It took me a few days to figure out what to say since there are so many places to start when it comes to addressing the impending fiasco that will be the city-owned and -operated convention center hotel downtown, which was unbelievably approved by the council Wednesday after what amounts to something akin to a lunch-time discussion of the merits of committing $500 million to the project. Perhaps the best way to talk about the hotel, which as I’ve written before is clearly needed downtown but should not be owned or operated by the city, is to address a few of the talking points being disseminated by backers:
1) "The city will not be in the business of running a hotel," Mayor Tom Leppert told the Dallas Business Journal, citing the example of American Airlines Center, which is a city-owned facility that is operated by the Center Operating Co." The big flaw in that point: The city owns the arena in name only; the actual title to the arena will vest with the Stars and Mavs sometime down the road, so Center Operating Co. may technically be operating the hotel on behalf of the city, but you can rest assured that the operator considers the arena "theirs" as opposed to the city’s and acts accordingly. That’s a huge difference between the city owning and operating the hotel, with no private owners waiting in the wings for title to pass to them. As far as I know, the city isn’t offering one of those $1 lease-buyouts on the hotel. Yet.
2) The city plans to select a developer by the fall and complete the hotel by 2011, according to Leppert. The budget is something like $350 million, with a $150 million contingency for operating losses so that the city and future councils won’t have to go back to the well (us taxpayers) for more money. The big flaw in this argument: When was the last time any construction project, starting with a $20,000 bathroom remodel, was completed on-time and on-budget? My prediction: The $150 million operating-loss slush fund will have less than $50 million in it by the time the hotel is completed, and within three years of opening the hotel, the city will be looking around for ways to cover operating losses that exceed $50 million. And here’s the brilliance of what the council has done — let’s do the math. Assume the hotel is completed in three years, and three years later the city needs more money. Due to the six-year term limits on city council service, none of the existing council reps will still be in office, and Leppert (assuming he’s elected to another 4-year term) will be in his final year of service. That means that despite the solemn pledges of existing council reps to keep an eye on this project and run it like a business, none of them will be around to blame when things go bad. And when someone calls them to get their reaction, what are they going to say? "It must have been the guys elected after us who screwed this up."
3) "Expert analysis shows a solid, positive cash flow from day one," Leppert said in an email promoting the deal, which I received a few hours after the deal had already been passed by the council. That sounds great, but how can we believe it? The expert cited isn’t guaranteeing positive cash flow, they’re just stating an opinion. Leppert and the council reps who voted for the hotel aren’t using their personal assets to guarantee a positive cash flow, either; they’re using city assets and taxpayer money as the guarantee. That’s like me buying a $2 million house, but pledging your assets as collateral. I’m telling you that I can afford to make the payments, but in case I’m wrong, you’re on the hook instead of me. Which one of you wants me to use your IRA/401K as collateral for that deal? Well, that’s just what the city is doing to us.
4) Also from the Leppert email: "Won’t this hurt other hotels? It will offer some competition, but other hotels will also benefit as major conventions return to Dallas. When a convention draws 30,000 people, only so many of them can stay in a 1,200-room convention center hotel." Want to guess how many 30,000-people conventions will make an appearance in Dallas each year, at best? Two, maybe three, max. And maybe one or none. And we all know how long a convention is in town — 3-5 days, max. So at best, there could be 15 days a year of fully maxed-out hotels in Dallas; the other 350 days, we’re looking at 1,200 new taxpayer-subsidized rooms on the market. And what do you think the city-owned hotel operator is going to be told by Leppert? Put Priceline.com on speed-dial, and keep the rooms booked so we don’t have to be embarrassed by a Dallas Observer story revealing that we’re secretly dipping into our reserve operating fund. So the rates on rooms those 350 days when a big convention isn’t in town are going to be low, lower and lowest — forcing other hotels in and around downtown to be lower, too. With that kind of taxpayer-subsidized competition, something has to give, and it’s going to be a private sector hotel or two (along with their attendant jobs and taxes) that will fail.
5) In an amazing two weeks or so, this hotel went from a questionable overpriced land deal to a $500 million city-owned facility. Virtually every council rep (save Rasansky and Hunt) threw in with Leppert to approve the deal, even though only Rasansky is a real estate guy, and he called the deal "insane". What did it take to line up that much support that quickly? I have to think that some back-room deals occurred (maybe Leppert promised to hand-wash and -wax the council reps’ cars for the rest of the year?). With $350 million in taxpayer construction money to throw around, want to guess how quickly this deal will turn into the next city hall scandal a la former mayor pro tem Don Hill and the South Dallas apartment shakedown scandal? My prediction: 2-3 council reps eventually will wind up indicted for accepting bribes to steer business to a contractor involved in the hotel’s construction, because $350 million for one project is just too much city money to be spent above-board. And watch for the next big money grab: Which developer, in this economy of dwindling business opportunities in real estate, is going to get the deal this fall, and whose palms are going to be greased to get them the deal?
6) Last question: Why the big rush? The current council reps spent about as much time debating the cell phone ban in school zones as they did debating this deal. Why couldn’t some more open discussion and some public hearings on this specific deal been held? Answer: Because this deal would never have happened if enough air had been allowed to shine on it. Leppert still has enough political capital to whisper "trust me" in the ears of the new council reps, and they’re still green enough to believe him. But if you ask any 10 voters what they think about the city building and owning a $500 million hotel financed by taxpayers, eight of them will say it’s a dumb idea. So why ask? The longer Leppert spent building a legitimate coalition, the more likely the deal would have sunk under its own weight, due to lack of enough specifics and too many questions. Leppert’s a smart guy, and he has a reputation as a business expert and a can-do leader: He used those attributes (which he paid to implant in our minds during his mayoral campaign) to his advantage, and when he shrewdly saw an opening he could wriggle through with this deal, and he went for it. That’s what ambitious politicians — but not good businessmen — do.
Remember President Bush’s ultimate moment of success, when he landed on the aircraft carrier and spoke in front of the "Mission Accomplished" banner? Many people thought that was a dopey move at the time, but he was riding a crest of popularity, and very few spoke out saying what they really thought. Today, though, it’s hard to find many people who will say that was the right thing to do; instead, it’s a symbol of poor judgment and endless ridicule.
Here’s my prediction on the convention center hotel: This will be Leppert’s "Mission Accomplished" fiasco. If he survives the political infighting and greedy money grab to get the thing built, and he’s able to tamp down the inevitable construction overruns and attendant scams and screwups, and if he’s still around when the hotel opens and immediately loses money, he’s going to have some explaining to do — no matter what office he holds at that time.
I’d feel a whole lot better about this deal if Leppert had simply manned-up and done the right thing: He has a significant fortune, so why not use some of his money to guarantee that this deal will do what he says it was? He has been kind enough to donate his mayoral salary; why not guarantee a portion of this deal, which he says is so important to the city, with his own funds, and encourage his fellow council reps to do the same thing?
Think they would have all voted the same way if they had some of their own skin in the game?