Hilton Garden Inn still waiting to turn a profit in Pascagoula

Hilton Garden Inn still waiting to turn a profit in Pascagoula

PASCAGOULA, MS (WLOX) - Before the hotel opened for business, the City of Pascagoula spent $2.5 million building roads, putting in drainage, landscaping and installing lighting around the property. Even a beautiful fountain was installed.

That money came in the form of a HUD grant administered by the Mississippi Development Authority. Part of the agreement was the creation of at least 77 jobs, a requirement that has been met.

City manager Joe Huffman said this is the new way of getting things done.

"You can try and use all the arrows in the quiver, so to speak, your economic development toolbox, or you can decide you're not going to invest in these strategies and you may realize nothing," Huffman explained.

So why is a new bond needed? Gentry Williams is one of the partners in La Font LLC, the company that owns the hotel and surrounding parcels.

"We spent money for all the infrastructure underneath and surrounding the hotel. Nothing to do with our parcels or anything like that. Only involved with the hotel that we borrowed funds to and the TIF dollars will go to pay those loan costs back," Williams said.

That loan was almost $1 million. For the company and Williams, it was worth the risk.

"We took a dilapidated old motel, the La Font Inn, tore it down and built a beautiful state of the art, modern facility. That was our goal from the start," said Williams.

There's another concern though, according to Huffman.

"Everything has not quite been developed as originally hoped. All the out parcels have not been sold. One out parcel has been sold to Hardee's, which is thriving," Huffman said.

There may be a reason for the empty space, according to city attorney Eddie Williams.

"The four remaining parcels, as you know, are behind the hotel, so that brings up an issue I think with respect to marketability because of their location," Williams explained.

There has been interest in the out parcels, just not the right kind, according to Williams.

"We've had offers to purchase it. It hasn't been the kind of businesses that interact with the hotel. They might detract from the hotel instead of adding to the hotel," Williams said.

Still, some members of the city council are proceeding with caution. One of them is Scott Tipton.

"We would love for them to be able to develop the parcels and continue to bring more tax money in, so it is a concern and we're digging into it to make sure we would be OK with that," said Tipton.

He went on to talk about a previous deal to issue the bond.

"The former council entered into an agreement on multiple developments, and we want to continue to meet our contractual obligations that the former council approved," Tipton recalled.

Let's take a look at the worst case scenario. Let's say that this entire Hilton project and the surrounding parcels are unsuccessful and possibly fail.  Let's say the TIF bonds can't be repaid by the company. What happens then? Is the city on the hook?

"These are revenue bonds, and they have to be repaid with the revenue generated by the development. If the development fails after the bonds are issued, the city has no liability to repay those bonds from the general fund. This is one of the risks that the bond purchasers assume when they buy these bonds," according to Williams.

Williams said the hotel has not made a profit in its two years of operation because of loan payments.  He does say he and his partners, which include foreign investors who hold a 25 percent share in the property, expect the hotel to make money this year.

Williams added such a start for a new property is typical in the hospitality industry.  He says it generally takes a new hotel three to four years to turn a profit.

He also pointed out the Pascagoula property is rated number three in the country in guest surveys.

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