The Des Moines City Council will be asked today to approve an increase in the city's financial commitment to a long-sought convention center hotel that will be built in the shadows of the Iowa Events Center.

Construction should begin next month on the 330-room hotel at Fifth Avenue and Park Streets, supported by financing that has undergone significant shifts in the last month, primarily due to a decision to end efforts to secure $20 million in second-tier construction financing from a controversial federal program that provides permanent visas to wealthy foreign nationals who invest in economic development projects.

The Polk County Board of Supervisors voted Feb. 2 to use gaming revenues to guarantee $27 million of a construction loan from a consortium of state lenders led by Bankers Trust Co. The board also will loan up to $29 million once the Iowa Events Center Hotel is completed in two years. Read more

As part of its financing for the project, the city of Des Moines had agreed to back up to $5 million of the $20 million loan from the federal immigration program. With that program off the table, the City Council will be asked to guarantee up to $10 million, including $1.5 million in interest fees, of proceeds that are expected to be generated under the Iowa Reinvestment Act.

Matt Anderson, the city's assistant city manager who is in charge of economic development efforts, said that backing the Reinvestment Act funds poses less risk to the city.

The Reinvestment act was passed by the Iowa Legislature in 2013 after intense lobbying by Greater Des Moines officials who considered it key to development of a convention center hotel as well as other projects that are vetted and approved by the Iowa Economic Development Authority.

In Des Moines, the Iowa Convention & Entertainment Reinvestment District was approved by IEDA to receive up to $36.4 million in hotel/motel revenues and sales tax revenues generated in a 23.5-acre that stretches south along Fifth Avenue from the convention hotel to Court Avenue, an area that also includes the Hy-Vee Inc. food store and apartments under construction at the southwest corner of Fourth Street and Court and the historic renovations of three buildings that are anchored by the Hotel Randolph at the northwest corner of Fourth and Court.

The City Council will be asking to backstop any shortfall in the annual reimbursement of those funds up to $8.5 million. The guarantee on the federal funds would have been an immediate call, due in five years, Anderson said.

Economic forecasts that have been conducted by Hilton Worldwide Inc., which will operate the hotel, do not forecast a shortfall in revenues once operations have stabilized, estimated to be five years after the hotel opens in 2018.

The city will issue bonds to cover the guarantee, if it is needed. The City Council vote will authorize the issuance of those bonds.
 
The City Council previously approved using slightly more than $14 million in tax increment financing revenues to help retire debt on the hotel.