FROM THE NEWS-LEDGER
By Steve Marschke
West Sacramento’s taxpayers are on their way to owning a “higher end” multi-story hotel on their riverfront. City officials are working on a deal in partnership with a federal stimulus program, a South Korean investor and a local hotel developer to bring the project to fruition. The project could put a 300-room hotel of around 16 stories on the River One site between the Tower Bridge and the “ziggurat” building.
“The idea of developing a hotel in a downtown location is one where subsidies are normally required,” said Paul Blumberg, the city’s project manager for the hotel. “Particularly if you have conference and meeting room space. Public entities almost always have to make those projects work.”
Blumberg described the project to the News-Ledger:
The city and its redevelopment agency have together created a “West Sacramento Financing Authority,” which will take on the project.
An acre of city-owned land near the riverfront will go into the project, as well as another 4.6 acres the Authority is buying from the Raley’s Corporation for about $9.6 million.
The Authority will then issue bonds to raise money for the hotel, backed by “Build America Bonds” from a 2009 federal stimulus bill.
“These are taxable bonds that are issued just like any tax-exempt municipal bonds,” he said. “It provides a federal subsidy in the amount of 35 percent of the interest rate on the debt service.”
With that 35 percent subsidy to the interest payments, the Authority will be able to offer bonds with an return attractive to investors, he said. And a foreign investor without U.S. tax obligations will find them even more attractive, because they won’t be taxed on their returns.
The current negotiations include an investor that wants to buy all the bonds issued for the project – and provide a $12 million loan for pre-construction work such as design work. That investor is Consus Asset Management, a real estate investment trust from South Korea.
“Consus has offered to purchase all of the revenue bonds to be issued by the West Sacramento Finance Authority, up to $100 million, to build the hotel,” said Blumberg.
At the center of the project is Parkcrest Development Corp., a Sacramento-area developer of commercial, retail and hospitality space. Parkcrest’s projects include Le Rivage Hotel along Sacramento’s southern riverfront. The hotel was completed on a troublesome piece of real estate. It was in the news this month for being in default on its original $25 million loan. Parkcrest also developed the Lake Natoma Inn.
The city has not pledged any general fund cash for the project, said Blumberg. But the future hotel’s room taxes – the “transient occupancy taxes” listed at 12 percent of a room rental in West Sacramento – will be set aside in case they are needed to rescue the financing. If they aren’t needed, they’ll eventually be freed to the city.
When complete, the hotel will be owned by a city agency.
“The agency will actually own the land, and once the hotel is finished, it will own the hotel,” said Blumberg. “The intent is to resell it at some time in the future. The authority can sell it to a private entity.”
The future hotel’s actual brand isn’t finalized.
“We hope to announce the identity of the hotel operator next month,” he said. “It will no doubt be one of the premier hotel operators in the country. The number of rooms being targeted is about 300 rooms, in a high-rise configuration. The development agreement calls for up to 18 stories.”
“A major part of this hotel is the components that go with it – ballroom space, a conference center, meeting rooms as well as a major destination restaurant overlooking the river. It will be full-service, with a day spa and health club. It will have a major ‘business’ focus. But because of its location, it will also be able to attract some leisure visits during the weekends.”
Hotel design is “to be determined.” The public is welcome to give its thoughts on the project at either of two September 21 workshops at city hall. The workshops are scheduled for 4 p.m. and 6 p.m.