Posted Dec 16, 2009, 5:32 PM
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Join Date: Jun 2009
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This story is relevant because it discusses the tax break for the Westin Hotel going in OCPE (last paragraph).
Phoenix mulls tax break for hotel downtown
Downtown Phoenix's Wyndham hotel could get a lucrative tax deal that's usually reserved for new business ventures, under a plan the City Council will consider today.
by Jahna Berry
Downtown Phoenix's Wyndham hotel could get a lucrative tax deal that's usually reserved for new business ventures, under a plan the City Council will consider today.
The lease-back agreement would give the hotel at 50 E. Adams St. a 20-year tax discount, a benefit that's estimated to be worth $400,000 annually. The Wyndham's owners now pay $700,000 annually in property taxes, said Jason Harris, deputy director of Phoenix's economic-development department.
The 520-room hotel would use the tax savings to begin $10 million in upgrades six months after the agreement is final. The upgrades "finish off" a $40 million renovation that began about four years ago, the majority owner said. Also, the Wyndham will be rebranded as Renaissance Hotel by Marriott.
The tax-deal idea comes as the city faces a shortfall of at least $105 million in its $1.1 billion general fund, which helps pay for day-to-day city services. A final figure, which is expected to be much higher, would likely be announced in February. Tax revenue is lower than anticipated because of the recession.
The Wyndham deal drew fire from central Phoenix state Sen. Ken Cheuvront, a Democrat.
If the deal is approved, it will cause a ripple effect that will raise residents' tax bills "immediately," he said. A new Arizona law removed a financial buffer that once insulated taxpayers when cities take properties off the tax rolls, Cheuvront said.
"Who says that this hotel isn't viable" without the tax break, said Cheuvront, who has unsuccessfully tried to pass a law to curb such deals.
Harris said he was unaware of that law and said the city plans to research the tax-bill issue.
City leaders generally downplayed the Wyndham deal, but could not recall another time that a similar agreement was extended to an existing business that hadn't switched owners.
Historically, City Hall has nurtured major hotels because tourism helps sustain almost every other kind of business in the heart of the city, said Deputy City Manager David Krietor.
Phoenix used revenue bonds to build the 1,000-room, $350 million Sheraton hotel, which opened in 2008, and the city bought the Hyatt's parking structure at Second and Adams streets, Krietor added.
The Adams Street hotel was built in 1975 and has been under the Wyndham flag since 2003. Steven Cohn has been majority owner since 2007.
Krietor said the Wyndham deal would attract more groups to the city's convention center, where last year, construction crews completed a $600 million expansion that tripled its size.
As a new Marriott affiliate, the hotel can leverage Marriott's group-booking prowess.
So while the city would forgo some tax revenue, it's poised to get more in the long run, advocates say. The Wyndham project is expected to generate $96 million in tax revenue over the life of the agreement, and up to 40 percent of that amount is new money resulting from planned changes at the hotel, Harris said.
"We are talking about generating more tax revenue, not less," Cohn said.
In other council action, Phoenix leaders plan to offer a similar deal to a Westin hotel proposed for the recently completed One Central Park East tower near Central Avenue and Van Buren Street. The office building, which plans to change its name to Freeport-McMoRan Center, had a 25-year tax reduction worth about $23 million. Because it added a hotel, city leaders want to extend that agreement to 50 years, adding a $15 million tax benefit for the developer, Harris said.
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