Tentative Deal Would Limit Public Financing of Convention Center Hotel

By Tim Craig
Washington Post Staff Writer
Friday, June 19, 2009

City officials have reached a tentative deal with a pair of developers to expedite construction of a hotel at the Walter E. Washington Convention Center without taxpayers having to pay for the entire project.

The deal, which still must be finalized by the D.C. Council, means that construction of the 1,167-room Marriott Marquis could begin this fall.

The agreement calls for the city and the Washington Convention Center Authority to spend $80 million on the hotel and an adjoining garage. The money would be in addition to $187 million in tax funds the city pledged earlier for the project through tax increment financing, which taxes certain businesses for a specific project.

Quadrangle Development and Capstone Development will team with ING to secure private financing for the rest of the project's costs.

"We need to make sure it's something that is a firm commitment and something that will work, and if it is, we will move forward," said council member Jack Evans (D-Ward 2), chairman of the Finance and Revenue Committee.

The deal, brokered by Chief Financial Officer Natwar M. Gandhi, will probably avoid a heated public debate about how much the District should pay to get the hotel project built amid the economic slowdown.

Frustrated that the hotel has languished in the planning stages for years, convention center and city officials began floating a proposal this month to publicly finance the $750 million project.

District leaders said that the convention center was losing business to surrounding jurisdictions, threatening the success of the city's tourism industry.

But the city would have broken its debt cap if it undertook such a massive financing proposal. And some council members are still upset over the nearly $700 million in taxpayer funds the city poured into building Nationals Park.

Council member Michael A. Brown (I-At Large) said a proposal for full public financing would have been "dead on arrival."

"You wouldn't have seen many people raise their hands to do that deal, especially after the baseball stadium," said Brown, adding that the new proposal sounds "more palatable."

Gandhi declined to comment. Greg O'Dell, chief executive of the convention center authority, said that officials still need to review details of the agreement but that it appears to be a good solution for both taxpayers and the authority.

"On behalf of the Convention Center, the highest priority has always been for us to get to a point of certainty and for us to try to get this done as soon as possible," O'Dell said. "We are encouraged by this deal because it will help us achieve that."

With the credit markets dried up, convention center officials began exploring full public financing to start construction because they feared losing business to the National Harbor resort in Prince George's County and the Baltimore Convention Center.

In recent days, some community and political leaders became concerned when the Washington Business Journal published a story suggesting that some development projects would have to be scrapped so the hotel could be built without exceeding the city's debt limit.

Evans said the prospect of full public financing appears to have motivated the developers into putting up the equity so they could gain more of the profits.

"It caused everyone to focus, step up and get it done," said Evans, who added that he hopes the council will vote on the proposal next month so construction can begin in the fall.

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