Omnipresent: OKC Council agrees to $85.4 million subsidy for hotel
By Brian Brus
The Journal Record
OKLAHOMA CITY – The Omni hospitality chain will receive $85.4 million in public assistance to build and run a 600-room convention center hotel in downtown Oklahoma City.
By a 7-2 vote, the City Council agreed Tuesday to front more than one-third of the total $235.5 million construction cost primarily through tax increment financing. The city will sell municipal bonds to fund its contribution, which will be paid off with interest over 25 years. City officials said they also expect to recoup at least $50 million through lease payments and tax revenue.
Councilman James Greiner voted against the measure for philosophical reasons – the government should not be involved in business, and the ends do not justify the means, he said. Greiner also said he was convinced the arrangement will benefit the city.
“It’s a much better deal than I thought we were going to get,” he said. “And I do believe the plan for this hotel … does need a subsidy. I just still question the fact of whether or not that is the hotel we need.”
Councilman Ed Shadid, the other no vote, was less gracious in his assessment of Omni’s position.
“Maybe ‘parasitic’ is not the right word,” Shadid said. “You could do this without us. If you can pay $150 million in cash with the assets you have, you can borrow $85 million on very favorable terms. … ‘Predatory,’ I think, absolutely applies.”
Dallas-based TRT Holdings Inc. founder Bob Rowling denied he was a parasite or predator and addressed other concerns in his presentation to the City Council. TRT is the holding company of Omni Hotels and Gold’s Gym.
“A parasite depends on another organization to survive,” Rowling said. “What we’re trying to do is bring $150 million and inject it in this city to bring life and vitality downtown. We have about 60 hotels and we take a very local approach to building our properties. We don’t want to build something here that’s just a bland rooms box that you might see in any city in America.”
Omni’s rate of return on the project including the subsidy is projected at 12.7 percent, Rowling said.
The agreement also calls for the city to provide 450 parking spaces, which Omni will lease at market rates.
Cathy O’Connor, president of the Alliance for Economic Development of Oklahoma City, prepared the City Council for the vote with a presentation by HVS Global Hospitality Services showing how Oklahoma City compares against its peers. In short, an influx of new hotel rooms will induce higher demand, HVS Director Tom Hazinski said. The new MAPS 3 convention center is projected to generate $62.4 million in additional economic impact to the community without a hotel and $137.6 million with a hotel.
City Finance Director Craig Freeman said revenue bonds will be issued through the Economic Development Trust, backed by a moral obligation of repayment to ensure a better interest rate and cost. The funding plan is based on several revenue sources to stabilize cash flow through economic vagaries over the years, he said. Those sources are primarily tax increment financing districts old and new, lease payments from Bass Pro in Bricktown and the Skirvin hotel lease and mortgage.
Shadid said he was again disappointed that such a weighty issue was decided by the eight council members and Mayor Mick Cornett instead of putting it to a citywide public vote. Councilman David Greenwell said that unlike the MAPS election in which residents agreed to spend $777 million for the convention center and other major projects, the Omni deal does not involve a tax increase.