Hotel funds must go to referendum Attorney general's office rules on bonds for Wyndham project; Developer wanted waiver; Controversial plan for Inner Harbor East must get voter OK

THE BALTIMORE SUN

Baltimore voters must decide the fate of nearly $22 million in bonds for the proposed Wyndham Inner Harbor East Hotel, the state attorney general's office said yesterday, rejecting a city effort to circumvent a required referendum.

The opinion, written by Richard Israel, assistant attorney general, came in response to a request for a review by Del. Howard P. Rawlings, chairman of the powerful House Appropriations Committee and a vociferous critic of the proposed $132.6 million Wyndham.

Israel said in a letter to Rawlings that the state constitution requires that the $21.75 million in tax-increment bonds -- issued with the expectation that revenue generated by a project would cover the debt -- must go to referendum.

The financing method won General Assembly approval in 1994, and the Wyndham would become the first city project to rely on such bonds.

The administration of Mayor Kurt L. Schmoke had planned to ask the legislature to waive the required referendum to avoid leaving a key piece of financing undecided until the November 1998 elections.

But Israel said the legislature has no power to waive the referendum because the law reflects the state constitution's requirement that any public debt for Baltimore projects must be decided by voters.

"It's clearly out of the hands of the legislature," Israel said. "Even if the requirement in the 1994 law were repealed, the constitution still requires a referendum for these kinds of bonds in the city because to create public debt, the voters have to have their say."

Rawlings, among the first critics of Schmoke's choice of the Wyndham a mile from the expanded Baltimore Convention Center, praised the decision as a "victory for the people of Baltimore City and the state."

"This means the legislature cannot remove the citizenry from participating in the city's economic future," said Rawlings, a Baltimore City Democrat, "and this preserves public participation in matters of public policy and, particularly, in the decision surrounding building new hotels in Baltimore City."

Efforts yesterday to reach members of the Wyndham development team, assembled by baking magnate John Paterakis Sr., and Schmoke administration officials were unsuccessful.

Peter G. Angelos, the Orioles owner who seeks $25 million in such bonds for a proposed 850-room Grand Hyatt that would be built on city-owned land and connected to the Baltimore Convention Center, declined comment last night. Tom Marudas, an Angelos associate, said Angelos had not seen the ruling.

Michael Beatty, development director for Paterakis' H&S; Properties Inc., has said repeatedly that the 750-room Wyndham would proceed regardless of whether the bonds had to go to a referendum, and even if voters rejected the bond issue.

But the Wyndham contract, approved last month by the city's Board of Estimates, requires that the city seek to have the referendum requirement waived by the legislature. Barring that, the city must seek "other sources of public funds at the same or more favorable terms" as the bonds.

The annual interest rate on the 25-year tax-increment financing bonds could not exceed 8 percent, according to the contract.

Schmoke's February choice of the Wyndham over two proposals to build publicly subsidized hotels much closer to the convention center drew widespread criticism. The move intensified fears that the lack of a nearby headquarters hotel could turn the struggling convention center, expanded at a cost of $151 million, into a failure.

By steadfastly clinging to Inner Harbor East, the mayor has rejected the recommendations of the staff of his economic development agency, the convention bureau, state legislators, the state treasurer, a host of business leaders, hoteliers and those who book conventions in the competitive, $83 billion-a-year meetings industry. The hotel's one-mile distance from the convention center, critics say, puts it too far away to serve as a "headquarters hotel" for conventioneers.

Besides facing the voter referendum, the Wyndham, which seeks more than $50 million in public subsidies, is confronted by other key hurdles. The hotel, which would be built on the harbor south of Little Italy, needs City Council approval for, among other things, $25 million in parking revenue bonds and for an overhaul of the Inner Harbor East master plan.

Pub Date: 8/28/97

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