CLEVELAND, Ohio – The administration of Cuyahoga County Executive Armond Budish is proposing a taxpayer bailout of at least $7.9 million for the county-owned Hilton Cleveland Downtown hotel because of business lost to the coronavirus pandemic.
And the bailout could rise to as much as $20.7 million if bookings at the 600-room hotel fail to rebound by the end of the year, or what county budget director Walter Parfejewiec describes as a “worst-case scenario.”
The administration is expected as early as Tuesday to ask County Council to approve the $7.9 million subsidy to cover $1.4 million in property taxes and $6.5 million in debt payments that would typically come from hotel’s own revenues.
Parfejewiec and Fiscal Officer Michael Chambers spoke Wednesday with cleveland.com about the need for the initial bailout and what they envision might happen later this year as the state reopens its economy after months of inactivity related to the coronavirus.
Where would the money come from?
The administration proposes drawing the $7.9 million from the county’s general fund, which already faces a projected $76 million shortfall due to coronavirus-related declines in sales and property taxes and other forms of county revenue.
Parfejewiec said the county has determined that $215 million in coronavirus-related aid received from the federal government cannot be used to subsidize the hotel.
Will more money be needed?
Probably.
Chambers said early county estimates put the expected cost this year for debt payments and property taxes at about $12 million.
How much the county pays later in the year is largely dependent on how well the hotel performs as the economy continues to reopen, Chambers and Parfejewiec said.
How much business as the hotel lost?
That is a secret.
Chambers and Parfejewiec declined on Wednesday to disclose the occupancy rate for the hotel, one of the largest in Ohio, saying the rate is considered proprietary information.
During a May 18 committee meeting, however, Parfejewiec said hotel revenues at that time were about 10% of what were expected.
Public Works Planning and Programming Administrator Nichole English on Wednesday told a County Council committee that the hotel’s business has started to slowly improve over the past month, particularly for weekend stays.
Hilton General Manager Teri Agosta did not immediately respond to an email from cleveland.com seeking details.
Did the hotel ever close because of the pandemic?
No. The Hilton reduced its staff, but opted not to close as did other downtown hotels.
That’s primarily due to two reasons, according to Chambers. Closing and then re-opening would have been more costly than to continue operations with a skeleton crew. And airlines that were trying to increase leisure travel continued to book rooms for their staff.
Who runs the hotel for the county?
CHMWarnick, a hotel-management firm with headquarters in Massachusetts and Arizona.
A County Council committee on Wednesday signed off on a three-year, $760,000 contract extension with CHMWarnick to continue managing the hotel on behalf of the county.
The county financed the $272 million hotel with a quarter-cent increase in the county sales tax. The facility opened four years ago, in time for the 2016 Republican National Convention.
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