Lombard denies hotel bond funding request
Asked to spend almost $1 million to help the agency that owns the Westin Lombard hotel make a bond payment due Jan. 1, the Lombard village board unanimously said "no."
The Lombard Public Facilities Corporation, created to finance construction and operation of the hotel and conference center, sought $911,747.94 to fill a gap in a bond payment created because the hotel has not generated as much revenue as projected.
"The board made the decision not to fund any of the shortfall from the village funds or from taxpayers," Village President Bill Mueller said Wednesday.
Although the hotel has underperformed since opening in late August 2007, this is the first time the public facilities corporation sought help with its twice-yearly bond payments.
The village hired the Naperville-based accounting firm Sikich LLP for advice on whether to fund the shortfall or let it be paid by reserves already set up to cover bond expenses.
The company's advice, presented at the village board's Tuesday night meeting, was not to cover the bond shortfall.
"The experts' message to us is the hotel is a great hotel; however, the bond deal is not great," Trustee Peter Breen said.
The public facilities corporation tried to restructure the bonds in March, but investors denied the offer.
The hotel was projected to bring in $14.6 million in 2008, its first full year in business, according to figures from Lombard Finance Director Tim Sexton. Revenue projections grew to $16.4 million in 2009, $17.9 million in 2010 and $18.5 million in 2011.
While the hotel's actual net operating income has grown from $6.7 million in 2008 to an estimated $12.6 million in 2011, revenue has remained below the projected amount each year.
Sexton and village officials said they blame the lower-than-expected revenue on the economic downturn and its effects on hotels and convention centers. The price the Westin can charge for rooms has decreased, and with it, so has the facility's revenue.
"Hopefully the hospitality industry sees a change where we can get our room rates and everything back to where they should be, where they were projected to be," Mueller said.
Unless the Westin's revenue far exceeds budgeted amounts in the next few months, Sexton said the public facilities corporation may struggle to make its July payment without using reserves and may again ask the village for funds.
"We anticipate there likely will be shortfalls in the future," he said.
Breen said he hopes the public facilities corporation and bond holders can agree to restructure payments so they are more reasonable in this economy.
"My greatest fear, and that of many of my colleagues, is that approving this payment would lead to a continuing process of payments with no end in sight," Breen said. "I am not comfortable with starting down the road of making these payments."