Bridge Park developer wants to cover debt shortfall with new bonds
Because of a decrease in hotel business at Bridge Park, developer Crawford Hoying is asking Dublin City Council to allow the developer to cover the shortfall in bed-tax revenues with new bonds, some of which are set to be issued this month.
Council members discussed the proposal with Crawford Hoying officials Aug. 24 and are slated to revisit it during a meeting Monday, Sept. 14.
City Manager Dana McDaniel said council would need to make a decision at that time regarding the proposal.
Alison Srail, executive vice president of finance with Crawford Hoying, said the developer is seeking approval from council because its proposed use of bond funds is not "explicitly approved" under the development agreement between Crawford Hoying and the city.
According to an Aug. 20 memo, Crawford Hoying is seeking council's permission to cover a $340,000 shortfall in A-block debt service with funds from new bonds issued by the Columbus-Franklin County Finance Authority for the D, F and G blocks of the Bridge Park development.
Refinancing of bonds for D and F blocks is scheduled to be completed later this month, regardless of a yes or no vote on the proposal, Srail said. The G-block transaction will be finalized in the first quarter of 2021, she said.
During discussion Aug. 24, council members shared their initial reluctance to agree to Crawford Hoying's proposal.
Council member Christina Alutto said she struggled with the funding proposal and that perhaps additional conversation would change her perspective.
"I do think it sets a dangerous precedent," she said.
Mayor Chris Amorose Groomes also said she was struggling with the proposed funding solution.
Crawford Hoying has many benefits in a public-private partnership with the city that other businesses don't have access to, she said.
Council member Jane Fox said she was concerned about the effect the pandemic could later have on other parts of Bridge Park. She said more financial information about Bridge Park would be helpful.
Council member Cathy De Rosa questioned why Crawford Hoying or other entities haven't decided to fund the $340,000 shortfall themselves.
She said she struggled with taking out debt to pay debt.
"Just saying that out loud," she said, made her feel uncomfortable.
When asked why Crawford Hoying itself did not cover the shortfall, Srail said, "Under the current structure, neither Crawford Hoying nor the city of Dublin can be reimbursed for funding the shortfall. If there is a gap in funds, the gap is covered by an additional tax that is administered against all property owners within Bridge Park. In order to alleviate this burden on the taxpayers, we've proposed to take advantage of excess proceeds which are the result of rate declines on bonds issued for a future phase to fix the shortfall in this block."
Details of the
A combination of variables contributed to the shortfall, including decreased revenue in bed taxes and events revenue, along with slowed construction and sales of townhomes in the H block portion of Bridge Park, the memo said.
The slump in hotel business is because of the COVID-19 coronavirus pandemic, which has drastically reduced hotel room night stays, according to Scott Dring, executive director of the Dublin Convention & Visitors Bureau.
Dring said figures in March showed the hotel occupancy for Dublin hotels was 33.5%. In April, that decreased to 18.5%. In July that rate increased to 49.2%, still a great deal lower than the 2019 occupancy rate for July of 83.2%.
Dring said he anticipates hotel-occupancy-percentage rates hovering in the mid-40s for the next couple of months.
Dublin's bed-tax revenue comes from the 6% lodging tax imposed on stays less than 30 days in the city, said Matt Stiffler city finance director.
The debt service is for bonds issued by the Columbus-Franklin County Finance Authority in 2017 to fund public improvements necessary to develop the A block of Bridge Park, which includes the AC Marriott hotel, the Exchange events center and an office building. Debt service is the money needed to make payments on the principal and interest of outstanding loans. The principal is the money that was lended.
The A-block debt service is funded through a combination of bed-tax revenue from hotels, revenue from events at the Exchange and real-estate taxes paid on properties in the Bridge Park New Community Authority, said Jeff Roberts, executive vice president and general counsel with Crawford Hoying.
Because of the format in which the A-block bond agreements were set up, if the debt service shortfall isn't paid from another source, residential and commercial property owners within Bridge Park would be responsible for funding it.
The Bridge Park New Community Authority, established in 2015, would impose an additional real-estate-tax-millage charge on property owners -- approximately 3 mills in 2021 and 1.7 mills in 2022.
An owner of a $750,000 residential condominium would pay $787.50 in 2021, and the owner of an office or apartment building valued at $8 million would pay $8,400 that year.
The new community authority is a separate entity from the city and collects development fees to help fund parking structures and other public facilities in Bridge Park.
Srail said the new community authority would begin assessing tenants the additional millage in 2021.
However, Crawford Hoying doesn't want its tenants to carry the weight of the shortfall, she said.
Srail said about 100 Dublin residents own residential property at Bridge Park. About 30 tenants of office and commercial properties could be affected, as well.
Before COVID-19, the hotel and events center were performing beyond expectations, Srail said. Crawford Hoying is forecasting hotel business will return to typical levels by 2023, she said.
"We think this is a one-time issue," she said.
An Aug. 21 letter to council members from Crawford Hoying details some of the financial challenges caused by the pandemic that have affected revenues used to service bond debt.
According to the memo, both the AC Marriott and Home2 Suites by Hilton had been performing well heading into 2020, but through March, occupancy was in the single digits.
Home2 management decided in mid-March to close for two months. The AC remained open, although occupancy was about 5%.
The Exchange also closed for two months during the early days of the pandemic.
Crawford Hoying officials said the AC is performing at 46% of what was budgeted for this year, and Home2 is performing at 40%.
Revenues for 2020 for the Exchange are projected to be about 37% of what was budgeted.
Another hotel, Marriott's Springhill Suites, is slated to open in the fall on Bridge Park Avenue in the development's F block, which is west of Dale Drive and southwest of the intersection with Bridge Park Avenue.
Srail said if any shortfall in debt service were to occur for the F block, the debt-service agreement stipulates the owner of the hotel is responsible for any debt, rather than all tenants of Bridge Park.
Bridge Park's hotels weren't the only businesses that felt the impact from the pandemic.
Srail said Crawford Hoying also worked with restaurant and retail tenants to mitigate financial challenges caused by the pandemic.
The developer offered to defer two months of tenants' rent to the back of their leases, she said.