Metro councilors expressed support for the proposed Oregon Convention Center hotel development plan Thursday, after a presentation of the plan's key elements by staff from the regional government.
In a 45-minute session, councilors asked questions about the city's hotel industry, the finances of the hotel's proposed developers and the potential economic impact of the project.
All the questions indicated the council is leaning toward approving the project's proposed development, finance and room block agreements.
Mortenson Development is proposing to build a $212 million hotel across the street from the Oregon Convention Center, which it would then sell to Hyatt. About $18 million of the project's budget would come from direct government grants and loans; another $60 million would come from tax-free bonds that would be repaid off room taxes on stays at the hotel.
Terms of the development agreement were initially reported earlier Thursday. The terms include Hyatt keeping rooms available to recruit large conventions to Portland and clauses that require the building remain an "upper-upscale" hotel.
The regional government would use $600,000 of its already-committed $4 million grant toward the project to pay for pre-development work. Other negotiated elements include active ground-floor use, an agreement on marketing strategies with Travel Portland and the signing of a labor peace agreement with the UNITE HERE union. Mortenson's development fee will not exceed 3.5 percent, the agreement says.
Project opponents were reviewing the terms on Thursday, but repeated their claims that the plan is risky for taxpayers.
"The deal Metro has put together involves putting tens of millions of dollars of public money at risk," said Sandeep Kaushik, a spokesman for the opposition. "We continue to believe that the public has strong concerns about the deal and that Metro is ignoring the public will by fighting tooth-and-nail to block a public vote."
The opponents have filed two lawsuits trying to force a vote on the project; Metro has opposed the suits, saying the decision is not subject to review by the electorate at large.
The biggest news this week on the project seems to be that its overall projected cost increased from $198 million to $212 million. The private-sector developers agreed to pick up the price increase.
"Our private partners in this are still willing to move forward with the project, even though their costs are going up and ours are not," said Metro Councilor Craig Dirksen. "That's good news."
But Kaushik sounded a more cautionary note about the project's increased cost.
"It's an indication to us that these private developers and hotel companies are doing it because they continue to see this as a sweetheart deal," Kaushik said. The deal, he said, is "structured in a way where much of the risk is being shifted on the backs of taxpayers, where if the hotel is successful, these benefits will go to the private partners. We think that's a huge problem."
At Thursday's council meeting, Dirksen asked what the hotel's economic impact would be in the Portland region – $120 million in spending in the local economy annually, Metro staff said.
"$120 million a year for a $60 million, 30-year investment seems like a pretty good investment," Dirksen said.
He also asked staff about the design of the hotel.
Metro analyst Hillary Wilton said the hotel would have to meet the city's design standards.
"We have specificity in the agreement about the interaction of that design with the convention center, with the streetscape, and retail and other amenities," she said.
Councilor Shirley Craddick wanted to know about the project's impact on other hotels in the city, pointing out that hotels are being built elsewhere in the city.
"Can you address how we're not interfering with other hotels?" Craddick asked.
Cruickshank said the hotels being built elsewhere in Portland – mostly on the west side of the Willamette River – aren't necessarily creating new demand.
"They are sharing the demand that already exists, whereas this new hotel will be bringing demand," he said.
That sentiment was echoed by Metro Council President Tom Hughes, the project's main proponent on the council.
"This is the only project I've seen proposed that will add additional tourists to the mix," Hughes said. "Every human activity comes with risk. I think you (staff) have done an admirable job reducing the level of risk that is consistent with the investment we've made, to get the return on investment we have promised."
Metro Councilor Kathryn Harrington asked how the room block agreement would actually work. The agreement says that Hyatt will hold 500 of its 600 rooms available for large conventions looking to book three years into the future and beyond. From two to three years out, it would hold 300 rooms for conventions.
"The groups we're really intending to attract with the hotel… are groups that would typically have about 1,500 rooms," said Oregon Convention Center director Scott Cruickshank. "The overabundance of those groups tend to book outside of 36 months. Many of them are on our books – for 2022 even. So the bigger the group, the further out they typically look."
He said smaller conventions – those that need about 600 rooms, and look for about 300 rooms near the hotel – sometimes look for a location less than three years in advance.
Hughes defended the project's public financing, which makes up about 37 percent of the hotel's budget, as more than just about securing rooms for large conventions.
"There's almost no discussion in the hotel industry about building a large hotel on the eastside. The eastside, aside from our friends in the Doubletree, has remained a hotel and restaurant desert," Hughes said. "We're about to change that, but we can only change it by offering an incentive or somebody to do something the market would not necessarily encourage them to do with their own money."
The council has a public hearing on the proposal set for 2 p.m. June 19, with a vote scheduled for the council's June 26 meeting.