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Promises linked to Hilton not fulfilled

As Baltimore finance officials ponder how to address chronic shortfalls in revenues from the city-owned Hilton Baltimore — which will cost taxpayers at least $2 million this year — some members of the City Council say political promises made in 2005 to get the hotel built in the first place have not fully materialized.

The 757-room hotel that opened in 2008 has lost a total of $54 million. It was built for $305 million with city-backed revenue bonds after then-Mayor Martin O’Malley made several promises to gain votes in the City Council to push through the deal to build the Hilton as the base hotel to the Baltimore Convention Center, located a block away.

The O’Malley administration boosted support for the publicly financed hotel deal by promising jobs for city residents at the hotel (which has been fulfilled), community-based programs and the establishment of an affordable-housing fund.

One specific promise, to open a community center in West Baltimore’s Edmondson Village, resulted in a center, but the facility in the Mt. Olive Holy Evangelistic Church on Edmondson Avenue abruptly closed in 2012 — after being open for about a year — said Councilwoman Helen Holton, who said she voted for the Hilton after receiving assurances that the center would be established.

“It was understood that my vote was needed and what was it going to take for me to give my vote?” Holton said, adding she is bitter about the center’s closing. “The [community center] we did get up until this past December, when the person who ran it retired and [the city department of] Housing chose not to replace that person, and so that center is now closed and I have been pushing to have it reopened. Housing didn’t have the courtesy to alert us that it was closing. All the talk of transparency is nothing but rhetoric. Too often, citizens become the casualties of administrative decisions.”

The affordable-housing fund has been used mainly for demolition efforts around Baltimore, documents from the city Department of Housing and Community Development show.

Those projects include $15.2 million for property acquisition, site improvement, demolition and administrative costs at the Uplands redevelopment in West Baltimore, $6.9 million for redevelopment and demolition in Poppleton and $4.6 million for acquisition, relocation and demolition costs in Barclay.

Another expenditure was $2.5 million for acquisition and demolition for a long-planned project in Coldstream on Tivoly Avenue, the city’s northeast quadrant.

“In January 2007, they came out to Tivoly to kick off the affordable-housing fund,” said Councilwoman Mary Pat Clarke, whose 14th District includes the community. “Just now, they are getting ready to actually tear down the houses. Just now. It’s taken them a while. … It has been slow going, and people were very discouraged.”

The affordable-housing fund set up in return for council votes to build the Hilton was supposed to have a total of $59.8 million. To date, Clarke said, the fund has only held $52.7 million, some of the funds coming from federal housing grant repayments from another city hotel, the Hyatt Regency Baltimore.

The affordable-housing fund has a balance of $17.1 million, Clarke said, based on figures from Andrew Kleine, chief of the city’s Bureau of the Budget and Management Research.

“The idea of the program was specifically to clear severely blighted properties and to clear sites for new development to be offered to developers,” Clarke said.

Clarke, Holton and Councilman James B. Kraft said they have monitored the losses at the Hilton since it opened, and recently became alarmed after city Finance Director Harry E. Black told council members the city would have to enter into talks this summer that could result in a restructuring of the hotel’s repayment structure as a way to protect taxpayers from further losses.

The chronic losses have forced officials to divert room-tax revenues to pay back the bonds instead of going into the general fund, and the amounts are slated to dramatically increase after this year, with the possibility of diverting room-tax revenues from other city hotels as well to help cover the escalating Hilton losses.

“I voted against the Hilton Hotel. I thought it was a bad idea at the time,” Kraft said. “I said at the time that the one thing I did not want to be able to do four or five years down the road was to say, ‘I told you so.’ That was the last thing I wanted to be able to do, and I still hate being in that position.”

Kraft, who represents the 1st District, said the new strategy for the financial structure at the Hilton should be aggressive in order to protect it from mounting losses that could be disastrous to the city’s general fund.

“We shouldn’t have gotten in this business in the first place, but our job now is to find a way to make the Hilton profitable. But we shouldn’t be in the position of having to use taxpayer money to bail it out.”

Holton challenged Mayor Stephanie Rawlings-Blake to step up and steer the restructuring.

“Absolutely, I’m concerned about it,” Holton said, “but let’s look at where power in the city of Baltimore rests. It rests with the mayor.”

She added that the recession is partly to blame for the Hilton’s lagging revenues, but advised that, as a whole, the city should take a lesson from the losses.

“Hindsight is always 20/20. If I knew then what I know now, I would say no.”