Street Corner Soapbox: Let There Be Hotel!
The Hotel Wars rage on.
The Hotel Wars rage on.
And you know what? What better time for this to be going on, right? I mean, it's freezing out. It won't stop snowing. There's no sign of spring. One cold, dark, snowy day follows the next. It's like we've been caught in some kind of weird space-time continuum, where time, too, is frozen. And the Super Bowl was a big snoozer.
So what better way to distract us from winter than to think about land swaps, loan guarantees, and credit enhancements? Right? If that doesn't put the sizzle into your day, what will?
In case you missed it, here's where we stand: the Erie County Convention Center Authority, which received a $25-million state grant towards building a new hotel next to the present-day Bayfront Convention Center, needed Erie County to guarantee the additional loans needed to complete the project – some $35 million or so.
That is, if the Convention Center Authority defaulted on its payments, the county would be liable for the money.
This isn't as bad as it sounds. First of all, that's not likely to happen. Secondly, it's really about linking the loan to the county's credit rating – which is much better than the Convention Center Authority's, for a variety of reasons. That, in turn, means the interest rates for the authority's loan will be much lower. In short, by having the county guarantee the Convention Center Authority's loan, it'll save money. And that's a good thing.
But what it also means is that without that debt guarantee, there'd be no loan. Without the loan, there's no hotel project.
For some, that'd be a good thing. Specifically, Scott Enterprises, which recently proposed a sprawling, ambitious, and wild development project complete with its own hotel and a floating entertainment barge next door to the Convention Center. They maintain that the state - and authority-funded hotel threatens the viability of their own project. Who needs taxpayer money to build a hotel? they asked, when we'll do it with our own money?
Not that the Scotts don't want to use taxpayer money. The city is applying for a $12-million state grant for their project, and its recent CRIZ application – for a program that would allow local tax money to go directly to the Bayfront instead of the state – was also about the Scott's proposal. But that money would be for infrastructure improvements, the streets, sidewalks, parks, and walkways for the site. Not for a hotel.
So Erie County Council had the opportunity to kill the Convention Center Authority's hotel.
But they didn't.
New councilmember and Soapbox heartthrob, Jay Breneman, instead brokered a deal. He said he would vote for the debt guarantee in exchange for yearly payments of $65,000 from the Convention Center Authority to the county – a kind of replacement for the tax revenue lost on the property because of its tax-exempt status. That's your "credit enhancement."
After approximately 0.002 seconds' deliberation, the Convention Center Authority agreed to Breneman's terms. That's because over the course of the loan lifetime, they'd pay the county some $2 million – just a fraction of the savings on interest rates they'd enjoy using the county's credit rating to back their loan. And voila! The County Council voted to back the Convention Center Authority's hotel scheme.
Forget here for a moment the improbability of a rookie councilmember engineering a nuanced credit enhancement deal on his own – might have some more experienced administrators handed him the keys to the shiny new deal? – and consider for a moment why the Council never for a moment seriously considered downing the hotel.
That's the amount of the state grant that'd simply be tossed back into the state's coffers if the deal went afoul. Erie wouldn't see a penny of it.
Or, as Convention Center Authority board member Roger Richards was quoted saying in last issue's Rebecca Styn feature: "There wasn't another place in the state that got a $25 million grant except for the city of Philadelphia. If this money has to go back, other communities are going to gobble it up, and it's going to be difficult get future grant money in Erie if we can't take advantage of this opportunity."
No one on the Council wants to be the one who fouled up the Convention Center hotel deal. And it was so: there was hotel.
Jay Stevens can be contacted at Jay@ErieReader.com, and you can follow him on Twitter @Snevets_Yaj.