I have been reviewing my notes on the proposed conference hotel at Foster Field. This issue is really two issues. First, should the city be a partner with the conference hotel and help fund it with our tax dollars. Next, are there other options for supporting this project without using tax dollars.
Before we go further, lets get some background information. We have a lot of people working in the leisure and recreation areas: 10% according to the latest MSA information we have. That is the fourth largest segment of our economy and it is also one of the lowest paid (see the figures from the BLS). The mean (average) wage for desk clerks is $6.48, maids and house keeping $6.77, food service $7.12. First line supervisors do better but still only make in the $10.00 to $12.00 with management possibly making around $20, but the bulk of the jobs will likely be in $6.50 to $7.50 range. This is about half of our mean salary of $14.04. It is well below the target wage that COSADC uses when it offers assistance to a business.
Looking further, there are about 1800 hotel rooms in the city. Our occupancy rate is in the 53% range. Average room rental was just over $50, with the top rate was in the $80 to $89 range. The conference hotel wants an occupancy rate of 65%, with a minimum break even point of 45% and a room rate in the range of $100. It would also add over 200 rooms that would be competing directly with the rest of the hotels and motels in town.
The hotel occupancy rate is also an indicator of problems we have attracting conventions here. There are problems with our current convention center. The multimedia support is old. There are few break out or separate meeting rooms. The closest hotels are struggling (one of them is currently closed) so it is hard to attract conventions to our convention center. There a number of other facilities in town. Some of them are small, like Spring Creek Marina which can hold 50 people. The coliseum, on the other hand, can seat 6500 people (with expansion possible into the Wells Fargo Pavilion and Spur Arena), and the Junnell Center can seat 5000 with another 1000 close by at the CJ Davidson Center. The La Quinta Inn has 4 meeting rooms, the largest of which has a 400 seat capacity. According to the local hotel representatives, they are having a very hard time keeping these smaller venues filled and feel the convention and visitors bureau needs to get the existing facilities filled before asking for new ones.
After looking at all the information so far, here are my conclusions. The city should not invest tax money of any type into this venture. The city council has time and again stated that their goals are high paying jobs with a future. COSADC won't consider a grant for a job that pays less then 75% of the average wage. Why should the city be partners in a business whose average wage will be about 50% of the city's average? Even if you take various multiplier impacts into consideration, the effect is more entry level, low wage jobs. There are also significant opportunity costs here. Any tax money used to build this facility can't be used for other projects. We have been told that it could be funded out of the hotel/motel occupancy tax, which is probably true. That tax is already used to fund the Chamber of Commerce, prize money and other incentives for various events we have, and lots of other cultural and tourism related projects. We already are at the statutory max of 7% for the tax rate, so there is no more money to be had there. Who do we take tax dollars from for this project?
There is another problem with the city partnering in a venture like this. It's a simple matter of fairness. The city needs to treat all the businesses equally. It needs to avoid even the appearance of favoritism or preferential treatment. How can it truly do that when it is in the business?
Looking at this project, there do appear to be some options where the city can help this project move forward. When the Quicksand Golf course looked at a convention center project there seemed to be some ways that the city could help such as tax abatements, road improvements, and possible help in getting tax free bonds for financing, although that was not commonly done. There did seem to be a possible problem with impact on bond rating, which should be looked at very carefully, but the bond advisor stated there would be no tax liability.
At the end of my quick analysis, I can't see a good case for the city to partner in building this conference hotel complex, especially if tax dollars are involved. There are still ways the city can encourage and assist this project.