The Hilton Vancouver Washington, which dipped into room-tax reserves for the first time this winter to make its debt payment, has kept costs down well enough to fully cover its July bill, the city’s chief financial officer said Thursday.
Though the hotel and convention business is still a struggle, Lloyd Tyler said that cash flow is up slightly compared with this time last year, and the Hilton will make its $1.7 million payment today without using reserves.
“We’re not out of the woods yet,” Tyler wrote in an email. “Eric Walters, the new general manager … is doing a great job keeping expenses down and pursuing all opportunities to increase revenues by bringing groups and individual travelers to our community.”
Until January, the hotel and convention center was able to meet its bond payments through operating revenue, a dedicated lodging tax collected by the city and a sales tax credit from the state. The debt is paid twice a year: $2.3 million in January and $1.7 million in July, for a total of $4 million annually.
As the Hilton reduced rates to bring up reservations, the city was forced to use $584,420 from $1.6 million in dedicated lodging tax reserves to cover the shortfall on the Jan. 1 payment.
The reserves used to cover the Hilton’s January debt did not come from the city’s ailing general fund, which pays for operations such as fire, police and streets. Rather, it came from reserves built up from saving half of a 4 percent lodging tax on room bills for all hotels across the city. State law prohibits lodging tax money from being spent on anything but programs that promote tourism.
“The top priority for the lodging tax reserve is to ensure that funds are available for the payment of debt, if needed, during variable business cycles (like the current recession) so the city’s general fund is not impacted,” Tyler wrote.
The other half of the lodging tax reserve goes to the city’s tourism fund, which provides funding for select events, such as the Vancouver Wine and Jazz Festival.
The Vancouver Downtown Redevelopment Authority in 2003 took out $68 million in bonds for the Hilton Hotel and Convention Center, with the city backing the loans. Hilton Hotels Corp. is paid a flat fee to manage the site.
Under the terms of the 2003 financing documents, the city of Vancouver agreed to guarantee the loan, but how much it must cover out of its reserve every year is capped, Tyler said. For 2010 and during the 2011-2012 biennium, the annual cap is $650,000.