Metro councilors engaged in a 15-minute debate on Thursday with opponents of the proposed convention center hotel project, a back-and-forth that came on the heels of opponents threatening to send a new tax proposal to the region's voters.
The threat, from project opponent Michelle Rossolo, was that if opponents are unsuccessful in their efforts to put the Hyatt finance deal on the ballot, they'll seek to have the region's voters institute a $5 million a year tax on hotels in the Portland region that get a public subsidy. That money would go toward "direct community benefits."
About a dozen people testified in favor of the convention center hotel project at Thursday's hearing, with Rossolo the only speaker in opposition to the Hyatt proposal.
The proposal calls for Mortenson Development to build a $213 million, 600-room hotel across the street from the Oregon Convention Center, which would then be purchased by Hyatt. The private sector would pay about $130 million of that, with the bulk of the public-sector contribution coming from $60 million in publicly-issued bonds.
Those bonds would be paid down by room taxes on stays at the Hyatt, Metro says, while room taxes on stays at other hotels would continue to be spent on promoting tourism in the region.
After about a half hour of testimony, Metro Councilor Shirley Craddick asked representatives for the opposition, the Coalition for Fair Budget Priorities, if they would consider dropping their opposition project didn't require a public subsidy.
"That's potentially correct," said Sandeep Kaushik, an opposition representative. "It's a coalition of folks. There are more than 250 members of our group. Some may go in some directions. Others may go in other directions."
Craddick continued to press on the subsidy aspect, saying that some opponents also receive public subsidies. After the meeting, staff from the Metro Council office pointed to subsidies for historic tax credits received by Provenance Hotels-owned properties in Portland.
They specifically pointed to the Hotel Lucia, which received a historic property tax credit in 2004 and cuts its property taxes from $63,578 to $16,633 a year. Overall, county data shows Provenance avoided paying nearly $1 million in property taxes using historic property tax credits.
Kaushik said the opponents' concern is more about the amount of public money and the risk to the public if the project fails. He said the deal is structured in a way that Hyatt could borrow their contribution to the project against the hotel itself.
"If the hotel was built, the bank could repossess the hotel and sell that to pay off Hyatt's obligations, and Hyatt walks away relatively scot free," Kaushik said. "That's a huge concern for us, the way this is structured."
That brought Metro Council President Tom Hughes into the debate.
"How likely is it that Hyatt is going to borrow money, and walk away from the loan?" Hughes said.
"The real question is the risk that the hotel would not be successful," Kaushik said, pointing to a failed convention center hotel in St. Louis. "It's not that Hyatt would involve themselves in the construction and walk away willy-nilly, the question is what if the hotel is a failure?"
Hughes: "How would we measure failure?"
"One of the concerns," Kaushik said, "is if the hotel is not generating revenue sufficient to pay back the bonds that Metro intends to issue, we'd call that a failure. There could be a more significant failure even than that."
"If the foreclosure bogeyman turns out to be real, we still wind up with a high-quality, 600-bed hotel right across from the convention center," Hughes said.
"That would largely be empty," Kaushik replied.
"We've got a market that's at 80 to 90 percent occupancy," Hughes said. "Why would a hotel be empty?"
"If this hotel was such a surefire guaranteed success," Kaushik said, "the private sector would have stepped up and built this hotel without a public subsidy. The fact is that did not happen."
The debate continued. Kaushik pointed out that the original Metro solicitation for developers called for minimal public investments.
"The RFP, as I remember it – and my memory fades as I get older – suggested that we would actually leave the room tax with the hotel owner as part of the compensation for locating the hotel," Hughes said. "This proposal says we will bond the room tax. It's the same amount of money. So how did the amount of money escalate hugely?"
Kaushik referred Hughes to a Politifact run by The Oregonian.
"We took exception to The Oregonian, and continue to take exception to The Oregonian, because the money is the same, and everybody was offered the same opportunity," Hughes said.
But Kaushik said members of the Coalition read the original RFP, and felt surprised by the subsidy that was ultimately proposed.
"They said, 'Why wouldn't I do this? There's limited risk on our side and huge potential upside.' But the way the capital is structured, it sets up a very beneficial deal for the hotel company that Metro's negotiated," Kaushik said.
Kaushik then reiterated the most important things to the coalition – that the public at large should vote on the project, and that if the project goes forward, it have a "direct, tangible and measureable public benefit associated" with it, presumably referring to the $5 million a year tax proposal.
Hughes challenged the notion that the project deserved to go to a vote.
"I guess the old schoolteacher in me keeps coming on every time I hear you guys talk about how much this needs to go to a vote of the people," Hughes said. "We have in this country a representative democracy. Elected officials make decisions, and voters opine on whether they should stay in office once they've made those decisions.
"I was the only one of the four of us who had to run for re-election that had opposition," Hughes said. "There was not a huge public outcry against my colleagues. The Oregonian, in an endorsement editorial, almost made this hotel the issue around which this election was decided. In my mind, we've put the question to the voters, and the voters have responded."
Kaushik agreed that the country has representative democracy – but reminded that the Northwest has a "cherished tradition of initiative and referendum that goes back more than 100 years."
Hughes said those issues where taxpayer dollars are being spent are often referred to the voters.
"Where we are spending money we collect from taxpayers, we ask those taxpayers whether we ought to tax them," Hughes said. "These taxpayers, it's impossible to ask them, because they ain't here yet," he said, referring to tourists.
"These are substantial public moneys that are being put at risk," Kaushik said.
With that, Metro Councilor Kathryn Harrington asked Kaushik to state his name and address for the record – Kaushik is a political consultant from Seattle – and Hughes asked Metro Exposition and Recreation Commissioner Elisa Dozono to testify, concluding nearly 20 minutes of debate on the project.
The Metro Council is set to vote next week on whether to approve agreements with the project's developers.