Statement of Metro President Tom Hughes on legislative approval of state support for the Oregon Convention Center hotel
The Oregon Legislature’s decision to invest $10 million in lottery funds to help bring more visitors to Oregon through construction of a convention center hotel paves the way for good jobs now and in the future and for greater prosperity for our entire state.
Attracting more visitors by using Oregon’s reputation as a great place is a smart, strategic and responsible choice that supports private businesses and the families who depend on them.
Our state and our region made such a choice when we built the Oregon Convention Center. The legislature made such a choice today by awarding lottery funds to help advance a convention center hotel.
Bringing visitors to Oregon helps all of our businesses thrive. When our businesses thrive we are better able to support well-educated students, well-trained workers, a healthy environment and functioning roads, bridges and other public structures that are the foundations of a strong economy.
A convention center hotel will attract thousands of new visitors who will support thousands of new jobs. Those jobs will create about $5 to $6 million in new state tax revenues per year that will help support schools, public safety, and other important public structures and services throughout Oregon.
When I took office as Metro president, I promised a fresh look at the convention center hotel. I said we would find out whether the private sector was willing to step forward to finance and operate a convention center hotel.
I believe the answer is yes. We have a private hotel developer and operator ready to contribute 60 percent of the cost to build the convention center hotel. The direct public investment in this project likely will be less than 10 percent, which is justified to ensure we can hold the majority of this hotel’s rooms in reserve to help attract new conventions to town.
I have met with meeting planners from all around the country who have told me repeatedly they will book conventions in Portland if we build the hotel. I believe them. With an average of 2,000 or more attendees, these conventions will drive more business for restaurants, shops and tourist destinations – and generate significantly more reservations for other downtown Portland hotels.
Financial elements of the convention center hotel project
The $10 million in state lottery money plays a strategic role in leveraging more than a $100 million investment by Hyatt Hotels and its private partners toward a project currently estimated to cost about $200 million.
Metro will contribute $4 million toward the project and the Portland Development Commission will provide a $4 million loan. These funds have been dedicated to a convention center hotel for years.
The rest of the project’s costs will be paid by visitors who stay in the new hotel using the existing hotel room tax charged at every central city hotel in Portland. The lodging taxes paid by convention center hotel guests – which will not be collected if the hotel isn’t built – will be dedicated to repaying what amounts to a $60 million construction loan.
The loan will come in the form of revenue bonds issued by Metro and backed by the new hotel’s room taxes. This approach is far less expensive than private financing. This public-private partnership approach will therefore reduce the cost of the project.
Financing a portion of the project’s construction costs using room taxes poses virtually no direct risk to the region’s taxpayers. Even under the most severe economic conditions, the convention center hotel will generate enough room tax from visitors to pay off construction financing. And, in the unlikely event that the hotel itself does not create sufficient room taxes, Hyatt Hotels or its partners or tourism tax reserves will make up the difference.
The direct public investment in this project, including the $10 million in lottery bonds, will be less than 10 percent. The public investment is needed to ensure the ability to hold large numbers of rooms off the market in reserve for conventions and to pay for the extra meeting rooms and other facilities needed to attract large conventions to the Portland region.
Private share – approximately 60 percent
$117 million – Investment by Hyatt Hotels and its development partners
$2 million – Private investment/project cost reduction
Public share – approximately 10 percent
$4 million – Investment by Metro, using reserve funds earmarked for a convention center hotel
$4 million – Loan from PDC, using funds dedication to a convention center hotel
$10 million – State lottery bond proceeds approved by Oregon Legislature
Construction financing backed by room taxes – approximately 30 percent
$60 million – Existing room taxes from new hotel dedicated to construction financing (Metro bonds based on current interest rates and projected project costs)
Total project cost
Approximately $197 million