Nov. 08–City Council moved closer Thursday to approving millions in tax breaks for a contentious 50-story hotel development in the heart of Center City.
The $280 million tower would include two hotel brands — W and Elements — built on a parking lot at 15th and Chestnut Streets, a half-acre plot adjacent to the disastrous 1991 fire that consumed One Meridian Plaza and resulted in the deaths of three firefighters.
The developers, Brook Lenfest and Jeffrey Cohen, say they can’t build there without tax increment financing (TIF), a deal in which they would borrow $33 million and repay the loan through tax breaks authorized by the city.
The project — and TIFs in general — has its critics, and the Council chamber was packed Thursday with lobbyists, supporters, and opponents, who waited out a hearing that lasted more than five hours.
A coalition of Center City hotels, some of them beneficiaries of tax breaks when they were built, oppose the W Hotel, saying there isn’t enough demand to support its 700 rooms.
Benjamin Rowe, chief financial officer of Kimpton Hotels, which owns the Monaco and Palomar Hotels in Center City, said the group wasn’t opposed to subsidies in general.
“The issue here is: This is the wrong time and the wrong project,” he said.
The project has been described by proponents as a game-changer in the effort to draw larger groups to the Convention Center.
The hotel, to be operated by Starwood Hotels, would be a “headquarters hotel,” agreeing to set aside large blocks of rooms for conventions.
Julie Coker, a senior vice president with the Philadelphia Convention and Visitors Bureau, said occupancy rates and demand for rooms had been increasing.
But the city doesn’t have the blocks of rooms necessary to book the largest conventions or host two medium-size conventions at once, she said.
Opponents countered with studies that showed convention attendance barely rising in the last dozen years, while Convention Center space has grown by nearly 36 percent.
If Philadelphia can’t attract new convention business, the W and Elements would cannibalize business from the city’s other hotels, opponents said.
John Grady, president of the Philadelphia Industrial Development Corp., said the city had been absorbing more hotel space for two decades.
“We’re not just talking about the Convention Center,” he said. “This is about how we sell the downtown as a shopping and tourist destination for all travelers.”
“So we can sum up your testimony as ‘build it and they will come’?” Councilman Bill Green asked.
“For 20 years, that’s been the case,” Grady said.
In the end, the members of the Finance Committee approved the TIF unanimously.
Councilman W. Wilson Goode Jr., who has said he opposes the bill, was not present when the vote was taken.
Goode equates TIFs with being allowed to skip paying taxes in order to afford a mortgage. He also says developers can’t prove TIFs are necessary to make projects feasible.
He noted the hotels would forgo paying $76 million in a variety of city taxes over 20 years to repay $33 million in financing.
Supporters point out that the city, the schools, and the Convention Center Authority still would collect about $144 million in taxes over 20 years — far more than if the site remained a parking lot.
In one exchange during the hearing, Goode asked Cohen and Grady about the project’s profit margin. Neither could provide the number.
“You can’t tell me how much money you’re going to make?” Goode asked incredulously. “That’s funny. I’ll be voting no.”
The developers have secured $40 million in other public funding, including $25 million in state grants Gov. Corbett authorized last week.
The developers plan to invest more than $205 million in debt and equity. The rest of the funding, 27 percent, is to come from public financing.
(Developer Brook Lenfest is the son of H.F. “Gerry” Lenfest, a part-owner of The Inquirer).
The TIF bill now goes to the entire Council. A final vote could be taken as early as Nov. 21.
The developers hope to begin construction, which would take three years to complete, on Jan. 1.
tgraham@phillynews.com
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@troyjgraham
