Judge sides with city in convention center hotel case

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A judge has sided with the City of Wilmington in a case that challenged its effort to land an Embassy Suites next to the Wilmington Convention Center.

The Wilmington Convention Center is off Nutt Street downtown. File photo by Ben Brown.
The Wilmington Convention Center is off Nutt Street downtown. File photo by Ben Brown.

N.C. Superior Court Judge Paul L. Jones on Thursday signed a ruling that determined the city wasn’t wrongfully subsidizing or underwriting the private hotel’s development, as alleged by resident Glenn Wells in a case he brought against the city in February.

Sotherly Hotels, owner of the nearby Hilton Wilmington Riverside, had made the same allegation and became a party in the case.

The reason for their allegation: the city sold land for the hotel’s development at a cost Wells and Sotherly said was well below fair market value. Selling the land at such a low cost–$578,820 for a riverside tract next to the city-built convention center downtown–amounted to a subsidy forbidden by a consent judgment from years earlier, they said.

Background: City’s convention center hotel plan challenged

Judge Jones disagreed.

He noted that the consent judgment in question didn’t restrict the sale of the land itself. He also pointed out that the sale agreement between the city and Virginia-based hotel developer Harmony Hospitality Inc. didn’t promise the latter any public funds to build the Embassy Suites. That would be an all-private project.

Under a state law dealing with local government assistance in economic development, Jones added, “Wilmington is required to set the fair market value of real property to be conveyed. Wilmington thus had the authority to set that value at $578,820.”

Five months before the city’s February land sale, a city-commissioned appraisal had valued the site at $1.32 million–more than double the final price.

Story: City approves land sale; Embassy Suites to break ground

The consent judgment, from 2006,  followed a lawsuit, of which Wells was a party, that complained the city was violating law by using public dollars in the creation of the convention center, which would be conveyed to a private entity, and in a private hotel. The order served to regulate the city’s involvement in the private hotel component. In January 2011, the convention center opened sans a companion hotel; the city continued in its effort to attract one.

Its eventual deal with Harmony is set to bring a 186-room Embassy Suites that officials say will help boost the convention center’s marketing power and sweeten the local tax base.

According to a city press release Friday, the city expects $6.4 million in property and sales tax revenues over the next 10 years. It also says nearly 350 jobs will be involved in the construction, to begin late this summer. When the hotel is completed, in early 2016, it will employ 207, the release said.

The city in its deal with Harmony agreed to reserve 250 spaces in the public convention center deck at $100 per space for the hotel’s guests, which is the publicly established parking rate. (There are 578 spaces in the deck in all.)

A motion from Sotherly had argued the parking agreement didn’t require Harmony to compensate the city for reserving those spaces as such.

In all, Sotherly said its nearby Hilton would be at a competitive disadvantage in the city-Harmony deal.

The respective attorneys for Sotherly and Wells were not immediately available for comment Friday afternoon.

Mayor Bill Saffo said he and fellow city officials were pleased with the ruling “because it validates what we have said all along. The city has been, and will continue to be, in full compliance the 2006 consent decree. We look forward to moving as quickly as possible so that we can begin to realize the economic benefits of this important project.”

Past stories:

Hilton owner sends last letter of dispute ahead of city council’s vote on convention center hotel land sale

Terms of convention center hotel land sale headed to city council

Hilton still wants clarification from city on hotel land value

City turns down Hilton’s proposal for new appraisal of convention center hotel land

Assertions from Hilton owners postpone convention center hotel update expected Tuesday

Embassy Suites developers express optimism, gain another extension for Wilmington hotel

Franchise approval lands for Embassy Suites downtown

Details emerge on convention center hotel

Ben Brown is a news reporter at Port City Daily. Reach him at ben.b@hometownwilmington.com or (910) 772-6335. On Twitter: @benbrownmedia