New downtown hotel is a risk worth taking for a brighter Kansas City future
We’re not unabashed cheerleaders for a new downtown hotel. The $311 million, 800-room project has flaws.
It ought to include a larger chunk of private financing. It could cannibalize the existing hotel market. It’s tough to predict the future effect on convention traffic. Revenue forecasts from a catering contract that benefits the new hotel’s owners appear optimistic.
However, this baggage should not be allowed to sink a deal that has more strengths than weaknesses. Mayor Sly James and the City Council have solid reasons next Thursday to move forward with this project.
It has the potential to be a huge victory for Kansas City, wooing out-of-town spenders, boosting overall convention numbers and continuing downtown’s revival. Most notably, this can be done without placing an undue burden on taxpayers.
Kansas Citians who are enthusiastic about the Hyatt-flag project — as well as those concerned about it — should keep a historical note in mind: City officials and downtown supporters have failed for years to attract a new, large hotel.
Now a reasonable plan is on the table and worth pursuing.
Consider the public subsidies, which start with providing long-vacant, city-owned land for the project. The city also will pump in $50 million over 25 years from a current revenue source.
The hotel will be allowed to impose an extra 1 percent sales tax, but that’s similar to sales taxes already collected at other districts in the city.
The city will allow developers to retain most of the tens of millions of dollars in new tax revenue their project creates. Yet that deal shares traits with incentive packages the city has given for other financially risky urban-core projects.
While opponents say a new hotel won’t bring in expected convention traffic because other cities are engaging in a hotel arms race, flip the argument: What does Kansas City gain by standing pat, by allowing other cities to build newer projects that will make themselves more alluring to convention planners?
As Mayor Sly James has correctly noted, “We tout ourselves as a high-tech city, and we don’t have anything that comes close to a high-tech hotel. ... It’s time to upgrade our stock.”
Which brings us to perhaps the strongest reason to endorse this specific project.
James has insisted during his first four years in office that local taxpayers will not be put on the hook to pay off bonds for a new hotel. For good reasons, city officials don’t want to repeat the mistake made with the financing of the Power & Light District. That deal forced the public to spend millions a year in bond payments for the entertainment area.
Taxpayers will not back bonds issued for the hotel. That’s a deal saver right there.
Some detractors of the hotel think that last point won’t stick, that developers will come to City Hall at a key moment in the future and say the project can’t go forward without a new, hefty dose of city cash.
The Star has asked James about that scenario twice in the past month.
“The deal is the deal,” he said in late June. Will the city put more money in the pot? “No.” Back the hotel’s bonds? “No.”
Last week he said the city had offered the “best deal” possible.
It’s not surprising that controversy exists over a $311 million project and that plausible arguments exist to try to improve the deal. The costly Power & Light District is a cautionary example of what can happen in the risky world of publicly financed economic development.
Yet big projects also can work out as intended, on budget, with large public benefits. See: Sprint Center.
The convention hotel has the potential to be a game-changer in Kansas City’s convention market. It’s a risk worth taking.
This story was originally published July 18, 2015 at 9:00 AM with the headline "New downtown hotel is a risk worth taking for a brighter Kansas City future."