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City eyesore may soon be all-suites hotel

Plans call for a $50-million, 250-room hotel at the site of the Fogarty Building on Sabin Street.

Wednesday, April 21, 2004

BY GREGORY SMITH

Journal Staff Writer

PROVIDENCE -- The Providence Redevelopment Agency is moving closer to a deal with developer Vincent J. Mesolella Jr. for the construction of a 13-story hotel on the site of the Fogarty Building.

Eager to see a taxable project at the site of the agency-owned building downtown, city officials have asked Mesolella to submit a tentative purchase-and-sale agreement that would lead to the developer's acquisition of the site.

Mesolella told the Redevelopment Agency board of directors Monday that he would do that. Submission of a tentative purchase-and-sale agreement would commence negotiation of the terms of a final deal.

At the agency meeting, Mesolella reacquainted the directors with the proposed design of a scaled-back $48-million to $50-million hotel project at the site.

The existing vacant building would be razed to make way for a 250-room all-suites hotel on Sabin Street across from the Rhode Island Convention Center. The hotel would be connected to the Convention Center by a footbridge and would have dedicated parking for 240 cars in the Convention Center garage.

The scaled-back design is the same Mesolella originally advanced for the site, before he became enamored of a more ambitious undertaking with additional rooms and amenities that he negotiated with the Convention Center Authority.

The authority would prefer to have more rooms and amenities to suit its convention-goers, and to have as close an association with the hotel as possible in order to get guaranteed blocks of rooms at the times and the prices it would like.

The more ambitious project called for nearly 400 rooms in a 21-story building, a $65-million price tag, and a heavy investment by the state, which would have become majority owner. Governor Carcieri killed it last year because he is opposed to state financing of a hotel.

Mesolella, a former state representative who has maintained his friendships in the General Assembly, is now asking for $15 million in financing from state government. The state would issue bonds that would be paid off with the proceeds from the project.

"There's significant support for this project [financing] in the legislature, especially among the Providence legislators," Mesolella told the Redevelopment Agency directors.

Although Mesolella contends his project deserves state financing help because it is meritorious, he acknowledged to the Redevelopment Agency that he "might very well" be able to get it financed privately.

"We would still pursue" the project if the state refuses to help, Mesolella said.

When he initially sought a smaller hotel, the developer said, he had lined up financing through a widely known New York City investment banking firm that caters to the hospitality industry.

If the project is a good business proposition, the governor says, a developer should be able to get private financing. If it is not a good proposition, then the state should not risk it either, his argument goes.

Mayor David N. Cicilline said yesterday that a reuse of the Fogarty site is critical to downtown redevelopment and he would like to see the state issue bonds to facilitate the hotel plan.

He said it is too early in the General Assembly session to predict whether Mesolella will be able to win state financing.

"That is a very, very attractive site. . . . I have no doubt it will be developed" for a hotel or another purpose sooner or later, the mayor commented.

For a couple of years Mesolella has been the "designated developer" of the site, meaning, that the agency gave him an option to build a hotel there. But progress was stymied as he fought unsuccessfully at the State House for the more ambitious project.

Assuming the Redevelopment Agency enters into a purchase-and-sale agreement with Mesolella, there would be a contingency arrangement to guarantee that the agency would regain control of the site if Mesolella is unable to accomplish the project, according to Thomas E. Deller, agency executive director.

The scaled-back hotel would have restaurants, a swimming pool and fitness center, a mini-ballroom and meeting rooms.

Mesolella will need demolition approval from the city Historic District Commission, design approval of the hotel building from the Downcity District Design Review Committee, and a waiver of the building height limit from the Zoning Board of Review.

The building would be about 5 feet taller than the maximum allowed by the city zoning code, according to architect Duncan Pendlebury.

The Redevelopment Agency owns the Fogarty Building, having bought it from the city in the financial preparations that were made for the construction of the Public Safety Complex.

The Fogarty Building is part of the collateral that the agency pledged for the borrowing that was done to build the Public Safety Complex, according to city Finance Director Alex Prignano.

At the time of the agency's purchase from the city, the administration of Mayor Vincent A. Cianci Jr. thought the Fogarty Building might have to serve as an interim police headquarters.

There was a package deal between Mesolella and Cianci in which Mesolella and a partner agreed to build the Public Safety Complex and a luxury hotel on the site of what was then the police-fire headquarters at LaSalle Square.

In order to clear the way for the hotel project, the Cianci administration thought it would have to temporarily relocate police headquarters to the Fogarty Building while the Public Safety Complex was under construction.

As it turned out, Mesolella lost both his potential hotel franchise agreement and his financing for a hotel at the headquarters site, and the Fogarty Building was not needed.

The Fogarty Building is valued at $2,965,570 and the land at $1,353,630, for a total of $4,319,200, according to the company revaluing Providence's real estate.

If Mesolella's project comes to fruition, Prignano said yesterday, the proceeds of the sale of the site would be expected to be used to reduce the debt on the borrowing for the Public Safety Complex.

From The Providence Journal

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Debate heats up over Mesolella's hotel plan

The former legislator seeks public money to partly pay for his downtown project.

BY SCOTT MAYEROWITZ

Journal State House Bureau - Friday, May 28, 2004

PROVIDENCE -- The governor's staff and the House Finance Committee went head-to-head yesterday over a powerful former legislator's bid for state financing of his proposed convention center hotel.

The debate revolved around one issue: can the General Assembly force the issuance of public bonds even if the Convention Center Authority has not approved -- or even reviewed -- the project?

At times, the hearing got feisty with committee members accusing Governor Carcieri of trying to kill the hotel for political reasons. In turn, the governor's staff said due diligence should be done by someone -- other than the legislators -- before public money is risked.

For several years, former state Rep. Vincent J. Mesolella Jr. has sought public money to finance, in part, the hotel. The proposal has gone through several revisions with the latest plans calling for $17 million in convention center bonds. The downtown Providence hotel, which would be connected to the Rhode Island Convention Center by a sky bridge, would cost a total of $50 million. Private investors would pay the rest; Mesolella said yesterday he does not have that financing secured. Mesolella would have no up-front cost.

Carcieri says the state should not be in the hotel business, and the Convention Center Authority had not seen the latest proposal until yesterday morning. But committee members yesterday indicated they were very much in favor of the project.

Last year the Convention Center Authority backed Mesolella but the hotel legislation never made it through the General Assembly, in part because Carcieri threatened a veto. Since then, the makeup of the Convention Center Authority has changed. Carcieri appointed an old friend, David A. Duffy, who ended up replacing Dominic L. Ragosta -- a key Mesolella suppporter -- as authority chairman.

No one from the current authority was present yesterday to support the proposed Embassy Suites hotel, but Ragosta testified that the convention center "desperately needs" more hotel rooms to attract better shows.

This year's proposal is scaled back from Mesolella's previous plans. Last year, he sought $27 million: $17 million as a loan and $10 million that would be used to buy the state a 60-percent share in the net profits. That plan included $2 million in developer's fees for Mesolella's company, Capital Hotels, LLC.

The state share and the development fee have been eliminated this year. However, Mesolella said that a developer -- him or someone else -- would still need to be compensated. The Convention Center Authority would also be required under the bill to provide 240 parking spaces in its garages for hotel guests.

Unlike most bills that simply allow any agency to borrow money, this bill, sponsored by Rep. John J. McCauley Jr., D-Providence, actually forces the Convention Center Authority to finance the project.

Mesolella told committee members that there is a problem attracting hotel financing for second-tier cities. Lenders look at the oversupply of hotel rooms nationally, he said, and do not focus on the shortage in New England. He and several lawmakers cited this week's news that a hotel proposed by GTECH and Marsella Development Corp. would not be built because of financing problems.

Ragosta said the likelihood of getting this project done without public financing "is virtually zero."

Rep. Paul E. Moura, D-Providence, who sponsored the legislation in previous years, told the committee that the state is already subsidizing -- through historic tax credits -- a hotel planned for the Masonic Temple by Sage Hospitality Resources.

But in a letter to the committee, Carcieri's chief legal counsel, Andrew M. Hodgkin, said the project "subverts the basic concept of separation of powers" because the legislature is telling a quasipublic authority what is best for its facility.

"Here, the General Assembly is dictating the very terms of a deal -- down to the details of parking spaces and developer's fees -- that should be negotiated by the [Convention Center] Authority," he wrote.

No one from the governor's office attended the start of the hearing, leading committee Chairman Steven M. Costantino to say: "I think it's a disgrace to this committee and the public . . . It's not like the governor's office is 30 miles away."

Costantino, D-Providence, said the letter from Carcieri's chief legal counsel lists a "whole bunch" of reasons why the governor is opposed to the hotel, but the chairman wanted to know if they are legitimate concerns or just "excuses."

Several minutes later, Hodgkin and the governor's policy director, Jeffrey Grybowski, entered the hearing room.

"To my knowledge, no one has done due diligence on this deal," Grybowski said. "Perhaps this is a great project. Perhaps there is a better project."

When Costantino asked him why the Convention Center Authority has not done a review, Grybowski said, "My understanding is that they have not received a proposal."

Richard R. Beretta Jr., special counsel and lobbyist for the Convention Center Authority, told the committee that while no formal proposal has been presented this year, the authority's board did discuss the hotel hours before yesterday's Finance Committee meeting.

No action was taken by the board, he said, but within the next 10 days it will be briefed by Mesolella in a special meeting.

With the governor's staff in the room, some committee members took the opportunity not to ask questions, but to make a point.

"We have a project that I have wanted for three years," said Rep. William San Bento Jr., D-Pawtucket. "I say it's something we should do. It's good for the state but we can't get large conventions in here because you want to play this game your way."

From The Providence Journal

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Ugh, what a mess... The imploding of the GTECH hotel proposal this week (PJN article) due to lack of financing would seem to indicate that the market alone won't be enough to fund these hotel projects. That building really needs to be replaced. Public money might be needed, but they definitely shouldn't approve a project they haven't reviewed... Ugh... :unsure:

Garris

Providence, RI

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yeah, I always take a look at what I'm spending my money on before I buy it, I'd expect the government to do the same with my money.

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Panel OKs state financing for hotel

BY W. ZACHARY MALINOWSKI

Journal Staff Writer - Wednesday, June 23, 2004

The measure would force the Convention Center Authority to help finance a private project advanced by developer Vincent Mesolella Jr., a former legislator from North Providence.

PROVIDENCE -- A controversial bill that would force the Convention Center Authority to subsidize a downtown hotel with $17 million in state bonds breezed through the House Finance Committee yesterday.

Among the 13 legislators who attended the hearing, only two, Victor G. Moffitt, R-Coventry, and Carol A. Mumford, R-Cranston and Scituate, cast dissenting votes.

In a brief exchange before the vote, Moffitt asked House fiscal adviser Michael O'Keefe whether he could ever recall the House Finance Committee approving legislation that "forced" the Convention Center Authority to finance a private project.

"I honestly don't recall one way or the other," O'Keefe said.

The prime benefactor of the bill is developer Vincent Mesolella Jr., a former legislator from North Providence, who has been trying to transform the site of the vacant John E. Fogarty Building at 111 Fountain St. into a hotel with about 250 suites. The proposed hotel, which would cost about $52 million, would be connected to the convention center with a walking bridge over Sabin Street.

David A. Duffy, chairman of the Convention Center Authority, has been a leading critic of the legislation, arguing that it could jeopardize another major project: renovating the Dunkin' Donuts Center with about $25 million in state bonds. The Dunk is the largest venue in the state for concerts and sporting events.

Yesterday, Duffy was dismayed at the news that the legislation had passed House Finance.

"It's the most egregious land grab since Attila the Hun," he said.

Two weeks ago, the board of the Convention Center Authority deadlocked 4-4 on the proposal, meaning that it did not endorse the project. Despite the tie, the General Assembly could still approve the financing.

A lawyer for the Providence Biltmore hotel also addressed the Convention Center Authority board, saying that the state-subsidized Mesolella hotel could be the death knell of the Biltmore, a landmark in the city's downtown for more than 80 years.

The lawyer said the Biltmore may have to be transformed into condominiums or residential apartments.

Governor Carcieri, who appointed Duffy to the Convention Center Authority, has also remained steadfast in his opposition to state financing of the proposed hotel.

Yesterday, spokesman Jeff Neal said the governor believes that this is another bad deal for Rhode Island taxpayers being rammed through at the last minute; that the developer has still not come forward with any financial commitments; and it is not clear that any due diligence has been performed on this $17-million project. By ordering the Convention Center Authority to issue this new debt, Neal said, the governor believes the General Assembly is turning the regular process on its head. The Convention Center Authority's job is to solicit bids for hotels and to make recommendations to state government.

Carcieri has also questioned the 2-percent developer's management fee that Mesolella would collect if the hotel is built.

Mesolella has argued that the fee, which often reaches 6 percent, is customary for any major development project.

Yesterday, Representative Mumford questioned O'Keefe, the house finance fiscal adviser, about Mesolella's developer's fee. O'Keefe said he did not know what the former legislator's cut would be.

On Feb. 14, 2002, the Providence Redevelopment Agency named Mesolella's firm, Capital Hotels LLC, as the "sole developer" of a hotel on the property across the street from the Convention Center.

In recent testimony before the House Finance Committee, Mesolella testified that he has the rights to the property until he cries "uncle."

James McCarvill, executive director of the Convention Center Authority, said the Providence Redevelopment Agency could break the agreement if a better offer came along. So far, no one has stepped forward with a proposal to privately finance a hotel on the site.

Mesolella's proposed hotel would feature 18,000 square feet of meeting space, a 150-seat restaurant, pool and cafe. The proposed opening date is April 2006.

The legislation now advances to the floor of the House of Representatives for a vote, which could happen sometime tomorrow. If approved by the House, the legislation would move to the Senate for final passage. Carcieri could veto the bill.

From The Providence Journal

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Exclusivity is key to Mesolella's hotel proposal

The former legislator's sole rights to the Fogarty Building are questioned by the governor's legal counsel, but City of Providence says the agreement is binding.

BY MIKE STANTON and W. ZACHARY MALINOWSKI

Journal Staff Writer | Thursday, June 24, 2004

Two years ago, on Valentine's Day, the Providence Redevelopment Authority handed Vincent J. Mesolella Jr. what critics describe as a sweet deal.

The agency designated the former state legislator and real-estate entrepreneur as sole developer of the vacant John E. Fogarty Building in downtown Providence, across the street from the Rhode Island Convention Center.

Armed with exclusive rights to the city-owned property, Mesolella is pushing to build a $52-million hotel that proponents say would boost the state's convention business -- a hotel financed with the aid of $17 million in state bonds under legislation that is rapidly moving through the General Assembly in its final days.

Today, as the House of Representatives prepares to vote on a bill that sailed through the House Finance Committee Tuesday, questions linger about how Mesolella came to be the exclusive developer of the Fogarty Building.

After examining the "sparse documentation" of the project in city files, Governor Carcieri's chief legal counsel recently questioned Mesolella's legal right to develop the property.

"To my mind, there is almost nothing that legally commits the city to this project," the lawyer, Andy Hodgkin, wrote in a June 7 memo to Carcieri, who opposes public financing of the hotel.

Mesolella has said that he has the rights to the property until he cries "uncle," but Hodgkin concluded that Mesolella may have breached the agreement by changing the terms of the hotel he proposes. Mesolella previously proposed a 300-room hotel, but has scaled that back to 250 rooms after failing to win $27 million in state financing last year.

Furthermore, Hodgkin said, city redevelopment files were conspicuously absent of details of the deal, such as "purchase price, good-faith deposit, delivery date, terms of financing, identity of proposed operator or other specific terms."

Hodgkin also noted the lack of: a signed purchase and sales agreement, details of the proposed hotel's finances, proof of Mesolella's "financial wherewithal," and commitments from lenders or agreements from hotel companies to manage such a facility.

"There is little documentation at the city or PRA to clarify the terms of the proposed hotel project," wrote Hodgkin. "In fact, it is the lack of legal documentation that is notable."

Providence Mayor David N. Cicilline criticized the Mesolella hotel when he ran for mayor in 2002, and asked his city solicitor to explore the legality of Mesolella's agreement after taking office last year. Yesterday, he said that city lawyers had determined the agreement is binding, and deferred questions about public financing to the legislature.

"It would be very good for the city to have a hotel developed at that site," said Cicilline. "If the legislature determines that public financing is the appropriate course, then the city, through the regulatory process, will make sure that the hotel takes shape in a way that makes sense."

Mesolella reiterated yesterday that his hotel is a good deal for taxpayers, that it will help Providence draw another 18 to 20 conventions a year and reap millions of dollars in revenue that it is now missing out on. He declined to talk about his dealings with the City of Providence.

"I'm not interested in discussing this any further," he said. "I'm going to wait and see what happens."

VINCENT MESOLELLA'S efforts to build a downtown hotel date back to the late 1990s.

In 1997, the then-state legislator negotiated with then-Providence Mayor Vincent A. Cianci Jr. to build a hotel on the site of the city's rundown police and fire headquarters at La Salle Square. By 2000, Mesolella had shifted his focus to the vacant Fogarty Building, down the block on Fountain Street. The building was considered a more desirable location because a hotel could be linked by sky bridge to the convention center.

When the Convention Center Authority struck a secret deal with Mesolella for a hotel and sought financing from the legislature, however, then-Gov. Lincoln Almond objected, leading to an open competition among five developers who bid on various downtown hotels.

But Mesolella, who had the exclusive rights to the Fogarty site, was the only developer who could bid on that location. He was chosen by the authority in 2002, because his site was deemed the best spot for a hotel linked to the convention center. He proposed a full-service Embassy Suites hotel, rising 14 to 17 floors.

Perhaps prophetically, Mesolella, in his quest for financing, said in 2001, "No deal is done until it is done."

On Feb. 14, 2002, the Providence Redevelopment Authority formally designated Mesolella's Capital Hotels LLC to develop a hotel at the Fogarty site.

That action followed the breakup of a co-developer arrangement between Mesolella and the Convention Center Authority. In his recent memo, Governor Carcieri's legal counsel wrote that the Convention Center Authority "felt it could not go forward on a proposal without competitive bidding and it sought to buy the property directly, free of obligation to Mr. Mesolella."

As a result of the breakup, according to Thomas E. Deller, director of Providence's Department of Planning and Development, Mesolella approached the Providence Redevelopment Authority, which had previously selected him to develop the property, and asked them to go back to the original plan, with him as the sole developer.

The project was still in the works in 2003, when a new governor, Carcieri, and a new Providence mayor, Cicilline, took office. During the 2003 legislative session, a new proposal emerged -- making Mesolella and the convention center partners in a hotel, with the state paying $27 million in financing and Mesolella receiving a $2-million developer's fee. (Nobody has said how much of a development fee Mesolella would receive in the current proposal.) But the 2003 legislation died after objections from Carcieri.

Cicilline, meanwhile, also wanted to reexamine the hotel deal. During the 2002 campaign, he had criticized the manner in which the city had assigned development rights to Mesolella, calling it "a classic example of what is wrong with this [Cianci] administration." The city had "an obligation," he said, to make sure that any such deals "are aboveboard and beyond reproach."

Cianci appointed a majority of the redevelopment authority members and had privately agreed to let the building go to Mesolella, who retained the rights to develop La Salle Square for residential and commercial space and also was chosen to oversee construction of the new Providence Public Safety Complex.

When Cicilline became mayor, he said in an interview yesterday, he asked his city solicitor to "review our legal obligations" to Mesolella.

"The property had been undeveloped for a long period of time, and it was a very important parcel," said Cicilline. "So we needed to either proceed with the existing developer or move on and look for new opportunities."

Cicilline said that his city solicitor, Joseph Fernandez, concluded that the 2002 resolution required the city to negotiate a purchase and sales agreement with Mesolella, which had not been done.

Ironically, Deller said that he has been asking Mesolella and his lawyers since last September for a draft of a purchase and sales agreement.

That request was rooted in a redevelopment authority meeting in which Deller said he proposed opening up the Fogarty site to other bidders, by putting out a "request for proposal," or RFP.

"I was going to ask for a new RFP, because nothing had been happening, as far as I knew," said Deller. "Then Vinny [Mesolella] stood up and pulled out a copy of the [2002] resolution and gave it to me. That was the first time I saw it."

As a result, Deller said, he asked Mesolella to tell his lawyer to draft a purchase and sales agreement.

"I haven't gotten it yet," he said yesterday.

In April of this year, Mesolella told the redevelopment authority that the project had been scaled back since 2003, and that a bill would be introduced at the General Assembly to provide $15 million (later raised to $17 million to cover the cost of the sky bridge) in financing. He said that he had retained a Manhattan firm, Sonnenblick-Goldman, the largest procurer of financing in the hospitality industry.

Deller once again requested a purchase and sales agreement, saying that it should mention "time frames" and other details lacking to date, according to minutes of the meeting.

In a letter to Deller in February, a lawyer for Mesolella wrote that "if my client is able to finalize terms on the agreement he expects to begin development before the end of 2004. Accordingly, we are prepared to close on this project on or before June 30, 2004."

If Mesolella fails to win state financing this time around, Deller says, the city is prepared to give him 6 to 12 months to prove that he can come up with financing or seek new proposals.

"Developers have called, asking what is happening," said Deller.

From The Providence Journal

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Governor rejects tax credits for Mesolella hotel proposal

BY CATHLEEN F. CROWLEY

Journal Staff Writer | Saturday, July 3, 2004

PROVIDENCE -- Calling it "the most egregious case of inside dealing" that he's ever witnessed, Governor Carcieri yesterday vetoed legislation that would give $20 million in tax credits to former state Rep. Vincent J. Mesolella Jr. to build a hotel in downtown Providence.

"The Vincent Mesolella hotel bill is fiscally irresponsible and inexcusably bad public policy," said Carcieri, who has opposed state financing for the Mesolella plan since he took office.

The General Assembly appears to have enough votes to override the governor's veto unless legislators change their positions. On June 25, the bill passed in the House, 46-23, and the Senate, 21-11. An override requires a three-fifths majority of the legislators voting.

Mesolella has proposed constructing a $52-million hotel on the site of the vacant John E. Fogarty Building. A sky bridge would connect the 250-suite hotel to the Rhode Island Convention Center. Mesolella has had the exclusive rights to develop the city-owned property since 1997.

The bill originally called for the Convention Center Authority to issue $15 million in state bonds, which Mesolella would pay back. The figure was later adjusted to $17 million. The authority opposed the plan.

On the day of the vote, legislators dropped the idea of bonds and instead approved a plan that would give Mesolella $20 million in tax credits.

With the switch, Carcieri said the hotel bill went from bad to worse.

"Tax credits are not bonds," the governor wrote in the statement that accompanied his veto. "A tax credit is a dollar for dollar direct contribution -- here an outright gift -- to the developer."

Carcieri said this should not be confused with historic tax credits.

"Historic tax credits are available to any developer who is willing to redevelop and preserve, at considerably greater expense than new development, properties that are deemed to have historic significance, enriching the heritage of Rhode Island," he said. "This is not such a case."

Mesolella did not return a call for comment yesterday, nor did Rep. John J. McCauley Jr., D-Providence, who sponsored the bill.

Rep. Paul W. Crowley, D-Newport, the architect of the tax-credit proposal, defended it yesterday.

The Fogarty building is "a 1960s cement behemoth that detracts from the Providence historic district," Crowley said. "Is the beauty of Providence enhanced by getting rid of that? Yes, it is."

He thought financing it with tax credits would resolve some of the concerns with the project. First, the convention center wouldn't have to float any bonds, he said. Second, he said he thought it would quiet the critics who argued that a hotel project requiring public financing may mean there is not enough demand for such a hotel.

With tax credits, Mesolella would have to prove to investors that the hotel project is viable.

Under such a plan, a developer sells the tax credits to companies and individuals looking to reduce their income taxes. In return, the developer receives cash to finance a construction project. Investors won't buy the credits if they think the project will fail.

"Let's put the market forces to work and see if the market believes there should be a hotel there," Crowley said.

The General Assembly is expected to reconvene later this month to consider bills that Carcieri has vetoed.

From The Providence Journal

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Chamber of Commerce backs hotel veto

The Providence group says it sees no need for the state to provide $20 million in tax breaks for former Rep. Vincent J. Mesolella Jr. to develop a hotel.

BY EDWARD FITZPATRICK

Journal Staff Writer | Tuesday, July 20, 2004

PROVIDENCE -- The Greater Providence Chamber of Commerce is backing Governor Carcieri's veto of a bill providing $20 million in state tax credits for the downtown hotel being developed by former state Rep. Vincent J. Mesolella Jr.

In a statement issued yesterday, the Chamber's board of directors said it does not dispute that more hotel rooms are needed near the Rhode Island Convention Center.

But citing "significant private sector interest in developing one or more hotels in Providence," the Chamber board said, "there is no need for the state to commit $20 million in income tax revenue for this purpose. That is money that could otherwise be used for badly needed municipal aid, to fund education or for social service programming."

The Chamber's statement comes as the General Assembly is preparing to reconvene on Friday, aiming to override Carcieri's vetoes of the state budget, a November casino referendum and the hotel bill.

Mesolella has proposed a $52-million hotel on the site of the vacant John E. Fogarty Building, with a sky bridge connecting to the Convention Center. The bill originally called for the Convention Center Authority to issue $15 million in state bonds, and that figure was later bumped up to $17 million. In the session's waning hours, legislators scrapped the idea of bonds and approved a plan that would give Mesolella $20 million in tax credits.

Carcieri vetoed that bill July 2, branding it "fiscally irresponsible" and saying, "The Vincent Mesolella hotel project is the most egregious case of inside dealing that I have ever witnessed."

In its statement yesterday, the Chamber said: "For the General Assembly to publicly subsidize this hotel when there is significant interest in financing a hotel from the private sector sends a terrible message to businesses considering an investment in Rhode Island. It leaves the impression that the state would rather use public monies and position themselves as competitors to private industry rather than support private investment in Rhode Island."

The Chamber took its stance on Friday, with 35 of the board's 50 or so members voting unanimously to support the governor's veto, said Bethany Costello, the Chamber's director of public relations and public policy.

"Why would they do that?" Mesolella asked yesterday. "Anytime the Chamber of Commerce takes a position against a project that would generate at least $6 million a year -- in income tax, sales tax, room tax and economic generation from 18 to 21 more Convention Center events a year -- you really have to question why. I'm begging the question."

Mesolella said the Chamber had supported the project several months ago and he attributed yesterday's statement to Chamber politics. "You have to look at the parties involved," he said.

Costello said the Chamber has always supported development of more hotel rooms in downtown Providence but has not taken stands on specific projects. "Our concern with this project is the financing," she said.

The House sponsor of the hotel bill, Rep. John J. McCauley Jr., D-Providence, attributed the opposition to Chamber members who own or develop hotels. "I just think it's a last-ditch effort by members of the Chamber who have a competing interest with this hotel," he said. "They're trying to sabotage the success of the project for their own self-interest."

McCauley said he expects plans for another downtown hotel to be announced as early as today. But he said developers have talked for years about developing downtown hotels without tax credits, and none are doing it. Meanwhile, he said, the Convention Center is losing larger shows because of a lack of nearby hotel rooms.

McCauley said he expects the Assembly to override Carcieri's veto on Friday, but he said it'll be a close vote. "This is a tough issue that's not easily accepted by some people because of the name of the principal of Capital Hotels LLC -- Vincent Mesolella," he said. "Vinny is either black or white. He's not gray. Some people find him abrasive, while some people find him embracing."

In arguing for a veto override, McCauley said he is asking fellow legislators to focus on the project, not the developer. "I try to convince them on the merits," he said.

Carcieri's spokesman, Jeff Neal, argued that the hotel bill lacks merit, and he praised the Chamber's stance.

"This just shows that the business community understands that Mr. Mesolella's hotel is a bad deal for Rhode Island," Neal said. "They also know that the state should not be in competition with private investors to develop a hotel in Providence. Finally, they recognize that handing $20 million to a single individual to develop a hotel is unprecedented."

In its statement, the Chamber cited an analysis highlighting 11 local companies that have received tax credits since 1996.

"These companies -- Amgen, CVS, Fidelity, Electric Boat and others -- are some of the biggest names in Rhode Island," the Chamber stated. "They have invested hundreds of millions of dollars in our state and created thousands of good-paying jobs."

Together, the 11 companies have received a total of $27.46 million in tax breaks, the Chamber said. "Yet, the General Assembly is now considering giving $20 million to one individual who has never before developed a hotel," the Chamber stated.

"Members of the board of directors are now calling on the members of the General Assembly to sustain the governor's veto of this unnecessary and egregious legislation," the Chamber's statement concluded. "Their message? That it is a bad deal for Rhode Island taxpayers and does not support private investment in our state."

From The Providence Journal

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Developers speak against Mesolella hotel

Three developers say they can privately finance a new hotel in Providence, but not if the Assembly overrides the governor's veto of $20 million in tax credits to a former legislator.

BY ANDREA L. STAPE

Journal Staff Writer | Wednesday, July 21, 2004

PROVIDENCE -- Just days before the General Assembly is expected to vote on a publicly subsidized Providence hotel, three established developers unveiled downtown hotel projects that will not need state funding.

Two Rhode Island companies, and one well-known national developer, have approached the state with three separate competing proposals to build a 150- to 250-room hotel on the half-acre park adjacent to the Westin Providence.

All three said yesterday that they could tap into private financing to build the hotel, now that the industry has rebounded from its economic slump.

But they would only be interested in moving forward with their proposals if state legislators agree not to give former state Rep. Vincent J. Mesolella Jr. $20 million in tax credits to build a hotel across the street from the Rhode Island Convention Center.

On Friday, the General Assembly is expected to vote to override Governor Carcieri's veto of a bill that would give Mesolella tax credits to finance construction of a $52-million hotel on the site of the vacant John E. Fogarty Building. Carcieri vetoed the proposal on July 2, calling it "fiscally irresponsible."

"We think that the way it's structured, the public money gives whoever gets it a distinct advantage over someone who's going out and trying to raise [money] in the public sector," said Robert L. Johnson, the billionaire founder of Black Entertainment Television and chief executive officer and chairman of RLJ Development. RLJ has proposed a 200-room hotel for state-owned parcel next to the Westin. It already owns the Providence Courtyard Marriott across Francis Street from the Westin.

"I think what [the Mesolella proposal] does is, it has a negative impact on hotel development in the state," Johnson, during a phone interview. "If the state were to say no subsidy for this hotel, we would have a serious bid in tomorrow to develop that property."

Yesterday's public admission of interest by Johnson; Cornish Associates, run by Arnold "Buff" Chace; and Carpionato Properties Inc., of Johnston, which owns the Crowne Plaza in Warwick, was a concerted effort by the developers to stop the General Assembly from overriding the Governor's veto.

All three sent letters to the Rhode Island Convention Center this month, officially proposing their separate hotel projects. The Rhode Island Convention Center Authority oversees the state-owned Westin and the adjacent land.

"It's a very bad message to send to the private development community that the state is going to subsidize hotel rooms," said Chace, during an interview yesterday. "We're responding to that now, as a way of trying to at least get the information out there to the legislators -- and the citizens."

But Rep. John J. McCauley Jr., D-Providence, who sponsored the initial Mesolella legislation, yesterday called into question the three developers' timing and their intentions.

"I think this is just an attempt to derail the Fogarty site from being developed," McCauley said. "I think this is just inside politics between those developers and the Convention Center Authority's leadership."

McCauley wondered why the developers didn't vocalize their intentions sooner, and said that the Rhode Island Convention Center Authority did not specifically ask developers to submit hotel proposals.

" . . . Some people will fall all over themselves because these guys have developed hotels before," he said. "This is a power play by special interests to control the market share and room rates in the city of Providence."

All three companies are members of the Greater Providence Chamber of Commerce, whose board of directors voted Friday to back Governor Carcieri's veto.

Mesolella did not return calls for comment yesterday.

As the debate over the Fogarty Building rages on, Sage Hospitality Resources, of Denver, has moved forward with the construction of a 274-room hotel in the former Masonic Temple, several blocks from the convention center.

That project is being financed by $13 million in federal tax credits and $18 million in state tax credits; both sets of credits are tied specifically to the preservation of the historic building. Carpionato and Cornish Associates said they had no problem with those types of tax credits, since historic buildings are both costly and risky to renovate. Mesolella plans to raze the Fogarty Building to put up his proposed hotel.

The developers also said yesterday that they are not trying to keep hotel competition out of Providence, but are instead encouraging it. They would like the Rhode Island Convention Center Authority to openly solicit developers for the parcel next to the Westin.

"We think that the best thing for the convention center and the state is to open up the competition. We'll take our chances. We'd love the opportunity to bid," said John Kokot, executive vice president for development for Carpionato Properties Inc.

All three hotels would have only rooms, no restaurants or special amenities, and all would connect through the Westin to the convention center. Carpianto and Cornish said that they are specifically interested in increasing the number of hotel rooms available in the state, in order to attract larger conventions. They said their proposed hotels would not compete with the high-end Westin, but rather would add a larger variety of different-priced rooms for convention-goers to choose from.

The three developers also said that they didn't step forward earlier in the legislative season with definitive hotel proposals because they didn't think that the Mesolella proposal would be approved by the General Assembly.

"I personally didn't think the Fogarty site was going to get this far," said Chace. In 2002, Chace also proposed building a hotel next to the Westin parcel but it was not approved by the Convention Center Authority.

If the General Assembly upholds the governor's veto of the Mesolella proposal on Friday, it doesn't automatically mean a hotel would go up next to the Westin. The Convention Center Authority would have to solicit bids and choose a developer. But whether the authority would start the search for interested developers depends on Friday's vote.

"Friday is going to be a very important day for the Convention Center Authority," said David Duffy, chairman of the authority.

Governor Carcieri's office yesterday welcomed the announcement by Carpionato, RLJ Development and Cornish Associates. The governor's spokesman, Jeff Neal, said it proves that "private investors are ready and willing to step into the breach, provided that they don't have to compete against a state-financed project."

He also said that the governor hopes the developers' proposals will sway legislators' votes on Friday.

"Governor Cariceri hopes that legislators will consider this new information when considering how to vote on Mr. Mesolella's hotel deal," said Neal. "This shows there is no reason for Rhode Island taxpayers to fork over $20 million to a single individual in order to get a new hotel built in Providence."

From The Providence Journal

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Legislators end effort to override veto of hotel deal

The move means that former Rep. Vincent J. Mesolella will not be given $20 million in tax credits to develop a facility.

BY LIZ ANDERSON

Journal State House Bureau - Thursday, July 22, 2004

PROVIDENCE -- Legislative leaders late last night abandoned their attempt to give former Rep. Vincent J. Mesolella $20 million in tax credits to develop a hotel across the street from the Rhode Island Convention Center.

The decision allows Governor Carcieri's veto of the hotel bill to stand.

Rep. John McCauley, D-Providence, the House sponsor of the hotel proposal, said he was confident there would have been enough votes to override the veto when lawmakers reconvene tomorrow.

But McCauley said he didn't want his colleagues to have to face questions on the campaign trail about the three developers who stepped forward Tuesday to oppose the project.

All three said they would be eager to develop a 150- to 250-room, downtown hotel next to The Westin Providence without state assistance, but only if the Mesolella deal for a separate site did not go forward.

If the Assembly turned down tax credits for Mesolella, Robert L. Johnson of RLJ Development vowed to The Journal, "we would have a serious bid in tomorrow to develop that property."

"I still think it's a ruse, but I'm willing to back off," McCauley said.

"Let's see if they can do it."

House Speaker William J. Murphy, D-West Warwick, said in a statement that he was "very encouraged" by the private developers' interest.

"There is a dire need for hotel space in downtown Providence, and this is important to the continued development of Providence and the State of Rhode Island," he said.

Mesolella's latest proposal for the vacant John E. Fogarty Building was a $52-million, 250-suite hotel that would connect by a skybridge to the Rhode Island Convention Center.

Lawmakers this year had originally considered ordering the Convention Center Authority to issue $15 million in state bonds for the Fountain Street project, which Mesolella would have to pay back.

The figure grew to $17 million before legislative leaders suddenly switched, on their final regular-session day, to the tax-credit plan, which also included a $5-million loan to build the skybridge.

Governor Carcieri vetoed the package days later, saying it had turned into an "outright gift" to Mesolella and his Capital Hotels LLC.

McCauley said he believes the Fogarty site remains a better one, and that the majority of the Convention Center Authority board agrees. Mesolella has contended that he would have difficulty building his project without state help, McCauley noted.

But if a hotel can be built without such help, "I think that's the way it should go," McCauley said.

He said he had tried to reach Mesolella last night, but had not yet spoken to him.

Convention center officials have said that, to attract larger and more lucrative events, the facility needs hundreds more hotel rooms nearby.

McCauley said the Convention Center Authority had never sought official proposals for the plot next to the Westin, making the timing of the developers' announcement suspect.

"I think there were inside dealings going on with the Convention Center Authority leadership and the governor's office," he said.

But now, McCauley said, the authority should issue a formal request for proposals and see what comes of it.

Authority Chairman David Duffy suggested Tuesday that the board would likely do just that if the Mesolella bill foundered.

From The Providence Journal

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I was reading through all of these articles and came across a comment made by a lawyer from the Biltmore claiming that a Hotel like the Mesolella would force the Biltmore to close it's doors and become condos.

I don't understand the hotel room issue here. If Providence is short of hotel rooms, then it must mean that, for a good amount of the year, the hotels are pretty full, no?

and a full hotel = good business

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I was reading through all of these articles and came across a comment made by a lawyer from the Biltmore claiming that a Hotel like the Mesolella would force the Biltmore to close it's doors and become condos.

I don't understand the hotel room issue here. If Providence is short of hotel rooms, then it must mean that, for a good amount of the year, the hotels are pretty full, no?

and a full hotel = good business

<{POST_SNAPBACK}>

We were discussing this a while back... We were hypothesizing that due to the Biltmore's older building, likely higher costs, etc than more modern hotel structures, that they're probably operating on a mighty thin margin, and that with another competitor about to be built across the street from the convention center (attached in fact!), that even a slight dip could cause them problems that the Westin, for example, could weather.

They also made that statement, I believe, before 110, Waterplace Condos, Westin Condos, etc... The hotel business might be lookin' a little better now...

- Garris

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Yes, if the Fogarty Hotel is the Biltmore's problem, then they should just close now. We've got the Fogarty and the Masonic Temple in the pipeline, additions to the Westin and the Hilton (maybe). And I'm sure we'll see at least one more hotel in the next 5 years, and probably an expansion someplace else. The Biltmore's big gripe was that the Fogarty Hotel was to be state financed (in great part) at one point. They didn't want the state paying to put them out business, and rightly so, Carcieri put a stop to it.

I think the Biltmore's fortunes have turned in the last year. McCormack's (as much as we knock it) helps (they had no restaurant for some time), the Red Door is good for them. I assume they both pay the Biltmore rent, which helps the bottom line, and having those amenities attracts guests.

The hotel business in Providence is very good. Most places are near capacity, most weekends, and the rooms attract high prices. We could probably comfortably add two more hotels to what's on the way, and if we get some more office buildings built, we could add a couple more.

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The Biltmore's gripe (my boss owns quite a bit of it so I'm familiar with the situation) was with the shady dealings with Mesollela. And look how right they were...Buff stated that the state didn't need to give a subsidy to someone to build a hotel for the convention center...he claimed he could name at least 3 developers would privately build and finance a hotel. And alas, more than 15 bidders came to the Westin, eager to PRIVATELY finance a hotel. The Mesollela deal was one of the saddest, most politically backwards things I've ever seen...another "only in Rhode Island"ism.

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