Omni Hotel

[HangryHippo]

The two things that irk me most are 1) the prohibition of incentives for other projects and 2) the lack of any residential component for this amount of subsidy.

[Urbanized]

I don't know about other people, but for me the problem is not the basic concept of a subsidy.

The problem is that this hotel is build on a basis of dishonesty. The Chamber, knowing full and well that it wasn't true, pushed the convention center as part of maps to be a debt free enterprise. They did that knowing that they would eventually come back and say that this debt free center is worthless unless we go into huge debt to complete it via a hotel.

To me that is a more reasonable thing to be critical of, much more so than the incentives themselves, which are standard for such a development and in fact much more favorable than in many markets. Incentives which also will pay long-term dividends for taxpayers, seriously. Since I wasn't a part of the planning, I can't say for a certainty how it all happened. But I do get the aggravation based on those assumptions you outline, if they were true.

The only point I'm trying to make - repeatedly - is that the incentives unlock a different type of development that would not happen otherwise, and that they enable the CC to compete at a much greater level - one that actually transforms it from an expensive amenity to an economic development generator for the city. This is purposeful economic development, and I don't think City officials are getting enough credit for that, while people are instead spending time assuming a level of nefariousness that I do not believe exists.

[shawnw]

Urbanized, as a fan of incentives to get deals done that are otherwise not feasible, are you okay with Omni dictating that we can't incentivize other hotels anywhere downtown for decades?

[stile99]

The two things that irk me most are 1) the prohibition of incentives for other projects and 2) the lack of any residential component for this amount of subsidy.

Can't agree more on #1. While I realize it isn't my decision, and those who DO make the decision wouldn't listen to me if their lives depended on it, I would stand firm on this. Tell Omni we're going to basically build your dang hotel for you, but if someone wants to build one next door (which I think is true, last I checked) or if someone wants to convert Spaghetti Warehouse, or any other possible scenario we can (or can't) think of, we're not going to stop them. You'll be THE convention center hotel, don't worry about that, but you'll only be one of many hotels in the area. Deal with it or buzz off.

[shawnw]

For clarification, the deal doesn't stop other hotels from getting built, it just stops the city from incentivizing them. Which I realize may stop some from getting built, but you know what I mean.

[HangryHippo]

For clarification, the deal doesn't stop other hotels from getting built, it just stops the city from incentivizing them. Which I realize may stop some from getting built, but you know what I mean.

Which is still horse****.

[dankrutka]

^^^^^^
Yes, it is very standard, for reasons I have outlined many times in this thread, not that anyone has bothered to actually read and digest them since their minds are already made up.

I've been reading your posts and others on this thread to better understand this issue. As I've stated before, I've learned a tremendous amount from you, Pete, and others from posting here. Please keep posting. It really furthers the conversation... even if you can't see it.

[Laramie]

OKC keeps an eye on Dallas whenever we undertake related projects. Dallas' new downtown Omni Hotel is owned by the City of Dallas:


Omni Dallas Hotel is a 23-story, 1001-room hotel at the downtown Convention Center District. The original cost of the hotel was estimated at $500 million.

Dallas is carrying a $659 million in debt on the convention center hotel which used close to $400 million in taxable Build America Bonds the city used to finance the hotel in 2009.

OKC proposed convention center - 200,000-square-foot exhibit hall, 45,000-square-foot meeting space, 30,000-square-foot ballroom.


Oklahoma City 600 room, 19 story Omni Convention Center Hotel and a proposed 133 room, 5 story Fairfield Inn & Suites Marriott.

Majority of our costs will be funded by the MAPS III initiative which did not include provisions for parking or hotel subsidies. A 600 room Omni & a 133 room proposed Fairfield Inn would increase the total room count to 733 closer to the proposed hotel study. Earlier studies indicated that OKC could handle a 735 room convention center hotel. Both hotels & the convention center will share the 1,365 proposed parking (865-space parking garage, and a 500-space parking lot).

OKC faces a potential $150 million in hotel subsidies--includes $27 million subsidy for a new parking garage.

[Urbanized]

Urbanized, as a fan of incentives to get deals done that are otherwise not feasible, are you okay with Omni dictating that we can't incentivize other hotels anywhere downtown for decades?

For clarification I'm not a fan of incentives; I just get that in some cases it is very reasonable to involve them to achieve a specific goal. I AM a fan of new money in the economy, new sales taxes to the general fund that benefit all of us, plus job growth, and I believe this project provides those things in a more direct manner than perhaps any in the history of MAPS. I think the litmus test for incentives should be (1) is the benefit to the community of equal or greater value than the incentive, and (2) would the market do this thing anyway, without incentive? In this case I think the answers are (1) YES, (2) DEFINITELY NOT. It's a lot easier for people to understand/care about First National, because they get the intrinsic value, but most people don't get/care about the existing and potential impact of the convention/tourism business. It's more or less invisible to them.

To directly answer your question, I will pose one myself: how many hotels to date have required TIF or other incentive? The Renaissance (pre-TIF) did, because it was a huge risk at the time. The Skirvin did, because, well, duh. And I think 21c got some, and hope we all can agree that was money well spent. Has any other hotel received any? Is it needed? This goes to that "but for" standard I previously mentioned. If hotels are building at a crazy pace and apparently still profitable, why would any of them need incentives, unless - as in this case - we want to dictate some unprofitable terms to them? Because that is what is happening here. They are agreeing to do less profitable things, in return for incentive.

I just don't see lack of incentive for future hotels being an issue. If a hotel in the future needs incentive to be worthwhile, well then the market has spoken. In this case, we need this hotel much more than Omni needs OKC.

[Urbanized]

...OKC faces a potential $150 million in hotel subsidies--includes $27 million subsidy for a new parking garage.

This is not accurate, Laramie. For one thing, the only $150 million number I have seen is the $150 million that Omni has agreed to spend. That is being missed, Omni is on the hook for a $150 million investment (more than any other hotel developer has ever spent here, by A LOT), millions in rent payable to OKC, and profit-sharing payments (to the City) for decades. Also, they agree to block rooms at far below market rate, which no other hotel will do.

Also, regarding the hotel, Omni will not be the major user. The parking garage will be a public garage, and it's anticipated that the park, the Convention Center and the Arena will more heavily drive use than will Omni. Also, Omni will actually be PAYING the City for the spaces it uses. All of this is pretty thoroughly detailed in Steve's story from Saturday, which I would encourage people to read: http://newsok.com/article/5556353

[Pete]

^

You have to count that $10 million for the garage against the hotel because 1) the city has to come out of pocket for at least that amount in order to get it financed; and 2) there will be plenty of surface parking to serve the convention center in the near term.

The only reason they are rushing to build a garage at that location and immediately is as a condition to get Omni.

Also, the land for the garage must be purchased and that site made ready for construction, two undetermined and likely sizable costs.

[Urbanized]

From that article ( http://newsok.com/article/5556353 ), here is what Omni is agreeing to:

• They are bringing $150 million of their own money (one of the largest private investments in our city's history)
• They are bringing their own financing (relieving the City of risk going forward, which means we won't be in a bad deal like Baltimore's, which is oft-cited by CC opponents)
• They will assume all responsibility/risk for running/operating (see above)
• Pay $200,000/yr in rent for 25 years ($5 million)
• Agree to minimum sales tax revenue to city of $1.4 million/yr (with no maximum) for 30 years (a minimum of $42 million)
• After fifth year of operation, for 25 years hotel would pay 10% of any net profit over $20 million, capped at $15 million (so maybe nothing, maybe $15 million)

So, even without factoring the economic development aspects associated with new business, the City stands to have a very substantial portion of incentives repaid.

[Urbanized]

^

You have to count that $10 million for the garage against the hotel because 1) the city has to come out of pocket for at least that amount in order to get it financed; and 2) there will be plenty of surface parking to serve the convention center in the near term.

The only reason they are rushing to build a garage at that location and immediately is as a condition to get Omni.

Also, the land for the garage must be purchased and that site made ready for construction, two undetermined and likely sizable costs.

Pete, I get what you are saying but I don't believe it is fully honest to lay all or even most of the garage cost on the hotel. They want a garage for the park, arena and CC, and this serves all of those. Not to mention that Omni will be renting the spaces they use.

[Pete]

Pete, I get what you are saying but I don't believe it is fully honest to lay all or even most of the garage cost on the hotel. They want a garage for the park, arena and CC, and this serves all of those. Not to mention that Omni will be renting the spaces they use.

It is a condition of getting the Omni, plain and simple. And that will cause OKC to spend $10 million now.

Wanting it and having to come out of pocket right away are two completely different things.

And, any garage assumes the parking spots will be rented. Doesn't really matter who pays the rent.

[shawnw]

For clarification I'm not a fan of incentives; I just get that in some cases it is very reasonable to involve them to achieve a specific goal. I AM a fan of new money in the economy, new sales taxes to the general fund that benefit all of us, plus job growth, and I believe this project provides those things in a more direct manner than perhaps any in the history of MAPS. I think the litmus test for incentives should be (1) is the benefit to the community of equal or greater value than the incentive, and (2) would the market do this thing anyway, without incentive? In this case I think the answers are (1) YES, (2) DEFINITELY NOT. It's a lot easier for people to understand/care about First National, because they get the intrinsic value, but most people don't get/care about the existing and potential impact of the convention/tourism business. It's more or less invisible to them.

Fair points, no disagreement

To directly answer your question, I will pose one myself: how many hotels to date have required TIF or other incentive? The Renaissance (pre-TIF) did, because it was a huge risk at the time. The Skirvin did, because, well, duh. And I think 21c got some, and hope we all can agree that was money well spent. Has any other hotel received any? Is it needed? This goes to that "but for" standard I previously mentioned. If hotels are building at a crazy pace and apparently still profitable, why would any of them need incentives, unless - as in this case - we want to dictate some unprofitable terms to them? Because that is what is happening here. They are agreeing to do less profitable things, in return for incentive.

I just don't see lack of incentive for future hotels being an issue. If a hotel in the future needs incentive to be worthwhile, well then the market has spoken. In this case, we need this hotel much more than Omni needs OKC.

While I agree there is no currently foreseen need for incentives for new hotels, just 1 year ago we had NO CLUE the SW building would be needing one in a year or two. It's the 20 year restriction that really gets me. Imagine what we wouldn't have if 20 years ago a hotel did this to us. SO MUCH can and will likely change for this city in 20 years, we just have no idea what may come hotel incentive demand wise. What if in 5 years West downtown is everything we hope it will be and someone finally comes around to wanting to restore the old city jail as a boutique hotel but we can't because Omni? I don't think this is a reach to imagine as a possible scenario.

[Pete]

Remember, a huge part of the First National project is a hotel and they are getting a ton of incentives.

You never know what the future may bring.

What if we finally got a proposal to do an amazing hotel on the canal, for example?

What about if hotels become an important part of redeveloping the Producer's Coop?

What about a hotel anchoring the Strawberry Fields development?

[shawnw]

Remember, a huge part of the First National project is a hotel and they are getting a ton of incentives.

You never know what the future may bring.

What if we finally got a proposal to do an amazing hotel on the canal, for example?

What about if hotels become an important part of redeveloping the Producer's Coop?

What about a hotel anchoring the Strawberry Fields development?

I just used one example, but all of these are valid concerns. Take out the 20 year restriction and I have significantly fewer objections to this deal. Not that I'm entirely happy about the incentive amounts.

[Urbanized]

Remember, a huge part of the First National project is a hotel and they are getting a ton of incentives.

You never know what the future may bring.

What if we finally got a proposal to do an amazing hotel on the canal, for example?

What about if hotels become an important part of redeveloping the Producer's Coop?

What about a hotel anchoring the Strawberry Fields development?

I can't personally envision a time when development of a hotel will be as critical to the success of ANY of these elements you mention. I'm good with future hotel development being market-driven at this point, is what I'm saying. All of these places work (or should work) without hotel subsidy, and it's not like we are going to see anything equaling the First National project again in our lifetimes. The areas where a place like Producer's Cooperative might need incentives are much more likely to be in the areas of infrastructure and/or residential construction. Does anyone seriously believe the canal, Producer's or Strawberry Fields lives or dies with/without a new, subsidized hotel? I don't, for a second.

I'm more concerned about the moratorium on hotel construction in the redeveloped Cox site, but even then there is a vehicle (Omni first right of refusal).

[Pete]

Does anyone seriously believe the canal, Producer's or Strawberry Fields lives or dies with/without a new, subsidized hotel? I don't, for a second.

Yet, that's your exact argument for the convention center.

And with subsidies both in dollar amounts and percentage that will absolutely dwarf anything before or after.

[Urbanized]

By the way, any math when weighing the convention center and CC hotel deals should also include unlocking the Cox Center site for potential new development, which would surely be in the many hundreds of millions. If the City simply sold that site for market rate it would go a long way toward negating public subsidy of the CC hotel.

[shawnw]

I also am concerned about the moratorium on the Cox site, but was hoping more for mixed use there.

[Urbanized]

Yet, that's your exact argument for the convention center.

And with subsidies both in dollar amounts and percentage that will absolutely dwarf anything before or after.

Pete, it is because the convention business (and success of the CC) lives and dies with attached HQ hotel like nothing else that you or anyone else can bring up. Believe me, I get the irony, but it is also ironic that you - an avowed and fundamental incentives critic - are using a PRO-incentive argument connected to future projects.

[Pete]

By the way, any math when weighing the convention center and CC hotel deals should also include unlocking the Cox Center site for potential new development, which would surely be in the many hundreds of millions. If the City simply sold that site for market rate it would go a long way toward negating public subsidy of the CC hotel.

The Cox site will become available completely independent of whatever happens with a convention hotel, even if we don't get one at all.

[shawnw]

By the way, any math when weighing the convention center and CC hotel deals should also include unlocking the Cox Center site for potential new development, which would surely be in the many hundreds of millions. If the City simply sold that site for market rate it would go a long way toward negating public subsidy of the CC hotel.

Also a great point. I would almost rather see the site handed over to OCURA for an open RFP process, but we would still probably recover costs with that site... so long as they didn't also seek incentives...

[Urbanized]

The Cox site will become available completely independent of whatever happens with a convention hotel, even if we don't get one at all.

Yes, thanks to a convention center that succeeds or fails based on the hotel. You are picking and choosing here.