As the city of Denton inches toward a final decision on constructing a convention center/hotel complex on University of North Texas land near Apogee Stadium, several concerns linger about the proposed project. Here are the basics of the proposal.
The public-private partnership involves three organizations: the O’Reilly Hotel Partners of Denton (OHPD) will construct and own the $60 million full-service hotel; the city of Denton will construct and own the $25 million convention center; and UNT will lease the 13-acre site to OHPD and the city of Denton.
Once built, the city will lease the convention center to OHPD. O’Reilly Hospitality Management (OHM), a separate group of hospitality professionals, will manage the hotel and convention center. The city’s debt service payments come from taxes on hotel occupancy, hotel and convention property, and retail sales.
Lease payments of 1.5 percent of gross revenues will be made annually by OHPD to UNT for the land used for the hotel.
For the first 25 years, the city will pay UNT $1 per year for the convention center space. Thereafter, the annual payment increases to $175,000 adjusted for inflation.
Although several public forums have been held, concerns remain about the proposed project.
Does Denton need a convention center? Heywood Sanders at the University of Texas at San Antonio has studied extensively the role of convention centers in large and midsized American cities.
He concludes that large “convention centers themselves are expensive, money-losing propositions.”
But the Denton proposal differs from these meta-centers in three ways.
First, the Denton facility targets a regional market of conferences, workshops, and professional development events, many of which are associated with Texas Woman’s University and UNT.
Second, the now downsized proposal for a 69,750-square-foot facility is modest in size compared to those in other Texas cities. For example, the city of San Marcos Convention Center and Hotel is a public-private partnership.
At half the population of Denton, the city of San Marcos facility is 78,000 square feet. Texas State University, located in San Marcos, is not a partner in the project.
The Lubbock Civic Center, a multipurpose facility owned and managed by the city, has 300,000 square feet for conventions, public performances and community events. It serves a much broader role in the community than envisioned for the Denton facility.
Third, Denton (population 120,000) in a county with approximately 750,000 people is one of the largest cities in the state without a modern facility capable of hosting events for area businesses, universities and nonprofit organizations.
The proposed facility is not necessary for Denton’s continued economic growth. It is, however, necessary if Denton wishes to be identified as a destination city — a city that draws visitors to it, not just through it.
Can Denton afford a convention center? The financing of convention centers falls into one of three categories.
The first, commonly found in large cities, is the city-owned and operated convention complexes, often with substantial subsidies from hotel occupancy taxes.
The second is the privately owned convention center, an approach taken in Norman, Oklahoma, (population 120,000). Neither the city of Norman nor the University of Oklahoma is a partner with the privately owned conference center and hotel. This approach was attempted in Denton without success in the 1990s when the Sheraton Hotel built a conference center on land leased from UNT.
The third, and the one taken by the city of Denton, is to form a public-private partnership to construct and manage a convention complex.
What is unusual, possibly even unprecedented, with the Denton approach is that it is a three-way partnership with each partner carrying a portion of the financial responsibility. For Denton, that means it does not have to purchase costly land for the project, a significant savings for the partners. The location of the complex on prime real estate next to Interstate 35E elevates its visibility and accessibility.
The agreement with OHPD has safeguards that reduce the risk for the city’s investment. If the tax revenue from the convention complex is insufficient to meet the city’s annual debt service, then OHPD will make up the difference. This back-up provision takes effect in the third year of operation.
Among the options for financing convention centers, the one crafted by the city of Denton appears to offer the most favorable terms for the city.
What will it take to make this venture a success? The market analysis for the Denton project suggests the demand for convention space already exists.
The key to gaining market share will be keeping Denton’s convention center affordable. It also must be self-supporting with no expectation of subsidies from any of the partners.
The convention center’s success also depends on tapping the strengths of both UNT and TWU. Both universities have programs that host meetings, conferences and workshops that would use the convention center if it is competitively priced.
The three-way partnership offers a viable opportunity for the city, in partnership with its universities and business community, to provide a quality convention center in which we all can take pride.
BOB BLAND is a professor of local government in the Department of Public Administration at the University of North Texas and a visiting professor at the LBJ School of Public Affairs at the University of Texas at Austin. He may be reached at bbland@unt.edu.
