A novel counterproposal

As commenter Rorschach notes here, the City of Houston is apparently considering selling the Hilton Americas Hotel to help finance another convention center hotel. Nancy Sarnoff and Carolyn Feibel report for the Chronicle:

The city of Houston is considering selling its 1,200-room Hilton Americas-Houston convention center hotel.

The sale would allow the city to pay off bonds used to finance the property and create more financial flexibility to undertake another project, such as a second convention hotel downtown.

That's according to Richard Campo, chairman of the Houston Convention Center Hotel Corp., the nonprofit created by the city to develop and own the hotel.

City leaders have been talking about bringing another large hotel to a site next to the George R. Brown Convention Center and across the Discovery Green park from the Hilton Americas, Mayor Bill White said Monday.

For a sale to occur, however, the city would first have to clear up hotel-related obligations tied to its employee pension fund.

The City Council approved a proposal in 2004 to use the Hilton Americas as collateral to cover $300 million of a $2 billion shortfall in the Houston Municipal Employees' Pension System.

Instead of issuing a bond, the city worked out an arrangement with the pension system allowing it until 2033 to pay off the obligation. In exchange, if the city defaulted, it would have to turn over ownership of the hotel.

But as soon as next week, the city plans to seek council approval to issue pension obligation bonds that would pay off the note to the pension fund, said Judy Gray Johnson, the city's director of finance and administration. The city owes the pension fund about $360 million, including interest.

Here is a novel counterproposal for city leaders: Fund the pension instead of (mis)using the Hilton Americas as collateral, sell the hotel, get out of the hotel business, and stay out of the hotel business.

BLOGVERSATION: Houston's Clear Thinkers.

Posted by Kevin Whited @ 01/23/08 11:41 PM | Print |

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