Hilton to skip out on taxes to pay its mortgage
“I expect it’s going to be an ongoing thing for a period of time,” Finance Director Harry Black told the Sun. Adding for the BBJ: “That does not necessarily concern me.”
The city floated $300 million in revenue bonds to build the hotel. It did so because no private investor would do it. Then-Mayor Martin O’Malley figured he and other city politicians had a better idea about what the future of tourism held than those in the industry who spend their lives and risk their fortunes on that question.
The hotel’s backers figured the place would see average room rates in the $215 neighborhood, the BBJ reports. The actual figure: $170. The hotel’s website is quoting rooms at $199 today. That’s $40 more than you’d pay at Pier 5 or the Residence Inn, and $120 more than at the Sheraton City Center three blocks north, which offers rooms for $79.
The Hilton has struggled to pay its debt service since its 2008 opening, dipping regularly into “reserve” funds set aside for the occasional bad year.
Now, apparently, the reserve is not enough. So the hotel will not pay a third of the taxes it owes the city under the 9.5 percent room tax. That money will go to its bond holders instead.
This failure is no failure, Black says. “Just stick to the plan,” the BBJ quotes him saying.
No word on when—or if—the hotel will make up for the shortfall.