LETTER TO THE EDITOR: Setting the Record Straight Why Public Contribution Goes Up While Value of Hotel Goes Down 

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    SETTING THE RECORD STRAIGHT CONCERNING PUBLIC CONTRIBUTION GOES UP AND WHILE VALUE OF HOTEL GOES DOWN BY 3RD WARD CITY COUNCIL MEMBER STEPHANIE BRINKERHOFF-RILEY

    In August of 2013, the Mayor’s office filed loan documents with City Council to borrow 38.5 million for a downtown hotel and conference center. The project at that time included an approximately 37 million hotel, of which the City would subsidize 20 million. It also included the City paying for ancillary components consisting of a retail space behind the Ford Center, a 336 space parking garage, 2 sky bridges, the hotel foundation footers and infrastructure improvements to MLK, Jr. Blvd., 6th St. and Walnut St. at a cost of approximately 17 million. In return, the developer would add to the project a conference center and 78 high end apartments. The total cost of the project was more than 70 million.

    City Council reviewed other similarly subsidized projects in the United States and balked at the level of subsidy on the hotel as outside the norm of under 25%, and negotiations led to an agreement within two weeks to reduce the 38.5 million bond to 20 million and bring in other stakeholders in the community. The cost of the hotel itself was reduced to approximately 31.5 million primarily by the elimination of some rooms and without any changes to the outward appearance of the structure. However, the retail space was eliminated. Old National Bank came forward with a plan to form a partnership with the developer and invest approximately 11 million. The Vanderburgh County Council and Evansville Convention and Visitors Bureau (CVB) pledged a combined 3.5 million in payments to the City over ten years. At the time neither body had the ability to contribute lump sums. The process led to a cap on all public monies of 20 million.

    The architectural design of the hotel with 12,000 square feet of conference space was presented as a 10 story urban design with curved glass, a rooftop bar, central heating and air conditioning and an indoor pool. The project was costed out by architects and engineers and presented to the City Council with images of how the block at Walnut and MLK, Jr. Blvd. would be transformed. The loan of 20 million was approved unanimously.

    The City Council Finance Committee meeting minutes from September 23, 2014 record an exchange between Chairman Conor O’Daniel and Administration officials confirming that the City’s 20 million contribution will be offset by the County and CVB’s funds at 350,000 a year over 10 years.

    The First Amended and Restated Project Development Agreement confirms the County and CVB contributions are within the City’s contribution in at least two places. Page 2, Item 10 states, “…which TIF Bonds will be issued along with other funds will generate Twenty Million Dollars for the Public Funding of the Project…” Page 9 under the section of “Maximum City Contribution” states, “…shall mean Twenty Million Dollars representing the maximum amount of Public Funding to be provided by the Cities Parties toward the costs of the Hotel and Ancillary Project Components…”

    Additionally, the First Amended and Restated Project Development Agreement makes the City responsible for paying all costs related to public funds. This was written initially because the City was fronting the County and CVB contributions to be paid back by those entities over time. This language carried over to the Second Amended and Restated Project Development Agreement and is now problematic, as the City does not have and should not have to generate the CVB’s 2 million contribution up front in addition to its 20 million to be paid on the project.

    Over the course of the nearly two years since the City Council agreed to a loan and maximum public subsidy of 20 million on the downtown hotel and conference center project, a lot has changed. The cost to the public has increased and the corresponding value of the product purchased has decreased.

    The Mayor’s office and developer failed to accurately determine the cost of giving the public the structure sold to it in August and September of 2013. After the ceremonial groundbreaking in March of 2014 that cost taxpayers at least $7,000, it was acknowledged that the construction cost of the hotel and conference center was off by approximately 14 million. Thereafter Old National Bank acknowledged it had failed to accurately estimate the value of the naming rights to the Centre. Over the course of 2014, the public was repeatedly disappointed by press conferences that ultimately revealed mistakes that could have been avoided.

    The hotel although increased in cost to 44 million is 13 rooms smaller (253 to 240), reduced to five stories and a suburban design, has room heating and air conditioning units, no rooftop bar, no high end apartments and no indoor pool. While the parking garage has increased from 336 to 552 spaces, the price has nearly doubled and there are less spaces for hotel use (252). The direct subsidy on the hotel has gone from 7.5 million to 9.9 million.

     

    The Second Amended and Restated Development Agreement for the first time list the County and CVBs’ contributions at 3.6 million and as additional to the City’s 20 million. The public financing is further increased with infrastructure improvements to 6th and Walnut Streets which are estimated to be at least 1 million. The public is also contributing an additional 4.65 million to the parking garage, which is widely regarded by outside experts as overpriced. Depending on one’s view of the parking garage, the public contribution to the hotel and conference center sits at anywhere from 24.6 million to 29.25 million. Additionally, the City is held responsible for any cost overruns related to the ancillary components.

    The increased public contribution and decrease in value in the final product should give us all pause in evaluating this project. We should at the very least be honest with ourselves as to what has happened in the drive over the last 3.5 years to bring a convention hotel to downtown Evansville.

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    32 COMMENTS

    1. ” Just the facts ma’am, nothing but the facts. ” Excellent Stephanie, thanks. Now where from here?

    2. BAIT AND SWITCH
      “is a form of fraud used in retail sales but also employed in other contexts. First, customers are “baited” by merchants’ advertising products or services at a low price, but when customers visit the store, they discover that the advertised goods are not available, or the customers are pressured by sales people to consider similar, but higher priced items (“switching”).

      The intention of the bait-and-switch is to encourage purchases of substituted goods, making consumers satisfied with the available stock offered, as an alternative to a disappointment or inconvenience of acquiring no goods (or bait) at all, and reckoning on a seemingly partial recovery of sunk costs expended trying to obtain the bait. It suggests that the seller will not show the original product or service advertised but instead will demonstrate a more expensive product or a similar product with a higher margin.”
      https://en.wikipedia.org/wiki/Bait-and-switch

      In my opinion: City Council MUST withdraw its’ $20,000,000 commitment on our behalf and evaluate the cost/value/practicality of the switched hotel proposal. …

    3. The taxpayers and city council have clearly had the wool pulled over their eyes
      the ones who are suppose to be looking out for our tax money are screwing us
      PULL THE MONEY BACK ,ALL OF IT

      • Doc if you feel this is a good summary ,then there is only one thing you can do , be true to yourself and the hardworking taxpayers of Evansville ,,,,,vote NO and pull back the cities contribution of 20 mill or whatever it is , you council members can’t even get the truth from Schaefer and the mayor is taking us all for a ride
        Set an honest example and the other 6 may follow

        • For hotel: Weaver, Mosby, Robinson, Adams, McGinn.
          That’s 5 and a majority vote rules.
          Am I wrong? Then prove it.

    5. The Convention Hotel should be built. The ONB Events Plaza, Ford Center, and the IU Medical facility need the hotel to attract people to these facilities to bring revenue to our City. There has been some necessary changes along the way but that is what happens when the public is kept informed of what is going on before all the contracts are signed by all entities.

      Wayne Parke

      • Here’s a thought, Wayne. If it’s such a good idea, YOU kick in the $20+ million.

        • English Bob–

          Why don’t you use your own name? Do you believe in being honest and upfront? Do you believe in transparency?
          Why don’t you state your opinion and/or give facts and not make libelous statements?

          Wayne Parke

      • IN OTHER WORDS?
        The Convention Hotel should be built. The Labor Unions, Political Operatives, Developers, Consultants, Attorneys, Realtors, Construction companies and the Connected Few need this project in order to extract revenue from the Taxpayers.
        There has been some changes along the way – and we should have kept them from the public until all the contracts were signed? …

      • Just wondering if the third groundbreaking ceremony will cost the taxpayers’ another $11,000 . . .a chartered jet to pick up Rick Huffman & Co from Branson . . . Opus One plus Food at Madelan’s . . . appears that some of us should have opened up a catering business . . .

      • We were told if the arena (Ford Center) was built, a developer would build a 4-star convention hotel for absolutely no cost to the taxpayers. Now you are saying the ONB Events Plaza, Ford Center, and IU Medical facility NEED the hotel to attract people to those facilities? Wasn’t it supposed to be the other way around?

      • Are you kidding us . . . Adams and O’Daniel was assured that they would be in the loop by Sinister Schaefer and it was made perfectly clear by Dr. Adams that was NOT the case . . Wayne, there you go again flying above 12.500 ft without oxygen!!!

      • Hey Wayne, if your Mayor can’t even get the Ball Park right, how do you expect this project to proceed without additional hitches . . .and what scares the B-Jesus out of me is the next project . . .the downtown Med School . . so we had the Johnson Controls Metergate, the Ball Park, the Hotel, stay tuned to a theater near you . .the Med School . .

        • Meter Maid–why don’t you use your real name ?? Do you believe in transparency??

          For the record—the Mayor/Mayor’s office had nothing to do with the mistakes made at the new ball fields. The new ball field project was handled by Bob Warren at the Evansville Convention & Visitors Bureau. I believe some mistakes will be fixed. It is a nice complex but some embarrassing mistakes were made.

          Wayne Parke

          Wayne Parke

      • Thanks for the statement in support on the convention Hotel.

        Since you’re a honest and upstanding man I know that you would not make such a declarative definitive statement in support of the Hotel without first doing a thorough and complete financial analysis of the project including a marginal discounted cash flow analysis showing the ROI with a hurdle rate of the cities borrowing costs.

        Since this convention Hotel is such a big game changer for Evansville and surrounding facilities please feel free to include any synergies ie any additional cash flows that might accrue to the Arena or other financial impacts.

        I’m sure that this is such a good deal for the city and the taxpayers that even a conservative projection of cash flows back to the city and the taxpayers will show a positive ROI, maybe even double digits.

        Since you are noble and honest man I’m sure you and Mayor Winnecke have already completed this analysis(including all updates and changes) and would be glad to share it with the local media(including the CCO) and the City Coucil.

        I also know that such a fine upstanding citizen as you who supports govt transparency would not want to withhold such information nor would you ever say that such an analysis is unnecessary.

        Thanks for your cooperation.

      • THIS hotel is an embarrassment to the city. Window air conditioners, outside pool, 2 star rating. Are you kidding. It is a waste of taxpayer dollars.

    6. Did the City Council ever agree by vote to the changes in the contract that increased the public contribution to above the $20 Million cap that was voted for? I don’t think so. Now, one of two things is needed. The City Council either needs to rescind the original deal because it has changed materially or it needs to vote on the new deal to legitimize it. The option being pursued now that involves the City Council rolling over and playing dead while the big bad Mayor railroads an illegitimate deal through is not acceptable. It spits in the face of the taxpayers. Come on City Council, step up and legitimize this deal with a vote or withold the funding.

    7. Again we see why SBR should be the candidate running for mayor. She has always had the best interests of Evansville’s citizens in mind regarding her actions, and she clearly is able to cut through the hyperbole on any issue and get to the heart of the matter.

      If anyone should be Evansville’s first female mayor, it should be Stephanie Brinkerhoff-Riley. She has already paid a high price for her loyalty to the taxpaying citizens of Evansville.

      • Perhaps, but when it was discovered that the Council had been duped, they should have moved precisely to affirm or dis-affirm in regards to the agreement which they thought had been the understanding . . . now, after additional funds have been spent for re-design and the fact that HCW has been guaranteed money. . . little to late . . culpability rests on both the Council and Santa Lloyd . . .just demonstrates the undo influence special interest groups have over our local government. . .Labor being one of them . .

      • She has the intellect to be a candidate for mayor but unfortunately too many time one’s past becomes their future . . the public seldom overlooks events and actions by candidates that are construed to be outside of the circle . . .like many of us, she has challenges and we should wish her the best of success . .

        • What I wish is that she were mayor of Evansville, and she would make a damn good one. Most of the snarky remarks about SBR come from mice who are reluctant to see their cheese moved, or worse yet, eliminated.

    8. This project has been touted all over Indiana . . and as such yes probably needs to go forward, however, we now have the old bait-and-switch, no indoor pool, no rooftop bar, no central HVAC system, no UV windows, no ten story grand looking structure . . might have been okay if the cost had decreased and HCW had the slick to pull of their side of the finances . . who’s at fault, it’s your Boy!!! . . . and of course, from Angola to Evansville and from East Chicago to Lawrenceburg, we have a quintessential roadside upscale motel, NOT a Downtown Convention Hotel . .but a motel/hotel never the less costing the taxpayers more than they bargained for . . .

    9. Best Council Person In Memory has detailed a classic bait & switch. If the voters don’t read and heed it and mindlessly vote Winnecke back into office they can only blame themselves. Folks like him and his mighty crew don’t get better, they double down. Read Parke’s comment, the reasons for that hotel keep getting more and more ridiculous, ignoring facts and realities, like those of the waning convention business nationwide. We are in the middle of Indy, Nashville, St. Louis and Louisville. Our city literally stinks. Nobody’s coming here. Councilman Adams says ‘excellent summary’ but does nothing. The council sits idle while the shameful Winnecke administration throws your money away.

      The CCO does a valuable public service by printing things like SBR wrote. I’m not sure where else it would go up unedited.

      • Great point about Adams. What a coward he is. Why comment here and not do anything about it?

      • You’re right about SBR’s value as a Council member, and what the voters have to do. If we don’t get the stinky albatross from around the taxpayer’s necks, we deserve to face the consequences. In the meantime, we need the CC to vote to withhold the money for the cheap motel that Winnecke and Wayne want to build as a reward for cronies. It is time for Dr. Adams to step up and lead the City Council to do the right thing for the taxpayers. If Winnie gets re-elected, he can always go ahead with his plans, and Evansville can file bankruptcy. The ball is in Dr. Adams’ court and it is time for him to DO SOMETHING!!!

    10. Her position is to just be critical She has no idea or plan on what to do with it. In fact, I haven’t heard anything of substance come from her as of yet.

      The hotel is a mess. For you party loyalists, the mess started under a democratic mayor, blew out of control with a republican mayor, and now NEITHER candidate shows any ability to get this right.

      If there was ever a time for a viable 3rd candidate, this would certainly be the year. Lloyd is out of his league, and Gail has proven she takes her orders strictly from political baffoons like Patrick Bauer and John Gregg. Gregg was directly quoted at her announcement “It’s time Indiana’s 3rd largest city comes under Democratic rule” That should tell you everything you need to know how these clowns think.

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