District Officials Consider Issuing Bonds to Build Hotel at Convention Center
Thursday, June 4, 2009
District officials are considering issuing about $750 million in bonds to build a hotel at the Walter E. Washington Convention Center, a move that would help the city compete with the National Harbor resort in Prince George's County but would break the city's cap on borrowing.
It would be a substantial financial and political commitment for the D.C. Council and Mayor Adrian M. Fenty (D), who are struggling to close an $800 million budget gap and overcome the perception that the city irresponsibly poured more than $700 million in taxpayer funds into Nationals Park.
The city needs a hotel or risks losing business to Maryland, said council member Jack Evans (D-Ward 2), chairman of the Committee on Finance and Revenue.
"There's no convention center of our magnitude in the country that doesn't have a hotel attached," he said. "The question is, how can you finance it? The city, unfortunately, has a 12 percent debt cap. That prevents us from borrowing."
The private development team that would build the 1,100-room Marriott hotel was initially to get $187 million in taxpayer funds through tax increment financing, said Natwar M. Gandhi, the city's chief financial officer. But the developers are looking for significantly more public money because of frozen assets and the recession, he said.
Gandhi, who is on the board of the Washington Convention Center Authority, said he supports a hotel but warned against breaking the city's borrowing restrictions.
"If you do borrow $750 million, you would seriously breach our cap," he said. "We have told Wall Street that we would borrow no more than 12 percent. . . . It's a question of the city's credibility with Wall Street. We don't want to jeopardize that credibility."
Greg O'Dell, chief executive officer of the authority, said that officials are "looking at ways to bring certainty to this project" in the midst of a dried-up credit market.
"We want to achieve this goal of trying to get this project done so we can reverse this tide of decreased bookings and the impact it has on the city," said O'Dell, who began shopping the plan to council members last week. Evans, other council members and the Fenty administration appear to be behind the proposal, which was first reported in the Washington Business Journal.
City Administrator Neil O. Albert said that tourists spend $5.5 billion a year in the city and that "the development of the convention center headquarters hotel is a critical element in ensuring we remain a top-tier destination for the meetings and convention industry." He said that if the city moves ahead with the financing, construction could begin by the end of the year.
Several council members expressed unease but said the District cannot afford to let the hotel project languish.
Council member Kwame R. Brown (D-At Large), chairman of the Economic Development Committee, said the convention center authority needs to prove it has "exhausted every possible option" before asking for a greater share of public financing.