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Divided Council to consider downtown hotel development offer

Wednesday, June 22, 2011 by Josh Rosenblatt

Nearly three years after a heated dispute over the fate of Las Manitas ended with the beloved downtown Mexican restaurant closing its doors, the City Council is split over how best to handle the development of the site where it once stood.


On one side are those who support an ordinance that would waive nearly $4 million in development fees for White Lodging, parent company of Marriott, to build a 1,003-room hotel on the site on Congress Avenue. On the other side are Council members who believe the project is moving too fast and hasn’t faced the kind of public scrutiny that some believe led to the reconsideration of city funding for the proposed Formula 1 racetrack last week.


Assistant City Manager Rudy Garza told Council yesterday that a large hotel is needed downtown if Austin hopes to be competitive in recruiting conferences and other large events.


“We’re losing out to bigger cities for conferences because we don’t have the capacity,” said Garza. “This will allow us to be more competitive in the market.”


Garza said that the city had received interest from other groups asking for partnerships with the city to build a large hotel downtown but that those groups were seeking “assistance in the range of $60-100 million direct cash contributions from the city.”


“The level of contribution by cities is tremendous,” Garza said. “It’s big money.” That’s what makes the White Lodging agreement so remarkable, he continued.


Under the terms of that agreement, the city would waive $3.72 million in fees — including $3 million in temporary use right-of-way fees, $455,585 in permit fees, and $120,000 in water quality fees– and contribute $500,000 to add a new 15-inch wastewater line. The total estimated fiscal impact would be approximately $4.23 million. “For this, the city would realize a $300 million investment,” Garza said.


Several Council members are concerned, however, that neither they nor the public have had enough time to consider the agreement. Public skepticism over economic incentives has grown, they believe, with the recession and the recent flap over city contributions to Formula 1.


“I certainly support economic development and I believe that the fee waiver is a tool we should have to help expand the tax base,” Council Member Sheryl Cole told In Fact Daily. “I, however, do not feel that we have received adequate documentation to evaluate the proposal and, more importantly, for the public to understand what the applicant is proposing.”


Council Member Bill Spelman, who co-sponsored the item, said that the “electorate has shown recently a lack of trust for deals of this kind” and that Council’s recent focus on the Formula 1 deal meant that not enough attention had been paid to a potential agreement with White Lodging.


“I think this is a good deal based on everything I know about, but I would like my 800,000 friends to agree with me on this and give them a few weeks to wrap their arms around the idea,” Spelman said.


Spelman recommended Council meet at some point during their July break to further discuss the proposal and hear from the public on the matter. “I’m happy with the terms of the deal — $4.3 million for a $300 million project,” he told In Fact Daily. “But we’re dealing with a very polarized public right now. More time would help people come to terms with it.”


Whether the public is polarized right now or not, it was clear at yesterday’s work session that Council is, at least on this issue. Cole and Laura Morrison joined Spelman in his desire for a postponement. Those three came out in favor of Council Member-elect Kathie Tovo in her recent race against Council Member Randi Shade. Meanwhile, the three Council members who endorsed Shade — Mayor Lee Leffingwell, Mayor Pro Tem Mike Martinez, and Chris Riley — made their support for the hotel project clear yesterday.


“I think this is a unique opportunity,” said Leffingwell. “We can put together all the information we can before Thursday, but I think if we don’t take the action that’s posted we definitely run the risk of losing a very unique opportunity, frankly a boon to the city.”


“We’re talking about a one-time waiver for a lifetime of benefit,” said Martinez.


“There’s always going to be a healthy amount of skepticism about any incentive package,” said Riley. “The amount we’re talking about strikes me as fairly reasonable in light of the objective.”


Shade, who is in her final week as a member of the Council, was not at yesterday’s meeting, nor was she at the meeting of the Public Health and Human Services committee later in the day. If current projections hold, Shade’s vote would be the difference between approval and postponement at tomorrow’s Council meeting.

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