Last November, I posted a blog about the EDC’s role in several Downtown development projects, namely the hotel and conference center. Since that time, we have remained steadfast in our commitment to the framework of the overall project, but there are some updates to share.
The EDC board approved a term sheet at their August 3rd meeting that provided highlights of our public-private partnership arrangement with Novak Cobalt Partners (NCP). The principals at NCP are the private side of the P3 in Georgetown that resulted in the newly-opened Sheraton hotel and conference center, so we have an experienced partner with which to work.
In short, the EDC will contribute $6.5 million toward the construction of the hotel, conference center, and adjacent improvements—with an estimated overall price tag of $26.5 million—by way of a performance agreement with NCP. This money will come from a sales tax bond issued by the EDC, so there will be no negative impact whatsoever to the City’s budget, bonding capacity, or tax rate. The hotel and conference center will be constructed on land owned by the EDC, so the EDC will charge NCP an amount of base rent in the form of a ground lease, plus additional rent that will be based on room revenue from the hotel. The base rent and additional rent paid to the EDC will be used to pay our debt service on the note and pay for public realm improvements throughout Lakeside Park, such as trails, a boardwalk, gardens, a beach, amphitheater(s), and more. Because these amenities will be available to everyone—tourists and local residents alike—we are awaiting the completion of the Parks Master Plan so that we have some guidance on phasing the construction of the projects that are most important to our stakeholders. If you haven’t already taken the Parks survey, please do so by the end of this month so that your voice is heard.
I’ve stated before that a hotel in and of itself will not provide a daily benefit to local residents (other than those who work at the hotel)—but the type of hotel we are planning, along with the conference center and related improvements that comprise the overall project, will catalyze Downtown and provide enormous dividends for the entire community for generations to come.
Finally, I’d like to address the EDC’s financial health and our capacity for involvement in projects such as the one at hand. We use incredibly conservative projections on our revenue, which comes almost exclusively from the half-cent sales tax for economic development in Marble Falls. This revenue is substantial—over $1.9 million in the last 12 months—because of the size of our trade area and the volume of transactions. (Think of it this way: every time someone buys a Whatameal with cheese for $7.88, the EDC receives slightly less than 4 pennies. It’s a nominal amount at the transactional level that adds up at the community level.) Our economy has obviously grown over the last several years, but we don’t take that into account when we budget at a flat sales tax level. Moreover, when we build in a 2.5% annual increase in our operations and programs budget and continue to honor our other commitments to Baylor Scott & White and others, we are further insulating our budget from occasional market slowdowns or corrections.
So, when we have projected the known expenses and potential revenue from the hotel/conference center project over the next decade, we have used four scenarios ranging from worst-case to an expected scenario and two cases in-between. Even in the worst-case scenario in which we would be responsible for debt service on the project with no income whatsoever, the EDC would still be fully operational without any impact to our existing programs or commitments. This is achievable because our note on the Colt Circle project will be paid off in 2018, so we would effectively be replacing one debt service payment with another. If, however, we meet or exceed the revenue expected from the project, the EDC will be able to retire our debt early, invest heavily in the public realm, and begin work on the community’s next big project.
To that end, I invite you to weigh in on what that next big project should be—and/or share your thoughts on what would make our forthcoming hotel and conference center project the best that it can be.