Last Friday, the Dallas City Council unanimously authorized the City Manager to move forward in selling the bonds to build the city-owned convention center hotel.
I did not, and do not, think that Dallas should wholly own a convention center hotel. After examining this issue very closely for more than a year, I still believe Dallas should have subsidized a privately-owned hotel, and that a private company should have borne the financial risk. As it stands, if the hotel fails, taxpayers would ultimately be responsible for the debt. I remain unconvinced that city consultant HVS’s overly optimistic financial projections will prove true.
However, Dallas voters assessed this risk when they voted on May 9. They (narrowly) approved city-ownership of the hotel. In the end, it is their money and their decision. So when it came time to authorize the bonds, I felt my obligation was to approve the authorization IF there were sufficient protections in place for taxpayers (my responsibility to the 49% who voted against city-ownership of the hotel).
I spent a great deal of time talking with city staff about the deal they have brokered for sale of the bonds, and what types of taxpayer protections were in place.
My primary concern with the original deal was with the way the reserve fund was set up. A reserve fund lets you dip into it if you don’t have enough money to make your debt payment. Originally, $50 million was going to be put in a rainy day reserve account for the hotel. If the hotel wasn’t profitable enough to make its debt payment, it could dip into the reserve.
However, the original deal required the reserve fund to be kept at $50 million (to protect the bondholders), and that meant using taxpayer dollars to shore up the reserve fund if funds were withdrawn from the account to make the debt payment — like robbing Peter to pay Paul. That essentially opened up the city’s general fund to the hotel, a risk too great when the returns on the hotel were too uncertain.
I am pleased that city staff took to heart the reservations expressed by those of us opposed to city ownership of the hotel. The current deal does not require that the reserve account be refilled by taxpayers. Instead, it is replenished only by hotel profits. That is a much better deal for taxpayers, and means that taxpayer funds will only be used if the various reserve funds are used up. There are several reserve accounts, starting out at over $50 million.
While I still believe the city would be better off with a privately-owned hotel, I am very pleased with the protections put in place for taxpayers and hopeful that taxpayer dollars will never have to be used to rescue this hotel.
As this project moves forward, I’m going to do all that I can to make it a success so that taxpayers never have to bail out this hotel.