City shouldn’t use tax fund to cover convention centre’s loan: hotel industry

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This article was published 16/09/2015 (3687 days ago), so information in it may no longer be current.

The local hotel industry says it would be wrong for city hall to use funds from a tax on hotel rooms to cover a $33 million Winnipeg Convention Centre loan for its expansion project.

But Mayor Bowman and other senior councillors said the bailout plan is the only viable option to cover an old deal made by the Sam Katz administration that has “unravelled.”

Leo Ledohowski, president and CEO of Canad Inns, and Jim Baker, president of the Manitoba hotel association, appeared before the executive policy committee meeting Wednesday morning arguing against an administrative recommendation to dip into the destination marketing reserve fund to cover off the convention centre’s $33-million loan until it’s able to make those payments from its own cash flow.

Ledohowski and Baker said the reserve fund was supposed to finance efforts to attract events and conventions to the city but city hall is now using it to supplement its own tax revenues.

“The hotel industry was unanimous against this (convention centre) expansion,” Ledohowski said following the EPC meeting. “The accommodation tax is there to acquire events, to bring export tourism into Winnipeg,” Ledohowski said following the meeting. “What’s happening is the fund is being used as a general tax fund and that’s not the purpose for it.

“If the city wants to have these so-called monument buildings, then they should be paid for by the city. It should not be loaded onto the backs of the hotel industry.”

City officials have been scrambling since January when the convention centre disclosed it would not be able to repay city hall any portion of a $33-million loan because it couldn’t arrange to have a new hotel built in time for the completion of the expansion.

City hall guaranteed $33-million in loans for the expansion, with the written guarantee that the convention centre would ensure a hotel is built. The hotel was key to the loan: the convention centre’s business plan for the expansion said a hotel is needed to generate new convention business, which would be used to pay off $17-million of the loan; the extra property tax revenue from the hotel (to be built on the now vacant lot at 220 Carlton St.) was to be dedicated to cover $16-million of the loan.

But the hotel isn’t being built and now the city needs to find the funds to start paying back those loans. It’s possible a hotel will be built near the convention centre as part of the proposed True North Square project – but that deal hasn’t been finalized.

The bailout plan was unanimously approved by EPC. It still needs to be debated and voted on by all of city council.

Bowman said he wasn’t involved in the original deal struck with the convention centre, adding the current city council is trying to find the best solution for a problem that was forced onto it.

“Right now we’re left with the unenviable task of finding sources to cover a loan guarantee that had been previously provided,” Bowman said.

“I wish we didn’t have to use any of (the reserve fund).”

Finance chairman Coun. Marty Morantz said the current city council is not responsible for the unravelling of the convention centre business plan and its failure to get a new hotel built downtown.

“This is not a really a place where we wanted to be,” Morantz (Charleswood-Tuxedo-Whyte Ridge) said. “This has really very little to do with this current administration.

“I say to people (the election) wasn’t about electing a new mayor, this is electing a new government – we have to deal with decisions that were made in the past.”

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Chief financial officer Mike Ruta disputed the hotel industry’s claim about the purpose of the destination reserve fund, telling EPC that when the fund was established in 2007, 40 per cent of that money was dedicated to the convention centre expansion project.

Ledohowski laughed at a key term of the bailout plan that requires the convention centre to replenish the fund from its operating surplus at some undetermined time.

“There’s never going to be surplus – that’s a joke,” Ledohowski said, explaining that the convention centre never generates enough revenue to cover its expenses and requires an annual subsidy from city hall.

aldo.santin@freepress.mb.ca