Vancouver replenishes reserves for Hotel/Convention Center | Community Spirit

VANCOUVER, Wash. -- More than 94,000 people attended 1,050 events at the Vancouver Convention Center/Hotel during 2011. However, tough times continue to impact the industry and community.

This month, Vancouver city officials transferred $1.7 million in lodging tax revenues to replenish the hotel/convention center operating and capital reserves. Lodging tax dollars that were collected and held for this purpose by the City were used for the payment. No City general funds have been paid -- or will be used -- for this purpose. Lodging tax revenues are restricted to tourism related activities like the convention center; under state law, they cannot be used for City services such as police, fire, parks, or roads.

Under the original 2003 agreement when the hotel/convention center was built, the City guaranteed limited funding on an annual basis, if needed, to support the debt issued to construct the project. Although the City was billed by the trustee for only a portion of its guarantee in 2010 and was not billed in 2011 or prior years, an amount due had been accruing.

Two reserves were put in place at the time of the 2003 Convention Center financing to support the hotel/convention center when needed -- the Operating Reserve and the Debt Service Reserve. Both reserves are managed by an independent trustee, a financial institution that manages reserve accounts.

From 2006 to 2010, the bond trustee drew from the Operating Reserve rather than request payment from the City. City officials discovered this procedural error and offered to pay the amount it should have paid during that time period. City officials held sufficient funds in its Tourism Fund in anticipation of a draw on the City guarantee.

"Lodging tax reserves were built up previously during strong economic times so the City would be prepared to meet its obligations to the hotel/convention center during weak economic times. A potential scenario like this was contemplated when the financial structure was put in place in 2003, and funds have been accumulated to make this payment," said City Chief Financial Officer Lloyd Tyler. "The top priority for City lodging tax revenues is to support the hotel/convention center, if necessary, so City general funds aren’t used."

Tyler continued, "We have learned a lot from the Great Recession and the collapse of the real estate market. Today, we are much more conservative about long-term financing deals. Our economy has fundamentally changed."

When visitors to Vancouver stay in local hotels, they pay a lodging tax. Half of the lodging tax revenue is committed to the hotel/convention center, and half has been held by the City in reserve if the 2003 financing agreements require additional City payment.

The hotel/convention center, managed and operated by Hilton Corporation, opened in June of 2005. The project got off to a good start under Hilton’s professional management. When the recession hit in 2008, lodging and convention facilities across the country were adversely impacted.

The Hilton has been aggressively keeping costs in check and encouraging business travelers and conventions to come to Vancouver and to bring their spending capacity with them. Using the Vancouver Convention and Visitors Bureau figures, the average hotel guest spends $311 per day in the local market. The Hilton Hotel occupancy had an estimated beneficial economic impact in the community of approximately $16 million during 2011.

In addition to the 1,050 events held during 2011, the hotel/convention center hosted 18 Vancouver-based non-profit community events. Through this program, a discount was provided on the event, resulting in a direct and positive benefit to the community through the respective charities.

"The City’s recent payment honors the agreements that have been in place since 2003 and satisfies our obligation to support the hotel/convention center in limited circumstances," said City Manager Eric Holmes.

The funds can be used for emergency operations, debt service, and planned capital investments at the hotel/convention center.

"The City provides backstop guarantees that limit our financial exposure to the project. City general funds are not used to support the facility," Holmes said.