Sessions Hotel Massive Taxpayer Ripoff
Helpless state, local, and federal taxpayers are going to be on the hook for $10 million to pay for a Bristol Virginia hotel development scam. Known as the Sessions the $21 million project that will occupy or tear down several buildings in downtown Bristol Virginia is another gross example of rampant crony capitalism.
The almost $10 million that will be forked out by taxpayers will include $2.4 million in local cash, $1.8 million in tourism grants, $3.1 million Virginia state tax credits, and a $2.5 million federal tax credits. For Bristol Virginia that's $1.2 million in kickbacks from a local meals and lodging tax plus an additional $850,000 from other funds.
This is another risky speculative venture where we privatize profits and socialize most of the cost. This was done by unanimous vote from the city's IDA in closed session with no public input and the public barred from attending.
Local press reports claim this thing will have a bar, a spa, two restaurants, etc. and might create 60 or so jobs. These are more of the usual part-time low wage poverty employment that so plagues this community. This thing is projected to be profitable if its 70 rooms stay 60% occupied at $150 night. What this will really do is compete for high end tourist traffic by drawing customers away from existing establishments.
Bristol Virginia is already in severe financial trouble as Moodys has downgraded the city's credit twice in 2015 due to excessive borrowing and debt surrounding the Cabela's retail development at exit 5. The store (projected 150 jobs) and the associated shopping complex will setback state and local taxpayers approximately $100 million. The City is projected to not even see a return on its previous borrowing binge until 2030.
I attended the Cabela's grand opening on October 1 and was floored by sticker shock. The place is hideously expensive for a community where the median family income is around $34,000. This new hotel is also quite expensive for the average citizen in this high poverty low-wage community. But at a taxpayer cost of $10 million for 60 jobs is a bargain at $100 million 150 jobs at Cabela's.
A Moody's Sept. 21 report titled, "Investment-grade local governments stumble with outside ventures" blasted and downgraded Bristol "after investing heavily in expensive enterprise or economic development projects."
"Based on current projections, the city is not expected to benefit financially from phase one of The Falls development until fiscal 2030 as all sales and other local tax revenues are allocated for debt service... Therefore, the city is dependent on tax base growth in phases two and three of the project to support increasing debt service costs.
The decision to back the project and assume the additional debt burden resulted in significant reduction in financial flexibility... The decision to support the project, known as The Falls, raised the city's debt burden from 5.2 percent in fiscal 2012 to a very high 9.8 percent in 2014."
The Bristol credit rating went from A1 in 2014 to Baa today. Many of those including an ex-city manager were behind this insanity has left public office. To quote the Bristol Herald Courier on this issue:
"Since 2012, the city effectively doubled its general obligation bond indebtedness to purchase 140 acres along Lee Highway and pay for development and infrastructure costs of The Falls. About $46 million of the city's current $95 million in general obligation bond indebtedness paid for The Falls. The city's limit is slightly more than $100 million, or 10 percent of the city's total appraised property values..."
Besides Cabela's the project is slated to get two new restaurants and lured Lowe's to relocate from 1.5 miles down the road from Washington County. BHC also noted,
"The Pinnacle, a large, mixed use commercial center just a few miles down Interstate 81 in Bristol, Tennessee, opened its second phase earlier this year and work is underway on the next phase. Anchor tenant Belk opened a new, larger store in that center after closing its store on the Virginia side of town."
Belk used to be at the Bristol Mall in Bristol Virginia but jumped the state line for taxpayer goodies. The loss here of retailers is also killing Bristol Virginia. The Bristol Mall was sold for $2 million in 2015 after being bought for $18.3 million Veritas Reality of Indianapolis in 2006.
As Bristol Virginia stumbles along with credit downgrades and cost overruns from its various pork barrel and corporate welfare initiatives the Bristol Herald Courier is reporting that site preparation is underway for a new 153 unit upscale apartment complex near The Pinnacle. Bristol Virginia in the meantime is buried under 11 public housing projects.
Unfortunately the new apartments will be unaffordable to those working in these retail establishments. In reality there is a lot of construction all over the Tri-Cities area including retail and housing. While this is to be applauded what about the 30% plus real poverty rate that exists in this community?
Already the signs of tension and breakdown are becoming more prevalent. In Johnson City for example suffered four pharmacy robberies in less than a month. Most of the crime here while not violent is steadily picking up and often involves drugs including a prescription drug epidemic that rips the region. The big question is how bad does this have to get before the affluent class takes notice?
Another report from the Bristol Herald Courier concerns the latest armed robbery this time in Big Stone gap Virginia. This took place on a Friday night as the assailant fired a gun and demanded money. Employees told officers that two men who were wearing mask had entered the restaurant then went into the kitchen in at least one of the man brandished a weapon.
Fortunately no one was injured and police seem to be flabbergasted. The town police chief claim there hasn't been any armed robberies since he's been in office. There's no real description of the assailants but they're asking people to call the town police anyway.
Finally Some Job Growth
Tri-Cities after years of a contracting labor force seems to have gained some jobs in the 2nd quarter of 2015. To quote economist Steb Hipple of ETSU:
"The second quarter labor market performance in the Tri-Cities was the best in several years, based on both the Current Population Survey (CPS) and the Current Employment Survey (CES). According to the CPS household data, regional employment grew 2.7% in the spring period. The CES payroll data puts employment growth at 1.9%. This is the first time in three years that both indicators are telling the same story.
According to the Current Population Survey, employment levels jumped 2.7% to 218,921 - reversing three years of decline. Unemployment fell 9.1% to 13,593 and the jobless rate for the metro area was 5.9% (compared to 6.6% in 2014 and 7.8% in 2013). Responding to higher employment levels, the labor force expanded by 1.9% to 232,514. Taken together, these CPS data show labor market strength."
But does that mean wage growth? More low-end retail and hospitality jobs which is what is leading this are often seasonal and unstable. While the news seems good let's see what coming quarters will reveal.
Back Taxes Sought
Bristol Virginia is so broke and hungry for public dollars to feed its corporate welfare hogs they plan to go after those that owe back taxes. $1.47 million - $850,000 in real estate taxes and $600,000 in personal property taxes. Why such a panic? To quote,
"For more than a decade, the City has regularly borrowed millions against its anticipated tax collections..."
With such massive debts and irresponsible borrowing it's easy to understand why there's such a panic.
Posted April 16, 2015:
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