Lane, Frank Moss, John Stevenson City Staff Present: Tom Higgins, Joe Paniagua, Reid Rector, Kirk Slaughter, James Horner, Betty Tanner, Peter Vaky, Ardina Washington, Marsha Anderson Call to Order: Chairwoman Wendy Davis called the meeting to order at 5:35 p.m. Ms. Davis introduced the Central City Revitalization and Economic Development Committee members and recognized the members of the Blue Ribbon Committee (Citizens' Committee for Fort Worth's Future). Ms. Davis expressed her appreciation to the Committee for their work. She reported that the Town Hall Meeting would begin with a presentation that would provide some history of the Convention Center Hotel Project along with the findings of the Blue Ribbon Committee and the current status of the project. She stated that the Committee was anxious to hear the public comments. Presentation and Discussion of the Convention Center Hotel Project: Assistant City Manager Joe Paniagua reported that staff would be making a presentation beginning with Doug Harman, President & CEO of Fort Worth Convention & Visitors Bureau, followed by Kirk Slaughter, Director of Public Events who would provide information on the background and current status of the hotel project and 41 ould include information from Laura Alexander of First Southwest Company, the City's Financial Advisors. (PowerPoint presentation attached) Mr. Doug Harman reported the background information on the hotel issues goes back many years. He stated that the economic impact of the convention business is enormous. He shared information from 1955 prior to the creation of the Convention Center in 1968. He stated the first Mayor Barr and others created a vision that resulted in the construction of the Convention Center and that vision is an important part of the long-term strategy of downtown revitalization. He reported that in 1985 when he joined the City, the issue of the condition of the Convention Center was uppermost in the minds of members of the hotel community, City staff and everyone. He stated that in spite of the support of then-County Judge Moncrief, the issue was not resolved. He reported that the City purchased the Convention Center in 1997 that led to the expansion of the Convention Center. Mr. Harman shared a headline from the September 2, 1995 issue of the Star Telegram that reported "Tourism brings $1 billion a year to Fort Worth, survey says". Mr. I Jarman reported that according to the Dean Runyan Associates for Texas Economic Development Department, convention and tourism spending in 2002 resulted in: • $2 billion total spending was generated by travelers in Fort Worth-Arlington PMSA (excluding air travel) • $2.3 billion total earnings were generated by travel spending in Fort Worth-Arlington PMSA • 59,720 total employment was generated by travel spending in Fort Worth-Arlington PMSA • For every million dollars spent, 16-17 jobs annually are generated July 22, 2003 Page 1 of 7 Mr. Harman reported that Fort Worth is competing with every other convention destination, and that there were seven factors that were fundamental for every convention destination. He reported that Fort Worth was strong in six of the seven factors, but it is Fort Worth's inability to offer committable hotel rooms that is comparable to other cities. He reported that Fort Worth is out of line when the number of committable rooms available for qlkties. and the number of rooms that are of the quality expected by conventions are compared with other Mr. Harman shared a listing of conventions that were lost, conventions that are at risk due to insufficient hotel rooms and groups that had committed contingent upon the headquarters hotel that are at risk. Mr. Harman stated the issue was economic development, redevelopment of downtown Fort Worth and jobs. Mr. Kirk Slaughter, Director of Public Events for the City of Fort Worth, reported he would be providing historical information on the hotel and convention center project and then would ask Laura Alexander with First Southwest to provide an historical overview of financing options. Mr. Slaughter presented information on how convention center hotels in other cities have impacted the market. He reported that in Philadelphia, the headquarters hotel increased supply by 24%. In Minneapolis, supply was increased by 29%, and Tampa's supply was increased 46%. He pointed out that in each of the cases, the occupancy actually improved once the hotels opened and new demand was generated. He reported that Philadelphia generated an additional 374,000 room nights, which resulted in increased spending in the community. Mr. Slaughter reported that the City purchased the Convention Center in 1997. General Obligation Bonds in the amount of $19 million were approved in 1998 for the expansion and renovation of the facility. Additional funding for the expansion and renovation was obtained from the 2% increase in Hotel Occupancy Tax as well as the City's portion of the tax on rental car fees at DFW Airport. The JFK Theatre was demolished in 2000 to make way for the expansion. Mr. Slaughter stated that there had been a number of studies to consider the feasibility of the hotel issue. He reported that C.H. Johnson Consulting, Inc. reported that Fort Worth should add between 1,200 and 1,400 ooms over a 7-10 year period. They suggested building a 400-room hotel expandable to 800 rooms. They also commended the renovation of the Ramada and Radisson Hotels. HVS International conducted an independent market study. He reported that HVS International is one of two firms recognized worldwide for performing market studies for hotel projects for the public sector. He reported that the HVS Study recommended Fort Worth build a 600-room first class, full-service hotel in close proximity to the Convention Center. He further reported that HVS also recommended a dedicated room block for conventions. Mr. Slaughter stated that the room block commitment is very important to conventions because the meeting planners want a large block of hotel rooms across the street from the Convention Center for the conventioneers. The study also recommended that the hotel contain 45,000 square feet of meeting space, 25,000 square foot ballroom, two restaurants and one lounge with athletic amenities including pool, whirlpool, exercise room, etc. Mr. Slaughter reported that the City of Fort Worth issued a Request for Qualifications for a Convention Center Hotel developer in 2001. Subsequently, a Request for Proposals was issued and negotiations with Portman Holdings were initiated after interviews with four development teams. Mr. Slaughter reported that meanwhile the City was investigating financing options for the development of the hotel. After extensive study and research, the City's financial advisor recommended that Certificates of Obligations be issued to finance the hotel. In December, 2002, a citizen's petition was submitted calling for a public vote if Certificates of Obligations were issued to finance the hotel. Mr. Slaughter reported that as a result of the petition, the Blue Ribbon Committee, Citizen's Committee for Fort Worth's Future, was appointed. The Committee was extremely dedicated and spent five months meeting every other Monday to study the hotel project. They examined a multitude of issues and challenges surrounding the development. Mr. Slaughter reported that the Citizens' Committee found that: -Fort Worth has the amenities, attractions and services to attract and retain mid-size conventions to the City. -The $75 million convention center expansion has brought the City back to a competitive level in terms of quality meeting space. July 22, 2003 Page 2 of 7 -Additional quality hotel rooms need to be developed in downtown. (Renovation of Radisson and Ramada would not add enough rooms to market to compete.) •A convention center hotel should enhance our ability to attract and retain conventions. -Fort Worth needs to aggressively market itself. is •The local hotel market will be impacted but should improve over time. Mr. Slaughter.reported that there was also a Minority Report submitted by four of the committee members. Highlights of the Minority Report are: •A 400-600 room convention center hotel is a desirable amenity and would be asset to Convention Center •Competitive convention and tourism environment not presently conducive to assure success. •City should work with existing hotels to upgrade and add rooms *City should explore public/private ventures when demand increases Mr. Slaughter reported that the Citizens' Committee invited a panel of developers to discuss different financing structures for constructing a convention center hotel. Mr. Slaughter stated that in addition, a number of developers from the private sector had approached the City and expressed an interest in the hotel development. Mr. Slaughter reported that based on the findings of the Citizens' Committee and the interest expressed by the hotel developers, the City released a Request for Proposals (RFP) for convention center hotel development on July 15, 2003. He stated that the RFP was basically a fact-finding mission to detennine if the market has changed and if there is still viability from the private sector for the project. He reported that a pre-submittal meeting would be held on July 31St whereby interested parties could ask questions, get clarifications, etc. The responses to the RFP are due on August 28, 2003. Mr. Slaughter reported that some of the key components of the RFP are: -Develop a hotel property with no less than 400 rooms Aldlikk -Bring a hotel operator that is recognized by the convention and meetings market IN -Use creativity in development options. Two structures of interest include private/public development with private ownership and private/public development with a local development corporation ownership. -Meet a clearly defined schedule, scope of development and guaranteed maximum price -Prove ability to bring debt financing/equity to the project -Project hotel revenue performance -Create jobs -Recommend location of the proposed hotel including city-owned real estate and Tarrant College District site Ms. Laura Alexander, First Southwest Company, reported that she would like to begin by talking about the decision last fall to use Certificates of Obligation to finance the convention center hotel. Specifically, Ms. Alexander reported that Certificates of Obligation would have resulted in lower borrowing costs with a savings of approximately$1.3 million per year in debt service. She stated that money would flow to the bottom line and could have been used for other projects for the City. She reported that a 600-room hotel was contemplated and that after all of the obligations were paid, approximately $330 million would have been available at the end of 35 years. She reported that it was these projections that helped influence City Council to consider Certificates of Obligation. She reported that the financing costs would be less because due to the City's credit rating, a lower financing rate would be available than a rating for a start-up hotel project. The difference in the interest costs made the project more viable and resulted in the $1.3 million annual savings. Ms. Alexander reported that they calculated a 1% increase in interest rates and found that the increase could add $47 million to the debt service over the life of the project. Ask s. Alexander reported that the City went to great lengths to try to insulate itself in the event the hotel did not operate as projected. She stated that two operating reserve funds were funded that were anticipated to be utilized on a daily basis for cash flow needs — a working capital fund and operating reserve fund. She stated July 22, 2003 Page 3 of 7 that in addition to those funds, the City anticipated establishing a debt service reserve fund. The fund was to have been equal to one year's debt service. In the event the hotel was not operating according to projections, the City would have at least one year on hand to make payments. The excess revenue fund is the surplus cash flow that was left over after all payments had been made. The excess reserve fund is unrestricted and the funds *uld be used for any purpose. Ms. Alexander reported that the City asked First Southwest Company to look at and consider scenarios if the hotel was not performing very well. She stated that typically convention center hotels take 3-4 years to obtain stabilized occupancy. She reported that one year's worth of debt service would always have been maintained in the city's reserve and the reserve funds were sufficient to cushion the effects of lower than projected occupancies. Ms. Alexander stated there were only two financing scenarios currently being considered based on the recommendation of the Citizens' Committee: Public/Private Partnership and Public/Private Local Development Corporation. She reported that the Public/Private Partnership is a privately owned and managed hotel. The public portion of the partnership comes from a capital subsidy that is estimated at 30-40% of the project. She stated the exact amount is unknown until the RFP responses have been received. The financial obligation of the 60-70% is the total responsibility of the developer; and the 30-40% is the responsibility of the City. She stated how the City pays for that is up to the City, but hotel revenues would not be available in that structure, but would be dedicated to repayment of developer's debt. Ms. Alexander reported that the Public/Private Local Development Corporation is a city-created corporation that would issue revenue bonds and is the primary financing alternative that was considered in the fall. The city-created corporation is a not-for-profit and is managed by third party entity. The LDC finances 90-100% of the project and is paid for with hotel revenues. The 0-10% could be financed by developer buy-in or subordinate debt. Revenue bonds are paid by hotel and possibly parking revenue. City credit support is required in order to make the financing scenario marketable. The City would basically co-sign a loan that would require the city to earmark a funding source to pay for the Obt in the event hotel revenue was insufficient. Ms. Alexander next reviewed the funding sources for both options. In the Public/Private Partnership scenario the privately owned hotel would pay property taxes unless they asked for tax abatement. The City could use tax abatement as part of the 30-40% contribution. Other sources of revenue that the City could use to fund the 30-40% is the 9% Hotel tax generated at the hotel; car rental tax from DFW Airport and possibly parking revenues would be available under a public/private partnership. Ms. Alexander stated that in contrast, in addition to the hotel revenues that are forecast to be sufficient, the Local Development Corporation could use the hotel tax up to 15% generated at the hotel. She stated the difference is a new legislative initiative that allows for the City-Owned convention center hotels to keep the 6% portion of the state hotel tax and all of the sales tax generated at the hotel. The City would be able to use the state's portion for ten years. The full 8.25% sales tax generated at the hotel could be used for the hotel's benefit. Normally, the city would only receive 2% of the sales tax. The two sources of funds are estimated to generate $2 million per year. She reported this additional source of funds is very significant for the hotel financing that could make the revenue bonds under the Local Development Corporation much more viable than they were last fall. She stated when the City last considered financing options, the Certificates of Obligation were recommended because debt service would be approximately $1.2 million less than revenues. Now, she dated the revenue bonds could be more successful and would limit the city's need to co-sign the loan. July 22, 2003 Page 4 of 7 Ms. Davis called for additional comments. There being none, she opened the meeting for citizen comments. Ms. Davis asked the comments be limited to three minutes. Stanley Stone, 6032 Lovell, Fort Worth, Texas 76116 Not in support of city-financed hotel. Referenced Bruce Walker study and Citizens' for a Sound Economy—wants a vote Allen Sanders, 813 Firewheel Trail, Fort Worth, Texas 76112 Supports the convention center hotel. Became convinced of the need for hotel after sitting through Citizens' Committee Cynthia L. Owings, 3940 Lakewood Heights Ct., Fort Worth, TX 76161 Opposed to city-owned hotel—wants a vote Preston Smith, 5417 Catlow Valley Road, Fort Worth, TX 76137 Served on Citizens' Committee — Did not sign majority report, but the minority report that says City should not be involved in a hotel project. Convention Center hotel would be in direct competition with other downtown hotels. Opposed to city-owned convention center hotel and asked that the City continue to explore projects similar to the Ramada tax abatements. Gretchen Rasheed, 8004 Grand Junction Dr, Fort Worth, TX 76179 Opposed to city-financed and owned hotel. Does not feel citizens have been informed about what is going on and asks City to look at other financing avenues and there should be a vote if tax dollars are used. Steve Hollem, 6471 Floyd Drive, Fort Worth, TX 76116 Served on Citizen's Committee and authored the minority report and was involved in petition signing. He stated that probably 98% of the people that signed petitions were opposed to a hotel. He stated he was disappointed that contradicting information that was presented to the Committee was not included in the presentation. Asked that if the project goes forward that the City's risk be minimized and protect the citizens from possible losses. Ms. Davis said that she would like to hear the citizens' input on financing a hotel under the structure of public/private partnership, if the city was only allowed to use revenue and taxes directly from the hotel (parking, tax abatement, etc.) and did not commit general funds, Glen Hahn, 777 Main Street, Fort Worth, TX 76102 Chamber, Central Area Council, Fort Worth Chamber of Council. Sees hotel as an opportunity for more business for downtown to expand the south end. Billy Martinez, 211 S. Main, Euless, TX, 76040 Believes convention center would have a positive impact and create hundreds of jobs due to increased use of hotels, restaurants, shops, etc. Encouraged quality jobs be created that included health coverage. Steve Murrin, 101 W. Exchange Ave, Fort Worth, TX 76106 Feels those in the industry have fallen short in educating citizens on the benefits of the high quality conventions. He stated the individuals that attend conventions spend approximately $250 each day per person. He stated that the cities that are successful convention destinations do a better job of marketing the city. Expansion of convention center is a halfway mark, and the City needs to build the hotel. July 22, 2003 Page 5 of 7 Tom Gillespie, Ramada Plaza Hotel, Commerce Street, Fort Worth, TX 76102 Substituting for Paul Barham, CEO of Harrell Hospitality Group. Read a prepared statement that endorsed the need for 1,500 first tier hotel rooms in support of city's recent investment. Supports renovation of Radisson and additional hotel rooms being added to the marketplace in the 2007 to i` 2008 timeframe. Alex Brassfield, 7700 Randol Mill Road, Fort Worth, TX 76120 Opposed to hotel because she feels the money should be used to make neighborhoods safer. Tom Brassfield, 7700 Randol Mill Road, Fort Worth, TX 76120 Opposed to city-financed hotel. Development is important, but the development in downtown will only help downtown. Told funds to pay additional police and code enforcement staff is not available to keep their neighborhood clean and safe. Use funds to improve what Fort Worth has and not what they may have. Jim Lane, Council Member, asked Mr. Brassfield if he believed the hotel would be in competition with police and codes. Mr. Brassfield responded yes. Mr. Lane stated that the City was not doing a good job of educating the public. He stated that if the hotel would compete for funds with police and code enforcement, he would not support the hotel. Mr. Lane stated it was definitely not the case. Doug Semmes, 4810 Birchman Avenue, Fort Worth, TX 76107 Gratified to live in a city that seeks public input. City Council and Citizens' Committee have come to the same conclusion that more hotel rooms are needed and that public money will be necessary. He stated that people are sensitive to the form the hotel would take. Suggested sites be considered that would help other Fort Worth attractions, such as the T&P building or site adjacent to the ITC to augment the Trinity Railway Express, existing sites adjacent to the facility, etc. Russ Brainard, 9309 Mountain Way, Landing at Eagle Mountain Lake He does not see any acceptable reason for public funds to support a 600-room hotel. Urged City Council to wait for private enterprise to build a hotel. Rick Disney, 805 Larkspur, Fort Worth, TX Member of Citizens' Committee. He stated that the committee spent a lot of time and study and hoped the findings would be carefully considered. He stated the majority found that there is a need for a convention center hotel. The first choice is that private enterprise build hotel, but that has not happened. The committee concluded building with revenue bonds was a prudent move on the part of the City. He stated he believed the hotel would be a catalyst for downtown development. Vic Tinsley, 5013 Highland Meadow, Fort Worth, TX Member of Citizen's Committee. He stated the amount of convention center space has increased and hotel occupancy is going down. He stated hotel occupancy in Dallas is down 5.0% and Houston was down 8.7%. Jerry Westfall, 1605 Tierney Road, Fort Worth Supports the convention center hotel. He stated that the City of Fort Worth was built with a vision and supporters including Amon Carter, the Bass Family, Anne Burnett, etc. He stated that $75 million has been invested and it was also told at that tirne that a new hotel would be needed. Fort Worth must have a 600+ room hotel. y4' There being no further comments, Ms. Davis called tier any further input from the Citizens' Committee members and Central City Revitalization & Economic Development Committee. July 22, 2003 Page 6 of 7 Mr. Frank Moss, Council Member, expressed his appreciation to the citizens and the Citizen's Committee. He stated it would be a challenge for Council to get the information out so there is a clear understanding about where the resources and financing for the convention center hotel would come from. %r. John Stevenson, Council Member, also expressed his appreciation to everyone for attending. He stated he had the opportunity to be a part of the Citizens' Committee as an ex officio member until he left to campaign. He stated the Committee worked long hours with a large majority of members who did not miss a single meeting or perhaps one. He assured the Citizens' Committee that City Council would work carefully and slowly on the hotel issue and in an open forum. He stated it was understood that the citizens want more information on the project. Mr. Jim Lane, Council Member, thanked the Blue Ribbon Committee for the hard work. He stated that the diverse opinions on the committee shows what Fort Worth is all about. Mr. Lane thanked the City Staff for their tireless work on the hotel issue. Ms. Davis added her appreciation for everyone's input and attendance. She stated that she heard echoed concerns about the hotel financing competing with other projects in the City of Fort Worth. She stated the City Council needs to do a good job in educating the citizens in terms of what kinds of financial resources would be considered for the hotel project. Ms. Davis stated that the revenue sources discussed by Ms. Alexander, car rental, hotel tax are dedicated specifically for tourism purposes and cannot be used for building parks, repairing streets, etc. Ms. Davis stated it was important to use those restricted funds to create the kind of tax base that will allow the City to fix the streets, parks and other things. Ms. Davis stated the responses would be due on August 28 for the Request for Proposals and that she would like to "go on the road" and communicate with the neighborhoods and explain the exact partnerships that may be explored, exactly where the revenues would come from and how to better educate our community and will absolutely not be taking money out of the general fund Or out of the next bond program that will compete with other projects in the City. Adjourn: The meeting adjourned at 7:00pm. July 22, 2003 Page 7 of 7