Risk vs. reward

June 24, 2005

THE MAYOR and City Council shouldn't be in the business of building hotels, not really. But the proposed 752-room hotel that the O'Malley administration plans to finance with $305 million in city revenue bonds isn't about getting into the hotel business. It's about priming the public's investment in the Baltimore Convention Center, which has been struggling to compete in a highly charged, ever-changing market. After nearly a decade of false starts, wrong turns, effects of 9/11 and a revamped convention bureau, it's now or never for a convention center hotel.

The urgency is real when you consider the time it will take to build the hotel and the choices already available to conventioneers who want to bypass New York, Orlando or Las Vegas. The Baltimore Development Corp. has structured a public financing deal that protects the city on several fronts. The Hilton chain, which would manage the convention hotel, is so convinced of its potential that the hotelier has agreed to cover up to $25 million of the city's debt service if hotel revenues fall short.

The convention center hotel would be the largest city-financed project in recent history, but Baltimore's ambitions have paid off in the past - the Inner Harbor is testament to that. It's time to give the convention center bureau the competitive edge it seems to so desperately need.

But why must the city pay for it? That's the critical question raised by City Council members and others. A private-public partnership would have been preferable, but private developers weren't lining up. Those with an interest wanted public assistance that BDC says would have cost the city more in cash up front and throughout the deal. Once Orioles owner Peter G. Angelos decided against the city-owned site, BDC shopped the project to 75 prospective parties - with no takers.

Baltimore isn't alone in publicly financing a convention center hotel. Eleven other cities have used revenue bonds, including Chicago; Sacramento, Calif.; Houston; Myrtle Beach, S.C.; Denver; and Vancouver, British Columbia. Baltimore's public financing deal not only limits its liability but also enables the city to reap some of the profits - an estimated average of $4 million a year, from 2013 through 2036. Baltimore's hotels are profitable; why shouldn't this one be, especially since it can offer good deals to conventioneers because it is reserving a block of rooms for such business?

But there is no guarantee, and experience across the country is mixed, according to a report by the Abell Foundation. Advancing this project alone won't automatically increase the city's convention business. The challenge - and onus - will be on the Baltimore Area Convention and Visitors Association. BDC President M. J. "Jay" Brodie has made that abundantly clear: "It needs to do well, and we're depending on it."

The City Council should move this project forward and insist that the nonprofit corporation set up as the convention hotel owner operates with the transparency of any other government agency. That will be the best way for Baltimoreans to assess if their investment is paying off.

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