Chief
08-29-2007, 08:36 AM
JEFFREY MIZE, Columbian staff writer
October 7, 2003; Page c1
A majority of Vancouver City Council members are ready to proceed with the hotel-conference center project, even if it means increasing the city's financial risk.
The council voted 5-2 Monday to hold a public hearing on the financing plan next week. Council members Jeanne Lipton and Jeanne Stewart, who have consistently questioned the $71.2 million project, cast the two dissenting votes. Lipton has called in the past for a public vote on the project. The other council members are undeterred by a new requirement that would increase the city's annual financial exposure by $275,000 to $1.54 million during the next 30 years, depending on the year.
The city's maximum exposure shoots up to $1.54 million in 2027 because it would no longer receive state sales tax dollars earmarked for the project, which means there are fewer dollars flowing to pay off construction debt. The 0.033 percent tax credit is good for only 25 years under legislation enacted in 1999.
Until recently, Vancouver officials said the city's financial exposure was restricted to guaranteeing that three taxes would not dip 15 percent to 20 percent below expectations. Because two of these sources are sales taxes, the city's financial risk was tied to the overall economy.
With the latest change, Vancouver would be tied not only to the economy but to how well the hotel performs. If revenues were to plunge 50 percent to 80 percent below projections, the city would have to use its general fund to bail out the project.
The requirement for the city to provide a financial backstop emerged from ongoing negotiations between U.S. Bancorp Piper Jaffray, the project's underwriter, and XL Capital Assurance Inc., the New York company that might insure the bonds sold to finance construction and cover other costs.
None of the council members asked why the financial terms of the project have changed so much at the last minute.
Peter Phillippi, Piper Jaffray's managing director in Phoenix, said during a break that there isn't a single reason behind XL's insistence that Vancouver take on more financial risk.
"The bottom line is there are no set criteria for these type of deals," Phillippi said. "As such, they evaluate each project on its own. ... This was a request that they made that they needed to get comfortable with the transaction.
"These tougher deals are subject to negotiations," he said. "I don't think anyone goes into them expecting nothing to change."
Phillippi said there was "zero" chance the city could strike a deal with another municipal bond insurer that did not require the city to take on more financial risk.
As long as the project doesn't fail miserably, Vancouver would not have to dip into its own coffers.
Officials say projections indicate that as much as $66 million in revenue bonds should be paid off in 2022, 11 years before their final maturity.
Paul Lewis, Vancouver's manager of financial and management services, said latest projections indicate the bonds will pay 5.2 percent in interest, which is higher than recent lows in June but lower than recent highs in August.
"We're still at 35-year lows in terms of municipal bond rates," he said.
Vancouver wants to build a city-owned hotel with 225 rooms and 30,000 square feet of meeting space south of Esther Short Park.
Even if the council approves the financing plan next week, there are several unresolved issues:
. County negotiations. The city has yet to reach an agreement with Clark County for diverting part of the county's sales-tax credit to the downtown project.
Phillip Parker, a member of the Clark County Public Facilities District, said a city proposal for the county to receive up to $100,000 a year as a return on its investment has been sent back to the city for more negotiations.
. Hilton discussions. The city doesn't have a signed agreement with Hilton Hotels Corp. to manage the completed hotel-conference center.
Hilton made a tentative commitment last month, but the latest discussions indicate the hotel giant would not make a cash investment in the project. Rather, it would agree its management fee should be "subordinated," meaning that the corporation receives its fee only after payments have been made to bond holders and only if there is enough money.
. Pending litigation. Two nonprofit groups, Public Funds for Public Purposes and Citizens for Leaders with Ethics and Accountability Now!, have named the Vancouver Public Facilities District in a lawsuit challenging the use of state tax dollars for projects in Vancouver and Olympia.
The city council discussed the lawsuit behind closed doors Monday, a city official said. Vancouver might join forces with other cities and counties to hire outside counsel to fight the lawsuit.
. Possible referendum. Larry Patella, a longtime opponent of building a conference center without a public vote, said if the council approves the plan next Monday, he and other opponents will mount a referendum campaign to repeal the approval at the ballot box.
Patella collected more than enough signatures to place the project before voters during a 2001 referendum campaign, but the city threw out the signatures because they had not been notarized.
Brent Boger, an assistant city attorney, said a second referendum would be a waste of time. Courts have ruled the Legislature specifically granted cities the power to build convention centers and similar projects, an authority that cannot be rescinded by local referendums and initiatives, he said.
October 7, 2003; Page c1
A majority of Vancouver City Council members are ready to proceed with the hotel-conference center project, even if it means increasing the city's financial risk.
The council voted 5-2 Monday to hold a public hearing on the financing plan next week. Council members Jeanne Lipton and Jeanne Stewart, who have consistently questioned the $71.2 million project, cast the two dissenting votes. Lipton has called in the past for a public vote on the project. The other council members are undeterred by a new requirement that would increase the city's annual financial exposure by $275,000 to $1.54 million during the next 30 years, depending on the year.
The city's maximum exposure shoots up to $1.54 million in 2027 because it would no longer receive state sales tax dollars earmarked for the project, which means there are fewer dollars flowing to pay off construction debt. The 0.033 percent tax credit is good for only 25 years under legislation enacted in 1999.
Until recently, Vancouver officials said the city's financial exposure was restricted to guaranteeing that three taxes would not dip 15 percent to 20 percent below expectations. Because two of these sources are sales taxes, the city's financial risk was tied to the overall economy.
With the latest change, Vancouver would be tied not only to the economy but to how well the hotel performs. If revenues were to plunge 50 percent to 80 percent below projections, the city would have to use its general fund to bail out the project.
The requirement for the city to provide a financial backstop emerged from ongoing negotiations between U.S. Bancorp Piper Jaffray, the project's underwriter, and XL Capital Assurance Inc., the New York company that might insure the bonds sold to finance construction and cover other costs.
None of the council members asked why the financial terms of the project have changed so much at the last minute.
Peter Phillippi, Piper Jaffray's managing director in Phoenix, said during a break that there isn't a single reason behind XL's insistence that Vancouver take on more financial risk.
"The bottom line is there are no set criteria for these type of deals," Phillippi said. "As such, they evaluate each project on its own. ... This was a request that they made that they needed to get comfortable with the transaction.
"These tougher deals are subject to negotiations," he said. "I don't think anyone goes into them expecting nothing to change."
Phillippi said there was "zero" chance the city could strike a deal with another municipal bond insurer that did not require the city to take on more financial risk.
As long as the project doesn't fail miserably, Vancouver would not have to dip into its own coffers.
Officials say projections indicate that as much as $66 million in revenue bonds should be paid off in 2022, 11 years before their final maturity.
Paul Lewis, Vancouver's manager of financial and management services, said latest projections indicate the bonds will pay 5.2 percent in interest, which is higher than recent lows in June but lower than recent highs in August.
"We're still at 35-year lows in terms of municipal bond rates," he said.
Vancouver wants to build a city-owned hotel with 225 rooms and 30,000 square feet of meeting space south of Esther Short Park.
Even if the council approves the financing plan next week, there are several unresolved issues:
. County negotiations. The city has yet to reach an agreement with Clark County for diverting part of the county's sales-tax credit to the downtown project.
Phillip Parker, a member of the Clark County Public Facilities District, said a city proposal for the county to receive up to $100,000 a year as a return on its investment has been sent back to the city for more negotiations.
. Hilton discussions. The city doesn't have a signed agreement with Hilton Hotels Corp. to manage the completed hotel-conference center.
Hilton made a tentative commitment last month, but the latest discussions indicate the hotel giant would not make a cash investment in the project. Rather, it would agree its management fee should be "subordinated," meaning that the corporation receives its fee only after payments have been made to bond holders and only if there is enough money.
. Pending litigation. Two nonprofit groups, Public Funds for Public Purposes and Citizens for Leaders with Ethics and Accountability Now!, have named the Vancouver Public Facilities District in a lawsuit challenging the use of state tax dollars for projects in Vancouver and Olympia.
The city council discussed the lawsuit behind closed doors Monday, a city official said. Vancouver might join forces with other cities and counties to hire outside counsel to fight the lawsuit.
. Possible referendum. Larry Patella, a longtime opponent of building a conference center without a public vote, said if the council approves the plan next Monday, he and other opponents will mount a referendum campaign to repeal the approval at the ballot box.
Patella collected more than enough signatures to place the project before voters during a 2001 referendum campaign, but the city threw out the signatures because they had not been notarized.
Brent Boger, an assistant city attorney, said a second referendum would be a waste of time. Courts have ruled the Legislature specifically granted cities the power to build convention centers and similar projects, an authority that cannot be rescinded by local referendums and initiatives, he said.