Urbana needs to take its time

Urbana needs to take its time

City officials need to put the proposed Lincoln Square hotel deal under microscopic scrutiny.

Urbana City Council members voted last week to keep talking about a proposal for the city to underwrite the redevelopment of the Landmark Hotel at Lincoln Square.

But that interest in pursuing discussions is a long way from making a formal decision to back the planned venture that would convert the Landmark into the "Lincoln Hotel," part of the new Hilton Tapestry boutique brand.

As is almost always the case in ventures of this sort — no matter whether it's a purely private sector initiative or a joint public/private operation — it's all about the money.

Do the financial numbers work? Or not?

Alderwoman Diane Marlin, who takes over as mayor on May 1, said she remains deeply concerned about "this idea of borrowing so much money" to back a private business venture. She should be.

Much as negotiators are trying to build protections into the plan, the city is being asked to contribute $7 million in post-construction bonds for a $19 million project.

The $7 million figure is an improvement over the original $9.5 million in post-construction bonds sought by developers representing Crimson Rock Capital.

The city is being asked to contribute $7 million in bonds to be repaid over 15 years instead of $9.5 million to be repaid over 20 years.

The proposal calls for the revenue to pay off the bonds to come from a variety of taxes on the hotel, including a hotel/motel tax, food and beverage taxes and property tax revenues. But the threat to taxpayers is that if expected revenues are insufficient to meet bond obligations, the city will be required to make up the difference from its general operating funds.

How many people are thrilled by the possibility of diverting money from the city budget for police and fire service and road improvements to hotel bond holders? Probably not many.

But that would be the result if the city decides to support a venture that doesn't work out.

Considering the series of hotel failures at the site over past decades, there's clearly no guarantee this proposal will work as forecast. Indeed, recent experience indicates to the contrary.

That's why its perfectly understandable that city officials are determined to take their time.

Alderman Eric Jakobsson said the review- and decision-making processes should be pushed over into the new term of Mayor-elect Marlin. After defeating incumbent Mayor Laurel Prussing in the February Democratic primary and winning election on April 4, Marlin will be sworn into office on May 1.

Jakobsson said Marlin is "the person who will have to live with the implementation" if this plan is ultimately approved. He also noted that three new members are joining the seven-member council.

What's important as this process goes forward is that the mayor and council members decide with their heads, not their hearts, how to proceed.

Everyone would live to see a thriving hotel in place of the Landmark. It would be good for everyone, the hotel owners, Lincoln Square, downtown Urbana and the entire city.

That, no doubt, is why a survey conducted of downtown business owners by Alderman Dennis Roberts showed strong support for the venture.

But as good as a success there would be, failure would be even worse because it would cut to the hearts of the city's weakest spots — its finances.

In conducting the classic risk-reward ratio, the rewards would have to far outweigh the risks to justify city participation.

That's why Jakobsson said the city must examine "all of the ways things might go wrong" and structure any agreement with developers in a way that would protect the city's financial interest. It might even mean revising the nature of the city's participation.

Mayor-elect Marlin said she's much more comfortable with the idea of traditional economic development incentives — grants from a tax increment financing districts, tax rebate — rather than a loan backed by city's operating revenues.

"Those are more appropriate incentives," she said.

The larger question, of course, is why the city should be involved at all. This is a private business venture promoted by developers in pursuit of private profit. Both they and the city have a mutual interest in seeing this plan be a success. But in terms of ownership, the city would remain on the outside looking in despite the requested investment.

That's a lot to swallow. Indeed, the plan borders on the bizarre. Perhaps there's a way to make it work. But this deal requires a thorough going-over before the city decides to get — even indirectly — into the hotel business.

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