Schaefer criticizes selling bonds for hotel

Md. comptroller opposes O'Malley plan, calls for more private funds in project

July 16, 2005|By Doug Donovan | Doug Donovan,SUN STAFF

As if resistance from the usually agreeable Baltimore City Council wasn't enough, Mayor Martin O'Malley now has another familiar irascible foe to face as he pushes for a publicly financed convention center hotel: William Donald Schaefer.

Yesterday the state comptroller criticized O'Malley's plan to issue $305 million in city revenue bonds to build the Baltimore Convention Center's proposed headquarters hotel.

Schaefer said he agrees with council members that the deal needs more private equity -- possibly from one of its developers, billionaire Robert L. Johnson.

Schaefer pointed to the privately financed hotel that Johnson clumsily proposed this week for Washington's convention center, and he wondered why O'Malley could not get the Black Entertainment Television founder to offer a similar deal for Baltimore. The comptroller said it is further proof of what he believes is the mayor's mishandling of the city's convention business.

"They made a disaster of this whole thing," Schaefer said of Baltimore's hotel plan. "It's a bad deal. It should be financed privately."

O'Malley said yesterday that his deal -- which needs the City Council's approval -- is in the "best interests" of Baltimore residents because it would allow them to share in the profits if the hotel is successful. He said Johnson proposed a privately financed deal in 2002 that entailed a substantial one-time public subsidy and tax break.

The mayor speculated that Johnson's Washington idea might be similarly structured.

"I want to know what his proposal was in D.C. and if it was the same sort of private financing where the District of Columbia parts with a lot of cash up-front like what was originally proposed in Baltimore," O'Malley said. "I'm sure [Johnson] didn't fully appreciate the juncture we were at in debating the convention center hotel here."

Johnson said yesterday that his Washington plans are preliminary but confirmed that he will require substantial public subsidies. He said a publicly financed hotel in Washington would be a "non-starter" because of the political struggle it took to get the city's new baseball stadium paid for with taxpayer money.

"This D.C. deal will have a significant public financial component in order to make it economically viable for me to invest," Johnson said.

He said he would have preferred a private-public partnership in Baltimore and was looking to proceed with tax breaks and tax-increment financing. But, he said, "it came back from [the city] that it was more economically viable to be publicly owned and we would be the fee-based developer."

Johnson also encouraged the council to make a decision soon before interest rates on bonds rise: "It's time that's going to hurt. Costs of raw materials ... are going to keep going up."

Still, Johnson's deal stunned council members and provided more ammunition for those opposed. "It raised eyebrows and raised more questions," said Councilman Kenneth N. Harris Sr., an opponent.

Even if Johnson's Washington deal had not surfaced, Schaefer has been stirring up more questions about the hotel deal and the agency charged with managing the convention center.

The state comptroller -- who is also a former Maryland governor and is credited with revitalizing the Inner Harbor during his time as Baltimore mayor -- has long been critical of the mayor's control of the Baltimore Area Convention and Visitors Association. Two years ago, Schaefer wanted O'Malley to appoint him to the BACVA board, which was under intense scrutiny for mismanagement by the agency's former director.

The attempt, which had Gov. Robert L. Ehrlich Jr.'s backing, failed. But now Schaefer has found another way to keep tabs on BACVA through his chairmanship of the state Task Force on Baltimore Convention Center Financing.

The Maryland Stadium Authority authorized the task force last summer, and this year the group issued a study that found some concerns with how BACVA manages conventions. The task force intends to remain in place until 2008, when it will recommend to Maryland lawmakers whether to maintain state funding for the convention center.

The task force's two most critical findings stated that BACVA spends too little on selling and marketing conventions, and that the agency's sales teams need to be better managed. "BACVA has been unable to attract the number of high revenue producing conventions that is necessary to generate the economic impact the state desires," the Feb. 3 report stated.

The task force recommended that BACVA should make convention sales its "primary mission." It also called for the city to budget an additional $500,000 for selling conventions and for cash incentives to meeting planners, a recommendation O'Malley followed in his budget for the fiscal year that began July 1.

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