Developers unfazed by lawsuit, efforts to put financing on ballot

Despite legal challenges facing the headquarters hotel, the Metro Council will begin considering the final agreements to authorize its construction today.

Other hotel owners have filed a lawsuit in Clackamas County Circuit Court to block construction of the hotel just north of the Oregon Convention Center, which Metro owns and operates. They also have collected petition signatures to put the project on the ballot, an effort that is before the Oregon Court of Appeals.

But on Thursday, June 12, the council will hear a staff presentation on the final financing and construction agreements between Metro and the hotel’s developer, Mortenson Construction of Minneapolis. A public hearing on the agreements is scheduled for next Thursday. And the council is scheduled to vote on the agreements the Thursday after that, June 26.

The overall cost of the project has grown since Metro last discussed it, from $197 million to $212 million. But, according to Metro, the entire $15 million increase will be paid by Mortenson, raising its total obligation to $134 million.

The sources of the remaining $78 million remain the same. They include: $60 million in bonds issued by Metro; $10 million from the Oregon State Lottery; a $4 million grant from Metro; and a $4 million loan from the Portland Development Commission.

The Metro bonds are still the most controversial source of financing. The Clackamas County lawsuit charges that Metro cannot legally issue the bonds because it will not own the hotel. Mortenson has agreed to sell the hotel to Hyatt after it is completed.

The hotel owners behind the lawsuit also are trying to put the financing plan for the bonds on the ballot. The Multnomah County Commissioner has amended the rules governing its transient lodging tax to allow taxes collected at the hotel to pay off the bonds. The initiative drive was intended to allow voters to reverse that decision, preventing the bonds from being sold. But a Multnomah County judge ruled the commission’s vote was an administrative action that cannot be placed on the ballot, prompting the appeal.

Metro is trying to consolidate all potential legal challenges to the project in a single case in Multnomah County Circuit Court under a rarely used legal move called a “validation proceeding.” The judge handling the Clackamas County case recently refused to send it to Multnomah County, ruling that it can proceed in his court. He did not indicate how he would rule on the question of whether Metro has the legal authority to issue the bonds, however.

If the Metro Council approves the agreements on June 26 and overcomes the legal challenges, construction is scheduled to start in spring 2017, with the hotel opening two years later.

A headquarters hotel is a large hotel with additional amenities for accommodating conventions, including extra meeting spaces for executive committees of their organizations and additional lounges and restaurants for socializing away from the conventions. Many other cities with convention centers have such hotels near them. Most have done well financially, though some have required ongoing public subsidies.

Metro has considered building a headquarters hotel next to the Oregon Convention Center for many years. It has commissioned studies that show such a hotel would attract additional national conventions every year, boosting the regional economy.

Studies commissioned by the opponents have concluded such a hotel would lose money, however, forcing it to reduce rates and draw business away from other hotels in Portland. They include those hotels whose owners are fighting the Metro project, such as the Provenance Hotels, the Hilton Portland & Executive Tower, and members of the Asian American Hotel Owners Association. They are operating under the name Coalition for Fair Budget Priorities.

Contract Publishing

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