Cash Cow or White Elephant?

The return of the convention center hotel plan

There's often a never-never land quality to the way current events unfold and are reported in Houston. It's as if everything that has gone before vanishes into an Orwellian memory hole, and this morning a new sun shines on virgin landscapes. Such is the case with the return of the convention center hotel proposal, nearly a half-decade after a federal sting and a developer long on talk and short on financing helped send its predecessor into a slow-motion demise that ended when the city yanked its life support last month.

Laid-back Mayor Lee P. Brown seemed unusually forceful at a press conference two weeks ago, as he announced the highly predictable findings of a handpicked advisory committee stuffed with hotel backers. The media dutifully reported the recommendation to rush a resolution to City Council for a publicly owned 1,000-room hotel adjacent to the George R. Brown Convention Center.

The committee party line is that if only we build the hotel they, meaning major conventions, will come. The convention center now resembles an underused ocean liner grounded on the east downtown reefs. The report recommends that while the hotel is under construction, a long-shelved expansion of the center should also be done to handle the future flocks of conventioneers.

Lost in the mists of recent history, or at least unmentioned in the reportage, is the irony that the chairman of the Council committee processing the recommendation is none other than John Castillo, inconclusively tried twice on federal charges of accepting bribes to champion the hotel during its previous incarnation.

Unfortunately, two other major advocates of a downtown hotel were not available to be on Brown's advisory committee. Former councilman Ben Reyes is locked in a Beaumont federal prison, while lobbyist Betti Maldonado works in the kitchen and lifts weights at a Fort Worth penal facility. Both are serving their time for hotel-related bribery and conspiracy convictions.

Since Mayor Brown reappointed Castillo to the Council ethics committee in the midst of the bribery trials, he must not be not excessively troubled by the reverberations from the federal investigation. Perhaps Brown just figures the councilman knows the ins and outs of the hotel deal as well as the palms of his own hands.

In 1995 Castillo backed the bid by developer Wayne Duddlesten to build a privately financed hotel with tax rebates from the city, county and school district. Duddlesten triumphed over rival JMB by playing on ethnic and free-market issues. He promised black and Hispanic councilmembers that 30 percent of the project would go to minority investors. His team warned of the dangers inherent in having the city involved in the hotel business.

As it turned out, minorities got no ownership, and the city got no hotel. Trapped behind the credit line, Duddlesten lateraled the deal to Fort Worth's Richard Rainwater and his Crescent Real Estate Investment Trust. Crescent ran into its own financial problems and declined to move forward.

Way back at the beginning, Councilman Ray Driscoll was one of the Duddlesten Council faithful. He issued a 1996 press release endorsing Duddlesten and opposing public ownership.

"I do not believe that a government sponsored non-profit corporation with all of its baggage is conducive to the successful construction and operation of the convention center hotel." Driscoll argued that because the nonprofit board would be appointed and contracts would have to be negotiated with the city and hotel operators, "the political process will forever be involved."

So you figure Driscoll would be even more appalled by the current plan, which has open-ended city ownership and liability in a $170 million project that Duddlesten and Crescent could not get off the ground. Not so.

"At the time, there was a proposal by private industry to do the hotel, and if there's a choice between the city doing it and private industry doing it, then the city should stay out of the picture," explains Driscoll, who's now backing the public hotel plan. "Right now, there is no private industry looking to build the hotel. We need that hotel, and if the city can do it with the least amount of risk, then we're probably going to have to do it."

One of the conclusions of the mayor's task force is that while the city may have to finance and build the hotel, it could then be sold to the highest bidder, an exit strategy embraced by Driscoll. "After it's built," he says hopefully, "then conceivably the city can sell the hotel and make money on it."

That expectation is based on two articles of faith pushed by the hotel preachers. One, a convention center hotel will suddenly make Houston competitive for the really big confabs with conventioneer faves New York City, New Orleans, Las Vegas and Denver. The second is that after the city absorbs the risks of financing and construction, the hotel will be an attractive acquisition for a private venture. San Antonio-based hotel consultant Bruce Walker, president of Source Strategies Inc., questions both assumptions.

"Downtown Houston just isn't a very attractive convention destination," opines Walker. "You can say, 'We've got a nice convention center and a nice hotel.' But that's not why you select a convention location."

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