Inquirer Editorial: Who should pay this hotel bill?

For about two decades, Philadelphia has subsidized Center City hotel development. The policy has worked, bringing in top-flight hotel operators and adding sparkle to previously shabby parts of town.

But now some, including a few of the hotel operators that benefited from past tax breaks, are questioning whether it is still a good idea. The question is appropriate, even though it's hard to swallow coming from a group whose main interest seems to be preventing competing hotels from being built.

A less myopic view might see the value in turning a boring parking lot in the 1400 block of Chestnut Street into the site of two luxury hotels that could help draw more business to the Convention Center.

Developers say they can't finance the 700-room, 50-story building, which would house both a W hotel and an Element Hotel, without a $33 million break known as tax increment financing, or a TIF. The project would also be eligible for state subsidies.

Benefits beyond shoring up Convention Center bookings, says the Philadelphia Industrial Development Corp., would include 1,800 construction jobs and 450 permanent jobs.

The project's critics say those jobs could be offset by jobs lost at other hotels due to competition. They argue that the Philadelphia market is becoming saturated and occupancy rates are flattening. A number of hotel properties could fall into decline, they say, if new hotels cost them operating revenue.

That's a possibility. Convention bookings in future years are below expectations, in part because budget-conscious companies aren't sending as many employees on expense-account trips to other cities.

Just as problematic is the poor reputation the Convention Center has gained for the exorbitant fees exhibitors must pay for union labor. That problem should spur the hotel community to put pressure on the Convention Center for a better labor agreement. With its new private operator, SMG of West Conshohocken, set to take over the center, it's time for a fresh approach to handling labor issues.

Councilman W. Wilson Goode Jr., although generally a supporter of economic development, wants a more thoughtful analysis of TIFs to be conducted before approving another tax break for a hotel. He wonders if a hotel is the best use for this land, or if another use requiring a smaller taxpayer commitment would be better.

It's a good question. Center City has become much more residential and has fewer dead zones with vacant buildings and neglected lots than it did 20 years ago. That changed dynamic begs for updated public policies, especially when it involves how taxpayer funds should be used.

The financing being sought for this project by developers Jeffrey Cohen and Brook Lenfest, son of Inquirer part-owner H.F. "Gerry" Lenfest, would not make taxpayers liable for the debt. But the city's investment through the tax break would be large.

The benefits of creating hundreds of jobs and building new amenities to draw more Convention Center customers seem to tip the scale for this project. But the best decision would be made in the context of how the city should employ TIFs going forward.