Cedar Rapids may cover losses at U.S. Cellular Center, convention center

CEDAR RAPIDS - The Cedar Rapids City Council on Tuesday will consider paying more than half a million dollars to DoubleTree Hotel by Hilton to cover 2015 operating losses at the adjacent convention center and arena, according to the agenda for the meeting at City Hall.

The latest figures are a reminder of the big investment Cedar Rapids has made in the city-owned hotel complex, which the city purchased in 2010, and the value placed on its role as a catalyst to bring people and money downtown.

'I always have been supportive of the city taking over the hotel,” said Ralph Russell, a city council member who was elected after the hotel purchase decision. 'Without that, we'd have a hole in downtown. The bad news is we have to subsidize the (complex), but the good news is it is getting more and more profitable.”

City leaders maintain the complex, which includes the DoubleTree Hotel, convention center and the U.S. Cellular Center, was a necessary investment and is doing as expected financially, if not better, since reopening in 2013. The losses in these early years were planned for, and they are decreasing over time.

The request before city council to authorize $569,590 in general fund dollars to the DoubleTree is on the consent agenda, which means it likely won't be discussed before being approved with other routine business. The meeting begins at 4 p.m. at City Hall.

City Manager Jeff Pomeranz acknowledged the losses, but said the numbers are somewhat misleading.

First, the hotel itself is profitable, while the convention center and arena are not, he said. Second, the amount includes a city-required set-aside of revenues to cover future improvements, such as an expensive repair or remodel, he said.

'The facility lost money. That was anticipated, but it was less than was expected,” Pomeranz said. 'These facilities around the country - not all of them - lose money, and our goal is to break even or even make money. It's only been open for a couple of years, and as we gain credibility in the market place, we will get closer to breaking even.”

In 2015, Cedar Rapids required the DoubleTree, which manages the convention center and arena, to set aside 3 percent of arena and convention center revenue. This is $320,000 of the $569,590.

The remaining $249,000 is an operating loss, he and Casey Drew, the city finance director, said on Monday.

By comparison in 2014, the city covered $500,000 in losses, but the set-aside was smaller at 2 percent, or $186,000, Drew said. The actual operating loss declined by about $65,000 from $314,000 in the 2014 calendar year to $249,000 in 2015, he said.

The set-aside is scheduled to increase by 1 percentage point per year up to 6 percent in 2018, Drew said.

In 2011, the city signed a 10-year contract with an option for 15 years with Hilton Worldwide Inc. to run the DoubleTree.

'Each year, we get better and better and better,” said Matt Felling, general manager of the DoubleTree. 'If you take out the reserve dollars, it would show as a complex it is doing well.”

The city purchased the run-down, 275-room, once privately owned Crowne Plaza Five Seasons Hotel from a creditor in 2010 for $3.5 million and spent $45 million to remodel it. The purchase came as the city was spending $85 million to renovate the arena and build the convention center.

'At some point we will sell it,” Russell said. 'At some point the operating loss will disappear, and the hotel will be making money. Is that two years away or four years away? We don't know that.”