Norfolk Hotel Conference Center

Norfolk Hotel Conference Center

Purpose 2 The City signed a letter of intent (LOI) with Professional Hospitality Resources (PHR) to pursue a public private partnership to construct a Hotel and Conference Center. Today, we will provide an update on the hotel/ conference center project and its current status. No Council action is required at this time.

Last Council Update January 29, 2013 Key Negotiation Points / Financial Considerations 3 City provides funds for conference center. City provides funds for parking facility. Gold Key/PHR constructs hotel with following considerations: $7.5 million grant to reduce hard cost construction of Hotel. $750,000 Performance Based Grant for restaurant. State, local, and developer participation in a Tourism Development Grant. City share estimated at ~$200,000 annually. Evaluation of shared costs of the project including City construction contribution. City share estimate at ~$2.5 million.

Development Budget 4 ESTIMATED PROJECT CONSTRUCTION COST $126 MILLION Grant Participation $7.5 million grant to reduce hard cost construction of Hotel and $750,000 is a Performance Based Grant for the restaurant.

The City s Contribution has been set aside for this specific purpose 5 Total Revenue Since Inception $56.2 million

The Public Amenities Fund has generated more than $50 million since FY 2003 Public Amenities Fund Revenue and Expenditures through FY 2013 (* FY 2013 budget) Public Amenities Fund Revenue (FY 2003 - FY 2013*) $56.2 million Public Amenities Fund Expenditures 6

7 Public Amenities Fund Balance From FY 2003-2012 the fund earned $50.7 million and is expected to earn other $5.5 million in FY 2013 bringing the total to $56.2 million. Of this amount $29.1 million has been dedicated to the conference center project. Public Amenities Fund Support for Conference Center Appropriation Spent Balance Construction $14,400,000 $6,838,536 $7,561,464 Support (CIP) Other Support $14,745,749 $2,608,545 $12,137,204 Total $29,145,749 $9,447,081 $19,698,668

Hotel Conference Center Long-standing Strategy (The Why) City Council endorsed a vision to create a focused conference center to enhance the City s ability to attract mid-range conferences and executive meetings to the City. Long term need to maintain and improve the diversity of the local economy. Market research has indicated that Norfolk is an attractive destination for smaller meetings. A vital component of the approach to cross marketing and collaboration in the City. 8

9 Diversifying our Economy Further diversify our economy by extending more into the tourism/hospitality industry. 2011 ODU s State of the Region Report: Tourism is one of region s economic kingpins accounting for eight percent of our Gross Regional Product (GRP). 2012 ODU s State of the Region Report: Department of Defense (DOD) spending now accounts for 45.6 percent of all regional economic activity.

10 Diversified Employment The City s civilian employment base is diverse, with no single employment sector accounting for more than 17% of total employment. Employment by Sector during 3 rd Quarter 2012 3.0% 10.5% 3.1% 4.8% 2.7% 9.1% 7.9% 7.2% 1.8% 2.1% 3.9% 16.5% 1.9% 11.1% 14.3% Construction Manufacturing Wholesale trade Retail trade Transportation, warehousing and utilities Information Finance and insurance Real estate and rental/leasing Professional and business services Educational services Health care and social assistance Arts, entertainment and recreation Accommodation and food services Public administration Other services Sources: City of Norfolk, Comprehensive Annual Financial Report (FY 2002 and FY 2012) and Virginia Employment Commission Labor Market Statistics, Quarterly Census of Employment and Wages, 3rd Quarter 2012.

11 Norfolk is an Attractive Market In 2004, the City engaged Strategic Advisory Group (SAG) to determine whether a conference center/hotel was feasible in Norfolk and would be supported by market demand. The general consensus in 2004 was that Norfolk could enjoy a competitive advantage by targeting small to medium-sized conventions and conferences. A 2012 SAG study update reconfirmed the feasibility of the project.

12 Cross Marketing and Collaboration Vitality Cross collaboration is occurring throughout the City. There is momentum to rejuvenate the waterfront strategy. We can capitalize on our strengths such as: MacArthur Mall Town Point Park Cultural facilities and events Festivals Granby and tourist attractions Street (both North and South of Brambleton) Enhanced and expanded Waterside Marina

13 Hotel/Conference Center Rendering

14 Project Overview ~50,000 SF conference center space ~300 key full service hotel ~600 space parking facility High end restaurant International Association of Conference Centers (IACC) designated Conference Center

15 Estimated Annual Direct Fiscal Impact City annual direct fiscal impact attributable to hotel/restaurant: Almost $2 million in the first full year of operation. This figure does not include visitor spending, parking revenue, and water sales. Visitor expenditures and hotel payroll ($5 million) are additional impacts that will support our overall economy.

16 Moving Forward Public Hearing April 9, 2013 Council Vote April 9, 2013