A rendering the Hyatt Regency hotel proposed for the area north of the Oregon Convention Center.
A new finance plan for building a hotel near the Oregon Convention Center would pay for itself, Metro staff said Tuesday, for the first time detailing the funding concept for the project.
Metro visitor venues general manager Teri Dresler, OCC executive director Scott Cruickshank and PFM Group consultant Ken Rust told members of the Metro Council and the Metro Exposition and Recreation Commission (MERC) that the $60 million in bonded financing would be covered by room taxes generated at the $200 million Hyatt-flagged hotel.
The plan hinges on a fund called the Visitor Facilities Trust Account that's filled by local room taxes. Dresler and Cruickshank have been negotiating for months with representatives from Portland and Multnomah County, who each have a stake in the visitor fund.
The fund, which brought in $12.3 million during the 2011-12 fiscal year, foots the bill for a prioritized list of projects. According to Metro, the fund spent about two-thirds of that paying down bonds and supporting the convention center and tourism.
The fund's first priorities are to pay off bonds to cover the construction of the convention center, the Portland Center for the Performing Arts and Portland's Jeld-Wen Field. That would be unchanged in the new financing plan.
Next in line would be the bonds sold to pay for part of the Hyatt hotel – a number expected to be around $3 million per year. After that, operational support for the convention center and marketing efforts would be supported, and a rainy day fund would be filled.
Staffers at Metro refer to the funding plan in terms of "buckets" – when one fills up, the room tax revenue overflows into the next down the line. Only three times has there not been enough money to reach the final bucket, the rainy day fund. Those years, money from the rainy day fund was used to supplement the revenue shortfall.
In response to a concern raised by MERC commissioner Judie Hammerstad that, should the project founder, the public would be "saddled" with debt, Metro attorney Alison Kean Campbell emphasized that the bond is not public dollars.
"The public does not own the hotel, nor will it have general obligation debt," Campbell said.
"It's not really public, it's not really private," Rust said. "It's paid by people staying at the hotel."
Essentially, the hotel's guests will pay for the bonds through the taxes on their hotel rooms, the same way visitors to the Rose Garden pay a ticket tax to cover the city's inflation-adjusted $52.7 million share of the $400.8 million arena project.
In this case, the hotel's guests would pay off a bond to cover $60 million of the $200 million construction cost. Metro and the Portland Development Commission would each chip in $4 million. On Monday, the state legislature confirmed a $10 million contribution in lottery dollars, and the remainder of the sum would come from the private sector.
Metro officials estimate that the hotel will generate $11 million in combined state and local tax revenue every year.
The plan has yet to be approved by Hyatt – Metro is focusing on getting approval from the regional government's partners first. Those votes are expected in August.
Advocates of the hotel say its biggest boon will be jumpstarting the economy and revitalizing northeast Portland by creating jobs and attracting business. Metro councilor Craig Dirksen expressed concern about accountability in this area.
"The most important part of this agreement are the community benefits," Dirksen said. "What happens if one of those commitments isn't met?"
Campbell explained that a mechanism for responsibility would be built into the development contract presented to Hyatt, which Metro and MERC will vote on later this year.
"There will be terms and stipulations we can enforce," Campbell said. "You will all have a chance to vote on the development contract."
MERC commissioners and Metro councilors generally supported the plan, but they expressed hesitance about depending on more and larger conventions to succeed.
The biggest risk facing the project, Rust said, is unquestionably the health of the economy.
Cruickshank agreed, saying that the convention industry closely follows the highs and lows of the economy, like any other industry. But, he added, he communicates with "dozens" of conventions that bypass Portland every year for lack of an anchor hotel near the convention center.
"It will bring its own demand," Cruickshank said.
MERC commissioner Elisa Dozono said the convention center's history should be considered through the lens of not having the hotel as a resource. The hotel project will make good on the large investment the public has already made in the convention center, she said.
Note: An earlier version of this story misidentified the estimated tax revenue generated by the proposed hotel. The hotel is projected to generate $11 million in state and local tax revenue annually. This version has been corrected.