Agency wants to tap tourism fund to pay for headquarters inn

by: TRIBUNE PHOTO: JONATHAN HOUSE - This conference enter across the MAX tracks from the Oregon Convention Center could be replaced by a 600-room hotel.To help win support for their plan to build a headquarters hotel at the Oregon Convention Center, Metro officials are talking with their counterparts at Portland and Multnomah County about redistributing funds from an obscure but important tourism fund.

Metro President Tom Hughes says the intergovernmental agreement that established the Visitor Development Fund must be amended to help finance the $180 million hotel project. According to Hughes, changes to the agreement could provide new sources of revenue to the city and county for tourism-related programs.

“The IGA governing the agreement is out of date and needs to be amended anyway. The changes could benefit all their governments,” Hughes says.

Representatives of Hales’ office and Multnomah County Chairman Jeff Cogen declined to discuss the specifics of the negotiations.

The Metro Council is scheduled to be briefed on the status of the hotel project in July. The briefing is expected to include a discussion of the intergovernmental agreement negotiations.

Opponents of the hotel project worry that amending the agreement could put taxpayers at risk, however. They say the current proposal — which includes a privately owned hotel — could leave Metro holding the bag if occupancy is below expectations.

“It appears that the taxpayers are taking all the risks and getting none of the profit, and we don’t think that’s a good deal for anyone,” says Paige Richardson, who represents a number of hotels in Portland, including the Benson, deLuxe, Governor, Hilton, Lucia, Mark Spencer and Paramount. The Asian-American Hotel Owners Association also is part of the coalition.

According to Richardson, the opponents are prepared to refer the project to the voters if the Metro Council approves it.

Financing sources unclear

Metro owns and operates the Oregon Convention Center at 777 N.E. Martin Luther King Jr. Blvd. The idea of building a nearby headquarters hotel has long been discussed. Several studies commissioned by Metro have claimed it would need at least 600 rooms, additional meeting space, and more dining facilities than usual to attract more conventions to the center. Developers repeatedly have said they need some level of public support to help finance the extra amenities.

Hughes says such a hotel could help bring an additional seven to 10 conventions to Portland a year, boosting tourism spending by around $120 million. Construction of the hotel would create about 2,000 jobs, and it would support between 900 and 1,000 permanent jobs when finished, Hughes says.

Metro currently is negotiating with a development team that includes Hyatt Hotels to build a headquarters hotel on several blocks north of the convention center. The property is owned by the Schlesinger family of Portland, which is part of the development team. The site is occupied by a small event center, a Starbucks and a surface parking lot.

Metro is studying a financing package that includes $100 million from the developer, $4 million each from Metro and the Portland Development Commission, and $12 million in state lottery funds requested from the 2013 Oregon Legislature.

In addition, Metro is proposing to sell a $60 million bond to be repaid by the transient lodging taxes that the hotel would be expected to generate during the next 30 years. According to Hughes, the intergovernmental agreement needs to be amended to segregate the hotel’s taxes from the other transient lodging taxes that pass through the Visitor Development Fund, and to dedicate them to the bond payments.

According to Hughes, Mayor Charlie Hales is interested in securing a new source of city revenue for one or more projects. Hughes says negotiators have discussed offering the county funds to provide services for homeless street kids, considered by some to discourage tourism.

Katz drew up pact

The Visitor Development Fund originally was proposed to fund an expansion of the Oregon Convention Center after voters rejected a Metro bond measure to do so in 2009. At the time, local hotel and motel owners were willing to have Multnomah County increase their transient lodging taxes 2.5 percent to fund the project. Rental car companies in the county did not oppose a similar increase.

Then-Mayor Vera Katz took the lead in drafting the intergovernmental agreement that created the Visitor Development Fund, a process that became known as the Visitor Development Initiative. By the time she was finished, city finance officials concluded the tax increase could finance 12 different projects and programs through a series of dedicated funds commonly referred to as “buckets.” In addition to the work at the convention center, the Portland Center for Performing Arts and the former PGE Park, they included funding for Oregon Convention Center operations and management, a Visitors Development Board, Fareless Square and two reserve funds. All are specified in the agreement that was approved in January 2001.

Hughes says some of the provisions in the intergovernmental agreement are out of date and needed to be amended, regardless of the hotel project. For example, the PGE Park financing also envisioned profit sharing with Portland Family Entertainment, a management company that no longer exists. And TriMet eliminated Fareless Square last year. Some of those funds are buying bus and rail passes for conventioneers, even though that was not foreseen when the agreement was first approved.

“Especially with the hotel project being considered, it’s well past time we revisited the IGA and decided what best serves the future,” Hughes says.

Richardson says there are better uses for the money, however.

“Elected officials currently considering this flawed hotel proposal need to think long and hard about whether they’re going to hand our money over to private corporate interests, or use it to solve some of our nagging local challenges like funding for schools and basic services,” Richardson says.

Negotiations with the development team cannot be completed until Metro knows whether the intergovernmental agreement can be amended and whether the Legislature will approve lottery funds for the project. The Legislature’s decision probably will not happen until the end of the session, when a so-called Christmas Tree bill stuffed with numerous special appropriations usually is passed by lawmakers.

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