Construction Costs that Exceed Valuations forcing Cities into the Shadow Banking Business
Excerpts from the study on the recent phenomena of cities wanting hotels enough to sell bonds to finance them.
“As most communities desire the economic impact of group events and the spending of the visitors they attract, many are providing public subsidies to projects that are not feasible on a purely private basis.”
“The recently approved project in Huntsville, Alabama is an example of a tertiary market in which city leaders chose to engage a private developer to construct a $40-million, 300-suite Embassy Suites Hotel adjacent to the convention center. The city offered to provide attached parking for the hotel, related infrastructure development, a favorable land lease and access to meeting space in the convention center to attract a hotel developer.”
“Since 1994, the only hotel projects of 700 rooms or more outside of the gaming and resort industries that have been privately financed are in New York City, where high occupancy and room rates can support new development. All other developments have required some form of public support, either through public financing and ownership or a public/private partnership.”
The excerpt above is bold because it underscores that the assertion and expectation that a private developer like Browning would do a hotel in Evansville without incentives was an incredibly naive expectation.
“Given that many event planners operate on multiple-year planning horizons, the full effect of a headquarters hotel on convention center activity might not be realized until several years following the hotel’s opening.”
“As most communities desire the economic impact of group events and the spending of the visitors they attract, many are providing public subsidies to projects that are not feasible on a purely private basis.â€
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In other words, Business and politicians picking the pockets of taxpayers. That is EXACTLY what this current city administration has been all about. That, and making sure the taxpayers had no vote in the process.
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