Thursday, January 18, 2007

$50 Million Subsidy For Billionaire White

Dean White may be worth $1.2 billion and ranked No. 283 on Forbes list of America's wealthiest, but the company his family controls, White Lodging Services, needs a $50 million handout from Indianapolis taxpayers to build a new J.W. Marriott Hotel to serve as a headquarter hotel for a newly-expanded Indiana Convention Center. This would be the same hotel the developers told the City of Indianapolis it would build even if it was not chosen by a city planning committee, which Mayor Peterson appointed to review competing hotel proposals. The Star's Jeff Swiatek writes:

The City of Indianapolis would invest up to $48.5 million in public money in the proposed JW Marriott hotel Downtown, according to a "letter of intent" released today by the city.

The six-page letter spells out a deal negotiated over the past month and says the city subsidy would be paid by selling bonds and paying them off with revenues from a tax increment financing district that would include the hotel site at West and Washington streets. The city also would grant property tax abatement to the hotel project, which would cost at least $250 million to complete.

Developers White Lodging Services Corp., of Merrillville, and REI Real Estate Services, of Carmel, agree to design the JW Marriott with 1,000 rooms, unless a market study that's yet to be done shows that a lesser number of rooms is desirable.

The developers also agree to break ground before Jan. 31, 2008 and open two years later, in time to host fans attending the March 2010 collegiate men's Final Four basketball championships that will be held in Indianapolis.

The developers also agree to make contributions, which weren't specified, to support the Indiana Sports Corp. and the Indianapolis Cultural Development Initiative.
So while the city doesn't have money to keep park pools open during the full summer season, doesn't have money to control crime in our neighborhoods, and is unable to keep our streets, sidewalks and sewers maintained and repaired, it can find $50 million to subsidize one of the state's wealthiest families to build a new hotel to accommodate out-of-town visitors to the city. When it comes to providing basic city services, we're told we have to pay higher taxes. When a billionairre needs a public handout, the city charges it to a credit card and sticks us with an even bigger tax burden to pay it off. Where's the outrage?


Anonymous said...

I am just as flabbergasted as you are Gary. I recall seeing a blurb about Mickey Maurer recently and a situation elsewhere in Indiana and a local administration was giving away "the farm" and Maurer stepped in and renegotiated the deal and the deal was done with NO subsidies.

Anonymous said...

Those out of town visitors you so casually dismiss spend $3.25 billion annually in Indianapolis, pay $734 million in state and local taxes and support a hospitality industry that employees 63,000 people.
Just thought it was worth mentioning.

Anonymous said...

Note a few other things:

- This agreement does not require 1000 rooms. The Marriott team never wanted to build to the original requirement, and now the city is letting them commission a "study" to get their way out of it.

- Nothing mentioned about improving the architecture of the hotel at all.

- Subsidies about the same as those of the Intercontinental proposal.

Anonymous said...

I don't have a huge problem with subsidies, in and of themselves, for anyone to build a hotel like this. It's a tourist magnet. Our convention center wil soon be much larger, and more hotels are needed. Those translate to dollars spent by tourists and that's good for the city. No one can seriously debate that.

I do have a problem with the details you've published, Gary. It would seem the city has once again sent someone to the negotiating table who does not do a lot of these kinds of deals.

White ought to build what the study says the city can use; he probably can't secure financing for any more than that anyway. Lenders require market data and justification.

But there are non-fiscal details that I hoped would get ironed out: design, timeframes and some other issues.

When are we going to stop sending legal beegles to do this stuff? They can review contracts afte rnegotiations are done. Dime for dime, send in a sales professional. They negotiate for a living evrey day. A law degree does not equal a negotiating degree. Frankly, far from it.

Anonymous said...

anon, the city already conducted its own study - by PWC I think - which showed the need for a 1000 room hotel. The only reason to conduct a second study is so the developers can come up with a justification for not doing 1000 rooms, which they were on record as not wanting all along. Their bid wasn't for a 1000 room hotel, they did not meet the requirement for rooms set out in the RFP, but the city picked them anyway, saying publicly that the size would be increased (and that the architecture would be better) and now appears to be reneging on those promises.

indyernie said...

I agree with 3:08.

No slam intended against attorneys.

The city needs a good old fashioned teamster negotiator along with a a Kirby distributor and few old school used car salesmen.

Mix in a couple attorneys to prepare the contract and our city would get a much better deal.

Gary R. Welsh said...

anon 1:50, the amount the out-of-town visitors kick into the local economy and pay in local taxes is no excuse for awarding a subsidy which was never needed to get the new hotel. I found it interesting that one of the purposes of the subsidy was to ensure a large ballroom to replace the existing one in the convention center which is being done away with under the expansion. Interestingly, Hyatt announced within the last week it was making several million dollars in renovations to its hotel, which includes a new ballroom for up to 1,100 people. That sounds like a ballroom big enough to replace the convention center ballroom. And no subsidy needed to get it.

Anonymous said...

Advance, it's worse than that. Putting the official ballroom for the convention center in the Whiteco hotel is itself a huge subsidy. That really gives their hotel a marketing advantage. It wouldn't surprise me if the convention center ballroom is being eliminated at least partially to enable it to be doled out to the winning hotel bidder as an incentive.

Anonymous said...

Wow. Conspiracy theorists abound.
Get a grip.

Anonymous said...

Be smart for your city...plan to vote for someone who has better leadership qualities..."Leadership is accomplishing something through other people that wouldn't have happend if you weren't there. And in today's world, that's less and less through command and control, and more and more through changing people's mindsets and hence altering the way they behave. Today, leadership is being able to mobilize ideas and values that energize other people"(N.M. Tichy)

How would you characterize Bart Peterson and his leadership qualities??

Anonymous said...

Ah, ha, looks like Bart's deal for the hotel was bigger than the one he cut with Johnson, Mays, Gray and Drummer for the bar at 300 East, now the whole gang is satisfied! Reason why no opposition to anything is being mentioned, and the taypayers are getting burned.

But we can't afford to give our law enforcement officers a raise!

Anonymous said...

Perhaps the $48.5 million was just to set the amount of kickback into the campaign war chest or somebody's back pocket. Shady selection at best.

Citizen Kane said...

This is not an investment in the city; it is corporate welfare to a billionaire. Investments by the city should be for public goods, not for the private good. Having the taxpayers subsidize 20% of the cost of a hotel (for the nth time) in the lowest wage employment category is beyond ridiculous. In fact, it is damn near criminal.

The tourism / hotel industry downtown is a minor portion of the total Indianapolis economy. Just because some big numbers are thrown around does not mean the numbers are significant.

The wage earnings (2004) for the category "Accommodations and Food Service was $846,174,000, which equates to 2.4% of the total earnings in Indianapolis, at an average wage just shy of $18,000. The total private earnings in Indianapolis in 2004 was about $31,000,000,000, with an average wage of about almost $52,000. So, yeah, let's subsidize an industry where the average earnings are little more than a third of the average earnings in the total economy. Good idea. Please don't stop!