Vancouver wants to refinance Hilton bonds at lower rate

Savings would pay for capital improvements

By Stephanie Rice, Columbian Vancouver city government reporter

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The Downtown Redevelopment Authority, the legal entity that oversees the city-owned Hilton Vancouver Washington, plans to refinance bonds to take advantage of lower interest rates.

The Vancouver City Council on Monday indicated it would follow the recommendation of Lloyd Tyler, the city's chief financial officer, and approve a revised payment agreement that would allow the DRA to refinance.

In December 2003, $65 million in 30-year bonds were issued for the construction of the hotel and convention center, with an average interest rate of 5.56 percent.

Tyler told the council that the DRA's Board of Directors believes it can refinance at an interest rate below 4 percent, saving an estimated $15 million over the life of the bonds. The savings, instead of going toward paying off debt, would be used for capital repairs and replacements, which are needed to meet Hilton standards, Tyler said.

If the project isn't refinanced, and repairs and replacements aren't made, the city could lose Hilton as the hotel's manager, Tyler said.

Refinancing, he said, ensures money for planned capital investments and scheduled refurbishments and makes the project more financially sustainable.

Also, he said, refinancing would make city lodging tax revenues, which have been tapped exclusively to help cover debt payments on the Hilton, available for other city tourism-related ventures.

Lodging taxes, before they were dedicated last year to helping cover Hilton debt, used to help fund community events such as Independence Day at Fort Vancouver and the Vancouver Wine & Jazz Festival.

State law prohibits lodging tax revenues, which are collected from a 4 percent charge on hotel rooms, from being spent on anything other than tourism promotion.

The hotel and convention center were meant to contribute to the revitalization of downtown, entice visitors and establish a venue for major conventions and community events. Between 2007 and 2012, the facility has been the site of approximately 7,000 events.

The city's annual revenue from the hotel and convention center averages $11 million, with a net operating income of approximately $2 million.

The hotel and convention center has fallen short of revenue projections by at least $1 million each year, which Tyler attributed in large part to the recession. He said there are signs of modest improvement, similar to what's happening in the hotel-convention center business in general.

The Hilton opened in 2005 at Columbia and Sixth streets downtown and south of Esther Short Park, the focal point of the city's downtown revitalization program.

The earliest the city could sell the hotel and convention center -- and make a profit -- would be 2028, Tyler said.

Stephanie Rice: 360-735-4508 or stephanie.rice@columbian.com.