Using city bonds to upgrade hotel is a bad idea

Our view: 99-year proposal from businessman Lopez not good for taxpayers
2010-06-29T00:00:00Z Using city bonds to upgrade hotel is a bad idea Arizona Daily Star
June 29, 2010 12:00 am

You'll remember Humberto Lopez. He's the businessman who organized the recall effort against Mayor Bob Walkup and Councilwomen Regina Romero and Karin Uhlich because he said they were anti-business. The recall fizzled into nothing early this year.

Lopez also tried to get the City Council to agree to buy his Hotel Arizona for $28 million a couple of years ago. The deal went south after the hotel was appraised for less than $20 million.

Now he's back, this time urging the city to sell $17 million in bonds to finance upgrades to his hotel so that it can become a 274-room Doubletree. He also wants the city to build a new 428-slot parking garage to replace the current garage. And finally, he promised to build a 226-room Embassy Suites next door to the Doubletree within three years after the garage is completed.

And get this: To avoid a big tax bill, Lopez wants the city to lease the improved hotel from him for $1.6 million per year for 99 years. That's right, 99 years.

The Star's Rob O'Dell reported last week that the lease payments would allow Lopez to pay down the more than $20 million in debt he has on the property without having to pay taxes on its sale.

Lopez says cash flow from the Doubletree would repay the bonds, and after its lease payments the city would still make a profit of $1.4 million annually.

But if the hotel failed to meet projections, city taxpayers would be responsible for the losses.

What a deal.

Does Lopez think the city is made of money? Evidently. This in spite of City Manager Mike Letcher's and the council's struggles to make spending cuts, impose furloughs on employees and otherwise close a deep budget gap.

The city is currently in the process of considering whether it can backstop Rio Nuevo bonds to finance a $190 million convention center hotel and expand the Tucson Convention Center. It's still not clear whether the city can - or will - pull that off. The third tine of that package is a parking garage for the hotel and the convention center; the financing for that garage has not been sorted out yet.

The Tucson Metropolitan Chamber of Commerce has endorsed the convention center hotel because it will create new jobs.

The chamber also announced last week that it supports Lopez's proposal.

The Star editorial board hasn't taken a position on the proposed new hotel because the Rio Nuevo redevelopment-district board still has no maximum guaranteed price in hand and the financing package for the project isn't yet set.

But we're not on board with the Lopez deal. Ninety-nine years? That's a good deal for taxpayers? No. It's not. We'd like to see the Hotel Arizona remodeled and brought up to date. But not on the backs of Tucson taxpayers.

Arizona Daily Star

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