Deirdre Fernandes
The Virginian-Pilot
©
VIRGINIA BEACH
The city's upfront cost for a proposed hotel to be built next to the Virginia Beach Convention Center on 19th Street would be more than half the project's total price, but city officials said the hotel would more than pay for itself over time.
City taxpayers would initially pay $61.8 million of the $109.2 million project to build the 15-story, 361-room Hyatt Regency under an agreement between the city and its developer, according to sources briefed on the proposal. The city would own parts of the project including hotel meeting space and the pedestrian bridge that would link the hotel to the convention center.
The details of the proposed deal were obtained by The Virginian-Pilot from sources who spoke on the condition of anonymity because the figures have not been made public. The Pilot also obtained a "term sheet" outlining the proposal.
Some City Council members have been briefed individually on the proposal, and the City Council was briefed by city staffers in a closed session Tuesday. A public briefing is scheduled Dec. 6 and a council vote is set for Dec. 13.
Deputy City Manager Steve Herbert, who agreed Thursday to talk about the project, said the city needs the hotel because it's losing conferences to other cities.
"If we don't have this, we're in danger of being less competitive in this marketplace," he said.
For years, the city has wanted a hotel to go with its $207 million convention center, which opened in 2005.
Critics fear the hotel won't be successful because it's not on the beach and question the large public cost.
In April, the city selected development company Armada Hoffler to build the hotel after a deal with another developer soured.
"It's an excellent deal for the city," said John Richardson, chairman of the city's economic development authority, which helped negotiate the deal.
Under the proposed terms with Armada Hoffler, the city would pay $42.7 million to build conference space in the hotel and some hotel assets that the developer would lease back and it would make street improvements.
The city would also spend $5.3 million on a walkway connected to the conference center. The city would own these facilities.
Virginia Beach would loan Armada Hoffler $13.8 million to be paid back by 2036, with interest.
In addition to the $61.8 million in upfront costs, the city would also make available to Armada Hoffler up to $4.8 million in city economic development grants and pay the company $450,000 a year to manage the city-owned meeting space.
The city spent about $28 million to help build the Westin Hotel in Town Center, a 12 percent contribution. The city also spent $31 million for parking and a park at the $79 million Hilton hotel at 31st Street.
Herbert said a convention center hotel would annually bring in 59 new events, generate 96,000 hotel room nights and stimulate $88.7 million in spending, while creating 900 jobs, according to a city consultant's report. He said over 20 years the hotel would bring in $111.7 million in new tax revenue.
"The bottom line is it does pay for itself," he said.
Bruce Thompson, who built the Hilton, said the convention center hotel deal didn't seem like a good one for the city.
"The hotel will need a significant subsidy from the city as the only time it will be busy is when there is a convention," he said in an email. "I don't understand with the size of the subsidy why the city, like many other municipalities, does not just own the hotel and hire an operator. They would have the asset, could sell it later if need be..."
Mayor Will Sessoms declined to comment on the deal.
"I'm very disappointed this information has gotten out," he said. "We're negotiating, and you just don't do business this way."
As Beach officials have inched toward the deal with Armada Hoffler, another group has started lobbying the city for their convention center hotel proposal. Officials with Harmony Investments, which owns the DoubleTree Hotel near the convention center, pitched a proposal to several council members.
Harmony has proposed spending $25.5 million to expand and upgrade the DoubleTree. The company is seeking $5 million to $10 million from the city to build an enclosed walkway between the hotel and convention center.
Page Johnson, president of Harmony Investments, said his company's proposal is "more cost effective," considering the city's current budget constraints and the city investment required for the Armada Hoffler deal.
The Beach is in exclusive negotiations with Armada Hoffler to build the convention center hotel and can't entertain another unsolicited bid until that process has concluded, said Rod Ingram, a city attorney.
Councilman Glenn Davis said he needs to see more specifics about Harmony's proposal.
"Some of us look forward to seeing the exact details in the weeks to come," he said.
Councilman Bob Dyer said, "We're going to be looking hard at Harmony's alternative."
Councilman John Moss objected to the speed of the deal with Armada Hoffler.
"The timeline does not permit a careful and due diligent examination of the proposal," he said.
Aaron Applegate, (757) 222-5122, aaron.applegate@pilotonline.com
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Cronyism
"I'm very disappointed this information has gotten out," he said. "We're negotiating, and you just don't do business this way." - Mayor Will Sessoms.
As a taxpaying resident of this great city, "I am disappointed this information was not presented to the public before negotiations began."
Plus the public hearing is scheduled for one day of debate/input and then a vote just 7 days later? Where is the due diligence? How can the City entertain viable alternative proposals in 7 days? It cannot be done, period.
Smoke and mirrors - smells like, looks like cronyism; pure and simple.
"...but city officials said
"...but city officials said the hotel would more than pay for itself over time." If this is the case then a private developer shouldn't have any problems financing it themselves.
It is not that simple
Well, simply put, the developer collects the taxes for the city, but does not keep them. The City does. Those taxes paid by conventioneers total about 15% of their bill. That money helps to pay the public operating costs for the resort, like police and fire, rescue, extra street sweeping, and of course, debt service for the convention center, and the balance is the fiscal dividend paid into the general fund that keeps our taxes low. Around this country, cities compete for convention business because it generates jobs, taxes, and profits for area businesses, and it benefits the tax base as well. But clearly, the hotel itself is not profitable unless seen in the context of attracting high end convention related business and extra taxes.
Explain…
why is the city is financially supporting this project to the extent which it is? I don’t have a problem expanding the tax base but look at the money the city is giving Hoffler and Hyatt; $61.8 million dollars of upfront money, why? $450,000 a year to manage a city owned space in the hotel, why? A loan of $13.8 million dollars to the developer with no payback for over 20 years until 2036? Plus $4.8 million in economic grants. This will pay dividends for our leaders long before the taxpayers. This really does look like at least some of the leaders in VB are going to individually and financially benefit from the developers. Other cities comparable to VB are business friendly without giving away taxpayer money.
You didn't address his
You didn't address his statement Mike. His statement wasn't about who pays the taxes. It was about the developer FULLY financing their own projects. But as usual, you are the master of spin sir. The best I have ever read.
Preference for rapid decay
The knee jerk negative reaction to this proposal, like many before it such as the Hilton Hotel, Park, Garage, and shops, the Town Center, Sandler Theater, Sand for Sandbridge, the TIF at Lynnhaven Mall, projects which bring tax revenue to the City and reduce our tax rates, are predictable from a small segment of our population that shouts the loudest and posts on Pilot on line the most. Angry citizens, mad about the fiscal condition of our nation, our Commonwealth, and our City. Got that. But what to do? Extreme enforced austerity is the path to deterioration and decline, which, last time I checked, does not lead to less taxation, it leads to more. So ask Moss and his cronies what they really want and the honest answer is rapid decay.
decay
Rapid decay as you put it, is develepors uprooting every blessed tree that ever remotely gets in their way, paving our little world over in more asphalt, and calling in the appointed nursery to plant a decorative shrubbery or two. If any of that manages to grow, you uproot it 25 years later and start the same destructive process all over again. I'm not impressed in the least. Try leaving some old growth for a change, and build your designs around it. I know it is possible, award winning architects are noted for doing just that. Everything of value does revolve around the almighty dollar, concrete, steel and glass. Sorry Mike, had to get my 2 cents on this pet peeve somewhere, maybe you have already subscribed to this line, but I doubt it.
middle ground
Well of course there is a middle ground which refuses to accept the gradual decay and decline of say the shopping center in the middle of Newtown, on Princess Anne Road, or many of the numerous community shopping centers that having passed their prime, now host second hand clothing stores and storefront churches. Fact is, without some stimulus, private commercial property may gradually deteriorate which causes the same in the surrounding neighborhoods, which depresses property values and therefore increases the tax rate. That is why strategic investments in public facilities that spur private investment and redevelopment is a smart way to increase the tax base. The alternative results in depression; not good for anyone.
My intended message went
My intended message went through one ear and out the other.
I can envision you uprooting those stately magnolias on the UVA campus, a standard procedure throughout the industry.
You're wasting your time
You're wasting your time with Mr. Barrett. Your perception is right on target. In one ear and out the other and never addressing the statement. The same M.O. of a democrat politician.