N.C. State to issue bonds for conference center, hotel, and golf course project

Clarion Call No. 150
North Carolina State University is soon going into the hotel business. Construction is slated to begin this year on the Centennial Campus Executive Conference Center and hotel, which would offer 250 rooms and 29,000 square feet of meeting space, to be complemented by a 18-hole championship golf course, all built on the university’s Centennial Campus.

Current cost estimates for the project are $65 million — $53 million for the conference center and hotel, and $12 million for the golf course. The university intends to issue bonds for the project, and the Board of Governors’ approval of it directs the university away from using tuition or General Fund money for it. The N.C. State Conference Center L.L.C. was formed in May 2001 after winning approval of the University of North Carolina Board of Governors — it had been approved by the N.C. State trustees in April despite not being listed on the meeting agenda, something university officials say was a simple oversight. This limited-liability company will “construct, own, and hire a management firm to operate the facility,” according to the university.
Still, the use of bonds is itself controversial, given that the state is currently undergoing a fiscal crisis in part brought on by the issuance of bonds related to the education bonds approved in 2000. The $80 million in new debt would nearly double N.C. State’s indebtedness (not counting the higher-education bonds), already at $87.6 million. University officials say N.C. State can afford it. “According to a current review by Standard & Poor, N.C. State actually carries very little bonded debt for a university of its size,” said Robert T. Geolas, Centennial Campus Coordinator.

A bigger controversy, however, centers on the competition issue. A study by the North Carolina Hotel and Motel Association suggests the N.C. State project would compete (i.e., reduce the market share of) not only with such private conference facilities as the Pinehurst Resort & Country Club, Grandover Resort & Conference Center, Grove Park Inn Resort, Sea Trail Resort & Conference Center, and the Ballentyne Resort Hotel, but also with traditional full-service hotels with meeting and convention facilities, including the Sheraton Four Seasons in Greensboro, Sheraton Imperial in Research Triangle Park, Marriott Hotel in Durham, Hilton in North Raleigh, Adam’s Mark Hotel in Winston-Salem, The Millennium Hotel in Durham, and others.

Geolas said that rather than cutting into the private facilities’ market, the project would expand the market. “Look around the country,” Geolas said. “In almost every case where local hotel, motel operators have come out against such a project, the project has ultimately generated new and expanded opportunities for those same hotels.”

Not only would the university compete against private industry, but it would have a competitive cost advantage, says the NCHMA, because the N.C. State Conference Center L.L.C.’s nonprofit status means it “would not be responsible for federal and state income taxes, and as an extension of a public educational facility would likely be exempt from most property tax liability and also allowed to claim reimbursement for state and local sales taxes paid on materials purchased for construction and on operating supplies.”
Geolas said that like the Centennial Campus, the project would mostly stand on its own.

Making this cost advantage even more important is the fact that the private-sector investors originally expected to bankroll the project pulled out of it. If private investors thought the project wouldn’t make money, critics ask, why does the university think it will?

Geolas said it wasn’t the case that private companies walked away from the project. They wanted very much to do the project, he said, but they also wanted some guarantee from the university to support revenues. Geolas said it was not unusual for a private developer for such a project to seek a financial commitment from the home university. At N.C. State, however, Geolas said, “We felt that if we were going to take the risk, we should also get the reward.”