City wants consultant to study time-share issue
To help city leaders and the owners of Embassy Suites Resort find an agreeable solution to the complex issue of time-share conversion, an independent consultant is being brought in.
South Lake Tahoe City Council members Tuesday announced that a consultant out of Colorado will work for the city, but be paid by Koar-Tahoe Partners, L.P., to look at both financial and policy issues that would come with converting 188 of the hotel’s 400 suites to vacation ownership units.
“The study will be looking at the financial aspects of a conversion and what would be the best business deal for the city,” said Councilman Kevin Cole, who has been directly involved in the negotiations with Koar. “The second part will be a market saturation study – what the market will handle in terms of time-shares in the city. Maybe our concerns will be verified, or maybe they won’t.”
Koar-Tahoe Partners, owners of the state line-area hotel, say they need the partial time-share conversion in order to deal with a $52 million balloon payment on their construction loan that was due July 31 of this year. Without the extra cash and downsized loan, the company says bankruptcy is inevitable.
In order to grant that request, the city would have to lift a five-year ban on time-share conversions. The primary concerns are the viability of the Park Avenue project and future redevelopment, the city’s already limited stock of up-scale hotel rooms and that the time share industry has not been tested in the city for a long enough period of time.
On the other hand, city officials are concerned about what a bankruptcy would say about redevelopment and how it may affect interest rates on bonds for the Park Avenue project.
Council also appears interested in preserving the public-private partner relationship with Koar, which was one of the first corporations to jump-start the city’s redevelopment efforts five years ago.
In briefly discussing the issues Tuesday, council members told the public they will be looking at long-term effects rather than short-term gains in making what will be a very difficult a decision.
“I’m putting my binoculars on, looking five to 10 years down the road at what one or the other will do to the community,” said Mayor Tom Davis. He stressed that no deal has been made and that both sides were working in good faith toward a solution. The missing link in having a strong position either way appears to be solid information.
“I want to make sure I have the right information before I make a drastic change in city policy,” said Councilman Hal Cole, who asked that the consultant also look into the circumstances that brought on the conversion request in the first place. “Are the problems due to factors beyond their control like the economic situation in California, or was is from unrealistic projections in the past?”
Councilwoman Margo Osti said she was concerned about how a conversion would affect Transient Occupancy Tax revenues after the city’s bond debt it paid off. Currently, revenues from the 12 percent room tax collected at Embassy Suites goes to bond payments. When the debt is retired, the city had expected to gain the full 12 percent in its general fund budget.
“That was one of the promises this community was given,” she said. “We were not getting a whole lot of TOT upfront, but that when the bonds were retired, we would get a lot more. I want to make sure that is addressed.”
Kevin Cole said that issue would certainly be considered under the financial aspect of the study.
The council declined to open the item to public comment until a final direction was established. City Manager Kerry Miller said the issue will likely be on the council’s Oct. 7 agenda, and the public will have the opportunity to speak at that time.
For further information on the outcome of Tuesday’s council meeting, including the Joint Powers Agreement for recreation, amendments to the city’s massage ordinance and sign ordinance amendments, please see tomorrow’s Tribune.
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