I unequivocally support – a – city-owned or -incentized convention, conference or event center. However, I believe the current project needs to be examined carefully to insure maximum benefit with minimal risk to the city. I support voter approval.
Principals of the project currently under discussion are the University of North Texas (UNT), developer O’Reilly Hospitality Management, and the City of Denton. The project is now in the feasibility study phase, in which the economic viability of the project is analyzed. The convention center (only, not the hotel), as proposed, would be funded by taxpayer-guaranteed bonds in an amount not to exceed $25 million.
As currently structured, all city revenue – property tax, sales tax and hotel/motel (HOT) tax – generated by the total project (including the hotel) will be required to pay the bond debt service for the convention center. The revenue will not be sufficient to pay the debt service, so the developer has agreed to make up the difference if, and only if, the debt issued by the city does not exceed $25 million. If the cost of the convention center exceeds $25 million, then everyone goes back to the drawing board.
All revenues from convention center bookings will go to the developer.
Additionally, the developer is requiring creation of a TIF (Tax Incremental Financing district) and participation by Denton County and Denton Independent School District (DISD) to provide an additional subsidy to the developer of approx. $400,000/year. The County and DISD have neither determined nor approved participation. If they do not participate, who will make up the $400,000?
The city has recently agreed to pay the first two years of debt service once the facility is open. This amount will be $1.8 million to $2.2 million per year. HOT funds are proposed to be the funding source for this debt service, but there will not be sufficient reserves from HOT funds to cover the debt.
Additionally, the city must escrow funds to create a capital reserve/remodel fund for future repairs and enhancements, scope and timing of which is determined by the hotel corporation. Said escrow fund will be capitalized with HOT fund revenue.
For the project to provide any contribution to the general fund revenue, convention attendees and hotel guests will have to leave the premises and spend money off-site.
Additionally, there is no plan for commercial development on land owned by the University of North Texas. Any commercial development within walking distance would require encroachment into the Denia neighborhood.