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« Jobbed | Main | Research project »

Jan 15, 2010

Comments

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Fec

My bad. Thanks.

Tim

sorry Rockh101 but too many people can't get it through their heads that this project isnt being funded with tax dollars. Its like talking to a wall.

Folks the details in this project are not set in stone. As I said before this could turn up being a 100 room hotel at $150 rate or it could stay the same. Remember this project started out with 300 guest rooms in a part of downtown that would not have received any support. I think the development group will likely want to get a feel on how much city council supports this project. If city council thinks this wont work, they likely reduce the number of rooms again. But based on reports in the media, it seems that 3 or 4 council persons have publically indicated they support this project. I can tell you right now who wont support it (mayor Bill Knight, Danny Thompson, Mary Rakestraw and Trudy Wade) I'm willing to bet everything I own that they wont support this project in any shape or form.

Yes I did champion for the downtown ballpark and the naysayers of that project were proven to be wrong also. The stadium doesnt produce all this vehicle traffic going through Fisher Park as they claimed would happen. More people also hang around downtown to eat at restaurants. I've seen a few people that fought this ballpark at the games as well.

Tim

I do agree on one thing. The development group is going to have to share more details with city council at the meeting and they are going to have to make a clear case as to why their feasibility studies show there is a demand for this hotel. It would also help if they had updated renderings of this hotel.

Spag

Tim, you are living in la-la land trying to sell people snake oil and quite obviously doing the bidding of someone else.

Ed, my stock market reference earlier today was an analogy that you correctly touched on when you mentioned the money to be made by people just for putting the deal together. Like any ponzi scheme, those who get in first make money and everyone else loses.

This project is not supported at all by the fundamentals so the obvious explanation for its support by a few private business interests is to make a few bucks, bail out, and then make it someone else's problem. Once profits are paid from the corporation to the individual they are shielded from creditors in bankruptcy if the money losing corporation goes under. When the math is so bad as they are in a project like this, there is always an ulterior motive.

Before I was paid to run my mouth, I was in the hotel business for 3 years. I understand how it works and this project does not have a market to support it at the prices it will demand.

Again, if this is such a sure thing then there is absolutely no reason the government should be involved. Unfortunately, the Robbie Perkins puppet faction in our government is just foolish enough (or getting paid enough) to push this through.

Tim

again spag read what I said. Nothing is set in stone. The hotel group is already backing down from the $200 a night rate based on what they said in the interview with Allen Johnson. They may even reduce the room count again who knows. That would certainly reduce the cost of the project which would make it even more feasible. The group is going to do what it takes to make this project happens even if it means giving in a little. If city council supports this project as is, I dont see them making too many more changes to this project and time will tell if this hotel succeeds or fails.

bubba

".....the obvious explanation for its support by a few private business interests is to make a few bucks, bail out, and then make it someone else's problem."

You sound like you're describing one of the Business As Usual Tag Team members who harbors further local political aspirations.

Spag

They can do whatever they want to make the project happen and I sincerely hope it works out as planned. Just leave the government out of it completely. Let them assume all of the risk like other businesses.

Tim

Indeed they will assume all the risk and thats why im supporting this. I would have a serious problem with this project and would be on the side with many of you if this project were being funded with tax dollars and not purchased bonds from the private sector. Now the parking deck is a seperate issue because the city is going to build the deck with or without the hotel. The hotel would help the city pay for that deck. Greensboro is looking at a 300 car deck. If the hotel has 200 rooms and leases just as many spaces, thats guaranteed money for the city. That leave a hundred spaces for general parking which is probably adequate for that part of downtown during its busiest hours.

Spag

Tim, who pays back the bonds when they come due?

Tim

in the end, the private sector has to pay this money back. One thing people are forget is that even if this passed with city council, the private sector that purchased the bonds would have to approve this. If they think its too big of a risk, this project will not get the bond. I personally think we havent seen the last of changes with this hotel project. I think every one agrees that a smaller hotel with at a slightly less hotel rate would reduce the risk because the cost of the project would be reduced. Its possible this hotel could go from 200 rooms to a hotel with 100 to 150 rooms. Someone mentioned that the Empire Room isnt doing to well. The biggest reason has to do with the fact there are no hotel rooms attached to their meeting space. You never want to have a major ballroom/conference space without hotel rooms. Bridget mentioned in the interview there will be a few surprises in this project so it will be interesting to see the final renderings, blueprints and all the ammenties in this hotel. We do know it will have retail space and restaurants. Thats a revenue generator for the project as well so they won't rely entirely on the hotel rooms.

Andrew Brod

Spag asks who'll pay the bonds back. Maybe the answer is in here somewhere.

I admit to knowing little about this stuff, and there's a lot of jargon in this PowerPoint presentation. But slides #15-17 appear to give credence to Fec's claims and questions about bond amounts being reallocated.

As for Spag's question, slide #22 appears to show that local government's role is to authorize the bonds' issuance, not to pay them back or even to guarantee them. Of course even if that's right, as a previous commenter very appropriately noted, there's an opportunity cost of using the city's allocation for this project rather than some other one. In any case, I offer this up so that more knowledgeable people can determine what the deal is with these bonds.

Andrew Brod

And now a quibble. I like Justin Catanoso and I like writing for him. I think the numbers in his Triad Talk column are impressive and damning. But if the downtown hotel doesn't make sense, it'll be because of those numbers, not because of his claim that "if downtown could support such an amenity, Greensboro would have it already."

The claim conflates capital investment with operations. It's possible for downtown to "support such an amenity" if private investors get the right kind of subsidy on the capital side. Just ask Roy Carroll.

Why should private investors get such a deal? Again, I'm not touting this particular project. But let's step back a second. If we had no community goals regarding our downtown, Justin's would be a fair point. But again and again we're told that there are such goals. We're told about the importance of reinvigorating our downtown, and yet things have a tendency to go elsewhere. Often the market dictates the outcome, and that's fine... as long as we don't believe that our downtown confers benefits that go beyond what the market can incorporate in its decisions.

If we believe that Justin's comment applies in general (and I realize that a few of the regular commenters here believe just that), then there will never be any reason to make a public investment in downtown. But I don't think that's what most of us believe. Again, this project might not be the one. However, if it isn't, it'll be because the numbers don't add up, not because the market is always right.

Tony Wilkins

Tim: "I can tell you right now who wont support it (mayor Bill Knight, Danny Thompson, Mary Rakestraw and Trudy Wade) I'm willing to bet everything I own that they wont support this project in any shape or form."
Don't make that bet Tim.
Predicting a 5-4 NAY with a twist.

RecycleBill

Timmy's back!

And he's still dodging every question and calling us names.

Who pays back the bonds when this fish floats to the top?

And where's the proof?

Call us naysayers if you like but unlike myself, many of those opposing this project were in favor of Southide and the downtown stadium. This time the "naysayers" are coming from both sides of the fence. Those folks want proof too.

Where's the proof, Timmy? Do you actually believe us gullible enough to believe you when we don't even know who you are?

And before you say it. I think most everyone who reads EdCone.com knows my real name is Billy Jones, aka RecycleBill, aka Billy the Blogging Poet, aka EZGreensboro, aka Veggie Head Stalker. Most everyone involved in this thread knows who all the others really are and we base our faith in knowing each other even when we disagree.

As for you, Timmy, you're currently a NOBODY with NO cred. Give us some cred or give us some proof! Or just crawl back into your soon to become slum condo in Southside.

You see, Timmy, those in the know want Southside to again become a slum so they can bulldoze it and use taxpayer dollars to build it again. It's the only business model they understand.

PS. I have a bulldozer too. They're really cheap nowadays. I bought mine for less than the cost of a ten year old clunker car and it runs like new. It's already returned a profit and I've never moved it more than 500'. And if it breaks down it's worth more than I paid in scrap metal. I know because I buy scrap metal for a living.

Show us some cred, Timmy. Otherwise we'll all take you for nothing more than another bought and paid for idiot.

Ed Cone

"Who pays back the bonds..." if the project goes bad?

Nobody, if the bond issue works as it seem to do. The bondholders would get stuck with the loss.

FWIW, the bondholders are likely going to be large institutions with huge bond portfolios that include a certain percentage of junky bonds.

RecycleBill

Oh, I get it. Downtown Greensboro is a junk bond.

Ed, do you really believe there will be ZERO cost to taxpayers if the project goes belly up? What about the fact that these same bonds might could be put to better use somewhere else? Perhaps on a project that could actually turn a profit? Is there no cost to that scenario?

What about police, fire and city services for such a project-- do you really believe the existing taxpayers incur no cost while we wait for a couple of out of town con artists to anti-up?

And what about lost tax revenues if the project flops?

And what about Greensboro's credit rating. If this product fails as even you seem to believe it will then will Greensboro not have to pay more to borrow money? And if Greensboro pays more to borrow money do we the taxpayers not have to pay the price?

Reality is: There is no such thing as no loss of taxpayer's money when it involves bonding a project of this scale. You know it and I know it. Good bad or ugly this "destination hotel" will cast Greensboro millions.

The developers who are pushing for this project need to form an IPO and sell stock if the project is indeed a good idea.

The taxpayers have been paying incentives to rich developers like Roy Carroll, Robbie Perkins, Milton Kern and the Bobblehead for far too long while they play fast and loose with a deck of 51. It's time Greensboro's developers started paying incentives the taxpayers and the lie that it will cost the taxpayers nothing was finally ended.

Truth is: this whole thing is nothing more than a twist to the old land grab developers have been doing for as long as we've had scum of the earth developers.

"FWIW, the bondholders are likely going to be large institutions with huge bond portfolios that include a certain percentage of junky bonds."

Isn't that pretty much the same scenario that began the economic meltdown these incentives are supposed to fix?

Ed Cone

Billy, "junk" is the common name given to bonds of a certain investment rating. I'm guessing that's where these bonds would be rated.

You asked who would pay back the bondholders if the project went bad. That question seems to have been answered (although a definitive public statement has yet to be made on the subject by the governments involved).

By the same logic, the credit rating of local governments would be untouched.

I agree that better projects might be found for the money.

There are a lot of questions about this project, but once one is answered it seems unproductive to keep brandishing it as a cudgel against the project.

Spag

Ed, how do you think the "bond issue" is supposed to function in this deal? Ordinarily when the city issues a bond, it has to pay the bondholders down the road. How is this project different?

Even if the local taxpayer isn't on the hook, we all pay federal taxes. If the money allocated to Greensboro via the federal stimulus bonds goes to waste and does not earn enough to pay for the federal cost, the taxpayer is still screwed. My understanding is that $26 million is from the Federal stimulus program and $4 million are regular municipal bonds.

Ed Cone

As I understand it -- see Andy Brod's comment with the slideshow reference above -- the city is not issuing or guaranteeing the bonds.

I would like a clear explanation, perhaps in diagram form, of where the money comes from and who owes what to whom.

Fec

I looks like Elm Street Center and Urban Hotel Group have to cough up $151K on the front end. And of course, Letters of Credit falls like apples upon the ground. Idiots.

Ed Cone

I just spoke with Bill Knight, who says bondholders bear the risk.

That was hardly the most interesting thing he said, though -- read The accidental bonds.

Abner Doon

Greensboro's credit rating could get downgraded if the project fails and they figure out the city and the county is governed by greedy morons.

Abner Doon

Elm Street possible thinking: Do the deal, the hotel doesn't make it, institutional bond holders get screwed (old people who own municipal bond funds), buy a it for a couple mil and live on the revenue at 40% occupancy and $85 per night.

Roch101

Roch101

"Indeed they will assume all the risk and thats [sic] why im [sic] supporting this." -- Tim

Here is why you stink as an advocate for this project and might as well save yourself the wear and tear on your keyboard.

You offer up a basic logic proposition: A is true, therefore B. But your response to "How do we know A is true?" is "People who do not think A is true are naysayers." You fail to validate your premise therefor your conclusion is an assertion of faith, not a reasoned argument.

You lack knowledge and the intellectual integrity to admit it. You are no help.

Roch101

"By the same logic, the credit rating of local governments would be untouched." -- Ed

That is also a major consideration. From the slides AB links to above, I am not convinced our credit rating isn't exposed to risk. The slides, at various points, describe financial institutions and local governments as the issuers. So that is another point of confusion that need to be explained and, certainly, fully understood by anybody making decisions about this.

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