(10-08-2014 12:20 PM)Deez Nuts Wrote: nothing to do with the convo. The hotel/conference center & parking facilities have been in talks for a long time. It's a win/win for the city and JMU.
This project is not a win-win for the city taxpayers. It is only a "win" for the developer who gets public money because no one will support his project with private funds. Anyone who lives in the city should not be interested in supporting this deal with back end public funds, as is currently the plan. Harrisonburg's tax $$ are much better spent elsewhere.
I know, I know... there is no upfront money from the city as the JMU foundation would pay the $10m up front to get the project started and that $10m will be paid back by the tax revenues collected locally off the project for up to 21 years. First of all, there is no way that the hotel will collect nearly enough taxes to pay this $10m back. When I run the numbers for year 5 of operation of the project (knowing that hotels can take 5 years to ramp up) I can only come up with numbers that are roughly 50% of what the city is projecting they will receive. Even if they were paying back the $10m at a rate of $476,000/year over 21 years, this is clearly too ambitious.
Furthermore, The city's statements about this project are always along the lines of "This is new tax revenue that we are using to pay back the $10m". This is not true. No hotel opens and automatically creates new demand. This hotel will only be successful by stealing market share from existing hotels in the marketplace and doing so at a rapid pace. This means that the tax revenue will not be new $$ but will just be displaced $$ which means that existing city tax $$ will be directly used to pay back the $10m. All of this while meeting and event business globally is declining at record paces as more and more companies and government agencies are mandating the use of virtual meetings.
Another note regarding tax revenues off hotels (often called transient or occupancy taxes) is that they are collected evenly among all hotels and boarding houses and should be used to support all hotels equally. This is why it is a common practice at city visitors centers across the country to train their staffs not to recommend specific hotels but instead to present all viable options. In speaking with key players from the city regarding this project it is clear that the city will be putting a heavier emphasis on marketing and selling the new hotel, over the existing lodging choices, since they have a stake in the success of the new hotel.
A similar project, by the same developer, was built at George Mason University. The project was foreclosed on within two years and the university was forced to purchase the hotel out of bankruptcy and convert it to dorms. Why is it assumed that this cannot happen in Harrisonburg?
FINALLY, and most importantly, the developers of this project tried, for years, to build this project with private funds and could not find any private investors to get involved. It is clear that without the public funds this project would collapse. That should tell you all you need to know. If this project had any chance of being a financial success, the developers would have hotel companies from all over the world picking up the phone and calling them (believe me the hotel development world is a very small circle with very large dollars) as hospitality investors are flooding the marketplace right now. If this project is really such a "win-win" then it should be able to be built solely with private money.
