Running the numbers: how do the finances of the proposed Downtown Hotel work?

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ABILENE, Texas (KTAB) – The proposed hotel located in downtown Abilene seems to be a sure thing, as far as the City is concerned. A vote to approve a master plan went through unanimously at the Thursday evening council meeting, and while there isn’t any money moving just yet, we can look ahead to see what the figures actually mean.

Ask City Manager Robert Hanna, and he’ll tell you he’s confident in the plan: “I think the liklihood of taxpayers ever having to have their property tax bill pay for a component of this hotel is possible, but not probable.”

That’s because the City plans on the hotel paying for itself. In fact, the plans depend on that happening. Here’s how the funding is going to work.

The City and the Abilene Convention Center Hotel Development Corporation will split the cost. The Development Corporation is the “local government corporation”, or LGC, that technically acts as a separate entity from the City.

The City’s part of the bill is around $23 million. Around $7 million is a gift from community foundations. Another $4 million is cash the City has on hand. The $11 million left on their tab comes from issuing bonds.

City Manager Hanna said, “Income from the hotel, and the taxes generated by that hotel: room night stays, sales tax, mixed beverage tax, all that kind of stuff. That all covers the debt service.”

On the LGC’s side of the 66 million dollar equation, they’ll be responsible for a little over $43 million in total. That’s split up over three rounds of loans. The first two will be sales of bonds to the public, and the City won’t need to back them up.

The third and final round, the junior lean, is around $11.5 million, and that’s going to be paid for by the same community foundations that made a gift to the City. For this bit of money, the City will be responsible to back up the money in case the hotel fails.

“I can’t promise that won’t happen”, said Hanna. “I would be lying if I did. I’m not going to lie to the public. So we’ve got to do that, there’s a potential we’ve got to make that payment. I will say this, though: We’ve structured this to be absolutely as safe as we can be.”

City staff, and the Council, are confident the hotel will be able to make back money. If it fails, taxpayers will ultimately be on the hook for the City’s portion of the debt. It isn’t the entire $66 million, but it is a multi-million dollar portion. Still, officials say the plan is sound, and based on predictions made by respected industry leaders. That makes this a calculated risk that they’re willing to take.

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