A Metro selection committee told the the Metro Council this afternoon which of two development teams should develop a long-discussed headquarters hotel
adjacent to the Oregon Convention Center.
The selection committee picked
the group that includes the Schlesinger Cos. of Portland, Mortenson Development of Minneapolis and their hotel partner, Hyatt
, choosing that group over another team headed by Portland developer Scott Langley and his hotel partner, Sheraton.
The choice came down to which group offered the more solid financing plan,
according to a staff report. The Schlesinger-led group presented four options, all of which included construction financing and equity investment from Mortenson Development, whereas the Langley proposal contained a less defined mixture of several different financing mechanisms.
"The [Langley] financing proposal was considered to be too complicated and speculative
to be completed in the schedule presented," the Metro staff report says.
The revival of an idea nearly as old as the 1980-built convention center, the headquarters hotel proposal is based on the premise that there will be far less taxpayer risk than in previous plans.
The Schlesinger proposal calls for a contribution of between $10.4 million and $36.1 million in public money to be contributed by Metro and the Portland Development Commission and another unspecified amount from allowing the 600-room hotel to pocket the tourist lodging tax it collects over 30 years. The hotel the Schlesinger group proposes will cost $175 million to $200 million, depending on which option Metro chooses.
How much that tourist tax concession is worth will be the subject of some debate—along with the question of whether it's sound policy to allow businesses to keep the tax they generate between now and the end of 2012, when Metro expects to finalize its deal.
Other hurdles: UniteHere
, a union that represents hotel workers, has been at war with Hyatt
for three years. Part of what Metro wants between now and the end of the year is for Hyatt to enter into a "labor peace agreement regarding employees of the proposed hotel." And, the selection committee identified a need to find ways "to close the funding gap between the available public subsidy and the requests contained in the written proposal."That "funding gap" will be the big question:
From Baltimore to San Francisco, the country is littered with convention center hotels that failed to match proponents' expectations
, in many cases leaving taxpayers holding the bag for revenue shortfalls.
The fear expressed by downtown Portland hoteliers in the past and again this year is that once built, a convention center hotel will discount rooms aggressively, damaging existing hotels. Metro's challenge will be to convince Portlanders that somehow the risks of building a convention center hotel are less here than in many other cities.
In 2009, the last time Metro seriously entertained building a hotel at the convention center, the deal collapsed
under fears that the City of Portland would be on the hook for tens of millions
of dollars if projected room revenues did not materialize—and the coming months will see a re-scrubbing of the consultants' projections for the proposed hotel.