Move to block future city hotels

officer, estimated the city’s total losses will be about $45 million to $50 million if the sale closes.

The city financed construction of the Sheraton, the largest hotel in the state, to support its nearby convention center and help boost downtown development.

After the hotel sustained heavy operating losses, city leaders were ecstatic last year when TLG Phoenix offered to buy the hotel for $300 million. But Councilman Sal DiCiccio, a vocal opponent of the hotel, recently suggested it is actually worth less.

“Today it is worth less than $250 million (actually on the market it is less than $200 million),” he wrote in a Facebook post last week.

The city’s project manager for the sale and Pillsbury wouldn’t directly address whether the building’s $300 million sale price is an issue.

Both sides offered few details when asked about DiCiccio’s assertion. Pillsbury said price is just one variable in the complicated transaction. He declined to specifically comment on the value of the building.

City officials emphasized that the hotel’s performance has improved in recent years, aided by an uptick in conventions, major sporting events and a redevelopment boom downtown. Olsen said the hotel is now making enough to cover its debt payments.

Phoenix refinanced its hotel debt in 2015, replacing bond debt with a bank loan. The city is now making interestonly payments, but it will have to start paying principal on the loan in 2020 , Olson said.

Financial records withheld

As uncertainty about the future of the Sheraton swirls, state lawmakers are seeking to stop a repeat of Phoenix’s troubled foray into the lodging business. A bill aims to prevent cities from building hotels.

Sen. Warren Petersen, R-Gilbert, introduced a strike-everything amendment to Senate Bill 1371 to prohibit Arizona cities and counties from constructing, developing or leasing to operate a hotel or motel. As currently proposed, it would not apply to the Sheraton.

“What it would do is prevent another Phoenix situation from happening,” Petersen said. “I am a strong believer that government should not be competing with the private sector.”

Phoenix is opposing the bill, as is the League of Arizona Cities and Towns. A representative from the league said the bill violates a provision of the state Constitution dealing with the rights of municipal corporations to engage in business.

Petersen said he will amend the bill to address any constitutional concerns. The bill now faces a hearing in the House Rules Committee.

A bad investment?

Concern about the city’s ownership of the Sheraton has become a political lightning rod, particularly as city leaders debate whether Phoenix has money to build a new basketball arena for the Suns.

Don Hamill, a resident who lives near downtown, said he’s eager to see the city sell. “It is taking focus and money away from public safety and other programs that are really the important functions of the city,” Hamill said of the Sheraton.

Phoenix owns the hotel and has an agreement with Sheraton’s parent company, Starwood Hotels and Resorts Worldwide Inc., to operate the facility. Phoenix pays Starwood an annual base management fee of at least $1.63 million, and the city bears any losses or profits from the hotel.

Of the city’s current elected leaders, only Stanton was in office when the city decided to spend about $350 million to build the hotel in 2004. Stanton, who was a council member at the time, has said it was a good investment.

Councilwoman Debra Stark, who took office last year, said she agrees the hotel served an important purpose as the city sought to lure larger conventions to the downtown area. But, she said, it’s now time for the city to divest.

“I think it has paid off,” she said. “But it weighs us down. We probably need to sell it to someone who really knows how to run a hotel and make money off of it.”