OMAHA, Neb.-
Omaha officials are working on a plan to refinance their Hilton Hotel bonds so taxpayers don’t have to pick up the bill.
The new financing plan would save about $8 million over the life of the bonds, which would be paid off by 2034. The plan goes to the City Council next month.
“This really straightens out the cash-flow issues for the city,” Mayor Mike Fahey said.
The hotel opened in April 2004, designed to complement the Qwest Center. They are attached by a skywalk.
The city issued nearly $103 million in bonds, expecting to pay them with hotel revenue. But the revenue has fallen short: $22.9 million gross revenue last year, well under the expected $28.4 million.
The hotel has been renting more rooms than expected, officials have said, but competition and convention incentives have forced room rates below the forecasts.
The bond payments began to rise this year, as did maintenance expenses.
The hotel needs $8.7 million in new furnishings over the next six years to maintain its standards as AAA’s only four-diamond hotel in Nebraska, said city finance director Carol Ebdon. That’s the travel and insurance association’s second-highest rating.
Even if the hotel revenue could meet its debt payments, Ebdon said, the revenue stream couldn’t handle the refurnishing.
With refinancing, the annual payments would drop enough to leave taxpayers out of the equation.
This year the city would pay up to $6 million on its hotel debt. After financing, the payment plummets to $3.8 million.
But even after refinancing, expansion would be out of the question, said Ebdon, who also leads the hotel corporation.
Some convention promoters say the hotel should add 150 rooms, providing 600 that would make Omaha a more attractive spot for conventions.
Under terms of the refinancing, the debt would be extended from 2031 to 2034. And Hilton said it would forgive $3.7 million in debt if its management contract were extended three years, to 2021. Hilton gets an annual management fee.
“The hotel is doing better every year,” Ebdon said. “Rates are increasing. But it’s been a challenge.”
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Information from: Omaha World-Herald,
