On Nov. 5, you published my letter in which I argued the “lunacy” of spending some $80 million all-in on the city-sponsored downtown hotel when the city’s own financial consultant MuniCap was valuing the project fully phased in at a mere $33 million. I wrote based on the latest data then available — projections done in 2014.
In the last week, I’ve been given fresh valuations from MuniCap dated Oct. 28 and Nov. 5, 2019. They put the hotel project value much higher than the numbers I cited. It is now valued at $50.01 million phased in, 53 percent higher than the 2014 estimate I used. The new numbers make the project look less lunatic, but they still suggest it is a loser.
And there are major problems in the assumptions given to MuniCap to project from. The $50 million valuation is obtained only by enlarging the hotel from the 183 rooms presented to the city Historic Preservation Commission and given Level 1 approval in June 2017, to 230 rooms, a 25 percent increase. Are we really going to have those contentious historic commission hearings all over again to approve an even larger financial folly on the city skyline?
The new valuations assume a $179/night average room charge and 72 percent average occupancy — very high numbers, local operators say. MuniCap manages to hike projected operating profit per room from 2014’s $11,300 to $17,500 per year — up 56 percent — but they get the improved result assuming no increase in hotel operating costs per room from 2014 to 2019.
MuniCap’s job as a consultant is to run financial projections based on assumptions provided by the city and Plamondon (the developer). An old adage about projections seems apt here: Garbage in, garbage out.