The Oklahoma City Council approved an agreement Tuesday to help finance a convention hotel with $85.4 million in public funding.
Under the agreement, the city would fund about 36 percent of the cost of building the Omni Hotel, which will complement the planned MAPS 3 convention center. Omni OKC, LLC will cover the remaining $150.1 million in costs.
The hotel plan passed with a 7 to 2 vote.
The hotel is expected to draw convention attendees and tourists to Oklahoma City, and to generate jobs and spending at local businesses. HVS, a consulting firm hired by the city, estimates the convention center alone would attract about $62 million in yearly spending, while the center and hotel together could generate a total of $137 million.
Cathy O’Connor, president of the Alliance for Economic Development of Oklahoma City, spoke in favor of the development agreement at the City Council meeting on Tuesday.
“It really is about keeping up the progress in Oklahoma City, continuing on the trajectory that we’ve been on, continuing to invest in ourselves and making this place the most attractive we can,” O’Connor said in a phone interview.
Oklahoma City will contribute its portion of the funding first. The city plans to issue $85.4 million in public bonds, and expects to repay them over a period of 25 years. According to city officials, the total cost to the city could amount to $135 million dollars when interest is included.
The funding for the repayment of the bond will come from a variety of sources. The Omni Hotel will pay sales, occupancy and property taxes, which will be collected into a tax increment finance fund. Over a period of 25 years, the hotel will also pay the Oklahoma City Urban Renewal Authority for the land on which it will be built. Finally, if the hotel nets more than $20 million a year, it will be required to contribute a portion of its profits to help the city repay its bond debt. Altogether, these sources are expected to generate between $22.1 million and $25 million.
An additional source of funding could be the state Leverage Act, which makes matching funds available for urban development projects. The city plans to apply for these funds, and could receive up to $16.3 million.
The city also plans to repay the bond debt with income from other development projects, including lease payments from Bass Pro and the Skirvin Hotel, and additional tax increment financing income from downtown districts. The city estimates it will generate between $43 million and $70.1 million from these sources.
The city plans to place any overflow funding into a revenue stabilization fund. The reserves will be used for debt repayments in case income from the above sources is lower than expected.
The plan was designed to avoid an increase in taxes. The diversity of revenue sources is intended to protect the city’s budget from being diminished in case hotel revenues are lower than expected, said Cathy O’Connor of the Alliance for Economic Development.
“We’ve come up with a way to move forward with the project that mitigates the city’s risk,” she said.
Omni will make its $150.1 million contribution to the project after Oklahoma City pays its share. In all, the project will cost $235.5 million.
Ward 2 Councilman Ed Shadid opposed the plan.
“Something of this magnitude, where you’re using so much public assistance, in my mind, requires a vote of the people,” he said in a phone interview, citing concerns that the city’s general fund would be held responsible for debt repayments if the hotel’s revenues are lower than projected.
Shadid said public funding would be better invested in diverse industries to encourage job growth and the exchange of ideas.
“We’re putting all of our eggs in one basket for the convention industry,” he said.
Omni and Oklahoma City have been in negotiations since September 2016, when the city chose Omni from a list of potential developers. The hotel is projected to be 570,000 square feet and have 600 rooms. Groundbreaking is expected in the fall of 2018, with completion in 2020.
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