Battle heats up over proposed Virginia Beach hotel

The political battle over the proposal to build a $109.2 million, four-star hotel next to the Virginia Beach Convention Center is heating up. Five City Council members have come out against the public-private partnership, arguing that the deal is not a good one. Six no votes on the 11-member body would kill the project.

Other council members said the deal will benefit the city in the long run. Some are still digesting its complex terms and its costs to the city and haven't decided how they feel. The deal has taken shape as the city and its schools face a $90 million budget shortfall for next year.

On Friday, Mayor Will Sessoms, facing criticism from some council members, called for the city to slow its speedy timeline for deciding on the hotel.

The first public presentation of the hotel plan is set for Tuesday, and a council vote had been scheduled for Dec. 13, the same night as a public hearing. Sessoms said the vote shouldn't happen that night so the public would have more time to weigh in. If the City Council agrees, the decision would be pushed into next year.

The Beach has been trying to get a hotel built next to the conference center for four years, contending that the city is losing conference business because it lacks one. Officials said the hotel and additional conference space would create jobs, bring in more convention center events, generate property taxes, and boost spending in the city by $88.7 million a year.

Most City Council members against the project agreed that the city needs a convention center hotel but said this isn't the deal to do it.

"I believe we're losing significant business by not having a hotel," Councilman Glenn Davis said. "But I haven't been sold on the fact that it requires a Hyatt with an upfront $61.8 million citizen investment to capture that opportunity."

Councilman John Moss said, "When you look at the deal and see how bad it is, you must think the developers have some council members' families held hostage."

Those two and council members Bill DeSteph, Bob Dyer and Rosemary Wilson said they will vote no on the proposal.

Others saw positives.

"I think it makes a lot financial sense for the city," said Councilman John Uhrin, who represents the Oceanfront and helped negotiate the deal for the city. He pointed to studies that said in the end it would bring millions into city coffers that would more than repay the investment. "The return is very dramatic."

Under the terms of the deal, the city initially would put in $61.8 million to help developer Armada Hoffler build a 15-floor, 361-room Hyatt Regency hotel, additional city-owned conference space, and a pedestrian bridge to connect them to the convention center. The developer would pay $19.1 million in loan repayments and in lease payments.

The $5.3 million walkway from the hotel to the conference center would eventually be paid for by a percentage of state sales tax revenue collected there. City officials say the net upfront cost to the city would be $37.4 million for conference space and street improvements.

On top of that, the city would give Armada Hoffler $4.8 million in economic development grants for the project and pay the developer $450,000 annually to manage the city-owned meeting space.

Supporters on the council said the hotel will make money for Virginia Beach over 20 years. A city study concluded the hotel will lead to $152.1 million coming to the city over 20 years at a total city cost of $98.8 million over that period - which includes debt service - for a positive economic impact of $53.3 million.

Sessoms said he's still thinking through the deal, adding that "it has a lot of positive points."

Vice Mayor Louis Jones, who worked with Uhrin on the deal, said he's not ready to comment on it.

Council members Harry Diezel, Barbara Henley and Jim Wood said they were still thinking it over. Diezel noted that the city's investment in the 31st Street Hilton hotel appears to be paying off.

"History is going to show the 31st Street project is going to pay dividends that far exceeded the investment there," he said. The city spent $31 million for parking and a park at the $79 million Hilton hotel at 31st.

Under the convention center hotel deal, Armada Hoffler would initially contribute $47.4 million, an amount that increases to $66.5 million over time through lease and loan payments.

"This is a large commitment for us," said Lou Haddad, president and CEO of Armada Hoffler. "We're willing to make it because we have faith in several elements," he said, citing the track record of Hyatt hotels and Crestline Hotels and Resort Inc., the company that would manage the hotel.

"But most importantly, we have tremendous faith in Virginia Beach. We feel very strongly with the commitment they've made on a beautiful convention center, that with a headquarters hotel, we can favorably compete with all the cities in the regional convention business, and that's why we're willing to invest the money."

Aaron Applegate, (757) 222-5122, aaron.applegate@pilotonline.com