Urbana's hotel venture daunting

Urbana's hotel venture daunting

Urbana city officials are demonstrating how much easier it is to spend other people's money.

Second marriages, so the story goes, are often considered to be a triumph of hope over experience.

Perhaps the same thing could be said about the city of Urbana's desire to have a vibrant, successful hotel in its downtown, one that serves visitors from all over the country, offers needed employment and is a source of tax revenue to local governments.

There is nothing wrong with that dream. But the problem over the years has been making it a reality.

Old-timers still recall the day more than 30 years ago when Urbana city officials learned the city had received a federal Urban Development Action Grant that was intended to help the owners of the Peoria-based Jumer's hotel chain convert the old Urbana Lincoln Hotel into another jewel in its crown.

And it did, for a while. Then Jumer's went bust, and the hotel changed hands, eventually fading into oblivion — a gigantic hole in downtown Urbana.

Once again, city officials are moving heaven and earth to get the hotel going. But it's worth asking at what cost?

Xiao Jin Yuan, who bought the hotel, persuaded city officials to commit $1.45 million from tax increment district funds over five years to help him renovate and reopen the property. But all has not gone as planned.

The hotel was scheduled to open in November 2011. Now city officials hope it will open in November 2012.

What happened? It's been an entrepreneur's nightmare — unanticipated expenses and problems that have driven costs through the roof.

City documents said the delays were caused by "the poor condition of the building, the unexpected scope of the necessary renovations, complications with contractors and other issues." In other words, the developer didn't know what he was getting into.

This is why it's always dangerous for elected officials to invest public money in private ventures.

Indeed, it's practically a flashing warning sign when entrepreneurs seek public assistance for their enterprises. By seeking help, the entrepreneur is saying that the venture can't make it on its own and, indeed, may not make it even with public assistance.

The city already has contributed $650,000 to Yuan's venture, and city council members Monday are expected to support another contribution of $400,000. Another $400,000 in loans will be due over two years after the hotel opens.

The city's original agreement with Yuan called for the city to forgive its $650,000 loan to Yuan "upon opening of the hotel." The new revised agreement calls for the city to forgive the $1,050,000 loan "upon two years of continuous hotel operation."

"This change was requested by the city to ensure Mr. Yuan's continued commitment to the project and to protect the city's investment from a possible sale or closure of the hotel," according to city documents.

That language clearly indicates that city officials are trying to limit their risks in supporting this venture. But that's hard to do when the hotel business is inherently difficult, particularly so given the track record of failure in this location.

Yuan's plan for the downtown is ambitious. His goal is to create an "upscale, boutique hotel" that, most assuredly, would be a blessing for the downtown.

That's why Alderman Brandon Bowersox-Johnson said he and his colleagues are "still very excited" about the project.

Would they, however, be excited enough to invest their own funds in this venture rather than the taxpayers' funds? Probably not.

Tax money is everybody's money, and everybody's money is nobody's money. So why not roll the dice and hope for the best when experience would indicate that the chances of failure are greater than the chances of success?

Sections (2):Editorials, Opinion
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