Kobra starts work on hotel, stalls on center City, developer disagree over who would pay for convention center
By Mark Anderson of The Sacramento Business Journal
Friday, January 25, 2008
Alizadeh got an extension from the city of Roseville for permits for the conference center project, which is to be built next to the 279-room Embassy Suites.
The city has long sought a conference center, and it worked out a deal with Alizadeh's Kobra Properties LLC in July 2005 to subsidize the construction of a $13 million conference center as part of a development that would eventually include two hotels.
Almost from the time the project was approved, construction costs escalated dramatically. The conference center that originally was to cost about $10 million ballooned to almost $28 million. In addition to increased labor costs, raw materials costs for everything from concrete to wood to steel rose steadily. That cost spike has been an obstacle in negotiations ever since.
Alizadeh said his position is simple: "We're waiting for the city on the conference center. The city pays for the conference center."
The city's contract from 2005 has a not-to-exceed amount of $10 million for the conference center.
"We have an existing contract. And as long as that is an existing contract, there's not a lot I can say about it," said Craig Robinson, Roseville city manager.
The existing contract has the city subsidizing the center and eventually transferring ownership to Kobra. Roseville doesn't want to own the center.
And Alizadeh doesn't want to pay for the center. His hotel will do fine without a center, he said, noting the center is the city's idea.
Conference centers are difficult to finance because despite being expensive to build, they carry almost no value. They do, however, come with ongoing expenses to operate.
"It's been a difficult issue," Robinson said. "We're scratching our head on that. We think he should be building the center, too, but if we do get an Embassy Suites, that would be great."
Until the rain started this month, Alizadeh had crews starting construction on the hotel's underground work for sewer and water.
The permits for the conference center were about to expire, and they would have expired if no work was done on it, Robinson said.
"We were asked for an extension, and we granted one. It is a request that is often sought by developers, and it is something we often grant," he added.
"There is no question that a convention and conference center is needed," said Greg Van Dusen, executive director of Placer Valley Tourism, the marketing bureau for the cities of Roseville, Lincoln and Rocklin.
"I hope they can find some middle ground and get something started."
A conference center would help attract visitors to area hotels.
The area's room taxes are low -- a 6 percent transient-occupancy tax in Roseville, 8 percent in Rocklin and 10 percent in Lincoln.
The room taxes in the city and county of Sacramento are 12 percent, and the tax revenue is used to market the area, support arts groups and pay off bonding on the Sacramento Convention Center, Memorial Auditorium and Sacramento Community Center Theater.
There have been several attempts to increase Roseville's room taxes in the past couple of decades, but those taxes must be approved by a two-thirds majority, and residents of Roseville haven't approved a tax increase.
"If you look at the top destinations around the country, they tend to have the highest occupancy taxes. They are able to invest that into attractions and marketing," Van Dusen said.
The city of Roseville for 20 years has wanted a conference center for up to 1,000 people. It has gotten to exclusive negotiations for such a project five times, the most recent with Kobra in 2005.
The center should be opening this summer, according to the contract between the city and Kobra.
One bright spot for any eventual center is that the Embassy Suites rooms have a 6 percent fee added to them, which is to go to funding the center.