8 years. $16.1 million spent. And still just a Norfolk drawing.

NORFOLK

The vacant 2-acre site is an ugly scar in the heart of the bustling financial district.

Surrounded by chain-link fence, the lot at the corner of Granby and Main streets is punctuated by chunks of cement, weeds, trash and an overturned, rusting cart. A frayed tarp that announces "Arriving 2011, THE WESTIN," flaps in the breeze.

Construction should be nearly finished on a 26-story Westin Hotel, a 50,000-square-foot convention center and a 600-space parking garage.

The city spent $16.1 million on the property and other development costs and tore down three historic buildings to make way for the project. It has signed deals with two prominent hotel developers to build the project, which was to be heavily subsidized with city funds.

Yet eight years after it was proposed, the lot lies abandoned, the project dormant, and it likely will be for years.

Mayor Paul Fraim said it's a victim of the financial market's crash. Some City Council members say, if not for procrastination by city officials, the project might be up and running.

Officials agree nothing will happen until the economy improves and the slumping hotel industry revives.

The city reached its most recent deal to build the project in 2007 with the LTD Hospitality Group of Chesapeake. But, like many hotel developers in the recession, LTD struggled to find financing and even to keep current on loans for its existing hotels.

LTD is delinquent on payments on several hotels in Norfolk and Chesapeake, and a large hotel project in northern Virginia was halted in mid-construction.

Rod Woolard, the city's director of development, said LTD remains committed to the downtown project and continues to spend money on it.

Yet, given the slump in hotel occupancy rates and a decline in room rates, financing a high-end hotel just is not possible, Fraim said.

"The cost of construction of the hotel is $60 million," he said. "At this point, the projected income from the project" won't cover the debt.

The project was controversial almost from the start because of city subsidies. The city proposed paying for a $50 million convention center and $16 million parking garage, both attached to the hotel.

The developer would have received a $7.5 million "performance grant" for the hotel, essentially a rebate of taxes to be paid to the city. The developer also would receive $750,000 for including an upscale restaurant.

None of that money has been expended, but the city already has spent $16 million on the project, according to information provided under the Freedom of Information Act. Its expenditures include $11 million on land acquisition, relocation of businesses and demolition and $2.4 million for architects and consultants. Interest on loans related to the project totals nearly $2.8 million.

The project was born out of a 2001 proposal by a North Carolina developer to build a hotel beside Waterside. City officials touted him as the first African American to build a significant project downtown.

However, a public outcry ensued about the location. City officials backtracked and negotiated a deal with the developer to build a hotel at another site, but that project died for lack of financing.

With African American members of the City Council pressing the city administration to seek another black investor, the city approached billionaire Washington, D.C., businessman Robert L. Johnson in late 2002. The city promised to build a convention center and a parking deck if he built a high-end hotel.

In 2003, he began negotiations to build a 16-story Hilton. A conceptual agreement was reached with Johnson in early 2005.

Johnson was a popular choice. He helped found the Black Entertainment Television n etwork and owned the Charlotte Bobcats of the National Basketball Association. He even lent his support to a bid to bring Major League Baseball's Montreal Expos to Norfolk.

But nothing happened. Johnson would not commit to a binding contract to build the hotel. "He missed deadline after deadline," Councilman Barclay C. Winn said.

Then, in September 2007, he withdrew from the project. The City Council quickly approved LTD Management as the new lead developer.

As historic preservationists protested, the city began dismantling one of the three buildings in October 2007. Eventually, The Decker Building, the Beecroft & Bull Building and a building constructed in 1869, last occupied by Ikon Document Services, came tumbling down.

LTD announced in May 2008 that the hotel had been redesigned and expanded and that several floors of condominiums would top the hotel, which would carry the Westin flag. LTD said it planned to begin construction by early 2009.

Then the bottom dropped out of the economy.

Fraim has since tried to jump-start financing through several local banks. That effort failed.

LTD is not to blame, Fraim said.

"We had one of the greatest financial contractions that the country has ever experienced," he said. "The hospitality industry was especially hit hard.

"The national government had to bail out the banking system, and they are the ones lending money. There's no liquidity in the system."

Some City Council members say, in hindsight, that the city made a fatal mistake in negotiating with Johnson for nearly five years.

"We spent nearly $10 million acquiring all of that land, and then nothing happened," Councilman Paul R. Riddick said. "We did more than enough. We treated Mr. Johnson too gently. And now we have that big hole in the ground as a result."

Vice Mayor Anthony L. Burfoot agreed. "I think we got so intrigued with having an African American developer that we put the cart before the horse," he said.

Johnson had never built a hotel before, Burfoot said. He had only acquired and renovated existing hotels, so perhaps he wasn't prepared, Burfoot suggested.

"I don't know what else we could have done differently," Fraim said. "We had a billionaire who was adamant about doing this deal. He called me one day out of the blue to say, 'I know it's been a long time, but we're actively working on this deal.'

"He told me, it's going to happen. Then 60 days later, it was off."

Historic preservationists, who bitterly protested the development when it was announced, now say I told you so.

"It seemed to us at the time that this was a break with the public trust," said Alice Allen-Grimes of the Norfolk Preservation Alliance. "Many people signed petitions to save the buildings. They took them down to make us be quiet.

"It's such a shame. Those buildings would be open now and businesses forced to leave downtown would be paying taxes. I don't know why they were in such a rush."

City officials say the project will be built.

Located a short walk from the waterfront, the Sheraton and Marriott hotels and the cruise ship terminal, "it's an ideal location for a hotel and conference center," Woolard said. "This project will happen."

The city continues to place tax revenue, from hotels and meals taxes, into a fund to pay for the convention center. So far, nearly $14 million has been socked away.

For now, the city plans to retain its relationship with LTD and wait for the economy to improve. City Council has not discussed the project in more than a year. Fraim said he has not spoken to LTD executives in months.

"I need to hear from LTD before we make any decision," Fraim said. "I need to find out if they want off the hook. If they do, then it's something the council needs to discuss.

"I've heard from at least two other people interested in developing the hotel. But until things return to normal in the financial world, I don't know that it's feasible for anyone."

Harry Minium, (757) 446-2371, harry.minium@pilotonline.com