The city of Chattanooga is poised to sell The Chattanoogan, the luxury hotel and conference center on South Broad Street the city opened in 2001.
At its meeting Monday, the Chattanooga Downtown Redevelopment Corp. is expected to approve a purchase price for The Chattanoogan and authorize a purchase and sales agreement and closing documents required to close the sale.
City officials were mum Monday about who might buy The Chattanoogan, which was marketed by the PFM Group, a nationwide financial services company for government clients - or say what price the hotel might fetch.
The city has about $37 million in bond debt on The Chattanoogan. In February, City Finance Officer Daisy Madison said that was the minimum sales price the city would accept.
The city built the conference center to help attract more business conferences and meetings, but the hotel has failed to generate enough income to pay the debt on the facility.
The Chattanoogan at a glance
› Location: Broad and 12th streets downtown› Owner: Chattanooga Downtown Redevelopment Corp., an arm of the city› Manager: Benchmark Hospitality› Age: Opened in 2001› Size: 199 hotel rooms, three restaurants and 25 meeting rooms› Exhibit space: 25,000 square feet
During the 2015 and 2016 fiscal years, Benchmark Resorts and Hotels, which manages the hotel for the city, has made lease payments of about $1.1 million, or about one-third of the roughly $3.4 million that's The Chattanoogan's share of the debt for the bonds that built the hotel.
So the city spends about $2.3 million each year to make up for the shortfall from the hotel's income in repaying the hotel's debt.
The Chattanoogan was funded years ago as part of a $129.2 million bond package that also paid to construct the Chattanooga/Hamilton County Development Resource Center (DRC) where city and county planners work, a parking garage, and the Chattanooga Convention Center.
Jon Kinsey, who was Chattanooga's mayor then, said that even if the city doesn't sell The Chattanoogan for enough to cover its bond debt, the hotel and conference center has paid for itself over the years by generating property tax and hotel bed tax.
"There's been a tremendous amount of sales tax and room tax that would not have happened [without the Chattanoogan]," Kinsey said. "Certainly we've seen a tremendous growth in visitors, and I think it has played a role in that."
"Most importantly, we voted to build it," Kinsey said. "People forget this. The citizens of Chattanooga voted to fund a half-cent sales tax to build a conference center, expand the trade center and do Enterprise South."
That said, it would be good to see The Chattanoogan go into private hands, said Kinsey, a developer who is one of the main partners of the group that bought the Choo Choo hotel complex in 1989.
"They're more focused on making money," he said of private owners. "I think it's a good thing that this is happening. And probably should have happened a long time ago."
Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/MeetsForBusiness or on Twitter @meetforbusiness or 423-757-6651.