County Votes to pay 35% of cost of Convention Center Hotel
April 12, 2011
This morning, the Board of County Commissioners voted 4-2 (Marcus/Aaronson/Vana/Burdick in favor, Abrams/Taylor against, Santamaria absent) to “conceptually approve” a county subsidy of $27 Million to The Related Companies to build a 400 room Hilton next to the convention center. They also approved $200,000 from the General Fund Contingency Reserves to fund consultant and legal services to further develop the proposal.
While most would agree that a hotel is needed to support the viability of the county-owned convention center (The Marriott across the street is considered too small to support large gatherings), the fact that no private entity was willing to take on the project without this large subsidy should be a red flag. The $27M is in addition to another $8M that the planners hope to get in the form of federal “New Market” funds (which may have to come from the county also) which together make up about 35% of the total cost of the $101M project.
So what does the county get for putting up 35% of the cost of the project and the use of the county owned land?
An ownership stake or revenue sharing? NO.
Jobs? – Yes, 350 construction jobs for 2 years and 300 permanent, low-wage hospitality sector jobs. (In other words, $35M buys 300 jobs at $117K per job – and those jobs will pay about a quarter of that.)
Ongoing tax revenue? – Yes and no. The annual $2.2M bond interest on the $27M ($2.7M if on the hook for $35M) is to be a recurring expense drawn from the ad-valorem funded General Fund, while bed tax revenue from the hotel would be restricted to non-ad valorem TDC programs.
Commissioner’s Aaronson and Marcus raised the issue that they were not able to bring the Florida Association of Counties convention to PBC because the convention center support infrastructure is lacking. This may be true, but Commissioner Abrams pointed out that the much larger Florida League of Cities has come to the county many times – although to Boca Raton instead of West Palm Beach. Both Commissioner Abrams and Taylor raised issues with adding this additional burden on the budget every year at a time we are striving to reduce spending, and pointed to the drain that the Scripps subsidy is to our current budget. Of course they were not on the commission when the convention center decisions were made. Commissioners Aaronson and Marcus on the other hand (who were) have invested their reputations in those decisions and of course want to spend more money to vindicate the original move.
Many people came forward to speak in favor of this project, particulary those in West Palm Beach who will clearly benefit. The Mayor was absent, but it was said she “supports the project”. I would hope so – having all the county taxpayers fund what will mostly benefit her city is quite a boon.
The decision is for “conceptual approval” and commits only the continuance of the planning, yet it is a clear ‘GO’ signal for the project.
We believe that for the county to have a successful convention center, a nearby hotel large enough to service a capacity convention is necessary. That said, for the county to contribute 35% of the construction costs and get no direct return on investment sounds like compounding an error. You may recall that the original proposal for the convention center never projected a county subsidy for a hotel, assuming that it would be a profitable project for the private sector. We would have preferred a smaller subsidy by the county, some contribution from the City of West Palm Beach, and a return to the General Fund of some of the subsidy, perhaps by converting a portion into a loan. Although some of the $1M in annual subsidy for the convention center itself could be reduced by an improvement in business, there are no guarantees.
The Taxpayer did not win today. Thank you Commissioners Abrams and Taylor for having the courage to try to stop this train.