Taxpayers shouldn't have to finance a hotel for the Washington's convention center.

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Tuesday, June 16, 2009

DISTRICT OFFICIALS are debating whether to borrow as much as $750 million to publicly finance construction of a long-stalled hotel across from the downtown convention center. There are compelling arguments that the hotel is needed and that this would be the fastest way to build it. Less certain, though, is whether this is the best use of public money. Officials would do well to explore other financing options, and by no means should they consider busting the District's prudent limits on borrowing.

The Washington Convention Center Authority is seeking bonding authorization for a 1,100-room Marriott Marquis with retail and underground parking. Original plans called for the city to issue up to $187 million in special bonds for the project, but the current credit crunch has dried up private lending. So the authority wants to cover the entire price of construction, interest and other costs.

The authority's frustration is understandable: It's been six years since the convention center opened and, because of delays and missteps, there still is no headquarters hotel, which puts the District at a disadvantage as it competes for conventions. Officials seem particularly anxious about the National Harbor resort in Prince George's County as they point to the convention center's $1.6 billion in economic impact over the past four years. "There's no convention center of our magnitude in the country that doesn't have a hotel attached," D.C. Council member Jack Evans (D-Ward 2) told Post reporters.

Borrowing the money would, as Chief Financial Officer Natwar M. Gandhi warned, push the District past its debt service cap, which limits tax-supported debt service to 12 percent of expenditures and transfers. It was just a year ago that the council agreed to the borrowing limits; this was an important signal to Wall Street that the city was taking steps to ensure its long-term financial health. Mr. Gandhi is right to insist that the city not jeopardize its fiscal credibility and its ability to borrow at favorable rates by taking on excessive debt. And he is correctly fighting the suggestion that the convention center's bonds should be excluded from the cap because, the tortured reasoning goes, they would be from an independent authority. No matter who issues it, it is District debt.

The argument that public financing is needed because private financing isn't available should give officials pause. What does that say about the viability of the project? It is hard to fathom, as was observed in the Washington Business Journal, that there's no interest in building a hotel across the street from a convention center smack dab in the middle of the nation's capital -- on free land, to boot. District officials should fully explore all financing options, possibly seeing if there's interest from other hotel companies. And if, indeed, public money is judged to be the only way to accomplish the project, they need to weigh the benefits of building this hotel against other capital projects the city has agreed to undertake but has yet to start.


© 2009 The Washington Post Company

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