Does Metro Council have a choice on Omni deal?

Sunday, August 29, 2010 at 11:45pm
Omni-Hotel-site.jpg
Although a deal is still in the development stages, this parking lot south of the Country Music Hall of Fame and Museum is slated to become home to an 800-room Omni Hotel. Jude Ferrara/SouthComm

When the debate over a new $585 million convention center reached its most fervent pitch nearly a year ago, some Metro Council skeptics said they had been painted into a corner.

After all, long before Mayor Karl Dean asked the council to approve financing for the Music City Center in January, the council had already signed off on several incremental phases of the project, including predevelopment work, land acquisition and the creation of the nine-member Convention Center Authority. In the end –– with the council serving as the final hurdle on a project that was in some respects well underway –– loud cries of opposition didn’t turn into votes and the council signed off on Dean’s signature project by an overwhelming 29-9 margin.

Now the council is poised this fall to vote on a public-private finance plan that would pave the way for Irving, Texas-based Omni Hotels & Resorts to construct a $250 million, 800-room convention center hotel, a component universally understood as crucial to the success of Music City Center. As Dean framed it when he announced details of a predevelopment hotel agreement, the convention center by itself would be a “home run,” but the addition of an anchor hotel would turn the project into a “championship win.”

Based on early reviews, council members who voted against bankrolling the Music City Center seem pleased that the hotel would not be publicly owned. Still, most are taking a wait-and-see approach. But with construction on the 1.2 million square-foot facility steadily moving forward, it could be difficult for convention center skeptics to vote against Dean’s hotel deal even if flaws are discovered.

“Now that we’ve obligated ourselves to build a convention center, I think we have to probably move forward on a hotel deal even if it’s not a good hotel deal,” said Councilman Jason Holleman, who voted against financing for the convention center. “The reality is, once you’ve made a decision to build a convention center, your ability to objectively analyze the hotel deal becomes more theoretical.

“If it’s a mediocre hotel deal, but it’s going to marginally improve the performance of the convention center, then I think since you’ve already decided to move forward with the convention center, you have to take that deal,” he said.

Councilman Eric Crafton, who voted against the Music City Center’s financing, said he still needs to review all the details, but said his ultimate position would come down to one criteria.

“As long as the taxpayers aren’t put at risk to guarantee a loan to fund the business, then I can support it,” Crafton said. “If they are put at risk ... then I don’t think I’d be able to support it.”

Financial obligations

Addressing a boisterous room of convention center supporters and stakeholders last week, Dean summarized the hotel plan this way: “We need to be clear,” he said. “This will be a privately financed hotel.”

Omni would take on $250 million up front to cover construction and other costs under the still-to-be-finalized plan. In return, however, Metro would pay Omni $103 million over the next 20 years. The funds would be collected from tourism and hotel taxes generated by the new hotel’s operation. Because those revenue streams are by law obligated to first pay off debt accrued by the city during the construction of the Music City Center, non-tax revenue –– which includes money collected from fines, fees, etc. –– would back up Metro’s hotel commitment. Another part of the proposed finance plan includes $25 million that would be delivered to Omni through tax increment financing, which Omni is to use to pay for the land acquisition.

Unveiling the plan, Dean referred to Metro’s financial obligation as “financial incentives.” The plan calls for “little risk to the taxpayers of Davidson County,” he said.

The building itself, which still lacks a final design, would be constructed directly south of the Country Music Hall of Fame and have a physical connection to the hall of fame’s eventual expansion. The structure would be bounded by Korean Veteran’s Boulevard and Fourth and Fifth avenues. Project leaders say the new hotel, featuring street-level restaurants and retail and 80,000 square feet of meeting space, would be uniquely themed to follow Nashville’s “Music City” brand.

“Omni’s financial commitment is not the only reason why they’re the right partners for this project,” Dean said. “Each of their hotels is unique. An Omni in Nashville will not look like an Omni in Dallas or in San Diego.”

Robert Rowling, owner of TT Holdings, the company that runs Omni, said that while the economy is “precarious,” the company’s financial commitment made sense because of Nashville’s appeal. (He should know. Until last week, he held a seat on the board of Nashville-based Gaylord Entertainment Co.)

“There’s probably no other place in the United States or the world where I’d be willing to write $250 million in checks to build a hotel right now,” Rowling said.

In addition to “completing the picture for our downtown convention center,” Dean said the hotel would have its benefits in terms of job creation, with 300 people expected to hold permanent full-time jobs as a result of the construction. Two hundred of those workers would be required to be Davidson County residents, and another 50 workers must reside in Middle Tennessee. Construction work could create a projected 1,000 jobs.

To date, Dean and his administration have only drafted a predevelopment agreement, which is to go before the Convention Center Authority in September. The predevelopment agreement obligates the authority to cover $1 million in land option costs if an actual development agreement is not reached.

In the coming weeks, the mayor’s office and Omni are expected to reach terms on a formal agreement, which would go before the council in the form of an ordinance. If all goes according to the administration’s plans, the council could sign off on the financing plan by the end of the year, which would allow the hotel to be completed by the late spring or summer of 2013, a few months after the Music City Center is slated to open.

Given the prevailing thought that an anchor hotel is indispensable for the well-being of Music City Center, the proposed hotel finance plan comes across as an easy sell.

But Councilwoman Emily Evans, perhaps the most outspoken critic leading up to the council’s approval of the Music City Center, doesn’t agree with the notion that the council is cornered into giving its nod of approval.

“Do I think we’re being put into a corner now?” Evans asked. “I don’t, because I knew back in January that when the decision was made to vote for the convention center or not for the convention center that part of that decision was what’s going to happen with the hotel.”

For now, Evans seems satisfied that the hotel wouldn’t be government-operated, but said she still needs to form a complete evaluation.

“First and foremost, what the council was told in September of last year was that we were likely to be asked to approve a 1,000-room, government-owned, government-financed hotel,” Evans said. “The fact that we’re not doing that, I think represents some good news.

“It’s going to be a risk-reward evaluation,” Evans said of the months ahead. “What’s the downside of not having a hotel? What’s the upside of this $5 million a year payment?”

31 Comments on this post:

By: producer2 on 8/30/10 at 6:17

This should be fun! A great way to start the week. Thanks to the writer for creating something out of nothing.....

By: TharonChandler on 8/30/10 at 7:20

This certainly is also an 'immigration' and state-economy and national security issue. This place would serve only 'splendor' after it were built and whom will it serve during construction: not poor white nor black workers (that's not who they want to hire in their 'application process).

They have Mark Borkowski on C-Span this morning (U.S. Border Patrol and Technology Acquisitions), talkng about the Border issues and what the problems are for the American people. One thing I'll remind you is that Canada stops poor white people at their border and sends them back southward. They do accept a lot of 'colored' workers, but not from the United States.

When Borkowski speaks of terrorism against the U.S. and it being 'grown in Afganistan'; I'd remind him that Afganistan is Not on this continent and is not logisticly in competition with American workers (and wife seekers).

By: JohnGalt on 8/30/10 at 7:43

Karl Dean/MCC fanboy producer2 is off and running with his same old same old.

By: xhexx on 8/30/10 at 7:43

" Metro would pay Omni $103 million over the next 20 years."

"Another part of the proposed finance plan includes $25 million that would be delivered to Omni through tax increment financing, which Omni is to use to pay for the land acquisition."

How is all this not "taxpayer funded" if that money isn't going into the Metro general fund for our benefit? That tax increment financing is what they were also going to use for the proposed renovation of the Bellevue Center. How is their not paying property taxes for 20 years not "taxpayer funded"?

By: TakePrideInNash on 8/30/10 at 8:25

JohnGalt, producer2 makes more sense then most naysayers who post here. I have never seen such a whiny and paranoid bunch of people.

By: tomw on 8/30/10 at 8:27

didn't the Rennaisance have a sweetheart 17 year deal in place with the last convention center. Who pays for the buyout on that?

By: JohnGalt on 8/30/10 at 8:48

Tell me, Pride, what part of the travel/visitor industry pays you?

By: yucchhii on 8/30/10 at 10:10

I STILL SEE NO MENTION ABOUT FINANCES FOR THE "HOMELESS". i SEE nothing MENTIONED AT ALL!! All this money going towards things that are NOT as important as getting the "HOMELESS" crisis under control! Still sweeping it ALL under the carpet. The mound under the carpet is getting bigger and bigger and "IS" visible to the public NOW, but soon it will get too big and when people start to trip on that mound is when they will start to NOT come around. The city needs to start caring about the HOMELESS people...NOW!!! Not tomorrow, not next week, not next year...NOW!!!

By: concernedtaxpayer on 8/30/10 at 11:09

I knew this was coming and of course, dean and his cronies will get this passed. After this, the sounds will get their stadium and dean will have a music facility built on the old thermal plant site before he comes up for re-election. By that time, dean and his cronies will have the city in around $1.2 billion more in debt and if something really occurs here in nashville that we need the money for, our credit rating will be lowered so we will be paying higher interest rates and will have limited amount of money to borrow. I am looking forward to the next election to oust this selfish guy who is in it to pad his buddies pockets. It's about time we quit letting attorneys hold positions like this.

By: airvols on 8/30/10 at 11:22

Yucchhii, move the homeless discussion to the new 20 million dollar center just built for the homeless in East Nashville. Enough with the Joan of Arc writing.

By: TakePrideInNash on 8/30/10 at 11:35

JohnGalt, to answer your question, nobody. I am not in that industry, but I think tourism is very important to Nashville. The MCC and adjacent hotel are going to be state of the art. All of Nashville should be very proud!

By: producer2 on 8/30/10 at 12:25

concernedtaxpayer,
Just a couple of questions. First who exactly is getting their pockets lined from the current projects going on in Nashville? Certainly some local and not local companies are getting bids and people are getting work, but do you have some knowledge of a direct correlation between Mayor Dean and these folks? Are you just doing the Rush Limbaugh thing and "intimating" without any real direct knowledge?

Second, what plan do you have for the City to continue to grow revenues in order for them to be able to continue to pay for your garbage pickup, fund schools, build sidewalks, fix the roads,and all the other things you want them to do for you? Have your taxes been raised since the Mayor took office? How do you think those services happen, magic?

By: JohnGalt on 8/30/10 at 12:26

Pride...Few will argue that tourism is not important but the cost to the taxpayer to cater to it should be very important. If you are a Davidson County taxpayer you are doing yourself no favors by blindly believing in the touted cost of the project.

By: TakePrideInNash on 8/30/10 at 12:38

JohnGalt, I guess you have proof about the REAL cost of the project?

By: producer2 on 8/30/10 at 12:47

Everybody has an agenda. If you were to believe that JohnGalt takes his from literature, this would be his character:
Galt is acknowledged to be a creator and inventor who symbolizes the power of the individual capitalist. He serves as an idealistic counterpoint to the social and economic structure depicted in the novel, Atlas Shrugged. The depiction portrays a society based on oppressive bureaucratic functionaries and a culture that embraces the stifling mediocrity and egalitarianism of socialistic idealism. In this popular mass ideology, the industrialists of America were a metaphorical Atlas of Greek mythology, holding up the sky, whom Galt convinces to "shrug," by refusing to lend their productive genius to the regime any longer.

In other words a fictional Republican.... :)

By: JohnGalt on 8/30/10 at 1:11

Thanks, p2. Your cut and paste capabilities are amazing. You could at least cite your source.

And Pride, if you think the $550 million total price tag for the MCC will be anywhere close, you should immediately investigate buying beachfront property in Phoenix.

By: JohnGalt on 8/30/10 at 1:14

You know you've got everything sewed up when a judge for the first time in anyone's memory seals the final price paid with your tax dollars for a piece of property in the MCC footprint.

By: producer2 on 8/30/10 at 1:19

No problem, the site was Wikipedia, but the fictional Republican was all mine! Still nothing of substance from you....do you also prescribe to that "intimate the negative even without any proof and the damage will be done?"

By: JohnGalt on 8/30/10 at 1:30

Just following your liberal creed, "Shout it long and loud enough and it will eventually be accepted as truth."

Your only substance is to blindly support what you will have to eventually see us a half-billion dollar plus long term albatross around the necks of Davidson County taxpayers.

By: producer2 on 8/30/10 at 1:41

No, actually all of the information regarding costs to build the facilities and how they will be repaid has been thoroughly vetted and out in the open for a long time. The City used past history of room night revenue in Davidson County as its guideline for repayment. of the bonds. Those are facts written down for all to see. Now your end of the spectrum is totally speculation. You are speculating that this will fail. You have no basis for your information locally at all. The vote was 29-9. Not really that close. You can say all you want to about who is in who's pocket,etc. but again it's all speculation on your part. Bring me some facts. Some that are written and not your opinion. Then we can talk...
.

By: JeffF on 8/30/10 at 3:21

1. Seeing Producer cite Wikipedia after bashing my citing of 25-30 local news sites and published scholarly works from Harvard PHds with bad news about the convention industry and market is funny.

2. I am mirthful about the "growing of revenues" comment just after the article that noted that the same revenue stream is double promised and the probable shortfalls will come from existing general fund revenues.

3. No one is still able to say where the money to fund the necessary government services for this phantom horde of visitors will come from since any money will be funneled back to yet another project. This is downtown after all, the tourists are going to get robbed and hurt and will need public safety resources. Or is the plan to let all the part-time bell hops and banquet servers handle security in the area in their off time?

4. Ever notice that no one ever mentions that convention center revenue will pay anything off? Is it because the industry is so overbuilt (just in the U.S., for some reason the rest of the world does not have world-class cities thus no reason to built multi-block convention facilities every 2-3 decades) that every one of these new centers is giving away meeting and rebating hotel revenue in order to get that now double-promised revenue in the door?

Ever notice the hole keeps getting deeper, but each decision is used to justify the cornering of elected officials for even worse subsequent decision. This is why real business people are taught in the good business schools to not use "sunk costs" into their decision making processes. THIS is what makes the spending of public money on this business so frustrating. if they were a real, well-run business, meeting planners would not need help from taxpayers. Instead, every dollar of their livelihood is dependent on the tax revenues from others.

Meeting planners and their "partner" vendors are economic bottom feeders with some strange hold on local elected officials. If they did not have government funded convention centers they would all be on a street corner in the Trinity Road area looking for cash-first parties.

By: JeffF on 8/30/10 at 3:37

http://blog.asmartbear.com/sunk-costs.html

http://www.princeton.edu/~tkelly/papers/Sunk%5B1%5D.pdf

We have been encouraged to build a new convention center and a new hotel. Why? Because we have spent so much in the past to build up a "brand" and it would be "unwise" to walk away from that now just because there are 200 more competitors giving away space to get our customers and another 50 will build or expand after we are done. This is the very definition of the unwise, and irrational use of "sunk costs".

This is compounded by the facts: Meeting attendance numbers have been declining (every year) since 1998, and that cities that have already built or expanded have seen minimal gains and in many cases drops in attendance since committing to the same plan Nashville has.

These are not just "sunk costs". These are "still sinking costs". Oddly enough losses will be used to justify even more spending, since we have 3/4 of a billion dollars (plus interest) in the game now. It happened in Dallas and St Louis and Atlanta and Baltimore. Lower than promised numbers for the convention center was used to build hotels and/or further expansions of the same center. Those cities are still bailing sunk costs.

By: JeffF on 8/30/10 at 3:40

We must build something new so we can give it away faster than the other cities who built something new and are giving it away to compete with the other cities who built something new and are giving it away to compete with the other cities who built something new and are giving it away...

yep...this the the business we have all "invested" in. Just so the meeting planners don't have to sell it on a street corner.

By: producer2 on 8/30/10 at 4:53

1.Your PHD is a paid, yes paid naysayer. Why is he the only one "on the circuit?" Where are the hordes of people who say it won't work in Nashville? Oh that's right, even your paid naysayer had to admit that sometimes it does work and you have to look at it on a case by case, city by city basis. It's over, let it go. They are building the facility and the hotel is right around the corner.

JeffF, did you ever notice that you were outvoted soundly on this? If you really cared about what happens in this City you would follow the lead of those on the Council who also were opposed. At least they care enough to now try and help make it a success.

By: JeffF on 8/30/10 at 8:01

I have been outvoted in Nashville by people who thought Obama, Gore, Cooper, and Dean would bring us prosperity and as you will no doubt attest each were miserable failures. So I guess I wear your criticism proudly since the vote on this topic will be the last time this center met the expectations of consultants paid only when they promise the gilding.

Producer in three years you still failed to name a self supporting public convention project, let alone one that has met the expectations put forth in the "study" that justified it. I am sure Sanders' record is much more accurate than yours. The business failures who have decided to follow a career path into glorified party planning in order to avoid prostitution could not have chosen a better mouthpiece.

By: producer2 on 8/31/10 at 9:04

I won't attest to anything that has not had a chance to play itself out but you have clearly shown your true colors...

By: MK-Ultra on 8/31/10 at 11:57

OK ,

Lets take a good look at this great deal that the Government here
in Nashville wants us to buy .

They need $ 250,000,000 dollars to float this hotel that hardly no wants to build .

There is a population of 6,3000,000 people in the state of Tennessee .
That comes to $ 39.68 per person .

They should offer this wonderful bargain to it's citizens to invest in ,
and sell shares of this money making venture so that all of us can
benefit from this . But , if they can't raise the money from the voters
then kill the project and move on .
Stop trying to put a square peg in a round hole !

By: JohnGalt on 8/31/10 at 12:14

"No, actually all of the information regarding costs to build the facilities and how they will be repaid has been thoroughly vetted and out in the open for a long time."

Approximately how much has been built in for inflation, cost overruns and change orders? Just a percent will do.

By: producer2 on 8/31/10 at 3:04

You would have to look up that info on your own. I do not work for the City. I do believe however that the construction company that got the bid signed a "not to exceed" type contract.

By: producer2 on 8/31/10 at 3:05

MK,
Keep up, Omni is putting up it's own money to build the hotel.

By: CitizensWin on 8/31/10 at 3:23

CitizensWin

'These Are Not The Tax Dollars You Are Looking For.'
__________________________________________

These Tax Dollars From Tourists Are Not For Public Use.

103 Million Tax Dollars For A 250 Million Dollar Hotel Is Not Your Tax Money

If You Build It They Will Come

I Believeā€¦.

__________________________________________

I Believe That the Mayor and Metro Council Have Bought a 16 Acre Bill of Goods.

That Locked Out Tourist Revenues For The General Budget For Generations.

I Believe That MCC Supporters Cannot See Past Their Little Brown Noses.*

_________________________________________

Especially MCC Trolls Like producer2

_________________________________________

CC: To: Albie DelFavero, Bruce Dobie, Butch Spyridon, Joe Hall, Peter Heidenreich, Terry Clements, Toby Compton, Chuck Creasy, Rob Moorefield, Ken Whitehouse, Paul Brown, Bob Davis

Can You Spell Walter Baker?

http://www.nashvillescene.com/pitw/archives/2010/03/05/nothing-funny-about-this-monkey-mail

http://nashvillecitypaper.com/content/city-news/hospitality-associations-fire-walt-baker-after-racist-email