August 21, 2013
Mayor Lloyd Winnecke:
After reviewing the available information, I have remaining questions regarding the downtown hotel project. My questions are listed below. I would like to meet with someone from the Administration to discuss my concerns as soon as possible.
(a) Size of the Project and Full Service Aspect
I need to understand the logic of 253 rooms. I have read that 300 rooms or more are required for larger conventions. It is my understanding that the downtown hotel’s market will primarily be smaller conventions using 200 rooms or less. I also understand that Aztar and Le Merigot have between 35 and 100 committable rooms per night that could be used for a convention.
I also struggle with the hotel being full service. The construction cost difference between a full service hotel compared to a limited service plus hotel, such as what was built in Ft. Wayne and Owensboro, is significant. It requires a larger subsidy, more capital to run, and it will generate a lower return on our investment.
(b) Source of the Base Business
Rob Hunden wrote that the hotel would cater to two markets, with business and leisure travelers making up 70% of the hotel’s occupancy and conventions only 30%. It is estimated that the 70% equates to about $5 million a year that would be shifted from the existing hotels to the new downtown hotel. I would like to understand if this prediction is true. I do not find it likely that the new hotel can win a rate war with the existing hotels, as their ability to lower the room rate will be far greater than the new hotel’s. Additionally, why would we subsidize one hotelier to try and take business from other local hoteliers? Shifting $5 million a year across town will not create jobs. The existing hotels will downsize their staff if they lose business. How many of the projected jobs will be the result of the shift in business?
(c) Hotel Meeting Space
The meeting space in the downtown hotel will presumably compete with the Centre. I would like to understand its need other than that the new hotel, which will be owned by HCW, would like some of the Centre’s business.
(d) The Retail Space
I don’t understand the requirement for the expensive retail space. We need storage for the arena and a base on which to build a Sky Bridge. Why are we paying $5.7 million to meet this need? Is it a necessity for the hotel deal with HCW? Why can’t we just build attractive storage space at less than half the cost?
(e) Long-term Cash Flow
Will a 253 room full service hotel generate enough revenue to maintain its quality? Hunden reported that 240-270 rooms were optimal, but he also said that our market does not generate enough demand to support a hotel that size. He called it a “feasibility gap.†He wrote, “even with up front financial assistance, too large of a hotel in Evansville will eventually need reinvestment, that if not supported by the market, will be too expensive to justify. This would lead to a repeat of the Executive Inn downward cycle.†(p.13). Hunden stated that the size of hotel that could sustain itself in our market was 120 to 150 rooms. It would be able set aside the appropriate amount of gross revenue annually for a capital improvement fund. What is the operating budget for the new hotel and conference center? Does it include funds for capital improvements?
I believe HCW proposed a 180 room hotel as one of their possible developments. I would like to see that proposal. A hotel of this size may address all concerns. It would be of a size that still carried significant risk, but could make it with a good start such as what HCW is capable of doing, and good management going forward. It would also be of a size that would force the hotel to focus on conventions and would be less of a threat to the existing hotel market. Hunden told us that the highest average occupancy rate that a 240 room hotel could achieve is 60%. The extra 60 rooms would rarely be used and, I believe, would not be worth the cost of maintaining them.
(f) CVB’s Ability to Deliver Conventions
What is the 5-year sales plan and forecast from the CVB regarding the new conventions/meetings market? I can find no corroborative studies that suggest that 253 rooms is a requirement for group business. Of the event planners surveyed, only 40% said it was likely that they would consider Evansville. Don’t we already have an idea of what groups would come here?
(g) HCW’s Plan to Market
What is HCW’s marketing plan? What prices are contemplated that will secure the business/leisure traveler business?
(h) Parking Garage Cash Flow
When you say the revenue from the parking garage will pay for running the parking garage, does that include a percentage set aside of gross revenue for capital improvements of that structure? We do not set aside revenue for capital projects with our other parking garages. We have over $3 million in needed capital improvements with our current garages.
(i) Hotel’s Final Assessed Worth
I would specifically like to know what we expect the hotel to be worth when it’s completed and projected out five years. Hunden says far less than what we put into it. Is that accurate? What is your estimate of $500,000 per year in property taxes based on?
(j) The Total Impact on the General Fund
I would like to understand the cost of maintaining (capital improvement fund) the Ford Center and these new ancillary projects- parking garage, retail/storage space, sky bridges, and streetscape. When Venue Works’ Scott Schoenike appeared at City Council, we were advised that the Ford Center should begin setting money aside for capital improvements. I would like to understand how much that should be on an annual basis. Even as a small percentage of gross revenue (4%), it’s a pretty high number. Right now, the Evansville Redevelopment Commission pays approximately $1 million a year to cover the arena’s operating deficiency and the cost of the Building Authority. The payment on the bonds is over $8 million. The real cost of the arena currently is about $10 million a year once we add funds for capital improvements.
The payment on the bonds for the hotel project is going to be $2.6 million. Once we take into consideration the capital improvement funds that will be necessary on an annual basis for the ancillary projects, it’s at least $3 million.
When we talk about the cost for having an arena and downtown hotel, we are really incurring a cost of $13 million dollars a year. $7.2 million of the money pledged is property taxes. The downtown tax increment finance zone (TIF) captures growth in property taxes after 1983. This is money that but for the existence of the TIF would flow into the general fund. The arena has encumbered about $3.8 million of these property taxes. The remaining $3.4 million annually could be set free from the TIF to rejoin the general fund and be used for any purpose. If we build the hotel, we tie it up for the next 25 years.
$13 million dollars a year to maintain the arena and hotel projects may not increase property taxes right now, but it’s unrealistic to think that this kind of set aside long term will have no impact on the general fund’s ability to meet the basic needs of the population. To put it in perspective, $13 million is the equivalent of two zoos in terms of the annual budget of the City. It’s more than the Police and Fire Departments combined. Just the $3.4 million a year in property taxes that we are about to pledge on this hotel project is almost twice what we will spend in 2014 to maintain our parks. I would like to understand the planning that goes with this kind of long-term pledge. Have we looked at the fact that funds from the state, federal government and gaming industry are going down?
(k) Size of the Subsidy
Why is the subsidy so large? It is well beyond what Rob Hunden estimated as necessary to build a 240 room full service hotel. His report estimates $26 million as the public contribution with regard to the hotel and ancillary projects.
Thank you for your time, and I look forward to discussing these issues further.
Sincerely,
Stephanie Brinkerhoff Riley, J.D.
City Council Ward 3
Stephanie is back in Earthcare Energy mode protecting the citizens of Evansville from the loosy goosey whims of a mayor who is over his head.
Today’s is it true hit the nail on the head with the story about the Reverend Mayor’s tent revival and the mindless fools that lap up the lies without question. Next they will be singing songs about the Reverend Mayor and testing their faith with copperheads and water mocassins.
I would like to add one more question. What is the number of heads in a bed/night to break even. How many conventioneers per night or per week or month of year. I don’t care how you calculate it. I came up with 600/night.
I hate that you think Roberts Park is a good idea, but I also appreciate you asking the tough questions about this project. Aside from the Roberts Park comment, you’ve been really hitting the nail on the head lately with all your comments about what some of these gov’t organizations are doing.
My biggest concerns are points J & K in your article. In it’s current form, this hotel is going to tie up an enormous amount of various city funds and that could potentially carry over into the general fund. As ludicrous as this may seem, building just an arena and hotel while leaving no funds for future projects is a recipe for disaster. It’s also a good way to ruin the Ford Center when it begins to age and there are no funds to keep it up to date.
Overall, I appreciate you asking these tough questions. I know it’s technically a county issue but I wish you would look into the ball fields plan like this too. You would soon see there’s an entire part of your ward that is better suited and more deserving of that project.
It’s encouraging to see a council member taking this kind of initiative to delve into real numbers. Contrast this with Weaver and Mosby, who were ready to vote in favor even before hearing a word of the pitch.
Thanks Stephanie. Now lets talk about the sewer problem all of which cannot burden the individual households and businesses. If it does, we will have unpaid and partially paid water/sewer bills from some of the working poor. I will not quibble about my sewer increase because I firmly believe that the buck stops here and now, with all of us. However the city’s government is all of us. Some of it has to come from city government coffers! It is a big thinking shift, especially for the last few administrations, but setting new budget priorities is hard and necessary. To borrow a phrase I heard at the recent meetings lately, “Let’s get ‘er done” (“her” being the sewer finances plan first).
Council members have some questions concerning the project, but many of them are unfinished arena questions resulting from a rush to get it moving. Why not scrap the current proposal and start over?
I do believe a hotel is needed but not with this level of local government support. Is Lloyd W, knowing that he has NO chance of re-election, trying to build a basis for his post-government employment?
Do the Reps have a new candidate in mind?
Three cheers for Stephanie for finally asking the hard questions about this wasteful hotel project. You make me proud to call you our city council women.
It’s about time the intelligent forces on city council take on the Mayors mis-guided statements on this project.
Looks like Weaver and his political side kick Missy Mosby are going to look like the idiots that they are.
” Hunden stated that the size of hotel that could sustain itself in our market was 120 to 150 rooms.” (Councilwoman Riley)
“Why is the subsidy so large? It is well beyond what Rob Hunden estimated as necessary to build a 240 room full service hotel. His report estimates $26 million as the public contribution with regard to the hotel and ancillary projects.” (Councilwoman Riley)
* * * * * * * * * * *
Next question: What should the subsidy be for a 120 to 150 room hotel?
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On this point, Hunden is clear, a 120-150 room hotel could survive without any subsidies.
The suminabitches want to subsidize whatever gets built so they can mandate union labor and get campaign kickbacks. If a developer goes it alone they are exempt from those rules about union labor rates that the politicians use to shake down the contractors and the unions for kickbacks. Look at how much of the Ford Center spending ended up in Weinzapfel’s pockets. Winnecke learned from the master of kickback schemes.
Yep. That’s what the fundamental problem with our political system in America is. You have to have good people run for office, but good people cannot get funding to win an office. Good people will always have to work three times as hard on a fraction of the money. The money always come from people and organizations with expectations of kickbacks and quid pro quo. The media is largely just an unwitting pawn in this overall arrangement, always either easily manipulated or directed from the top down.
Exposing the C&W’s Pate and ERC’s Hafer as ERBC members is, in my mind, a major step toward educating the public on the dirty relationship between local business, media, and politics. Hopefully, this is just the beginning of a shift in Evansville politics.
Unfortunately not nearly enough of the public has been educated on this topic. The public is woefully uneducated on practically everything, because the C&P only reports what the machine wants people to know and the TV stations only care about sound bites and fluff pieces.
On point A, lets not forget the interest expressed in making the River House into a hotel. That would further buffer the number of available rooms downtown. Furthermore, this was not considered in Hunden study in any way.
My sources tell me that the city told the guy doing that to not even bother applying for a tax abatement that is pretty standard for anything built downtown. They furthermore say the city is waging a compliance war against the guy busting him for every code violation imaginable. Why on earth would the city make war on someone who is willing to convert a hell hole into a Comfort Inn in downtown? If this is not unequal protection under the law then what the hell is it. It is right next door to another of Weinzapfel’s follies called the McCurdy.
I know. I heard about how the City is trying to fine him out of the project. I think it’s disgusting. I also happen to think it’s intentional and seems too backward to be sheer coincidence.
Stephanie and Al are asking the tough questions. Councilmen Robinson, Friend, O’Daniel, Adams: are you asking questions or following the Pied Piper of Hamlin?
O’Daniel has already said he is a “no” vote. If we’re keeping score on the way things are leaning, the score looks like this:
Yes:
Mosby (wore sickers, said they were pro hotel)
Weaver (wore sickers, said they were pro hotel)
McGinn (said in C&P interview he supports Mayor)
No:
O’Daniel (told me via text he will vote “no”)
Brinkerhoff-Riley (skeptical from the fir st hearing)
Friend (has betrayed sense in the past. Likes political games. Unpredictable, but looking for good reasons to say “no”.)
Lindsey (Letter supports SBR.)
Adams and Robinson need lobbying. Adams in particular should be leaning our way. He is smart enough to know this isn’t going to turn out well for Evansville. Surely he has taken the time to read Hunden. Plus he was in the room when Huffman said “WE are the business plan.”
I’ve spoken to Councilwoman Robinson on the phone and she did say our side seemed “well informed” with good information, but she also said there was a lot of pressure coming from all sides. This gave me the impression of a preemptive apology to us that she might be voting “yes”.
As President and Vice-President of the Council, it would make sense that these two might be feeling slightly more pressure than the others.
City Council – President
Constance Robinson
1812 Judson Street
Evansville, IN 47713
812-423-3869
connie@hmrdistribution.com
City Council-At-Large
Dr. H. Dan Adams – Vice President
P.O.Box 4792
Evansville, IN 47724
812-425-4220
drhda501@aol.com
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