First, nail down the numbers
The Oregonian, (Portland, OR) – Monday, September 24, 2007
SUMMARY: Metro shouldn’t rush to a decision on the hotel project even though dropping it would be its easiest choice
Going into the hearing on the headquarters hotel last week, Metro was eye-to-eye with a frightening set of figures.
Equally unnerving is the fact that all of these numbers are still on the loose. None of the hotel ‘s financial projections has been pinned down.
The scariest animal at the Oregon Zoo, which the Metro regional government also runs, looks tame beside the estimated $168 million needed to build a hotel . (Metro wouldn’t operate it, but would issue revenue bonds to build it.)
And, as The Oregonian’s Ryan Frank reported last week, when you add in interest, reserves and other costs, the total price tag soars to $244 million. Covering the mortgage payments for the first eight years with a cushion to safeguard the public leaves a possible financing gap of $7.8 million annually. Metro could cobble together several sources of public funds to help cover it, but current projections still leave $1.5 million a year uncovered.
All of these numbers induce something akin to altitude sickness, but last week’s hearing did a good job of grounding them. Or to be more precise, it left a few numbers on the floor. In a surprise appearance, Portland-area economist Joe Cortright questioned several key assumptions about the hotel , and even pointed out a possible flaw in the math of project consultants. That made everything feel shaky.
The Metro Council, quite properly, has asked that Cortright ‘s questions be addressed quickly. The regional government had hoped to move quickly on the hotel project in general, but it needs to slow down now and carefully respond to Cortright ‘s analysis, in addition to doing more of its own.
Metro also needs to send its own team to evaluate how publicly funded hotel projects are faring in several comparable cities, including Denver. The answer to that question depends, in part, on how you define success. A successful hotel would not only pay for itself, but would also “induce” demand in other hotels by bringing big conventions to Portland.
Admittedly, Cortright ‘s testimony last week was disconcerting. What made it powerful is that, unlike most people at the hearing, Cortright was not there representing a client or even a public agency, but was offering his own independent analysis, and pronouncing the hotel ‘s prospects dim.
The net effect was to emphasize that the easiest course for Metro would be to walk away from the project. But Metro must also weigh other factors, including the diminished value of the Oregon Convention Center if the hotel isn’t built.
Lacking such a hotel , Portland is already severely handicapped in the national race to attract lucrative conventions. If the uncertainties surrounding the hotel are scary –and they are –the near-certainty of the Oregon Convention Center’s decline is daunting, too.
Metro has done a fine job of examining the hotel , but it now needs to pin down all the numbers. Spending $600,000 and another six months to do that is worthwhile, even if the regional government has to wind up walking away. At the very least, the community deserves precise figures.
Going forward, Metro Council members should heed the shrewd advice of UCLA coaching legend John Wooden: “Be quick –but don’t hurry.”