Hotel Tab

The boardroom of the St. Louis Development Corp. sits on the 12th floor of a high-rise at 10th and Locust, surrounded by characteristic downtown de-construction -- vacant bus stops, piecemeal parking lots and buildings long abandoned and shuttered against the elements. The physical irony wasn't lost on anyone who braved the weather to get there Monday morning.

Especially sensitive to the surroundings were the developers of the proposed convention-hotel complex, who had come to ask the St. Louis Tax Increment Financing (TIF) Commission to approve millions in tax subsidies to help them justify investing in an area with so little commercial energy. But just as aware of the city's economic desperation were opponents of the project, mainly organized-labor and civic groups, who acknowledged downtown's dire need for a convention hotel but said that the expected results of this project did not warrant the huge public investment.

The proposal at hand presented a recurring question for St. Louis officials: Just how much leverage does the city have in demanding that developers of a tax-subsidized project pay decent wages and benefits to their employees? Apparently none.

The proposed hotel will be owned and managed by the New Orleans-based Historic Restoration Inc. and Marriott International, partnered as Gateway Renaissance Venture Inc. The name of the hotel complex represents an amalgamation -- the Marriott Renaissance Hotel. Tim Tucker, project manager for Historic Restoration, told TIF commissioners Monday that the restoration of and addition to the Lennox and Gateway hotels would yield 1,083 hotel rooms and suites, a 1,000-car parking garage, two ballrooms, 500 construction jobs and, eventually, 575 permanent jobs. Tucker added that the project would allow the convention center to increase its annual business from an average of 33 events per year to 56.

"This is going to be a tremendous economic boost for the city of St. Louis and will give tremendous confidence to other investors interested in downtown," Tucker said. "This is truly a linchpin project that has tremendous potential."

But it was when Tucker later explained how the project would be financed that the air in the boardroom turned noticeably colder.

"The way it works currently," Tucker began, "Mercantile Bank has agreed to take the lead and put together a consortium of lenders that would essentially lend the Gateway Renaissance Venture development team $65 million, and then, on Dec. 15, we made a presentation to the Missouri Development Finance Board in which we introduced the project to them and identified the resources that we thought they could help the project with. We received preliminary feedback from the board indicating that they favorably reviewed the project, and what we are asking of them specifically is to issue $25 million in revenue bonds.

"We have a $41 million tax-increment-financing component," Tucker continued. "Approximately $33 million of that is local city TIF and $8.5 million is state TIF. The city has received an award from HUD (the U.S. Department of Housing and Urban Development) for $22 million, and we are in the process of putting together the buyers for the federal and state tax credits."

In a nutshell, the hotel complex, to be built just south of America's Center downtown, will cost $193 million, and the developers want a total of about $116 million -- or 60 percent of the cost -- to come from public funds.

"We think building a convention hotel center is a good idea, but we have a lot of concerns about this particular deal," said Dave Morton, organizing director for Hotel Employees and Restaurant Employees Local 74 in St. Louis. "We are concerned that the amount of public money -- $116 million -- will cost $202,000 per job creation."

For Morton and other critics present at the hearing Monday, the question before the city and its TIF commission was just what kind of "job creation" the project represents. To bring a safety net of sorts to the table, Morton and others want the city to require -- as a condition of the subsidy -- that Marriott, which will manage the hotel's operations, sign a "neutrality agreement" promising that it will not oppose any effort on the part of the union to organize the hotel's employees. Even though labor laws prohibit companies from actively opposing organizing activities, they often do, labor organizers say.

A second aspect of the neutrality agreement requires the company to recognize the union as soon as a majority of workers sign on, thus bypassing the National Labor Relations Boards election process. Signing the agreement and allowing a union to be formed, labor organizers say, would guarantee that living-wage jobs would be generated with the public's investment rather than minimum-wage jobs paying $5.15 an hour with few or no benefits.

Similar campaigns have been successfully waged in more than a dozen large cities across the country, where private businesses profiting from public revenue are required to pay their employees enough to bring them above the poverty level. In Chicago, for instance, the city's aldermen passed a law this summer requiring all city contractors to pay a living wage of at least $7.15 an hour. In Oakland, Minneapolis and San Antonio, any company receiving tax abatements is required to pitch in a living-wage ante.

The idea isn't so much one of sound economic justice, supporters say, as it is good economic sense.

Sister Mary Ann McGivern, a St. Louis activist and freelance writer, told the TIF Commission that a tax-subsidized project that generates low-paying jobs ends up costing the government in the long run. "Will the management firm give back enough to the city in return for these tax benefits?" she asked the commissioners. "That deal will define whether the employees will earn enough to pay taxes and support the schools, the police, the fire department and city government or, alternatively, place a drain on city resources in terms of routine and catastrophic health-care costs, subsidized housing and crisis intervention at home when work grievances pile up or an employee is fired. The cost of subsidizing unsustainable work is steep."

The city must insist on the neutrality agreement because Marriott has already rejected the union's request for the company to do so, said Kenneth Ilg, a spokesman for the Hotel Employees and Restaurant Employees. "What we're looking for is certain commitments," Ilg told the commissioners, "commitments that they won't interfere with people's rights, rights that are guaranteed to them as United States citizens to form a union. Marriott has refused to do that. We're asking that they commit to providing a living wage and benefits at this hotel. We share your goals, but we want to do it right."

The original legislative intent for TIF projects was to provide incentives that would lure businesses to blighted inner-city areas where they otherwise would not locate. For its part, Marriott -- whose assets top $6.5 billion -- usually targets areas with large tourism potential. The company owns 95 hotels comprising 45,718 rooms (average room rate: $133) in cities such as New York, Los Angeles, San Francisco and Miami. Consider the following statement made on Marriott's Web site in its "financial review" of 1998: "The company concentrates on larger upscale and luxury properties in urban, airport and resort convention locations."

As an example, Marriott will build a 717-room, full-service hotel in Tampa, Fla., adjoining the Tampa Convention Center. The cost of that hotel was about $104 million, the financial document says. "Ancontinued on next pagecontinued from previous pageessential part of the economics of this transaction is financing assistance in the form of a large subsidy from the City of Tampa in the approximate present value of $16 million. As a result of the city's significant involvement, the company's net investment in the hotel is estimated to be $88 million, or $124,300 per room."

The point? Marriott's building in a Midwestern sleeper like St. Louis probably wouldn't have happened without the kind of subsidies being offered.

The city's administration is acutely aware of St. Louis' market potential. "I will be the first to say that over the last 20 years, the public leadership and the business leadership of this city has over-promised and under-performed on a lot of significant public projects," Mike Jones, chief of staff for Mayor Clarence Harmon, told the TIF commissioners.

"But there is no single project within any city in America that turned that city around. Redeveloping cities and communities is a sustained effort over time. Building this hotel is just one part of that effort," Jones continued. "Relative to this project and the amount of public support going into it, I say we're not subsidizing this hotel; we will make an investment of equity into a public project and expect a return on that investment obviously in the form of jobs and becoming a catalyst for other investments.

"Would this activity happen if we did not make this investment?" Jones asked. "The answer to that is no."

The meeting ended with the TIF Commission unanimously approving the $33 million TIF subsidy -- without any requirement on the employee pay scales or the neutrality agreement. The battle will resume when the proposal hits the city's Board of Aldermen.