The trio of Kansas City Council members who got the brushoff last week when they sought more details from developers of the new $322 million downtown convention hotel will get a public hearing on their questions Wednesday.
The council’s finance and governance committee will take up an ordinance, sponsored by Councilwomen Heather Hall, Teresa Loar and Katheryn Shields, to withhold the city’s $35 million cash contribution to the long-delayed project until they received greater clarity on the complex public-private real estate deal.
The development team is headed by Loews Hotels, who will be the owner operator, and its investment partners, New York financier Steve Rattner and Denver hotel developer Tim O’Byrne, and their local attorney. Mike Burke.
Mayor Sly James, emerging Tuesday from a closed council session called to discuss the ordinance, acknowledged there had been lapses in communication around the project and that there was “room for improvement.” While a trove of financial data was presented by the developer team, it might not have been effectively explained.
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“They tried to answer what they thought the questions were. They missed,” James said. “I don’t have a problem with that. But even when you (release) the documents you have to sit down and explain them.”
The deal was considered all-but-buttoned up when developers briefed the council for more than two hours last Thursday. The group was fresh from winning key tax abatements from two city agencies and required no further approvals from the council. They announced a January groundbreaking.
But they deflected several questions from Hall, who sits on the council’s planning and zoning committee. The questions concerned the certainty of their bank financing, construction costs and the basis for believing that the hotel would be successful.
Hall also expressed resentment at having hundreds of pages of documents, many of them blank pages, released to her on short notice after months of requests.
James said Tuesday he could have headed off the issue had he been aware of what Hall was asking for.
“I could have solved this problem for them in a day,” he said. “When I talked to Mike Burke before (the last Thursday’s briefing) I didn’t know that she was after all this stuff. I just said, ‘Don’t forget when you make your presentation try to answer Councilwoman Hall’s questions.’”
When the three members filed their ordinance Friday, it appeared to be dead on arrival.
The city attorney’s office declined to sign off on the legality of the ordinance, expressing concern it would undermine the existing 2015 agreement committing the city to the project.
Mayor Pro Tem Scott Wagner said he would not call the measure up for a hearing. A Loews spokesperson e-mailed a statement from New York declaring that all required disclosures had been made.
But city officials and developers grew concerned that the existence of the measure — even if it languished indefinitely on the committee docket — could raise uncertainty on the part of lenders and potential purchasers of bonds needed to finance the venture. So their tone changed.
Financier Rattner flew back to Kansas City to meet with the three sponsors of the ordinance, who later reported that they were beginning to receive some of the documentation they requested.
“We’re not there yet, but we’re getting there,” Shields said at an early afternoon press conference.
After a closed council session in the afternoon, Mayor Pro Tem Scott Wagner said he would hold a hearing.
“It was very clear that you have a cloud that exists so you deal with it,” he said.
Asked if the conflict might have been avoided had last week’s council briefing been postponed until more details were available, James said that was not an option.
“We don’t have time for all that,” he said. “We’re running up against a lot of outwardly imposed issues, like tax reform, that may take away the tax exempt on the bonds. Things change financially. The way things are going right now, things could change financially in a hurry.”
Loews, Rattner and O’Byrne, will contribute nearly $60 million in equity to the project. Developers said they will have a $110 million construction loan from Wells Fargo, although the ordinance sponsors said they have yet to see a written guarantee.
The financing package also includes about $79 million in revenue from bonds to be sold by the Land Clearance for Redevelopment Authority and the Tax Increment Financing Commission, and a $32 million bank loan secured by catering revenue.
Kansas City is contributing $35 million from its convention and tourism fund.
Under the approved financing structure, taxpayers aren’t on the hook for cost overruns, construction delays or if the project fails.
The three council members said they still supported the hotel and were not trying to relitigate the project for political reasons. They said they only wanted to ensure that deal was secure.
“We don’t want to end up in a situation where we’re halfway through things and we have a hotel that doesn’t get built,” Shields said.