City offers more money

To land hotel bond buyer

Council approved additional $50 million in bonds

Last week, the City Council approved an additional $50 million in bonds to finance the Convention Center Hotel and agreed to send $10 million ahead of schedule to Austin Convention Enterprises, Inc. (ACE), which will own and operate the hotel. The total now approved for the hotel revenue bonds—which are not backed by what is called “the full faith and credit of the city”—is $275 million.

Director of Finance John Stephens explained, “These are bonds that are being issued by a non-profit corporation. These are not even city bonds. The governing body that approves the creation of the corporation also has to approve the bonds . . . but after that (the City Council is) out of the picture because the city is not in any way obligated for the repayment of the bonds.” Since the bonds are not being paid for through tax revenues and are not guaranteed by the city, voter approval was not required, he said.

Last March, the Council created ACE and approved issuance of hotel revenue bonds to finance construction of the Hilton Hotel and garage across the street from the Convention Center. But the economy was starting to cool and the bonds were not as easy to sell as they might have been earlier. ACE has been looking for a buyer for the past year, unable to begin construction on the 800-room hotel.

Zurich Center Solutions (ZCS) is the prospective customer. Stevens said the company, which is referred to as ZC Specialty Insurance Company, would buy the bonds, insure them and sell them to other investors. However, ZCS insisted on increasing the bonding amount, with the city paying $35.1 million as an insurance premium, plus fees.

“We are trying to finalize the terms of the agreement with them. But, depending on what happens, we might shop the same deal with someone else,” he said.

Stephens said there are three types of bonds, referred to as Series A, B, and C. “The Series A Bonds are going to be . . . marketed to large investors—that has not changed.” A large insurance company is going to buy all of the Series B Bonds, Stephens said. That company will then insure the bonds, called certificates of participation, and sell them to individuals or groups of investors at a lower rate. But those buyers will have the security of the insurance.

Stephens said, “There’s what they call a waterflow schedule, a cash flow schedule, that says the first money that comes in is going to be used to pay for the operations of the hotel. Second, money is to be used to pay the Series A bonds and that’s why those will sell at a lower interest rate, but they’ll sell easier than the Series B bonds. Then the Series B bonds, and then the developer will be last in line.”The Landmark Organization's bonds are Series C.

“This is a big insurance company. If the hotel does not produce enough revenue to pay the insurance company it doesn’t matter to you—the buyer—because they have insured it. The company gets the difference between what the hotel pays and what they pay to the ultimate buyers,” the finance director said. Stephens said the bonds would be much easier to sell once they are insured.

When the city chose the Landmark Organization to build the hotel, Council Members bragged that the city would not have to put any of its own money into the venture. ( In Fact Daily, July 23, 1999) However, last summer, the Council approved an economic development program grant of $5 million per year for three years to assist in the hotel’s development. ( In Fact Daily, June 30, 2000.) In addition, according to documents provided by the city, ZCS requested that the city authorize payment of the full $15 million on the date the bonds are issued.

Stephens said he thought the deal with the insurance company might be completed in about a month.

Alvarez seeking home

Rehabilitation volunteers

Council Member hoping for waiver of some fees

Council Member Raul Alvarez is working with Ray Ramirez of the East Austin community group “Con Ganas” to organize volunteers and raise money to help repair run-down homes on the East Side. Ramirez says it’s important to repair those older homes for their current residents in order to prevent the gentrification of the neighborhood. Alvarez hopes that volunteers will be able to help homeowners who don’t meet the guidelines for the different grants or loans under the city’s Housing Rehabilitation Program, or need more money for repairs than those programs would be able to offer.

“There’s been a lot of good steps the city has taken to help address issues related to affordability,” Alvarez said. “Even if we look at what the city is currently doing there are still some gaps in terms of . . . the availability of those programs to everyone who needs help.” The group has selected three homes with serious problems for its pilot program. In one case, the estimated cost of repairing the home is $50,000. In addition to volunteer labor, Alvarez and Ramirez are seeking people who can help get the appropriate electrical, plumbing, and mechanical permits. Alvarez also says his office will work with other city departments to see about waiving some of the building permit fees for the houses being repaired under the program. (Ray Ramirez can be contacted at 928-1688).

On the South By Soutwest side

ABIA meets SXSW: Visitors flying into Austin for the South By Southwest music conference this week will hear some of the state’s top musicians perform in the airport itself. As reported here last week, the airport has been designated an official South By Southwest venue. For musicians accustomed to the dark confines of a nightclub, the airport stage can be a new experience with its own unique distractions. During his Wednesday afternoon performance, singer-songwriter Slaid Cleaves had to pause before the final verse of his song “Broke Down” because he was drowned out by the airport’s public-address announcer requesting the owner of a ”maroon Chevrolet pick-up truck left unattended…please return to that vehicle immediately.” Airport regulations prohibit the music from being louder than the P.A. system so travelers will still be able to hear important arrival and departure announcements.

©2001 In Fact News, Inc. All rights reserved.

First Lady visits . . . First Lady Laura Bush, the twins and a couple of friends were spotted leaving Guero’s Taco Bar Thursday afternoon. Sure, the White House has great chefs, but can they do Tex-Mex? . . . Thrown out of the tribe . . . Disgusted with members who fail to show meeting after meeting, active members of the city’s Downtown Commission agreed last night to send a list of those not making the grade to the City Clerk’s Office. Upon notification that a member has missed three meetings in a row or more than three meetings in a year without an acceptable excuse, the Clerk can notify commission members that they have been bounced . . . Eastside neighborhood plan meeting . . . The Central East Austin Neighborhood Planning Area workshop is scheduled for 10:45 a.m. to 1:30 p.m. Saturday at the Carver Library, 1161 Angelina . . . Wearing of the green . . . The Dog and Duck Pub will begin celebrating St. Patrick’s Day on Friday and will continue through Saturday. The attendant St. Patrick’s Day Street Festival will close the 400 block of W. 17th St. from 6 a.m. Friday through Saturday night. Another celebration will close the 200 block of E. 6th Street on Saturday from 11 a.m. to 8 p.m. Fado Irish Pub will celebrate too, closing the 200 block of W. 4th St. from 6 a.m. Saturday to 6 a.m. Sunday . . . Gay/Lesbian March . . . The Lesbian Gay Rights Lobby of Texas will gather on Park and James streets for a march to the Capitol from 11 a.m. to 1 p.m. Sunday. Congress Avenue will be closed and reopened as the group moves through. Park and James is near the 1200 block of S. Congress . . . Goin’ fishin’. . . In Fact Daily is taking Friday off.