The Biltmore–Asset or Liability

I very much appreciated the detailed comments of Danielle Frineburg of the Biltmore on my three Biltmore posts.

1. The main Finnegan point is that the Federal Government has confirmed that monies for proper maintenance and protection (“property’s repair, rehabilitation, restoration and recurring maintenance requirements”) of this historical facility should be paid before excess revenues are paid out.  This suggests that Coral Gables should subtract all recognized and agreed upon maintenance and restoration expenditures (with capital expenditure restated in annual payments of the financed capital expenditures) before taking out its payment.  What is unusual is that this has not been a issue between the management and the city until the declining economy actually led the hotel to have falling revenues,  and (perhaps coincidentally) after the departure of a city manager who is widely thought to have been extremely friendly and accommodating to the hotel’s management.
2. Another Finnegan point is that the taxpayers have not had to subsidize the hotel.  This may have been true in the past but the taxpayers are now subsidizing the hotel.  The failure to pay rent has meant a reduction in city revenues which have led to reduced services to taxpayers, higher property taxes and fees–these directly related to the Biltmore not paying at least $2.0 million in rent owed and past due (the Commission recently postponed repayments starting next year).  If the new lease is not strongly negotiated the hotel will pay less than it should and the taxpayers will pay more than they should.
3. Another Finnegan point is that the hotel has brought many benefits to the city.  I am sure that this has been true, but I tried to say that the hotel may be more of a burden than a benefit to the community in the coming years.  The US economy is not coming back.  The number of people who are willing and able to pay the cost of the luxury that the Hotel Biltmore represents has declined substantially.  Conventions are moving to lower cost venues.  Fewer people are able to attend expensive hotels.  This means that the hotel wants to pay less, the city will receive less and the taxpayers will have to shoulder the costs of the future of the hotel.

No doubt the Biltmore Hotel has been a great asset for this city–indeed it has been at the center of the city’s brand–but just as the Coral Gables Country Club became an anomaly for this city (too exclusive, too expensive, too costly for the city) and and then not viable in the future.  Let us hope that the taxpayers of Coral Gables do not have too pay too much to keep the hotel and that the hotel finds a viable long-term business niche.  That is our hope.

Biltmore Hotel–Return it to the National Park Service

One option that has not been considered so far is to return the Biltmore Hotel to the Federal Government.  It has the money and the ability to maintain it and the authority to negotiate with a management company.

The taxpayers of Coral Gables cannot afford to keep subsidizing the management company and the community cannot stand the spectacle of the City Commission to acting like they are the owners  and users of a facility we can’t afford.

City Not Investing in the Biltmore’s Preservation. Taxpayers Take Another Hit.

Thanks to the article by Tania Aldemoro of the Miami Herald:

Seaway cited a May 12 letter from Daniel Wenk, deputy director for the U.S. Department of the Interior, which oversees the Biltmore because it is a national landmark. The federal government deeded the property to Coral Gables in 1973 to preserve it.

“Expenses related to the hotel’s repair, rehabilitation, restoration and recurring maintenance requirements should be paid before any excess income is realized,” the letter stated.

The Biltmore contends its rent is “excess income.”

The city disagrees.

Coral Gables City Attorney Elizabeth Hernandez wrote the National Park Service in June, saying the city “used the excess rental receipts from the Biltmore for public historic preservation, park or recreational purposes.”

The city spent $11.6 million in 2008 and $13.4 million in 2009 for those purposes, according to a June 2010 report from the city’s independent auditors, McGladrey & Pullen.

On Wednesday, Hernandez said she could not say how much of that money went to the hotel.

The future of the city of Coral Gables earning income from the Biltmore is in question.  It seems that the city should have used its share of the income to maintain the Hotel to high standards.  This means less money for the city’s own public historic preservation according the of City Attorney who states that is where the money went.

It doesn’t seem to make sense that the Federal Government would allow the city to use the hotel’s income to pay for its own “historic preservation, park or recreational purposes” that did not include first fixing the hotel; it should first do the upkeep of the Biltmore and if there is any money left over the Federal Government could care less where the money went.

The city has delayed rental payments owed by the Seaway Biltmore, Inc. until next year and at the same time the city will negotiate a new lease.  The new lease would easily be negotiated in favorable terms to tacitly include these delayed payments.

What we are seeing then is that the city is in fact forgiving millions of dollars in rent due under the formula (now being covered by the taxpayers), with a more favorable contract for the Biltmore later this year and a new formula that will de facto dispense with the old payments due by the hotel.

All of this suggests that neither the Biltmore Hotel management nor the city of Coral Gables believes much in the future of the Hotel.

Can Coral Gables Afford the Biltmore Anymore? The Answer Seems to be No!

All of the information on the back-and-forth between the City of Coral Gables and the managing company of the Biltmore Hotel has raised a very fundamental question:

Can the City of Coral Gables and the taxpayers of Coral Gables keep paying for the hotel?

Isn’t it time for the City to think about the real future of Coral Gables, rather than committing its taxpayers to more and more taxes to keep up this business.

Another good question:  Is the Biltmore Hotel truly a viable business?

In the past decade rampant consumption, product of a false and temporary prosperity engendered by a property bubble, has now withered away with  lower property values (household ATM machines), lower incomes, unemployment, a stagnant economy and pubic deficits to finance the debts of a failed Wall Street.  Under these circumstances the Biltmore Hotel will never return to times of prosperity because people cannot afford a luxury hotel to the previous extent.

Either taxpayers will have to keep subsidizing the hotel (i.e., subsidize the rich clients of this hotel) or the City should admit that it can no longer afford this luxury.  To negotiate a new contract with the hotel in which taxpayers have to pay the true costs of the hotel is not a good solution, because the economy will not return to the good times of the past decade.

Maybe the Biltmore Hotel should be turned into a museum and convention center or be shuttered.  Hopefully, our Commissioners and the Mayor will think beyond their own term limits and come up with a solution that is fair to all Coral Gables citizens.