The City Council kept its finger on the pause button for Denton’s convention center project, even though the staff relayed a breakthrough in the deal Tuesday afternoon.
According to Assistant City Manager Jon Fortune, the developer, Tim O’Reilly, said his company, O’Reilly Hospitality Management, and his investors were willing to go ahead with the project without property tax breaks from the county and school district for its hotel, which would be built adjacent to the city’s convention center.
Fortune told the council that O’Reilly was also willing to back the city’s choice for a better but more costly roof and foundation for the convention center, which would be built on University of North Texas land near Apogee Stadium.
He asked the council whether he could amend the architect’s contract to continue design work on the building.
Fortune said he wanted to be sure that when the City Council issues the bonds to pay for the project, construction costs are set.
That design work has been on hold since last week. But council members said they weren’t ready to go ahead just yet.
First, they said they needed to see, in writing, O’Reilly’s commitment to go ahead without the tax breaks and the agreement to the new financing cost of $28.98 million.
O’Reilly has agreed to pay “rent” to make up the difference between the tax money the city would collect from the project — property, sales and hotel occupancy taxes — and the debt payment.
Early on in the negotiations, the city agreed to kick in another $100,000 per year, and delay the start of the “rent” until the third year of the project.
Second, the master development agreement requires O’Reilly to provide its loan commitment documents. Council member Greg Johnson said he needed to see those documents before moving ahead with the deal.
He was looking for specific information about O’Reilly’s investment in the full-service hotel and restaurant that he knew he could find in those documents.
“I need to see those to feel comfortable voting for this deal,” Johnson said.
Third, several council members said they wanted to see new financial projections, now that the deal has changed so much.
Council member John Ryan has been studying and testing different scenarios in those projections, particularly since the now-defunct county and school tax breaks would have helped keep O’Reilly’s “rent” low.
“Instead of paying us $1.7 million [in rent over the years], he could be paying $7.1 million,” Ryan said.“That’s quite a swing for a businessman.”
Mayor Chris Watts asked that the new projections include the 25-year and 30-year financing side by side.
A decision — which was not a vote, but simply the council’s direction — to continue the project when construction bids came in higher than expected ultimately led to that change.
“If that’s the case, then the city is losing revenue,” Watts said.
In other words, the city would likely continue five more years of debt payments on the convention center when it originally expected to be receiving income. Finally, Ryan asked that the master development agreement itself be redone before the council would allow the project to resume.
Fortune said that while he thought the first three requests could be brought back to the council shortly, the new master development agreement couldn’t be finished until Nov. 11.
The council is expected to take its first official votes of the deal that day, including its “notice of intent” to issue the $28.98 million in bonds that would pay for the convention center’s construction.
PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.
IN OTHER ACTION
During its regular meeting Tuesday, the Denton City Council also:
• Began eminent domain proceedings for a 0.535-acre parcel in the 200 block of Mayhill Road and a 15.037-acre tract at Masch Branch Road and FM1173.
• Agreed to reimburse capital expenditures of $67.9 million by Denton Municipal Electric, $6.3 million by the solid waste department, $600,00 by streets and $6.8 million of general government projects with certificates of obligation.
• Agreed to reimburse Robson Denton Development, the developer of the Robson Ranch retirement community, about $90,000 to install a larger water line at an elevated storage tank on Lively Road.
• Approved the purchase of two backhoes and one dozer from Holt CAT for $326,336; and from Kirby-Smith Machinery, three asphalt rollers for $296,870, a soil stabilizer machine for $531,378 and a dozer, water truck, excavator and dump truck for $1.9 million.
• Awarded a design contract to Dunaway Associates for two pedestrian bridges in Evers Park for $190,000.
• Amended its engineering contract with CP&Y to expand the landfill by $248,250 to a new, $1.3 million maximum price.
• Awarded three-year contracts to multiple vendors for soil, sand, limestone and aggregate rock for $3.9 million and to Labor Finders for temporary labor services for $1.4 million.
