Council votes to table convention deal until Tuesday

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For the third consecutive week, the Denton City Council declined Tuesday to authorize another $75,000 for design work on the convention center.

But the council didn’t kill the deal either.

In the first actual vote on the matter in months, the council voted 4-2 on continuing the financial request to its next meeting, which is scheduled for this Tuesday.

Council member Dalton Gregory was absent from Tuesday’s work session.

Mayor Chris Watts and council member John Ryan voted against the continuance, both expressing serious concerns about the viability of the deal that has the city building a convention center and a developer building a full-service hotel on University of North Texas land.

Council member Joey Hawkins said many people in the community still believe the public-private partnership is a good project for Denton.

He made the motion to continue, adding two conditions from the council to be fulfilled by the developer before Tuesday.

The council first put the project on pause two weeks ago, seeking assurance that Tim O’Reilly, the principal of O’Reilly Hospitality Management and the investment group that will build the hotel, would agree to go forward without tax breaks from the county and school district.

Although it secured that assurance last week, the council again delayed authorizing the additional expenditure pending receipt of the developer’s loan documents, which were due to the city.

Those documents arrived this week.

Council members noted that the developer’s bank did not agree to guarantee the city’s debt payment should the O’Reilly investment group, O’Reilly Hospitality Partners Denton, default on the hotel financing.

A key component of the master agreement between the city and O’Reilly was that the developer make up the difference between tax money the city collects on the hotel and convention center and what the city must pay in annual debt service.

Council member Greg Johnson asked again whether O’Reilly Hospitality Management, as a company, or Tim O’Reilly, personally, would guarantee that part of the agreement should the investment partners default on the hotel.

“It’s a simple question,” Johnson said, adding that he felt that was what was needed to salvage the deal for the city.

Ryan reminded the council and staff that the city couldn’t sell its construction bonds until O’Reilly and its investment partners closed on their own financing.

O’Reilly had not paid a $19,500 bank fee necessary to proceed with its final loan documents and, in a letter to the city, noted that it would not do so until mid-December.

“Now we’re looking at January [to start construction],” Ryan said.

Assistant City Manager Jon Fortune told the council that O’Reilly didn’t want to complete the loan work until it was certain that there would be no election for the convention center bonds.

The city plans to issue certificates of obligation, which do not require voter approval, in December.

But, if enough voters signed a petition in the 30 days between the bond sale notice and the actual sale of the bonds, the matter could be forced to an election.

Council members Johnson and Hawkins joined Kevin Roden and Jim Engelbrecht in voting to continue the discussions for another week, pending the resolution of the $19,500 bank fee and the additional guarantees should the investment partners default.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.

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