City Hall can protect taxpayers and get a new downtown Hyatt hotel, too

It has been 30 years since Kansas City welcomed a new, large convention hotel to downtown — the Vista International, now known as the Kansas City Marriott Downtown.

So it’s easy to see why Mayor Sly James and many other public officials have embraced a recent deal to build a $302.5 million, 800-room hotel east of the Bartle Hall Grand Ballroom.

However, this big project could create potential risks for taxpayers, because they will be asked to finance quite a bit of it. James and others at City Hall can’t eliminate those risks. Meanwhile, the private investors behind the Hyatt-branded hotel present a convincing case they can’t complete the structure without the public’s help.

That’s why, at every step of the way, city leaders must press to prevent excessive use of taxpayer funds for the hotel. The current memorandum of understanding between the city and the hotel’s private sector developers appears to do a reasonable job of walking that fine line.

On Tuesday, for instance, City Manager Troy Schulte said part of the agreement called for fees to be paid through an exclusive catering agreement the developer will have for Bartle’s meeting space. As Schulte walked through the deal, he noted a few times that he didn’t think the fees would become a burden on taxpayers.

“There would be no risk to the general fund,” Schulte said, even if catering revenues didn’t meet expectations. That’s a strong claim that James and other City Council members should fully vet as this project moves forward.

Taxpayers will be asked to help make the project possible in other ways.

Primarily, the developer in the next several weeks will pursue approval for two tax increment financing deals, one lasting 23 years and the other 30 years. Essentially, the developer wants to keep tens of millions in tax dollars that the project will create, diverting those funds from the city, Jackson County and other taxing entities.

In a city and region where too many of these TIF deals have been handed out, a good case can be made that building a large hotel in the urban core has a solid argument for getting public incentives.

However, even in this case, the TIF Commission and the City Council must not rubberstamp the lengthy deals sought by the developer. Officials must get clear answers on exactly how much revenue the tax diversions will generate and how that money will be used.

Mike Burke, a civic leader and local point person for the developer, said Tuesday that the project likely will require all of that TIF revenue to make it financially possible. He also noted that one major decision by the city — the excellent requirement that taxpayers not be on the hook for any bonds issued to build the hotel — could complicate attempts to get private bank financing.

“If we had a city guarantee (for the bonds), things would be a lot different,” Burke said.

Yet Kansas Citians already are paying millions of dollars a year for the Power & Light District’s city-backed bonds because that project has failed to meet revenue expectations. Repeating that costly decision would not be wise in the case of a hotel that might have its own financial problems.

City boosters say convention planners already are calling, eager to hear more about the proposed hotel and how it might allow them to meet in Kansas City sometime after it opens in 2018. That’s encouraging.

A final agreement should clearly spell out how much the public sector could pour into this deal. Then the City Council has to decide whether that final pact is worth approving, thus pushing the project closer to the finish line.

This story was originally published May 26, 2015 at 5:09 PM with the headline "City Hall can protect taxpayers and get a new downtown Hyatt hotel, too."