Oklahoma City Opens Negotiations With Omni For MAPS 3 Convention Center Hotel

Sep 30, 2016

Earlier this week, the Oklahoma City Council voted 7-2 to pursue negotiations with the developer Omni for a proposed hotel attached to downtown Oklahoma City’s new convention center that’s part of the MAPS 3 series of projects.

An artist’s conception of a proposed hotel that would be attached to downtown Oklahoma City’s new convention center.
Credit Provided / Omni Hotel and Resorts

This may not seem like a big deal on the surface, but it does have significant implications for the spending of taxpayer dollars and future funding. The process goes all the way back to 2009 when Oklahoma City voters approved the one percent sales tax, but the hotel conversation started about 18 months ago. The Journal Record’s Ted Streuli says the city needed someone who could develop an appropriate hotel to go with the convention center, and they identified four developers who could handle the task.

“What they were looking for is a hotel with 600 rooms, 50,000 square feet of ballroom and meeting space, an upscale name for its branding, and physical connectivity to the convention center itself,” Streuli said. “Of the plans they looked at, Omni actually submitted two. The city likes one of those as its favorite of the four, but it's going to require about $85 million in public funding.”

The $85 million figure represents about 36 percent of the cost, The Journal Record’s Brian Brus reports:

Tom Morsch, managing partner at Public Financial Management, said those figures compare favorably with projects in similar markets. The Kansas City Hyatt, for example, which is expected to be finished in 2019, will require $156 million in public participation, or 51 percent of the total. The Omni in Louisville, Kentucky, to be finished in 2018, will require $107 million from the public, or 47 percent of the final cost.

Cathy O’Connor, president of The Alliance for Economic Development of Oklahoma City, has led negotiation on City Hall’s behalf. She said interested parties were told parking would not be included in their proposals.

The $85 million price tag for the public didn’t sit too well Ward 2 Councilman Ed Shadid. He’s well-known for being skeptical of using public money for private projects, and he’s also worried about some of the parking issues that will come from having a hotel, a convention center, and the Chesapeake Energy Arena all within a few blocks from each other.

A plan put forth last week suggests surface parking and a three-story garage to provide about 900 parking spaces, but the city is about $10 million short.

“The proposal that came up last week was that they would some of the contingency money that's built in to MAPS 3 to make up the difference to build the parking,” Streuli said. “Councilman Shadid objected to that. He doesn't think that the public was aware that funding for a parking garage was part of the deal when they voted for MAPS 3 and he feels that's a little bit deceptive to try to slide it in now.”

Shadid and Ward 1 Councilman James Greiner both voted against the Omni proposal Tuesday, and during discussion Greiner questioned the necessity of the new hotel’s meeting space requirements.

“The average person viewing this is not going to really think that makes any sense when we’re already building a convention center across the street that has that already,” Greiner said. “And do we need that? Is that actually needed? And I think that’s a legit question. And we probably want it, but I’m not sure we need it.”

Kenny Tsoodle, the assistant finance director for the city, told the council that it's really difficult to plan financing options at this stage until they get into further negotiations with Omni representatives on the hotel itself.

Depending on the company’s own preferences and resources, construction funds could be raised in several ways, including a tax increment finance district, ground lease, general obligation limited tax bonds and rental car tax.

“It’s really hard to say until we put together the final funding plan,” Tsoodle said. “We don’t know what the (financial) structure looks like. We don’t know what the coverages will look like. We don’t know if there will be city backing on a bond deal or if it stands alone.”

“This gives us a chance to go back to the people and ask them what they think,” said Councilman Pete White, who also echoed some of Shadid’s concerns. “I think the idea that it could be partially funded through an increase in the hotel/motel tax or in a citywide car rental tax would give an opportunity for the public to weigh in on this.”

Greiner also floated the idea of a fourth MAPS sales tax for the convention center as well, although that could lead to pushback from a grassroots movement that wants to see a MAPS 4 include neighborhoods outside of the downtown core.

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