HARLINGEN — After about 18 months, a developer is securing the “right” financing to build a hotel to be attached to the city’s $16.7 million convention center.
Earlier this week, city commissioners unanimously voted to show their support for BC Lynd Hospitality’s plan to pay for the construction of the $25 million, five-story, 150-room Hilton Garden Inn.
Meanwhile, three residents voiced concerns during a public hearing held to comply with a requirement of the U.S. Internal Revenue Service as a result of BC Lynd financing plan.
As part of the deal, the Arizona Industrial Development Authority, an economic arm of the state of Arizona, will issue $32 million in tax-exempt revenue bonds to Provident Group-Harlingen Properties LLC to finance the construction project that is about a year behind schedule.
“We have been busting our tails to get the right financing,” Brandon Raney, chief executive officer of BC Lynd, said before Wednesday’s meeting. “We have a significant capital investment already in the project.”
Raney said the financing plan will fund construction of a five-story, 150-room Hilton Garden Inn.
“We’re going to have a very contemporary upscale hotel,” Raney said. “We’re hoping to create a place that attracts people to Harlingen. We think it will be great for hosting people and for people here.”
Raney described the financing plan as not uncommon.
In Irving, similar financing is funding construction of that city’s convention center hotel, he said.
“It’s not unusual,” he said.
During the meeting, Mayor Chris Boswell stressed the city was not selling bonds or incurring debt.
The city’s bond counsel, financial advisor and city attorneys have determined the city will incur no financial obligation and will face no liability as a result of the city commission’s votes, Boswell said.
“We are not issuing bonds. We are not issuing debt,” City Manager Dan Serna said. “We are not obligated in any way to pay for the bonds. We are not obligated in any way by these transactions.”
The first vote of the night involved the unanimous approval of a resolution showing the city’s support for BC Lynd’s plan “to finance costs of acquiring, designing, constructing and equipping a convention center hotel.”
Commissioners Michael Mezmar and Victor Leal were absent from the meeting.
Serna has described BC Lynd’s partnership critical to the convention center’s success.
As part of an agreement approved in late 2015, BC Lynd will operate, manage and staff the convention center while splitting any profits or deficits with the city.
“Having a hotel connected to the convention center makes our convention center a more financially stable project,” Serna said yesterday.
But the explanations didn’t temper concerns about the project from Minerva Simpson, co-manager of Fairway Independent Mortgage.
She told commissioners the city’s convention center deal could cost taxpayers money.
“It is factual that there will be loses incurred based on historical data on local convention centers, which will in turn affect the revenue from hotel-motel usage which has remained constant with no growth being documented since 2014,” she said reading from a statement. “Therefore, the income of the hotel-motel tax may not be sufficient to cover any additional costs.”
Those weren’t the only problems she had with the project.
Simpson also said the city has failed to disclose the convention center’s revenue projections.
“There’s been a lack of transparency from the city with the disclosure of the projections of revenue and deficits (for) this project,” she said.
Commissioners also unanimously approved a corporation and development agreement between the city and Provident Group-Harlingen Properties for the hotel’s construction.
Under the agreement, the hotel property will be donated to the city or its designee after a 40-year term, city officials have said.
After the 40 years, all revenue derived from the hotel’s operation, sale or rent would go to the city.
But one member of the public questioned what could happen.
Buck Bickley, of the company H20 Only, expressed concern the city could incur liability if a party in the deal would default.
“What happens in default? Who gets the hotel? Who gets the property?” he asked.
Bickley said the convention center did not require an attached hotel, adding the Residence Inn by Marriott stood near the project site.
“You don’t need a hotel — there’s a hotel across the street,” he said. “Don’t get sucked into this.”
Bickley said most convention centers do not generate enough revenue to turn profits.
“You didn’t ask us if we want to build a convention center,” he said. “We know (convention centers) don’t make money. They’re a burden to the city.”