On Tuesday, following nine months of negotiations, Salt Lake County Mayor Ben McAdams said he is walking away from a proposed contract with Omni Hotels & Resorts to develop a headquarters hotel for the Salt Palace Convention Center in Salt Lake City. McAdams said in a statement that, while the development of a convention hotel is an important part of growing the county's convention business, the proposed financial details Omni was asking for would put too much of a burden on Utah taxpayers.
"I'm disappointed that we could not get to 'yes' with Omni, but it reached a point where they were asking for too much in public financing that would benefit their bottom line at taxpayer expense," he said.
In 2014, the Utah Legislature approved a bill to help finance the 1,000-room convention center hotel to serve the Salt Palace by providing tax incentives to the developer, and Omni was selected to begin negotiations. By mid-July this year, however, Omni wanted that incentive and then some, in the form of public grants and cash advances, according to McAdams.
He added that the county and the hotel company also were having trouble over an agreement with hotel owners to block rooms for citywide conventions at the Salt Palace. While willing to "technically" block rooms, McAdams said Omni wouldn't agree to the room-block market-rate protection that was set forth in the original request for proposal and is typical for a convention headquarters hotel. Without room-rate protection, McAdams said, Omni could get out of the agreement by offering above-market room rates not acceptable to event sponsors. McAdams said providing the incentives to the private hotel owner and then ultimately not having a viable room commitment was not acceptable to the county.
For the hotelier's part, "Omni was disappointed to receive notice of termination of negotiations related to a new convention center hotel," Charlie Muller, the company's vice president of acquisitions and development, said in a statement. "Salt Lake County, in conjunction with the state of Utah and Salt Lake City as other stakeholders, had put together a very compelling incentive package that drove Omni's interest to work closely with HKS [an architectural firm] to evaluate multiple potential sites. The County showed great flexibility throughout the site-selection and negotiation process. Unfortunately while both sides were very close, the final economic terms were just not suitable enough for Omni to be able to commit to the project. Beyond economic tax incentives, Omni understands and supports the need for a reasonable room-block agreement, which the company has reached to the satisfaction of other municipalities for similar projects -- and Omni indicated to the County it would revisit its stance on room-rate control should other economic incentives have been agreed to."
The loss of time in building a new hotel could hurt Salt Lake County very soon. According to the Associated Press, the Outdoor Retailer Show, which has been coming to the Salt Palace for almost 20 years and will meet there for two big events in 2016, has grown too large for the city's hotel base and is close to making a decision about where the shows will go in 2017 and beyond. Without the promise of 1,000 new rooms coming online, other cities with more guest rooms and convention space are starting to look attractive.
The county plans to reissue the RFP to find a new developer for the project, with the support of Visit Salt Lake. "We support Mayor McAdams' decision, and know that he has the best interest of the taxpayers of Salt Lake and the future success of our convention industry in mind as he continues to move this project forward," said Scott Beck, president and CEO of the convention and visitors bureau.