The already much prolonged hotel/civic center has once again been postponed as the result of the Wall Street financial meltdown, which has made acquiring financing for the $37 million project all but impossible.
With the costs of taking out bonds to finance the city of Covington and Newton County's public commitment to the project now more than 10 percent, Mayor Kim Carter said the project is financially "just not feasible at this time."
In August, the city council and the Newton County Board of Commissioners agreed to increase the bond amount issued to fund the civic center from $12.2 million up to $23 million after project delays and higher labor costs and construction material costs raised the price of the project.
However, no bonds were taken out as the two bodies waited for their private partner, P.R. Hospitality, to draw up an official development agreement. Before any agreement could be signed though, the stock market collapsed, taking with it any hopes of a commercial loan for the hotel portion of the project.
"The whole world's nuts right now. It's all upside down," said Phil Riley, president of P.R. Hospitality. "It's very difficult to go get a commercial loan. If the major Fortune [500] companies can't get money, little people like us can't get it either."
Prior to Wall Street's collapse, Riley had been planning on taking out a $12 million loan to build the hotel. He said he is still hopeful that the project can resume once the financial markets calm down and banks are confident enough to resume lending again.
"I think it's an excellent project and one that I think we can hopefully complete," Riley said adding, "I haven't given up on the project."
How quickly the market calms down will depend largely on the incoming Obama administration and Congress implementing the right policies to restore confidence to the financial sector and lower interest rates on commercial loans and municipal bonds.
Riley said he was hopeful this could happen in as quickly as 90 to 120 days.
Carter said she believed it would likely take longer.
"I don't see that the financial markets are going to calm down to the levels where they're really stable as soon as three months," she said. "But certainly we are open to revisiting the civic center project when and if the markets stabilize."
John Boothby, president of the Covington/Newton County Chamber of Commerce, said the county is not alone in seeing its plans stalled. Hotel projects all over Metro Atlanta have stalled he said.
"There are too many questions about the demand as people cut expenses," he said. "Hotels have taken a big hit because business travel is one area where people have cut back."
If the market turns around relatively quickly, Riley said he could see some cost benefits to the latest postponement of the project.
Before Wall Street's collapse set off a domino affect world-wide recession, developing countries, especially China, had sharply bid up the price of raw materials. The recession though can be expected to depress the cost of those materials as well as somewhat lower the cost of labor used in the building of the project, Riley said.
"Depending on what our leadership does in Washington, it could be beneficial in the long run in making this project materialize," he added.
Riley said there may be the possibility of downsizing the size of the hotel, which as it was presented in August, had 116 guest rooms.
"From an exposure standpoint we may want to downsize a little bit," Riley said. "We'll just have to wait and see. It all depends on the cost of money. That's really the key."
